KMG Chemicals 1Q Profit Narrowly Edges Ahead of Expectations

KMG Chemicals (NASDAQ:KMGB) reported Thursday a stronger first-quarter profit from the year-earlier period, however its results only marginally beat estimates, doing little to impress traders.

The Houston-based company posted net income of $3.5 million, or 31 cents a share, compared with $4.6 million, or 41 cents a share, in the same quarter last year, narrowly beating the Street’s view of 30 cents.

Revenue for the manufacturer of specialty chemicals used to clean chips, treat electric and telephone utility poles and preserve wood, was $62.1 million, up 26% from $49.4 million, missing the Street’s view of $59.3 million.

KMG, which also makes animal health pesticides, said sales were led in its electronic chemicals and animal health products, up 60% and 18%, respectively, partially offset by slightly lower sales in its wood treating unit, its largest segment by sales.

The company was comparing wood treatment sales to the year-earlier first-quarter, where decreased costs for raw materials helped the company post unusually high revenue.

Neal Butler, KMG chief executive, said revenue in electronic chemicals improved despite flat demand, and the company believes the trend will continue into the current quarter.

Looking ahead, KMG said it continues to search for additional acquisition opportunities in electronic chemicals, noting it is “very pleased” with the progress made so far with its most recent acquisition.

The company sees long-term organic growth in the electronic business, with $15 billion of expansions in progress or announced over the next few years.