Universal Stainless' Net Sales Expected to Drop 19 Percent
10/16/2015 - Specialty steelmaker Universal Stainless & Alloy Products Inc. said that it expects to record a third-quarter loss of US$2.40 to US$2.45 per share, partly on account of costs associated with throttling back production.
In a statement, the company said it incurred US$2.3 million in after-tax charges through temporarily idling plant capacity, inventory write-downs and workforce reductions. The cost also includes damages arising from a vendor's unauthorized substitution of a critical supply part for the melting process.
However, the majority of the loss, about US$1.87 per diluted share, arose from a write-off of all of its goodwill.
All told, the company said that it expects to post net sales of US$43.4 million, a decline of 19 percent from the same quarter last year.
"The company's stock price and recent operating performance reflect very challenging conditions in the specialty steel industry in 2015," Universal Stainless said in a statement.
"The sharp and prolonged decline in the oil and gas market has led many customers to destock inventory. Customers have also delayed purchases due to the continued decline in nickel and other commodity prices in order to capture lower future prices. Additionally, downward trends in commodity prices have temporarily reduced margins because of the misalignment of surcharges with material costs of products shipped," it said.
Nevertheless, Chairman and CEO Dennis Oates said the company is beginning to see signs of a pick-up in demand. He noted that September orders for its premium alloys were 64 percent above the prior two-month average.
"While the recovery may be uneven going through the balance of the year, customers continue to point to 2016 as a year of improvement,” he said.
However, the majority of the loss, about US$1.87 per diluted share, arose from a write-off of all of its goodwill.
All told, the company said that it expects to post net sales of US$43.4 million, a decline of 19 percent from the same quarter last year.
"The company's stock price and recent operating performance reflect very challenging conditions in the specialty steel industry in 2015," Universal Stainless said in a statement.
"The sharp and prolonged decline in the oil and gas market has led many customers to destock inventory. Customers have also delayed purchases due to the continued decline in nickel and other commodity prices in order to capture lower future prices. Additionally, downward trends in commodity prices have temporarily reduced margins because of the misalignment of surcharges with material costs of products shipped," it said.
Nevertheless, Chairman and CEO Dennis Oates said the company is beginning to see signs of a pick-up in demand. He noted that September orders for its premium alloys were 64 percent above the prior two-month average.
"While the recovery may be uneven going through the balance of the year, customers continue to point to 2016 as a year of improvement,” he said.
