Hexion announced results for the first quarter ended March 31, 2021. “Our first quarter 2021 results demonstrated strength across the board as Segment EBITDA increased by $41 million, or 56 percent compared to the prior year,” said Craig Rogerson, Chairman, President and Chief Executive Officer.

“This is the third consecutive quarter we’ve posted solid year-over-year improvements in Segment EBITDA as our product portfolio is well positioned to benefit from the improving demand we are seeing from new home construction, remodeling, wind energy, and general commercial construction, as well as the general economic recovery from the pandemic. We were also pleased to drive a significant increase in our Segment EBITDA margins in the first quarter, which exceeded 15%, and reflects our multi-year efforts to strategically invest in highly-targeted growth capital expenditure projects and align our portfolio with more sustainable products. For example, in 2020, about 20 percent of our sales came from new products that were developed within the last five years, such as our recently-introduced ArmorBuilt™ fire resistant wrap, and we are working closely with our research and development teams to drive this percentage even higher over the next several years. In addition, our first quarter results, while very strong, were negatively impacted by the winter storms and do not reflect any potential insurance recovery proceeds in the period. Our associates also remain focused on operating our plants safely by following closely all the proper COVID-19 protocols, and I’d like to recognize their ongoing dedication to serving our valued customers."

Rogerson added: "We were also pleased to complete the sale of our Phenolic Specialty Resin, Hexamine and European-based Forest Products Resins businesses at the end of April. The proceeds from the transaction further improves our financial flexibility and liquidity profile as we used a portion of the proceeds to repay EUR 125 million of the EUR-denominated Senior Secured Term Loan in early May. We are encouraged by the underlying demand trends we are seeing. We expect continued strong progress and a robust second quarter 2021. Going forward, supported by tail winds in multiple key end markets and a track record of controlling costs, we are focused on driving year-over-year earnings growth, generating strong levels of free cash flow, and increasing stakeholder value through opportunistic share repurchases and debt reduction.”

Hexion Completes Strategic Divestiture

On April 30, 2021, the Company completed the sale the sale of its Phenolic Specialty Resin (PSR), Hexamine and European-based Forest Products Resins businesses for approximately $425 million to Black Diamond and Investindustrial. The Company received gross cash consideration for the Held for Sale Business in the amount of $304 million. In addition, the Buyer assumed approximately $31 million of certain liabilities, net of preliminary working capital and other closing adjustments as part of the Purchase Agreement. A subsequent post-closing adjustment to the initial cash considerations will be made in accordance with the Purchase Agreement.

Hexion expects to use the net proceeds to invest in its business and reduced its borrowings under its Senior Secured Term Loan, in accordance with its credit agreement.

First Quarter 2021 Results

In January 2020, Hexion updated its reportable segments to align around two growth platforms: Adhesives; and Coatings and Composites. The Adhesives Segment is organized around Construction Adhesives, Industrial Adhesives, and Intermediates and Derivatives, while the Coatings and Composites Segment is organized around Composites, Performance Coatings, and Base Chemicals. Corporate and Other continues to be a reportable segment.

As of March 31, 2021, the Company reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of its operations for the three months and year ended December 31, 2020 as “Loss from discontinued operations, net of taxes” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented. See Schedules 9 and 10 for additional financial information for our Held for Sale Business.

Total net sales for the quarter ended March 31, 2021 were $753 million, an increase of 10% compared with $687 million in the prior year period. Pricing positively impacted sales by $64 million due primarily to raw material price increases contractually passed through to customers across many businesses, as well as favorable product mix and improved market conditions in our base epoxy resins and specialty epoxy resins businesses. Foreign currency translation positively impacted net sales by $13 million due to the strengthening of various foreign currencies against the U.S. dollar in the first quarter of 2021 compared to the first quarter of 2020. Volumes negatively impacted net sales by $11 million, primarily due to the impact of Winter Storm Uri in the U.S. Gulf Coast on several of our businesses, offset by volume increases in our specialty epoxy resins and global resins businesses. 

Net income for the three months ended March 31, 2021 was $11 million compared to a net loss of $59 million in the prior year period. Total Segment EBITDA from continuing operations for the quarter ended March 31, 2021 was $114 million, an increase of $41 million compared with the prior year period, or 56 percent, reflecting strong gains across both the Adhesives and Coatings and Composites segments. First quarter 2021 was also negatively impacted by $6 million of repair costs and $12 million of lost volume due to temporary manufacturing outages caused by winter storm Uri in the U.S. Gulf Coast.