Lubrizol Posts Loss, Cuts 170 Jobs

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While Lubrizols additives segment posted solid earnings for the quarter ending Dec. 31, the company overall announced a $243 million loss – including $325 million in special charges related to its coatings and polymers product lines. Lubrizol also last week began laying off 170 employees as part of efforts to cut costs.

In a statement issued Thursday about the job cuts, Lubrizol said about 130 of the affected employees are in the United States, mainly at its Wickliffe and Brecksville, Ohio, sites. These actions are necessary both to manage expenses and to allow us to allocate our resources in the most efficient manner, Lubrizol said. The company stated that the number of positions cut represent less than 2.5 percent of its total work force.

The company did not disclose how many jobs were impacted in the additives segment. The affected employees are from across the entire organization, which includes both business segments, Lubrizol spokeswoman Julie Young told Lube Report. The affected employees were notified on Wednesday, Feb. 4.

Wickliffe, Ohio-based Lubrizols $243 million loss in the fourth quarter came on revenues of $1.1 billion, or $3.59 per diluted share, compared to $59.7 million in net income on revenues of $1.1 billion, or 86 cents per diluted share, in 2007s fourth quarter.

In its Jan. 16 update on full-year guidance for 2008, Lubrizol CEO James Hambrick noted that a $325 million non-cash goodwill impairment charge in 2008 reflects an increase in the companys cost of capital since 2007.

This increase is due mainly to the significant deterioration in the capital markets in the fourth quarter and the decline in market value of our own equity and debt, Hambrick explained. The cost of capital is used to discount future cash flows and so is a key assumption used in estimating the fair value of a business. In addition, the impairment charge reflects a reduction in the near-term earnings outlook for our Performance Coatings and Engineered Polymers product lines.

The numbers were brighter for the Lubrizol Additives segment, which posted operating income of $93 million in 2008s fourth quarter, up 6 percent from $87.9 million in 2007s fourth quarter. For the full year, the additives segments operating income reached $427.3 million, up 7.3 percent from 2007s total.

In the fourth quarter, the Lubrizol Additives segment posted $789 million in revenue, one percent higher than in the year earlier period. For the full year, the additives segments revenues totaled $3.5 billion, up 1.7 percent from $3 billion for 2007. The company attributed the increase in revenues to improvement in the combination of price and product mix, which offset a volume decrease and an unfavorable currency impact.

As we advised in our earnings guidance issued last month, both of Lubrizols operating segments experienced significant and sudden declines in volume at year end due to the weak global economy and inventory reductions by some of our customers, Hambrick said.

We know 2009 will be a difficult year in many respects, he continued. In fact, the year-over-year decline in volume likely will be one of our worst since the early 1980s. We do project that some product areas, particularly in additives, may benefit from some modest inventory replenishment. However, volumes in other product areas, such as Performance Coatings and TempRite Engineered Polymers, will remain weak until key markets, such as construction and vehicle production, recover.

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