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KMG CHEMICALS PROVIDES UPDATE ON SECOND QUARTER AND COMMENTS ON 2009 SECOND HALFSCHEDULES SECOND QUARTER NEWS RELEASE AND CONFERENCE CALLHOUSTON, TX – February 17, 2009 – KMG Chemicals, Inc. (NASDAQ: KMGB), a global provider of specialty chemicals in carefully focused markets, today provided an update on the Company’s business during its second fiscal quarter ended January 31, 2009 and the outlook for the second half of its fiscal year. While earnings in the second fiscal quarter will be positive, they are expected to decline relative to the comparable prior year period due to the adverse impact that higher priced raw materials in inventory had on margins during the period. However, that inventory has generally been sold and the Company is now benefiting from lower cost material that has been purchased during the second quarter and is now being sold as finished product. Discussing the second quarter, Neal Butler, President and CEO of KMG, commented, “The price of purchased raw materials generally peaked for us in the first quarter, adversely impacting margins through the second quarter. Additionally, we saw a slowdown in sales in the latter half of the quarter, predominantly in our Electronic Chemicals business as semiconductor manufacturing declined. The slowdown exacerbated the tight margins on the product being sold from inventory.” Mr. Butler added, “The price of some key raw materials declined significantly during the second quarter, and we have begun to see the positive impact that will have on our margins in the third quarter. Additionally, price increases were implemented in January on a number of products in both the Electronic Chemicals and Wood Treating businesses.” The Company indicated that Creosote sales have remained strong driven by a healthy railroad industry, and it appears that these trends should continue in the fiscal third and fourth quarters. Also, the Electronic Chemicals business KMG acquired last year has performed well, despite the sales slowdown, and was accretive to earnings and cash flow in the first half of fiscal 2009 even with the associated integration costs in the first quarter. Mr. Butler continued “Wood Treating revenues have remained at healthy levels, and indications are that this will continue through the second half. Electronic Chemicals revenues have declined about 17% in the second quarter relative to the first quarter, following adverse press releases by our customers announcing cut backs in production. However, raw material price declines, targeted selling price increases, and extensive cost reduction initiatives undertaken should enable us to maintain this as a profitable business through the second half.” Mr. Butler concluded, “While second quarter earnings were disappointing, it is important to note that we manage the business for annual performance and not quarter-over-quarter results. We feel KMG is well positioned in the current economy to have a good year overall. While we will likely fall short of our original revenue goal of $200 million or more for fiscal 2009, we expect earnings to be notably ahead of fiscal 2008.”
Second
Quarter Results & Conference Call The conference call will also be webcast live via the Investor Relations section of KMG’s website at www.kmgchemicals.com. To listen to the live call please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the website.
About KMG
The information in this news release includes certain
forward-looking statements that are based upon assumptions
that in the future may prove not to have been accurate and
are subject to significant risks and uncertainties,
including statements as to the future performance of the
company. Although the company believes that the expectations
reflected in its forward-looking statements are reasonable,
it can give no assurance that such expectations or any of
its forward-looking statements will prove to be correct.
Factors that could cause results to differ include, but are
not limited to, successful performance of internal plans,
product development acceptance, the impact of competitive
services and pricing and general economic risks and
uncertainties.
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