November 06, 2018
- 3Q18 Net sales growth of 4.9%; Net Sales, Constant Currency up 7.2%*
- 3Q18 Net income from continuing operations of
- 3Q18 Diluted earnings per share from continuing operations of
- 3Q18 Adjusted EPS* growth of 54.5% to
- 3Q18 Adjusted EBIT* growth of 9.7% to
- Updating 2018 financial guidance
|Total GCP Applied Technologies|
|3Q 2018||3Q 2017||% Change|
|Net Sales, Constant Currency*||7.2%|
|Gross margin||37.3%||37.9%||(60) bps|
|Adjusted Gross Margin*||37.4%||38.1%||(70) bps|
|Income (loss) from continuing operations attributable to GCP shareholders||NM|
|Net income (loss) attributable to GCP shareholders||(96.1)%|
|Diluted EPS from continuing operations attributable to GCP shareholders||NM|
|Adjusted EBIT Margin*||13.4%||12.8%||60 bps|
Gregory E. Poling, GCP’s Chief Executive Officer, said, “We are pleased with our third quarter results, as GCP’s sales and earnings grew due to higher price and volumes as well as contributions from our bolt-on acquisitions and our cost reduction program.”
Poling continued, “Our Specialty Building Materials business performed well with good project work and strong price capture, resulting in improved gross margin and segment operating income. This quarter, we made progress repositioning our Specialty Construction Chemicals business. We are increasing the penetration of VERIFI®, focusing on higher margin admixture markets and technologies, and reducing our overall cost structure.”
Third Quarter 2018:
- Net sales increased 4.9% and Net Sales, Constant Currency increased 7.2% due to growth in Specialty Construction Chemicals and Specialty Building Materials
- Gross margin of 37.3% decreased 60 basis points as an increase in SBM’s gross margin was offset by a decline in SCC’s gross margin
- Income from continuing operations attributable to GCP shareholders was
$7.2 millioncompared to loss from continuing operations of $18.1 millionin the third quarter of 2017. The change was primarily due to lower expenses as a result of a loss recognized during the prior-year quarter on the deconsolidation of our Venezuelaoperations, partially offset by higher income taxes.
- Adjusted EBIT of
$39.7 millionincreased 9.7% primarily due to higher SBM segment operating income and lower corporate costs
|Third Quarter Segment Performance|
|Specialty Construction Chemicals|
|3Q 2018||3Q 2017||% Change|
|Net Sales, Constant Currency*||9.8%|
|Gross margin||32.5%||34.2%||(170) bps|
|Segment operating income||(19.1)%|
|Segment operating margin||7.7%||10.1%||(240) bps|
- Net sales increased 5.9% and Net Sales, Constant Currency increased 9.8% due to higher volumes in our Concrete and Cement businesses. Volumes increased despite being negatively impacted in September by wet weather and storm-related disruptions in
North Americaand Asia Pacific, as well as planned exits from certain admixture markets.
- Gross margin declined 170 basis points as price increases were offset by raw material inflation, increases in logistics costs and volatile foreign exchange rates in certain emerging markets
- Segment operating margin decreased 240 basis points primarily due to lower gross margin
|Specialty Building Materials|
|3Q 2018||3Q 2017||% Change|
|Net Sales, Constant Currency*||3.9%|
|Gross margin||43.6%||42.9%||70 bps|
|Segment operating income||14.0%|
|Segment operating margin||26.2%||23.9%||230 bps|
- Net sales increased 3.7% and Net Sales, Constant Currency grew 3.9% primarily due to growth in our Building Envelope and Residential businesses
- Gross margin increased 70 basis points due to price increases and productivity gains, partially offset by increased raw materials and logistics costs
- Segment operating income increased 14.0% to
$34.3 millionand segment operating margin increased 230 basis points to 26.2%. The increase in segment operating income and margin was primarily due to higher gross margin and lower operating expenses.
