US/Canada Specialty Phosphates sales were up 4% entirely on growth related to acquisitions. Excluding acquisition benefits, sales were level compared to last year with the business experiencing a greater than normal seasonal slowdown arising from year-end customer destocking actions.
Mexico Specialty Phosphates sales improved on a sequential basis but were lower by 11% compared to the year ago period. GTSP & Other sales at $24 million for the 2012 fourth quarter were $1 million above the year ago level on lower market prices, but higher volumes.
Diluted EPS for the fourth quarter 2012 was $0.60 compared to $0.93 for the fourth quarter 2011. Included in the current quarter was $0.02 per share expense for accelerated deferred financing and interest rate premiums related to the senior credit facility refinanced in December 2012.
The fourth quarter 2011 results included a $0.05 per share benefit for changes in estimates on Mexican water duty charges and currency translation effects on the Mexican effective tax rate. Giving effect to these adjustments, fourth quarter 2012 diluted EPS would have been $0.62 compared to $0.88 for the fourth quarter 2011.
Net sales for 2012 were $862 million, a 6% increase over 2011. Specialty Phosphates 2012 sales of $758 million increased 6% compared to 2011 primarily on higher prices. US/Canada organic volumes were flat, and acquisitions added 3% growth which exceeded a decline in Mexico volumes. GTSP & Other sales at $105 million for 2012 were $6 million above the year ago level on lower market prices, but higher volumes.
Diluted EPS for 2012 was $3.30 compared to $3.83 for 2011. The fourth quarter adjustment items noted above, together with earlier adjustments noted in prior quarters, amounted to $0.22 per share for full year 2012 and $0.02 per share for full year 2011. Giving effect to these adjustments, 2012 diluted EPS would have been $3.08 compared to $3.81 for 2011.
Randy Gress, CEO of Innophos, commented on the results, “I am satisfied with the progress we made throughout 2012 in delivering on our strategic objectives and positioning the business for future growth. However, our results in 2012 have also reflected the challenging market conditions we have experienced. The environment was particularly reflected in the fourth quarter, as the timing of the holiday season, combined with customer efforts to reduce inventories in an uncertain demand environment, resulted in a significantly more pronounced fourth quarter seasonal slowdown in our US and Canada Specialty Phosphates business. That said, volumes have since recovered strongly in January 2013, which gives us confidence that the effect was limited to the fourth quarter.”
Mr. Gress continued, “Our strategic accomplishments in 2012 included two acquisitions in the attractive high growth nutritional ingredients space, as well as a significant step forward in the resources and capabilities dedicated to developing our business in higher growth geographies such as the Asia Pacific region. Our latest acquisition, Triarco, was completed on December 31st, and I believe Triarco’s botanical and enzyme based ingredients business will prove highly complementary to the two mineral ingredients businesses, Kelatron and AMT, that we acquired in late 2011 and mid-2012. Through these acquisitions we have built a strong platform for future growth that will also support growth in our Specialty Phosphate product range.”
Mr. Gress concluded, “Looking ahead to the coming year, we are encouraged by what looks to be a strong start and we are confident of continued success with our strategic initiatives. We will also continue to take the necessary steps to ensure we are maximizing shareholder value by leveraging our strong cash flow and balance sheet both to invest in growth and improve cash returns to shareholders, and I expect 2013 to show further progress against both of these goals.”
For the full year, Specialty Phosphates sales revenue was up 6% year over year with prices up 5%. US/Canada volumes were up 4%, with moderately lower market demand offset by growth initiatives, while acquisitions contributed 3% to growth. Mexico volumes were also affected adversely by lower market demand. For the quarter, Specialty Phosphates sales revenue was down 1% year over year.
Full year operating income at $108 million was $8 million below 2011 levels as the effects of 2011’s market raw material cost inflation were more fully realized in cost of goods sold, thus catching up to selling price increases achieved in earlier periods.
Operating income margin for 2012 was 14%, down 210 basis points from 2011 levels, with US/Canada at 15% and Mexico at its expected 12%. For the quarter, operating income at $20 million was $6 million below fourth quarter 2011 levels primarily due to lower volumes in Mexico. Fourth quarter operating income margin was 11%, down 290 basis points against the fourth quarter 2011 and down 240 points sequentially, with lower volumes and unfavorable mix the primary reason for the quarter margin sequential decline.
