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The Zn Factor

11/01/2006 -  

Nov. 1, 2006 — North American Galvanizing & Coatings, Inc. announced consolidated net earnings of $1.1 million on sales of $20.2 million for the third quarter, and net earnings of $3.5 million on sales of $53.8 million for the first nine months of 2006.

 

The Zn Factor

During the six months ended June 30, 2006, North American Galvanizing’s forward purchases of zinc at prices lower than current market contributed $2.9 million to gross profit.

Pricing on the company's zinc purchases
during the three months ended September 30, 2006 did not vary significantly from current market prices. The company's gross margin did not benefit from forward market purchases during the third quarter.

The London Metals Exchange (LME) market price for zinc in the first nine months of 2006 averaged $1.34 per pound, compared to $.59 in the first nine months of 2005. At September 30, 2006 the LME market price for zinc was $1.52 per pound.

With these increases in zinc costs, the market could react by using other corrosion protection alternatives, such as paint, or by postponing projects.

The company says this potential impact has been minimal to date, and that it does not anticipate it will be a major factor this year. However, the company notes there is no assurance that continuing zinc price increases will be absorbed by the market.

Third Quarter Results—Consolidated net earnings for this year's third quarter were $1.1 million ($.14 per diluted share), compared with $.2 million ($.02 per diluted share) in the third quarter of 2005.

Sales increased 59% over the prior-year third quarter. The main reason for the increase was a higher average sales price and a 4% increase in volume. (Sales prices have increased related to increases in zinc costs.) Average selling prices for galvanizing and related coating services were 53% higher than the prior year third quarter.

Commenting on the results of the third quarter 2006, Ronald J. Evans, President and CEO, said, "We are extremely pleased that we were able to capitalize on strong market demand and pass through increasing raw material costs as our volumes continue at all-time-high levels. Sustained higher volume, coupled with improved net margins and continuing operating efficiencies produced record earnings for our galvanizing business during the third quarter period and the nine month period."

Nine-Month Results—Net earnings were $3.5 million ($.46 per diluted share), compared with $.4 million ($.05 per diluted share) in the first nine months of 2005.

Sales increased 55% over the comparable prior-year period. Sales prices have increased related to increases in zinc costs. The increase in revenues is due to a higher average sales price and a 13% increase in volume over the same period in 2005.

Average selling prices for galvanizing and related coating services were 37% higher than the first nine months of 2005.

North American Galvanizing is a leading provider of hot-dip galvanizing and coatings for corrosion protection of fabricated steel products. The company conducts its galvanizing and coating business through a network of plants located in Canton, Ohio; Denver, Hurst (Dallas/Forth Worth), Houston, Kansas City, Louisville, Nashville, St. Louis and the Tulsa area.