Falling Prices Prompt Universal Stainless to Reduce Q4 EPS Guidance
11/11/2008 - Universal Stainless & Alloy Products updates its business outlook for the fourth quarter of 2008 to reflect diluted EPS ranging from breakeven to $0.15 due to lower raw material prices.
Universal Stainless & Alloy Products, Inc. updated its business outlook for the fourth quarter of 2008 as part of its quarterly report on Form 10-Q filed on Monday.
In updating its outlook, the company confirmed its forecast of consolidated sales in the range of $45 to $55 million, including sales of $10 to $12 million from its Dunkirk Special Steel segment. However, it now expects that diluted EPS will range from breakeven to $0.15 due to lower raw material prices.
The revised estimates compare with sales of $49.6 million and diluted EPS of $0.65 in the fourth quarter of 2007. The company adjusted from its initial forecast of diluted EPS in the range of $0.20 to $0.35 based on, among other factors, its total backlog of approximately $101 million at September 30, 2008, which compares to a backlog of $97 million at June 30, 2008. The company attributes the increased backlog primarily to tool steel plate and electroslag remelted products.
The company's updated forecast also takes into account recent price decreases for nickel, chrome and carbon scrap, which fell by some 32%, 13% and 52%, respectively, in October due to reduced global demand for stainless steel products. The revised EPS estimate could be further impacted if raw material costs continue to decline.
The updated forecast also reflects the company’s fourth quarter sales expectations, which the company said should approximate $10 to $12 million from the Dunkirk Specialty Steel segment on lower shipments as compared to the fourth quarter of 2007. The company said the anticipated reduction in shipments is a result of lower demand from the effect of the Boeing labor situation on demand for aerospace products and very conservative buying patterns for service centers. Based on current raw material costs, Dunkirk is now expected to generate an operating loss between $1 and $2 million for the quarter.
The company's 2008 fourth quarter estimates do not include any receipts under the Continued Dumping and Subsidy Act of 2000 (CDSOA) Program. The company files claims each year under the CDSOA program to receive its appropriate share of the import duties collected by the U.S. Treasury; it received $586,000 (net of expenses incurred) during the three-month period ended December 31, 2007, which equates to $0.06 per diluted share.
Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products manufactures and markets a broad line of semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The company's products are sold to rerollers, forgers, service centers, original equipment manufacturers and wire redrawers.
