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Northwest Pipe Reports 3rd Quarter Results
10/26/2007 - Northwest Pipe Co. reported net income of $5.1 million on sales of $92 million for the third quarter, and net income of $15.3 million on net sales of $285 million for the first nine months of 2007.
Northwest Pipe Co. reported net income of $5.1 million on sales of $92 million for the third quarter, and net income of $15.3 million on net sales of $285 million for the first nine months of 2007.
Third-quarter net income of $5.1 million was substantially higher compared to $4.1 million for the third quarter of 2006. Third-quarter sales were $92 million, approximately the same as for the third quarter of 2006.
Water Transmission Group Results—Sales in the Water Transmission Group were $63.9 million compared to $65.5 million for the third quarter of 2006. Gross profit was $14.3 million (22.5% of sales), which compares to $12.7 million (19.4% of sales) in the third quarter of 2006.
"Sales were a little less than our expectations. Margins, however, were very strong, reflecting a positive mix of projects as well as general improvements in productivity," said Brian W. Dunham, Northwest Pipe’s President and CEO.
Tubular Products Results—The Tubular Products Group's sales were $25.2 million in the third quarter of 2007 compared to $22.3 million for the third quarter of 2006. Gross profit increased to $3.1 million, or 12.2% of sales, compared to $2.2 million, or 10.1% of sales for the same period last year.
Fabricated Products Results—Sales in the Fabricated Products Group were $2.9 million compared to $4.7 million for the same period in 2006. The Group reported a small loss for the quarter. "Volume in our propane-tank business was dramatically lower and we have not yet added enough pipe fittings work to offset this decrease. We expect to see these results improve in the future," said Dunham.
Fourth Quarter Outlook—The company continues to forecast a stronger fourth quarter in its Water Transmission Group for overall volume, but cautions that the significant improvement in margins exhibited in the third quarter is not likely to be repeated. "The margin improvement was partially due to a positive mix of projects as indicated earlier," said Dunham. "Based on our current schedules, the mix will not be as favorable in the fourth quarter. Margins should still exceed last year's comparative results, but will not be as strong as the third quarter's margins."
"As we have said previously, we expect the Tubular Products Group to have lower sales in the fourth quarter as a result of normal seasonality. Additionally, we will not be continuing our strategic alliance with U.S. Steel," stated Dunham.
The U.S. Steel alliance began in 2005 with Lone Star Steel, which U.S. Steel subsequently acquired. In this arrangement, the company produced pipe for the oil and gas industry under Lone Star's label and Lone Star distributed these products. “The termination of this arrangement has impacted our backlog and will also impact our near term sales and earnings,” noted Dunham. “However, we are pleased to announce that we have signed an agreement with a new sales and marketing company for energy tubular products, LSS Group of Houston, Texas. We believe we will be back in the market with our products under our own name in the near future.”
The company expects its Fabricated Products Group to increase sales slightly over its current level and generate a small positive margin in the fourth quarter. “We now have several pipe fittings projects slated for this facility,” stated Dunham. “However, we will not see much change in volume or profitability until next year.”
Longer Term Outlook—The company reported a backlog of $174 million as of September 30, 2007, which compares to an order backlog of $195 million at September 30, 2006. “While our backlog is lower, as expected, the fourth quarter should be a strong bidding quarter and we are forecasting an increase in the backlog by the end of the year,” said Dunham. “Furthermore, the 2008 market continues to look very strong and we are continuing to focus on building our capacity to address the opportunities we expect in the years ahead.”
The company announced the acquisition of Continental Pipe, in Pleasant Grove, Utah, last quarter and is now announcing plans for further expansion. “We have agreed to purchase two new state-of-the-art spiral weld pipe mills from Wilson Byard, Ltd.,” Dunham announced. “These mills will be built jointly by Wilson Byard and Northwest Pipe in our Adelanto, California, facility. One of the mills will remain in Adelanto, while the other will be designed to be relatively transportable and will ultimately be deployed at a location to be named later."
The company said that it is also in the process of acquiring additional acreage adjacent to its Saginaw, Texas, facility. This land will be used to reconfigure some manufacturing operations and future expansion.
Northwest Pipe Co. manufactures welded steel pipe and other products in three business groups. Its Water Transmission Group is a leading supplier of large diameter, high-pressure steel pipe products that are used primarily for water infrastructure in North America. Its Tubular Products Group manufactures smaller diameter steel pipe for a wide range of construction, traffic signposts, agricultural, energy, industrial and mechanical applications. Its Fabricated Products Group manufactures propane tanks and other fabricated products. The company is headquartered in Portland, Ore., and has ten manufacturing facilities across the United States and Mexico.
