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Cytec Industries Inc. announced it has completed the sale of the former Umeco distribution product line, currently part of the Industrial Materials segment, to Cathay Investments for total consideration of 5.5 million GBP cash ($8.6 million based on a 1.56 exchange rate) subject to customary post-close adjustments.
The sale is expected to result in a second quarter pre-tax loss of approximately $12.5 million. The divestiture was factored into Cytec’s previously communicated sales and as-adjusted earnings guidance. The Distribution product line had revenues of approximately $20 million in the first five months of 2013. Cytec also announced, in agreement with its joint venture partner, it has exited and shutdown their Process Materials Joint Venture in China and will enter liquidation. The Joint Venture, which served the Chinese wind market, was operated under the Industrial Materials business and was acquired as part of the Umeco acquisition. Cytec’s share of the venture’s operating losses were approximately $0.6 million annually. The closure will result in a second quarter pre-tax charge of approximately $3.3 million. “These actions are aligned with focusing the Industrial Materials business on improving its existing business in its targeted growth markets”, said William Avrin, Vice President Corporate Development and President Industrial Materials. Cytec also announced its initiative to move all production operations from the Costa Mesa, Adelanto and Huntington Beach, California sites, each acquired from the Umeco acquisition, into its Winona, Minnesota and Tulsa, Oklahoma locations. Approximately 120 employees will be impacted by this move. The estimated total cost of this initiative is approximately $27 million which includes about $13 million of capital required to move the products into the existing operations and approximately $3.5 million for non-cash accelerated depreciation expense. The remaining costs are for retention and severance plans, product re-qualifications, certain lease liabilities on impacted facilities and clean-up costs. Product resites and re-qualifications will begin immediately with final completion by year-end 2014 and once completed, annual savings are expected to be $3 to $4 million. Final closure of these California facilities is expected by mid-2015. As a result of the above, Cytec will record a pre-tax restructuring charge in the second quarter of 2013 of approximately $1 million with essentially all of the expense amount recorded over the second half of 2013 and full year 2014. William Wood, President Aerospace Materials commented, “After a thorough analysis, this initiative provides a clear path to creating a production foundation establishing high standards for quality and customer service to support growth and improved profitability of aerospace interior materials, specialty composite materials and a variety of industrial materials.” More information:www.cytec.com