COLUMBIA, Md., Feb. 09, 2021 (GLOBE NEWSWIRE) -- W. R. Grace & Co. (NYSE: GRA) today announced financial results for the fourth quarter and full-year 2020, summarized in the table below, and provided its 2021 financial outlook.

“Our team delivered a very strong finish to the year,” said Hudson La Force, Grace’s President and Chief Executive Officer. “Our fourth quarter sales, earnings, and cash flow were all at the high end of our expectations. We delivered these results by taking decisive actions early in 2020 and executing well throughout the year.”

“I’d like to thank Grace’s 4,000 employees around the world for their continued focus on health, safety, and meeting our customer commitments during the pandemic. I’m proud of how they managed in 2020, delivering impressive results in a once-in-a-century year.”

“Looking ahead to this year, our growth and profitability opportunities are strong. We exited 2020 with sales, gross margins, and cash flow nearing pre-pandemic levels, and we are planning for a strong recovery in 2021, especially in the second half of the year. We are encouraged by the vaccine rollout, though we are closely watching the level of COVID-19 cases and related economic indicators. We are well positioned to continue to capture growth as the recovery progresses.”

Fourth Quarter 2020

• Fourth quarter sales of $470.2 million were down 6.8%, or down 8.0% on constant currency, versus the prior year. Higher sales in Materials Technologies (+6.0%), which were driven primarily by growth in pharma/consumer and coatings end-markets, were more than offset by lower sales in Catalysts Technologies (-10.6%). Sequentially, sales were up 12.1% led by higher refining catalysts sales volumes and continued strength in pharma/consumer end-markets. Catalysts Technologies (+14.1%) and Materials Technologies (+6.9%) were both up sequentially, and we are encouraged by the improving demand trends and positive momentum as we begin 2021.
• Net loss of $43.5 million and Diluted EPS of ($0.66) includes a pre-tax non-cash pension mark-to-market adjustment of $94.6 million, or $1.09 per share. The adjustment is a result of lower discount rates, partially offset by better than expected return on assets.
• Adjusted EBIT of $96.2 million decreased 27.6% and Adjusted EPS of $0.88 decreased 32.8% versus the prior year, including hurricane-related costs of approximately $8 million, or $0.09 per share. The year-ago period also included $8 million, or $0.09 per share, in business interruption insurance recoveries. Sequentially, Adjusted EBIT was up 38.2% and Adjusted EPS was up 57.1%.
• Sequentially, gross margin of 38.5% was up 120 bps and Adjusted Gross Margin of 39.5% was up 130 bps versus the third quarter. The improvement in Adjusted Gross Margin was driven by higher sales and increased production volumes.

Full-Year 2020

• Full-year sales of $1.73 billion were down 11.7%, reflecting the economic impacts of the COVID-19 pandemic, partially offset by improved pricing (+0.3%) across all businesses. Catalysts Technologies sales were down 15.1% for the year, as Refining Technologies (-17.9%) and Specialty Catalysts (-11.9%) were both significantly impacted by the pandemic. Materials Technologies (-0.7%) sales were down slightly for the year, with growth in pharma/consumer end-markets offset by weakness in chemical process end-markets.
• Net loss of $1.8 million was down $128.1 million, and Diluted EPS of ($0.03) was down $1.92.
• Adjusted EBIT of $312.2 million declined 34.0% and Adjusted EPS of $2.64 decreased 39.7%, including hurricane-related costs of approximately $19 million, or $0.21 per share.
• Net cash from operations was $349.6 million and Adjusted Free Cash Flow was $236.9 million, reflecting strong execution of cash and cost management actions in response to the pandemic. During the year, we continued to proactively mitigate the impact of the pandemic by focusing on strong cash generation through improving working capital, lowering capital spending, and reducing operating costs.

Delivering on Our Strategic Initiatives

“Over the last five years, we have been actively repositioning our portfolio for faster growth,” continued La Force. “We pruned businesses, reduced SG&A and corporate costs, added strategic acquisitions, increased our capacity in high growth businesses, and significantly upgraded our global R&D, marketing and commercial capabilities.”

“Despite the recession in 2020, we maintained a steadfast focus on building a stronger Grace. In implementing our cash and cost reduction actions, we were careful to protect our growth investments, maintain our focus on technology leadership, and continue our commercial excellence and operating excellence initiatives. And, we further integrated sustainability into our strategy.”

“As we continue to execute our growth plan, we are also undertaking a review of potential strategic alternatives to maximize value for shareholders. The process remains active and we will continue to share updates as appropriate.”

