Chemtura Urethane Comments During Quarterly Results Update
Industrial Performance Products ("IPP")
Our IPP segment reported lower net sales and higher operating income on both a GAAP and managed basis for the fourth quarter of 2015 compared with the fourth quarter of 2014. GAAP and managed basis net sales and operating income were lower on a sequential basis compared with the third quarter of 2015.
Net sales for the fourth quarter compared to both the same quarter last year and the third quarter of 2015 reflected unfavorable product mix and moderate volume declines, an issue we have seen throughout 2015 for both our petroleum additives and urethane product lines. IPP also experienced lower selling prices, primarily in petroleum additives as we passed along the benefit of lower raw material costs to certain customers under formula based pricing contracts, although the reduction in selling prices sequentially was less pronounced since raw material prices flattened in the fourth quarter compared to the third quarter of 2015.
Sequentially, we saw a decline in sales volume and to a lesser extent unfavorable product mix. Year over year, we saw a continuation of the weaker volume and product mix we have seen throughout most of 2015. The unfavorable translation effects of the strengthening of the U.S. Dollar at the start of the year on the value of our foreign currency denominated sales is evident in comparing the fourth quarter of 2015 to the same quarter in 2014. As foreign exchange rates had stabilized by the end of 2015, we did not see the same magnitude of the impact from foreign exchange translation sequentially.
Operating income on a GAAP and managed basis improved for the fourth quarter of 2015 compared with the same quarter of 2014 despite the reduction in net sales. The improvement year over year was due to lower raw material and manufacturing costs, which more than offset lower selling prices and unfavorable product mix. Sequentially, operating income was slightly lower as a result of unfavorable manufacturing costs and product mix which was only partly offset by lower raw material costs. We were able to offset a portion of the impact of the decline in sales on operating income by the successful implementation of the cost savings initiatives that we had announced in the fourth quarter of 2014.
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