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Grace Q2 2015 results

Hydrocarbon Engineering,

W.R. Grace & Co. has announced second quarter net income of US$57.4 million. Net income for the prior year quarter was US$136.2 million. Grace recognised a discrete tax benefit of US$53.2 million, in the prior year quarter compared with a discrete tax expense of US$11.9 million in the second quarter.

Fred Festa, Chairman and CEO, Grace said, “I’m pleased with our results for the second quarter given the uneven economic environment and currency headwinds. We delivered strong growth in construction products, expanded margins across the company, and produced exceptional cash flow. In addition, we secured strategic commercial positions in catalysts, and are on track with our separation into two industry leading public companies.”

Catalyst technologies

Second quarter sales for the catalysts operating segment, which includes specialty catalysts and additives for refinery, plastics an other chemical process applications, and polypropylene process technology were USR289.3 million, a decrease of 7.6% compared with the prior year quarter due to unfavourable currency translation and lower sales volumes and pricing. Lower licensing sales accounted for 1.2 points of the lower sales volume, and lower catalyst sales volumes accounted for 0.3 points of the decrease. Sales volumes in refining catalysts decreased during the quarter, largely offset by increased sales volumes in specialty catalysts.

Segment gross margin was 43.3% compared with 43.6% in the prior year quarter. The decrease in gross margin primarily was due to a decline in licensing sales, partially offset by lower manufacturing costs. Segment operating income of US$86.6 million decreased 11.2%, or approximately 4.8% at constant currency. Segment operating margin was 29.9%, a decrease of 120 basis points compared with the prior year quarter. The decreases were primarily due to lower licensing sales. The ART joint venture contributed US$2.3 million to segment operating income compared with US$3.1 million in the prior year quarter.

2015 outlook

As of July 29, 2015, Grace is tightening its outlook within its original range. 2015 Adjusted EBIT is now expected to be in the range of US$675 million – US$685 million on a constant currency basis, an increase of 8 – 9% compared with 2014. The company expects 2015 Adjusted EBITDA to be in the range of US$815 million – 825 million on a constant currency basis, an increase of approximately US$5.15 – 5.25 per share on a constant currency basis, an increase of 16 – 19% over 2014. The company estimates the currency headwind to Adjusted EBIT to be approximately US$60 million and to Adjusted EPS to be approximately US$0.55/share.

The company continues to expect 2015 Adjusted Free Cash Flow to be at least US$430 million, including a favourable impact to 2015 cash flow of approximately US$95 million, equivalent to US$1.30/share, due to Grace’s low cash tax rate compared with its expected effective tax rate. The company is unable to make an estimate of the amount of the annual mark to market pension adjustment or 2015 new income.

Edited from press release by Claira Lloyd

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