Grace's strategic framework for profitable growth includes four elements:

• Invest to accelerate growth and extend our competitive advantages
• Invest in great people to strengthen our high-performance culture
• Execute the Grace Value Model to drive operating excellence
• Acquire to build our technology and manufacturing capabilities for our customers

Fourth Quarter and Full-Year Segment Performance

Catalysts Technologies

Fourth Quarter 2020

• Fourth quarter sales of $348.7 million were down 10.6%, or down 11.7% on constant currency, versus the prior year. Sales declined primarily due to lower sales volumes (-10.8%) and lower average price in the quarter (-0.9%). Certain Refining Technologies customers have temporarily switched to a lower performance catalyst as a result of the pandemic. Sequentially, Catalysts Technologies sales were up 14.1% versus the third quarter.
  • Specialty Catalysts sales were down 10.5% year over year, primarily due to order timing in the prior year. Sequentially, Specialty Catalysts sales were up 5.1% versus the third quarter.
  • Refining Technologies sales were down 10.7% versus the prior year. Sequentially, Refining Technologies sales were up 23.5% versus the third quarter. Global demand for transportation fuels and refinery operating rates have shown steady improvement over the last two quarters but remain below pre-pandemic levels. For the trailing twelve months, average FCC catalysts pricing improved approximately 20 bps.
• Gross margin of 40.0% decreased 300 bps versus the prior year, primarily due to lower sales and production volumes, partially offset by lower raw materials and energy costs (+110 bps) and cost mitigation actions. Sequentially, gross margin improved 80 bps reflecting higher sales and increased production volumes.
• Operating income of $88.8 million was down $45.0 million, or 33.6%, primarily due to lower gross profit, hurricane-related costs of approximately $8 million, and $6.3 million lower income from our ART joint venture, partially offset by lower operating expense. The year-ago period also included $8 million in business interruption insurance recoveries.

Full-Year 2020

• Full-year sales of $1.27 billion were down 15.1%, or down 15.2% on constant currency. Lower sales volumes (-15.5%) were partially offset by improved pricing (+0.3%).
  • Specialty Catalysts sales were down 11.9%, primarily due to customer catalyst inventory draw downs resulting from the pandemic and order timing.
  • Refining Technologies sales were down 17.9%, reflecting significant impact from the pandemic on global demand for transportation fuels and refinery operating rates.
• Gross margin of 39.2% decreased 360 bps, primarily due to lower sales and production volumes and inventory reductions, partially offset by lower raw materials and energy costs (+110 bps) and cost mitigation actions.
• Operating income of $309.6 million was down $156.8 million, or 33.6% versus the prior year, primarily due to lower gross profit, hurricane-related costs of approximately $19 million, and $14.3 million lower income from our ART joint venture, partially offset by lower operating expenses.

Materials Technologies

Fourth Quarter 2020

• Fourth quarter sales of $121.5 million were up 6.0%, or up 4.5% on constant currency, versus the prior year. Continued strength in pharma/consumer end-markets (+21.2%) and stronger demand in coatings (+10.8%) were partially offset by lower demand in chemical process end-markets (-12.2%). Sequentially, Materials Technologies sales were up 6.9% reflecting continued strength in pharma/consumer end-markets.
• Gross margin of 38.2% increased 310 bps versus the prior year primarily due to higher sales and increased production volumes, favorable mix, lower raw materials and energy costs (+40 bps), and cost mitigation actions. Sequentially, gross margin improved 250 bps as a result of higher sales and increased production volumes, partially offset by unfavorable mix.
• Operating income of $29.1 million was up $5.5 million, or 23.3% versus the prior year.

Full-Year 2020

• Full-year sales of $458.4 million were down 0.7%, or down 0.3% on constant currency. Lower sales volumes (-0.6%) were partially offset by improved pricing (+0.3%). Strength in pharma/consumer end-markets (+12.4%) was offset by weakness across chemical process end-markets (-9.9%). Coatings markets were down slightly (-1.6%) for the year, with demand rebounding in the second half of the year after pandemic-related weakness in the first half.
• Gross margin of 33.6% decreased 290 bps, primarily due to lower production volumes and inventory reductions, partially offset by favorable mix, lower raw materials and energy costs (+90 bps), and cost mitigation actions.
• Operating income of $85.0 million was down $12.8 million, or 13.1%.

Capital Allocation

• Capital investments: For 2020, we invested $155.5 million to support growth, operating excellence, and other priorities. For 2021, we expect to invest $150-$160 million in capital expenditures.
• M&A: Strategic bolt-on acquisitions remain important to our long-term growth strategy. We will remain disciplined as we seek to continue to diversify our portfolio towards markets with compelling growth, profitability, and cash flow characteristics.
• Dividend: For 2020, we paid $80.1 million in cash dividends to shareholders, or an increase of 11% per share versus the prior year. For 2021, we increased our annual cash dividend 10%, from $1.20 per share to $1.32 per share. 2021 marks the fifth consecutive year of increases since initiating the dividend in 2016.
• Share repurchase program: For 2020, we repurchased approximately 674,000 shares of Grace common stock for $40.4 million before temporarily suspending share repurchases on April 3. We expect to resume our share repurchase program in 2021 while continuing to prioritize reinvestment and reducing temporarily higher net leverage.

Full-Year 2021 Outlook

Our 2021 outlook assumes continued strength in Specialty Catalysts and Materials Technologies and a steady recovery in the demand for transportation fuels as the year progresses, with refining demand approaching pre-pandemic levels by the end of the year. Our outlook does not assume a double dip recession or a resurgence in the pandemic.

For the first quarter of 2021 we are planning for sales to be up 6-8% versus the prior year with adjusted EPS of $0.77-$0.80.

About Grace

Built on talent, technology, and trust, Grace is a leading global specialty chemical company. The company’s two industry-leading business segments—Catalysts Technologies and Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customers around the world. With approximately 4,000 employees, Grace operates and/or sells to customers in over 60 countries. More information about Grace is available at grace.com.