*Non-GAAP financial measures. See the tables herein for important information regarding these measures and a reconciliation to the most comparable GAAP measures.
NM – Not meaningful.
2018 Restructuring and Repositioning Plan (the “2018 Plan”)
On August 1, 2018, the Board of Directors of the Company approved a business restructuring and repositioning plan. The 2018 Plan is designed to streamline operations and improve profitability primarily within the concrete admixtures product line of our Specialty Construction Chemicals segment by focusing on our core markets, rationalizing non-profitable geographies, reducing our global cost structure, and accelerating the integration of VERIFI® into our global admixtures business.
The Company expects to incur total pre-tax costs in connection with the 2018 Plan of approximately
The Company expects to realize total annualized pre-tax cost savings associated with the 2018 Plan of approximately
The 2018 Plan is separate and additional to the plan approved by the Company’s Board of Directors on June 28, 2017 (the “2017 Plan”). The Company is on track to achieve the cost savings targets of the 2017 Plan.
Interest Expense and Related Financing Costs
Interest expense and related financing costs were
Debt Refinancing Transactions
On April 10, 2018, the Company announced the issuance of
The income tax expense (benefit) attributable to continuing operations during the third quarter and prior-year quarter was
Full-Year 2018 Outlook1
|Net Sales, Constant Currency||Growth of 5% to 8%||Growth of 4% to 6%|
|Adjusted Free Cash Flow|
1GCP guidance figures assume average 2017 FX rates carried forward into the guidance period.
2Includes effective tax rate of 28% to 31%, which reflects the Company’s current estimate of the impact of the Tax Cuts and Jobs Act of 2017.
3Assumes 73 million shares outstanding.
GCP has scheduled a conference call and webcast for 10:00 a.m. ET today to review its third quarter 2018 results and full-year outlook. Those who wish to listen to the conference call webcast should visit the Investors section of GCP’s website at www.gcpat.com. The live call can be accessed by dialing (844) 887-9408 in the
For those unable to participate in the live conference call, a playback will be available until November 13, 2018. To listen to the playback, please dial (877) 344-7529 in the
Non-GAAP Financial Measures
In this press release the Company refers to non-GAAP financial measures including Net Sales, Constant Currency, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted EPS, and Adjusted EBIT Return On Invested Capital. These non-GAAP measures do not purport to represent income or liquidity measures as defined under
The Analysis of Operations pages included in this press release provide reconciliations of these non-GAAP financial measures to their most comparable GAAP measures, as well as definitions for each of these non-GAAP financial measures and explanations as to why management finds them useful and believes they are useful to investors, potential investors and others.
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About GCP Applied Technologies
GCP is a leading global provider of construction products technologies that include additives for cement and concrete, the VERIFI® in-transit concrete management system, high-performance waterproofing products, and specialty systems. GCP products have been used to build some of the world’s most renowned structures. More information is available at www.gcpat.com.
This announcement contains “forward-looking statements,” that is, information related to future, not past, events. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues,” or similar expressions. Forward-looking statements include, without limitation, statements about expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives, plans and objectives; and markets for securities. Like other businesses, GCP is subject to risks and uncertainties that could cause its actual results to differ materially from its projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, risks related to: the cyclical and seasonal nature of the industries that GCP serves; foreign operations, especially in emerging regions; changes in currency exchange rates; the cost and availability of raw materials and energy; the effectiveness of GCP’s research and development, new product introductions and growth investments; acquisitions and divestitures of assets and gains and losses from dispositions; developments affecting GCP’s outstanding liquidity and indebtedness, including debt covenants and interest rate exposure; developments affecting GCP’s funded and unfunded pension obligations; warranty and product liability claims; legal proceedings; the inability to establish or maintain certain business relationships and relationships with customers and suppliers or the inability to retain key personnel; and the handling of hazardous materials and the costs of compliance with environmental regulation. These and other factors are identified and described in more detail in GCP’s Annual Report on Form 10-K, which has been filed with the