Innospec (IOSP) has reported 67.98 percent plunge in profit for the quarter ended Sep. 30, 2016. The company has earned $11.40 million, or $0.47 a share in the quarter, compared with $35.60 million, or $1.45 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $19.10 million, or $0.78 a share compared with $29 million or $1.18 a share, a year ago. Revenue during the quarter dropped 19.16 percent to $205.50 million from $254.20 million in the previous year period. Gross margin for the quarter expanded 298 basis points over the previous year period to 38.54 percent. Total expenses were 90.80 percent of quarterly revenues, up from 83.79 percent for the same period last year. That has resulted in a contraction of 701 basis points in operating margin to 9.20 percent.
Operating income for the quarter was $18.90 million, compared with $41.20 million in the previous year period.
Commenting on the third quarter results, Patrick S. Williams, president and chief executive officer, said, "I am pleased to report that, from an operations perspective, the third quarter met our expectations despite a number of one-off items that negatively impacted our earnings. Outside of this we have also seen the phasing of orders into the fourth quarter and an increase in stock-based compensation costs driven by a 32 percent increase in our share price. With this in mind we expect a strong end to the year and to carry this positive momentum into 2017."
Operating cash flow falls marginally
Innospec has generated cash of $86.80 million from operating activities during the nine month period, down 4.19 percent or $3.80 million, when compared with the last year period. The company has spent $5.70 million cash to meet investing activities during the nine month period as against cash inflow of $22 million in the last year period
The company has spent $50.60 million cash to carry out financing activities during the nine month period as against cash outgo of $25.40 million in the last year period.
Cash and cash equivalents stood at $167.10 million as on Sep. 30, 2016, up 30.85 percent or $39.40 million from $127.70 million on Sep. 30, 2015.
Working capital increases sharply
Innospec has recorded an increase in the working capital over the last year. It stood at $320.20 million as at Sep. 30, 2016, up 29.79 percent or $73.50 million from $246.70 million on Sep. 30, 2015. Current ratio was at 3.01 as on Sep. 30, 2016, up from 2.25 on Sep. 30, 2015.
Cash conversion cycle (CCC) has decreased to 71 days for the quarter from 103 days for the last year period. Days sales outstanding went up to 58 days for the quarter compared with 47 days for the same period last year.
Days inventory outstanding has decreased to 59 days for the quarter compared with 94 days for the previous year period. At the same time, days payable outstanding went up to 45 days for the quarter from 38 for the same period last year.
Debt moves up
Innospec has witnessed an increase in total debt over the last one year. It stood at $147.50 million as on Sep. 30, 2016, up 9.58 percent or $12.90 million from $134.60 million on Sep. 30, 2015. Total debt was 14.14 percent of total assets as on Sep. 30, 2016, compared with 13.24 percent on Sep. 30, 2015. Debt to equity ratio was almost stable at 0.23 as on Sep. 30, 2016, when compared with the last year. Interest coverage ratio deteriorated to 27 for the quarter from 41.20 for the same period last year.
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