Horsehead Announces Third Quarter 2011 Earnings
11/08/2011 - Horsehead Holding Corp. reported consolidated net earnings of $23.1 million ($0.52 per diluted share) for the third quarter of 2011.
Horsehead Holding Corp. reported consolidated net earnings of $23.1 million ($0.52 per diluted share) for the third quarter of 2011. Results include a noncash mark-to-market adjustment related to open hedge positions that increased net earnings by $23.7 million ($0.54 per diluted share). Results excluding the hedge adjustment, a net loss of $(0.7) million, compares to a net loss of $(2.4) million ($(0.05) per diluted share) for the year-ago third quarter.
“Demand for our products and services continued to be strong for the quarter,” said Jim Hensler, President and Chief Executive Officer. “However, we experienced unusually high operating costs and reduced shipments due to production difficulties at the Monaca smelter, planned maintenance outages, and other one-time costs combined with higher energy costs. INMETCO turned in another solid quarter.”
“We are pleased to have our hedging program in place for 2012 and the first half of 2013, although it has caused, and may continue to cause, volatility in reported earnings,” continued Hensler. “Our financing activities during the third quarter including the convertible notes offering and the new revolving credit facility have helped us to accumulate $250 million of cash as of September 30, 2011. We believe we are well positioned to move forward with the new zinc plant project,” he said.
Looking ahead,Hensler added, “Steel industry capacity utilization continues to be in the low-to-mid 70% level. While we continue to believe there is still considerable upside to current dust receipt levels in the long-run, we expect to see a slight decline in steel output and, hence, dust receipts in the fourth quarter based on recent public comments by several steel producers.
“We will complete the series of previously announced major maintenance outages at our recycling plants in early November,” continued Hensler. “We recently announced that we had entered into a ten-year agreement to expand and extend our recycling services with Nucor Steel. We expect to begin receiving dust from the additional Nucor plants under this new agreement by the beginning of next year. At projected steel industry operating levels, it is likely that we will idle one or more kilns in our recycling plants until such time that we begin receiving the additional Nucor dust. In addition, we have taken the annual maintenance outage at INMETCO early in the fourth quarter.
“Productivity at our smelter returned to normal late in the third quarter, which should result in production levels for the fourth quarter returning closer to second-quarter levels. We expect energy costs to decline somewhat going forward as metallurgical coke prices have moderated slightly and electricity costs at our smelter will be lower in the fourth quarter as a result of our new power contract.
“We continue to see steady demand for zinc metal and zinc oxide,” continued Hensler. “We expect to continue to operate our full complement of six zinc smelting furnaces for the balance of the year and into the next year. INMETCO continues to operate at full capacity even though tolling receipts softened during the quarter. We have begun to realize the results of the capacity expansion investments we have been making at INMETCO. We expect to be well-positioned to service the U.S. stainless steel industry when new stainless melting capacity is expected to come on-line in mid-2012.
The company announced the acquisition on November 1 of all of the outstanding shares of Zochem Inc, a zinc oxide producer located in Brampton, Ont., for a cash purchase price of $15 million, and said that it was also on track with plans to construct a new lower-cost, environmentally-friendly zinc production facility in Rutherford County, North Carolina. Site preparation work, preliminary permitting activities and engineering continue to be underway. The company said it has begun to order longer lead time equipment and continue to target startup of the new plant by the third quarter of 2013.
The company is estimating the construction cost for the new zinc plant to remains at $350 to $375 million. Once fully operational, the company said the new plant should provide it with annual incremental EBITDA of approximately $90 to $110 million. The new plant will be capable of producing special high grade (SHG) zinc and continuous galvanizing grade (CGG) in addition to the Prime Western (PW) grade that the company currently produces.
Horsehead Holding Corp. is the parent company of Horsehead Corp., a leading U.S. producer of specialty zinc and zinc-based products and a leading recycler of electric arc furnace dust, The International Metals Reclamation Company (INMETCO), a leading recycler of metals-bearing wastes and a leading processor of nickel-cadmium (NiCd) batteries in North America, and Zochem Inc., the second-largest single site producer of zinc oxide in North America. Horsehead, headquartered in Pittsburgh, Pa., employs approximately 1,150 people and has eight facilities throughout the U.S. and Canada.
