COLUMBIA, Md., April 03, 2020 (GLOBE NEWSWIRE) -- W. R. Grace & Co. (NYSE:GRA) today provided an update regarding its preliminary 1Q20 financial results, response to the COVID-19 pandemic, and strong financial position.
Preliminary 1Q20 Financial Results
Grace expects 1Q20 Adjusted EPS to be at the high end of its February 4, 2020 outlook range of $0.65 to $0.72 per share, which included an unfavorable impact of $0.06 to $0.10 per share from the effects of the COVID-19 pandemic.
The significant economic impact of the rapidly evolving pandemic, including lower manufacturing activity and transportation fuel demand, will negatively affect our full-year results and outlook. We are evaluating the effect of the pandemic and the policy responses of governments on our financial results for the remainder of the year and will provide an update on our first quarter earnings conference call scheduled for April 30.
“Grace is well positioned to meet the operating and financial challenges of the global pandemic,” said Hudson La Force, Grace’s President and Chief Executive Officer. “Our first priority is the health and safety of our employees. We have fully implemented our pandemic response plan, including significant new safety protocols throughout our operations. We are also focused on business continuity for our customers. Our manufacturing operations and global supply chain have not been materially impacted at this point. Our businesses are designated as critical infrastructure by the U.S. Department of Homeland Security. Our global manufacturing footprint, strategic flexibility and strong business continuity plans position us to remain a reliable technology supplier to our customers.”
Strong Financial Position and Focus on Cash Generation
Grace’s balance sheet and cash position remain strong, with ample liquidity and resilient cash flows. We have disciplined approaches to cash flow generation and capital allocation and made cash flow our principle operating and financial metric in March when COVID-19 became a global pandemic.
“In today’s highly uncertain macro environment, we are reducing capital spending, working capital, and operating costs to ensure we continue to generate strong free cash flow,” continued La Force. “We are adjusting our manufacturing operations to match lower near-term demand.”
“Grace has a proven track record of effectively adapting to dynamic and challenging conditions,” concluded La Force. “We expect to safely and successfully navigate the challenges the pandemic creates, and I am confident our high-value technologies, leading market positions, and deep customer relationships will allow us to capture new opportunities in the recovery to follow.”
Ample Liquidity: At the end of 1Q20, available liquidity was over $600 million including cash-on-hand and revolving credit facilities. We have not drawn on our $400 million revolver.
Resilient Cash Flows: Our cash position is strong, and we are taking proactive actions to further support free cash flow. We are aggressively managing all operating costs, reducing net working capital, and targeting at least a $30 million reduction to our $195 million of planned capital expenditures for 2020 by delaying certain growth and productivity investments.
Limited Debt Service: Grace’s balance sheet is well positioned with no maturities related to our term loans, revolving credit facility, or bonds until September 2021. The covenant-lite credit agreement includes only one minor springing financial covenant on our revolving credit facility that is not expected to affect our ability to access the full amount of the facility.
Minimal Pension Funding Requirements: Grace’s U.S. qualified pension plans are well funded with expected cash contributions of only approximately $1 million per year for the next three years. The expected cash contributions related to Grace’s unfunded, pay-as-you-go and non-U.S. pension plans are approximately $15 million per year for the next three years. These amounts are consistent with 2019 and are reflected in our earnings and operating cash flows.
Committed to Our Dividend: Grace increased its quarterly dividend 11% for 2020 and paid the first quarter dividend on March 17, 2020. We remain fully committed to maintaining our dividend.
Share Repurchase: We temporarily suspended our share repurchase program in early March when it became clear the epidemic would become a pandemic. We repurchased $40 million of common stock in 1Q20.
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.
