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Synalloy Updates Fourth Quarter Outlook
12/26/2013 - Synalloy Corporation announced that it is now projecting a loss on an adjusted net earnings basis for the fourth quarter of this year.
During October and November, the company's BristolFab unit experienced a pre-tax loss of US$1.4 million. The loss occurred as the company increased the number of production workers from 70 in September to approximately 140 in the past two months in response to a surge in the backlog, with resulting labor efficiencies falling well below profitable levels. The company expects to see this continue into December.
While the Ram-Fab unit has maintained targeted levels of efficiency and profitability, both of the fabrication units have had difficulty adding experienced welders to support the current backlog. As a result, the company is now working with customers to assess how it can better align the production capacity with delivery schedules. This will likely result in downward adjustments to the backlog going forward as the company works through these scheduling issues.
The company, specifically the fabrication management team with the assistance of both the Metals president and the CEO, is highly focused on resolving these issues. It has identified the initiatives and actions to be taken, and the company is confident that it will put the fabrication unit back on a profitable course.
With respect to the other Synalloy business units, BRISMET has been winding down the Bechtel nuclear project which will be completed this month. We have seen the stainless steel tons shipped increase by over 5% in both October and November. However, the product mix was adverse. Six-inch and under pipe shipments were up 50% in each of the past two months, while twelve inch and up pipe shipments were down over 25%. Conversion margins are lower in the small diameter pipe than in the large diameter sizes.
Palmer had good results in October, but shipments were soft in November and are expected to be weak in December as well. Work in November through January typically slows in west Texas this time of year and the recent ice storm reduced shipping days as well.
The Chemicals operation, including the recently acquired CRI Tolling, performed very well in October and November and the company expects more of the same in December.
As the company aggressively addresses the aforementioned issues, it continues to see reasons for optimism in all of the business units and remains confident in Synalloy's future.
Synalloy Corporation is a growth oriented company that engages in a number of diverse business activities including the production of stainless steel pipe, fiberglass and steel storage tanks, specialty chemicals and fabrication of stainless and carbon piping systems.
While the Ram-Fab unit has maintained targeted levels of efficiency and profitability, both of the fabrication units have had difficulty adding experienced welders to support the current backlog. As a result, the company is now working with customers to assess how it can better align the production capacity with delivery schedules. This will likely result in downward adjustments to the backlog going forward as the company works through these scheduling issues.
The company, specifically the fabrication management team with the assistance of both the Metals president and the CEO, is highly focused on resolving these issues. It has identified the initiatives and actions to be taken, and the company is confident that it will put the fabrication unit back on a profitable course.
With respect to the other Synalloy business units, BRISMET has been winding down the Bechtel nuclear project which will be completed this month. We have seen the stainless steel tons shipped increase by over 5% in both October and November. However, the product mix was adverse. Six-inch and under pipe shipments were up 50% in each of the past two months, while twelve inch and up pipe shipments were down over 25%. Conversion margins are lower in the small diameter pipe than in the large diameter sizes.
Palmer had good results in October, but shipments were soft in November and are expected to be weak in December as well. Work in November through January typically slows in west Texas this time of year and the recent ice storm reduced shipping days as well.
The Chemicals operation, including the recently acquired CRI Tolling, performed very well in October and November and the company expects more of the same in December.
As the company aggressively addresses the aforementioned issues, it continues to see reasons for optimism in all of the business units and remains confident in Synalloy's future.
Synalloy Corporation is a growth oriented company that engages in a number of diverse business activities including the production of stainless steel pipe, fiberglass and steel storage tanks, specialty chemicals and fabrication of stainless and carbon piping systems.
