Sterling Chemicals Announces Styrene Business Exit to Pursue Other Strategic Initiatives
13 Novembre 2007 - 11:00PM
PR Newswire (US)
HOUSTON, Nov. 13 /PRNewswire-FirstCall/ -- STERLING CHEMICALS, INC.
(OTC:SCHI) (BULLETIN BOARD: SCHI) announced that it will exit the
styrene business to pursue other strategic initiatives. This
decision followed the clearance under the Hart-Scott-Rodino Act of
a styrene supply agreement with NOVA Chemicals Inc. ("NOVA") that
has subsequently been assigned by NOVA to INEOS NOVA LLC ("INEOS
NOVA") and INEOS NOVA's nomination of zero pounds of styrene under
the supply agreement for the balance of 2007. The clearance under
the Hart-Scott-Rodino Act caused the agreement to become effective
and triggered a $60 million payment obligation to Sterling due
November 27, 2007. This payment, combined with cash on hand of $29
million at September 30, 2007 and the actions discussed below, are
expected to result in at least $150 million net available cash in
addition to Sterling's unused credit lines. In accordance with the
terms of the supply agreement, INEOS NOVA is expected to assume
Sterling's contractual obligations for future styrene deliveries
and Sterling has exercised its right to permanently shut down and
decommission its styrene plant. Under the agreement, Sterling is
responsible for its closure costs of the styrene facility and is
also subject to a long- term commitment to not reenter the styrene
business for a period of time. The closure costs of the styrene
facility are expected to be between $10 million and $15 million,
which include the payment of employee severance costs and
decommissioning costs. Sterling expects $3 million to $5 million of
these costs to be expensed during the fourth quarter of 2007, with
the balance expensed during 2008. The cash flow impact of these
costs will be offset by approximately $90 million expected from the
monetization of styrene-related working capital during the balance
of 2007 and the first quarter of 2008. Sterling expects to record
an impairment charge of approximately $3 million (before taxes)
during the fourth quarter of 2007 related to incomplete capital
projects associated with its styrene operations. Unless certain
strategic initiatives being pursued are implemented, Sterling
anticipates reducing its workforce over the next nine months in
connection with its exit from the styrene business. This reduction
of workforce would result in severance costs of between $4 million
and $5 million. In an effort to mitigate these disruptions, reduce
costs and add value to its Texas City site, Sterling is actively
engaged in third-party discussions regarding strategic initiatives
that would require the services of a significant number of its
dedicated styrenics employees. Sterling's remaining acetic acid
business continued its excellent performance during the third
quarter of 2007 and its plasticizers business is performing as
expected. Sterling expects to file third quarter 2007 financial
results on November 14, 2007. In anticipation of this business
closure, Sterling has been evaluating other projects to utilize its
styrene-related facilities in alternative manufacturing processes.
Sterling believes that successfully reengineering and deploying
these assets at our Texas City site will have substantially greater
value than selling the styrene-related equipment for their base
metal value. "Our deep water port facilities, rail access, other
infrastructure assets coupled with Sterling's talented operating
team would complement the development of any chemical or oil and
gas related activity at our Texas City facilities," said Richard
Crump, Sterling's Chief Executive Officer. "These assets, our
remaining operations, strong balance sheet and substantial cash
position leave us in an excellent position to pursue our strategic
growth initiatives either alone or in partnership with others." If
one or more of these strategic initiatives are consummated over the
next few months, the reduction to Sterling's workforce, the amount
of severance payments and the other styrene business closure costs
could be reduced significantly. Based in Houston, Texas, Sterling
Chemicals, Inc. manufactures petrochemical products at its
facilities in Texas City, Texas. Statements in this press release
that contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, include,
but are not limited to, statements concerning the amount of
expected closure costs, the amounts and times when closure costs
are expensed, the amount of resulting impairment charges, the
timing of any reductions in workforce, the number of employees
involved and the amount of any resulting charges to operating
income, the timing and amount of the cash flow received from the
sale of styrene-related inventories, the possible implementation of
strategic initiatives and the ability of Sterling to use the space
and infrastructure that are currently associated with its styrene
operations. Such statements are inherently subject to a variety of
risks and uncertainties that could cause actual results to differ
materially from those anticipated or projected. A discussion of the
risk factors that could impact these areas and Sterling's overall
business and financial performance can be found in Sterling's
filings with the Securities and Exchange Commission, including
Sterling's Annual Report on Form 10-K. Investors and analysts
should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of this press
release, and Sterling undertakes no obligation to publicly update
or revise any forward-looking statements. Copies of Sterling's most
recent Annual Report on Form 10-K are posted on, or may be accessed
through, Sterling's website at http://www.sterlingchemicals.com/.
DATASOURCE: Sterling Chemicals, Inc. CONTACT: John Beaver of
Sterling Chemicals, Inc., +1-713-654-9548 Web site:
http://www.sterlingchemicals.com/
Copyright