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Kraton's (KRA) Earnings and Revenues Lag Estimates in Q4

Anindya Barman
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Kraton Corporation KRA logged a profit (attributable to the company) of around $17.5 million or 55 cents per share in the fourth quarter of 2018, down roughly 75% from a profit of $69.6 million or $2.17 per share a year ago.

Barring one-time items, adjusted earnings came in at 67 cents per share for the reported quarter, falling short of the Zacks Consensus Estimate of 68 cents.

Revenues fell around 4% year over year to roughly $447.8 million in the quarter. It also trailed the Zacks Consensus Estimate of $474 million.

Sales were impacted by lower sales volumes at the company’s Polymer segment mainly due to production disruption at its Wesseling site. Kraton saw lower revenues across its segments in the quarter.

FY18 Results

Profits for full-year 2018 were $67 million or $2.08 per share, down roughly 31% from $97.5 million or $3.07 recorded in 2017.

Revenues for the year rose around 3% year over year to around $2,011.7 million.

Segment Review

Revenues for the Polymer segment fell roughly 2% year over year to $273.4 million in the reported quarter. Sales volumes declined 8% year over year to 69.5 kilotons in the quarter. Lower volumes in Performance Products and Specialty Polymers more than offset higher Cariflex volumes.

Sales for the Chemical segment declined roughly 6% year over year to $174.4 million. Sales volumes dipped roughly 5% year over year to 95.8 kilotons. The company saw lower volumes for Tires, Performance Chemicals and Adhesives, hurt by lost sales from Hurricane Michael.

Financials

Kraton’s cash and cash equivalents were around $85.9 million at the end of 2018, down 4% year over year. Long-term debt was $1,487.3 million, down around 6% year over year. The company reduced debt by $116.6 million in 2018.

Outlook

Moving ahead, Kraton expects adjusted EBITDA for 2019 to be $370-$390 million. Per the company, the guidance assumes recovery under its business interruption policies that is expected to offset any lost margin in first-quarter 2019 related to Hurricane Michael at the Panama City, FL, site. The company envisions significant volume growth and margin expansion across its segments.

The company also expects to cut consolidated net debt (barring the impacts of foreign currency) by $170-$190 million in 2019.

Kraton also expects planned maintenance costs to rise $7 million on a year-over-year basis in 2019.

Zacks Rank & Stocks to Consider

Kraton currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Israel Chemicals Ltd. ICL and Franco-Nevada Corporation FNV.

Kirkland Lake Gold has an expected earnings growth rate of 20.9% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have shot up around 130% in the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 35% over the past year.  

Franco-Nevada has an expected earnings growth rate of 11.2% for the current year and carries a Zacks Rank #2. Its shares have gained roughly 7% in the past year.

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