KMG Chemicals Reports Fiscal Fourth Quarter and 2001 Results

Revenues up, earnings off, financial flexibility for growth


HOUSTON, Sept. 6, 2001 (PRIMEZONE) -- KMG Chemicals, Inc. (Nasdaq:KMGB), a global provider of specialty chemicals in carefully-focused markets, today announced its unaudited financial results for the fiscal fourth quarter and fiscal year ended July 31, 2001.

For the fiscal fourth quarter 2001, net income was $0.9 million or $.12 per share, off from $1.1 million or $.14 per share for the same quarter in 2000, after adjusting for the 10% stock dividend declared in March 2001. Fiscal fourth quarter net sales were $11.2 million, an increase of 25% from $9.0 million in the year earlier quarter.

For the fiscal year 2001, net income decreased to $2.6 million or $.35 per share, from $3.8 million or $.50 per share for 2000, after adjusting for the 10% stock dividend. Net sales increased to $35.8 million for the 2001 fiscal year from $33.8 million in the prior year.

At the end of fiscal 2001, KMG had total assets of $27.0 million, up 6.7% from the previous year. Long-term debt decreased to $1.6 million or 36.8% lower than a year earlier, to 6.0% of total assets. The company had approximately $3.1 million of cash and cash equivalents at July 31, 2001.

"KMG's successful MSMA acquisition (the agricultural herbicide Bueno(r) 6) in October, 2000 contributed to revenue growth and helped offset market declines in the wood treating business," said David Hatcher, chief executive officer and president of KMG Chemicals. "Commercial demand for treated wood in the United States was below historical levels during the year, as a result of deferred maintenance on the part of the utilities and railroads that use treated wood products in their infrastructure. Despite our 7.4% net profit margin, which outperformed our peer group, we are still not satisfied with our financial results. During the year management completed significant cost control measures, including shift reductions at our Matamoros, Mexico facility, and we continue to pursue other opportunities to increase profitability."

During fiscal 2001 the relocation and reconstruction of the MSMA plant to KMG's Matamoros facility continued on schedule and within budget. Hatcher stated that KMG has accelerated its search for other mature, niche-market agricultural and industrial chemicals, and that the number of deals being screened has increased significantly. He further noted that continued industry consolidation and weak overall economic conditions have created an even more attractive acquisition environment.

"We have made progress in our key strategic initiative to diversify our revenue stream and are poised for more growth," concluded Hatcher. "Although we know that demand in the wood treatment markets is stable over the long-term, our near-term forecast in the current down cycle is for earnings per share in the range of $.04 to $.05 for the first quarter of fiscal 2002.

With our entrance into the agricultural chemicals market, our earnings will be more skewed toward the second half of our fiscal year due to the seasonal nature of that market's sales. Fundamentally, we have strong positions in stable markets and we operate profitably. KMG's strong balance sheet and cash position going forward give our management team a competitive edge in growing the company through additional accretive acquisitions."


                          KMG Chemicals, Inc.
                        Selected Financial Data
         (UNAUDITED, and in thousands, except per share data)

                                 Three Months Ended   12 Months Ended
                                       July 31             July 31
                                       -------             -------
                                   2001      2000      2001      2000
                                   ----      ----      ----      ----

 Net sales                       $11,198   $ 8,984   $35,791   $33,754
 Gross profit                      3,418     3,478    12,005    13,221
 Income before income tax          1,405     1,773     4,259     6,170
 Net income                          871     1,099     2,640     3,845
 EBITDA                            1,728     1,993     5,366     7,201
 Earnings per diluted share          .12       .14       .35       .50
 (restated for stock dividend)
 Weighted average diluted
  shares outstanding
  (restated for stock dividend)    7,544     7,733     7,583     7,733
 Shareholders' equity             19,276    17,589    19,276    17,589
 Long-term debt                  $ 1,615   $ 2,554   $ 1,615   $ 2,554

KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to carefully-focused markets. The company grows by acquiring and managing stable chemical product lines and businesses with established production processes. Its wholly owned subsidiary, KMG Bernuth, Inc. is a global provider of wood preservation chemicals to the lumber treatment industry and herbicides to the agricultural industry. For more information, visit the company's website at www.kmgchemicals.com.

The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.



            

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