Shifting exchange rates boosted the second quarter performance of Quaker Chemical Corp. and Milacron Inc.s Industrial Fluids business, according to financial statements released last week.
Quaker Chemicals net income for the three months ending June 30 was 9.4 percent higher than the same period of 2002, thanks in part to acquisitions and new contracts for chemical management services. Operating earnings by Milacrons fluids segment grew 12 percent year-to-year, but would have been flat if not for the effects of favorable currency translation.
Quaker Chemical, a metalworking fluids manufacturer and service provider based in Conshohocken, Pa., had net income of $3.5 million, or 36 cents per diluted share during the second quarter, up from $3.2 million, or 35 cents per share during the same quarter a year ago.
Net sales grew 20 percent, from $69.5 million to $83.5 million. Currency exchange rates contributed $4.2 million to the increase, while acquisitions were credited with $2.5 million. The company also recorded $6.7 million during the quarter for chemical management services contracts awarded in May.
Gross margin as a percentage of sales declined from 41.7 percent to 34.7 percent. Nearly half the deterioration was due to changes in the structure of the new CMS contracts, which count the value of goods that are passed-through as expense and revenue. The rest of the decline in margin was the result of higher raw materials costs and product and regional sales mix. Selling, general and administrative expenses were flat, as increases from acquisitions and foreign exchange rates offset cost containment and reduced incentive pay.
Management said its outlook for the rest of 2003 has turned a bit more pessimistic than it was earlier this year, largely because of continued sluggishness in the steel industry, the companys biggest market.
We’ve seen weakness as steel producers in some markets lower their production to maintain pricing, Chairman and Chief Executive Officer Ronald J. Naples said. We do expect some improvement in raw material costs as compared to the first half, but not to the extent we had expected earlier in the year.
Naples added that Quaker Chemicals continued growth should leave it well-positioned for higher profits once the economy picks up. Even as we keep a sharp eye on current performance, we continue our emphasis on building for the long-term with initiatives that expand our market reach and strengthen our competitive positioning.
Milacron, of Cincinnati, Ohio, said its Industrial Fluids segment had pre-tax operating earnings of $3.7 million during the second quarter, up from $3.3 million during the same period of 2002. Sales grew from $24.1 million to $26 million, but the company said the increase was entirely due to currency exchanges.