Overstated earnings in the polymer additives business of Ferro Corp. have led the Cleveland-based firm to lower its second-quarter profit estimate almost 70 percent.
Ferro, one of North America's largest polypropylene compounders, was expected to release second-quarter results July 27. But the firm issued a news release July 23 saying that accounting entries for polymer additives ``both overstated the business unit's performance and undermined the reliability of the forecasting process in that unit.''
The report has been delayed until sometime in August, pending conclusion of an internal investigation. The firm also expects to take a noncash charge related to the matter.
Ferro's line of polymer additives includes PVC heat stabilizers, plasticizers, biocides, waxes and lubricants. Spokesman Todd Tyler declined to say which products were included in the overstatements. Most of the unit's sales are in North America.
However, Tyler did confirm that the company's compounding business was not involved.
``Polymer additives and compounding report to the same business, but through different channels,'' he said.
Polymer additives and specialty plastics - including compounding - each generated between $220 million and $240 million in sales for Ferro last year. The company posted total sales of about $1.6 billion.
Ferro officials said an undisclosed number of employees believed to be responsible for the overstatements have resigned or have been put on administrative leave. Tyler declined to estimate the time period the overstatements covered.
``We have investigated this matter internally and believe all of the inappropriate accounting entries have been corrected,'' Ferro Chairman and Chief Executive Officer Hector Ortino said in the release.
Before discovering the overstatements, Ferro had expected its second-quarter earnings to be 34-35 cents per share. Officials since have reduced that estimate to 10-12 cents per share.
Ferro's per-share stock price fell from almost $25 per share July 22 to less than $19 per share by the close of trading July 23. The stock closed July 27 at $20.04.