Universal Stainless Lowers First Quarter Earnings Outlook
03/26/2009 - Universal Stainless & Alloy Products lowers its earnings expectations for the first quarter, saying that it no longer expects to meet its previous guidance of breakeven to $0.10.
Universal Stainless & Alloy Products, Inc. has lowered its earnings expectations for the first quarter, saying that it no longer expects to meet its previous guidance of breakeven to $0.10, despite sales that are still expected to range from $32 to $42 million.
The company said that a number of factors contributed to the downgrade, including a breakdown at the Bridgeville facility's Universal Rolling Mill that required a two-week maintenance outage, and reduced operating levels due to lower-than-expected orders. The company said that surcharge revenues were lower than expected due to further declines in raw material values and the consumption of higher-cost materials. Additional factors included costs associated with a 20% reduction in salaried employee headcount and an increase in bad debt reserve.
The company noted that its current backlog had declined to $62 million (vs. $75 million at December 31, 2008) due to lower-than-expected orders in its main end markets. The company said it has adjusted production levels accordingly, including extending the outage for a capital improvement project at its meltshop, previously planned for two weeks, to a minimum of four weeks.
The company said its planned inventory build will support the extended outage, so delivery schedules will not be affected. However, the lower production levels will reduce the company’s operational cost effectiveness and contribute to an expected loss for the first quarter.
"We are seeing the effect of the difficult economic conditions across all our markets and our customers are reluctant to place orders to restock their inventories,” commented President and CEO Dennis M. Oates. “Therefore, we are executing our contingency plan to adjust our operating levels to the economic realities while focusing on customer deliveries and other ongoing business needs. Our plan includes reviewing the composition of our stock inventory in light of the deceleration of business conditions and current outlook that may lead to utilizing certain stock for production of new ingot product.
"Ultimately, the economy and demand for our products are expected to recover and we will be better positioned to take advantage of the market demand,” continued Oates. “Our strong cash position, supplemented by our new credit agreement with PNC Bank, will allow us to continue executing our long-term strategy to strengthen our competitive position through essential capital investment necessary to deliver unparalleled customer service.”
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.
