Claymont Steel Reports 3rd Quarter Results
11/14/2007 - Claymont Steel Holdings reported net income of $1.0 million on revenues of $71.5 million for the third quarter of 2007; earnings were impacted by difficulties restarting the reheat furnace following a scheduled maintenance shutdown at the plate mill.
Claymont Steel Holdings reported net income of $1.0 million on revenues of $71.5 million for the third quarter of 2007.
Third Quarter Results—Net income of $1.0 million ($.06 per share) compare to net income of $6.4 million ($0.57 per basic share) in the third quarter of 2006. Revenues of $71.5 million compare to revenues of $84.0 million in third quarter of 2006, and shipments of 83,739 tons compare to shipments of 106,875 tons (which included 11,587 tons of conversions) in the third quarter of 2006.
Average spread was up by $14 per ton from the previous quarter as decreases in scrap costs outpaced a decline in selling prices which averaged $854 per net ton for the quarter. Results were impacted by a planned plate mill outage in July and the associated problems restarting the reheat furnace.
The company noted that adjusted EBITDA of $7.0 million, net income of $1.0 million, and earnings per share of $.06 were all in line with the company's third-quarter earnings guidance issued in early October.
Management Comments—“Our employees have responded well to a difficult quarter as evidenced by our record-breaking production and shipments in the month of October,” said Chairman and CEO Jeff Bradley. “They faced a set of unexpected challenges coming out of the planned mill outage and rallied strongly as a team to address them. Victor Clark, our new Vice President of Operations, was instrumental in providing the necessary leadership at this time," said Bradley.
"We also continued to make progress on our major sales initiatives, acquiring 20 new accounts in the quarter and shipping record volumes in Custom Burning where shipments increased by more than 30% over the second quarter and are on track to increase by more than 50% for the full year."
"I am very encouraged with the strong start in the 4th quarter as demand for our product continues to be solid,” continued Bradley. “Price levels are increasing as expected and we appear to be making progress reducing the operational volatility that we have experienced so far this year. The fourth quarter should be a good spring board into next year," he added.
Operating Results—Gross profit of $10.0 million decreased from the previous quarter due primarily to the previously disclosed $17.1-million burden of decreased shipments, increased costs and lost production associated with the planned plate mill outage in July and related issues restarting the reheat furnace. Gross profit for the period ending on September 29, 2007 was down $26.4 million verses the same period in 2006 largely due to higher scrap costs and the aforementioned operating issues.
Selling, general and administrative costs were $0.5-million higher than the second quarter due to expenses paid for recruiting, legal and Sarbanes Oxley compliance consulting. For the nine-month period, expenses were only slightly higher with no significant contributing factor.
The company’s effective tax rate is estimated to be 37.3% for the third quarter of 2007. During the quarter, the company continued its reinvestment plan, spending $3.2 million in capital expenditures. Average net debt for the quarter remained approximately flat from the second quarter at $150.0 million. "In the fourth quarter, we expect to continue to reduce debt with the free cash the company will generate", commented Allen Egner, Interim Chief Financial Officer.
Outlook—The company said that it expects fourth quarter shipments to be in the range of 100,000 to 105,000 net tons as the plate mill operations improves over the third-quarter operating rates. The company also expects earnings for the quarter to fall between $.30 and $.45 per share, burdened as previously disclosed by $2.3 million of excess cost relating to third-quarter operating issues embedded in the inventory at the end of the third quarter.
Claymont Steel manufactures and sells custom discrete steel plate in North America. Claymont's headquarters and manufacturing facilities are located in Claymont, Del.
