Universal Stainless Reports 4Q12 Sales Consistent with Low Activity Levels Industry-Wide
01/29/2013 - Universal Stainless & Alloy Products said economic uncertainty kept customers focused on inventory reduction at 2012 year-end, but there are early signs that some customers are returning to the market, with most predicting only a gradual recovery in meaningful demand.
Universal Stainless & Alloy Products, Inc. reported fourth quarter results in line with its recent guidance. Sales for the fourth quarter of 2012 were US$47.2 million compared with $62.2 million in the fourth quarter of 2011.
Operating income for the fourth quarter of 2012 was $1.8 million, or 3.7% of sales, including $1.3 million of ramp-up expense for the company's North Jackson operation. This compares with operating income of $7.0 million, or 11.3% of sales, in the fourth quarter of 2011, which included $0.9 million of expense for the start-up of North Jackson acquired by the company in August 2011. Excluding the effect of North Jackson in both periods, operating income was 6.8% of sales in the fourth quarter of 2012 and 12.8% of sales in the fourth quarter of 2011.
Net income for the fourth quarter of 2012 was $1.1 million. In the fourth quarter of 2011, net income was $4.3 million.
On 18 January 2013, the company reported that it expected fourth quarter 2012 revenues to approximate $47 million.
For full year 2012, sales were $251.0 million compared with $252.6 million in 2011. Net income for 2012 was $14.6 million compared with $18.1 million in 2011.
For the fourth quarter of 2012, the company had positive cash flow from operations of $12.7 million, even after continued investment in the ramp-up of North Jackson. Capital expenditures in the fourth quarter of 2012 were $4.3 million, including $3.0 million for the North Jackson operation. At 31 December 2012, the company had total debt of $106.7 million, or 35.0% of total capitalization.
Shipment volume for the fourth quarter of 2012 decreased 25% from the fourth quarter of 2011. This reflected a 19% increase in tons shipped to the service center plate market, offset by decreases of 20%, 41% and 53% in shipments to the aerospace, petrochemical and power generation markets, respectively.
Chairman, president and CEO Dennis Oates commented, "Our fourth quarter sales were consistent with low activity levels industry-wide. An expected pick-up in order entry at year end failed to materialize as economic uncertainty kept customers focused on inventory reduction. An exception was the solid demand for service center plate products in the quarter, which have applications in the automotive and heavy industrial markets.
"We achieved further operational improvement company-wide in the fourth quarter, including commissioning of additional equipment and process modifications that will benefit quality and cycle time. However, lower shipment volume and the continued ramp-up of our North Jackson operation resulted in a consolidated operating margin of 3.7% for the quarter.
"We are successfully entering the final stages of the North Jackson ramp-up. The approval process with customers for our vacuum induction melting (VIM) products is proceeding with prime and first-tier OEMs in our major markets.
"Despite a slowdown in order activity that began for us in the second quarter of 2012, our full year sales approximated those of 2011, and our operating margin, even with North Jackson, approached 10% for 2012. We expect our North Jackson operation to begin making an increasingly positive contribution to our results as we go through 2013. In addition, there are early signs that some customers are returning to the market, although most are predicting a gradual recovery in meaningful demand. We are fully focused on further strengthening our position to respond to that demand as it returns."
Segment Review
For the fourth quarter of 2012, the Universal Stainless & Alloy Products segment, which includes the North Jackson operation, had sales of $37.6 million and operating income of $0.2 million, including North Jackson ramp-up costs, yielding an operating margin of 0.6% of sales. In the fourth quarter of 2011, segment sales were $49.2 million, and operating income including North Jackson ramp-up costs was $4.0 million, or 8.2% of sales.
For the fourth quarter of 2012, the Universal Stainless & Alloy Products segment, which includes the North Jackson operation, had sales of $37.6 million and operating income of $0.2 million, including North Jackson ramp-up costs, yielding an operating margin of 0.6% of sales. In the fourth quarter of 2011, segment sales were $49.2 million, and operating income including North Jackson ramp-up costs was $4.0 million, or 8.2% of sales.
Segment sales decreased 24% from the fourth quarter of 2011 on 22% lower tons shipped mainly due to decreased shipments to all customer categories except service centers.
Sales for the Dunkirk Specialty Steel segment were $19.4 million for the fourth quarter of 2012, and operating income was $1.0 million, yielding an operating margin of 5.1% of sales. This compares with sales in the fourth quarter of 2011 of $24.5 million and operating income of $2.5 million, or 10.1% of sales.
Dunkirk's sales decreased 21% from the fourth quarter of 2011 on a 26% decrease in tons shipped mainly due to decreased shipments to all customer categories except OEM.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The company's products are used in a variety of industries, including aerospace, power generation, petrochemical and heavy equipment manufacturing. Established in 1994, the company, with its experience, technical expertise, and dedicated workforce, stands committed to providing the best quality, delivery, and service possible.
