Universal Stainless Says Demand Recovery Proceeding Slowly
05/03/2013 - As it reported its first quarter 2013 results, Universal Stainless & Alloy Products, Inc. said it saw increased tons shipped to most major end markets, with shipments to aerospace up 5%, power generation up 17%, heavy equipment up 27%, and general industrial market up 124%, offset by 23% lower shipments to the oil and gas market, all in comparison to the fourth quarter of 2012.
Universal Stainless & Alloy Products, Inc. reported first quarter 2013 results in line with its recent guidance. Sales for the first quarter of 2013 were US$49.1 million compared with US$74.6 million in the first quarter of 2012.
Operating income for the first quarter of 2013 was US$0.2 million compared with US$9.7 million in the first quarter of 2012. Net income for the first quarter of 2013 was US$0.04 million compared with net income of US$6.3 million in the first quarter of 2012.
On 25 April 2013, the company reported that it expected first quarter 2013 revenues to approximate US$49 million and operating income and net income to be at break-even levels.
The company had positive cash flow from operations of US$4.4 million for the first quarter of 2013, compared with a use of cash of US$3.8 million in the first quarter of 2012. Capital expenditures in the first quarter of 2013 were US$3.6 million. At 31 March 2013, the company had total debt of US$104.7 million, or 34.5% of total capitalization, compared with US$106.7 million, or 35.0% of total capitalization, at year-end 2012.
Shipment volume for the first quarter of 2013 decreased 31% from the first quarter of 2012 but increased 8% from the 2012 fourth quarter. The sequential improvement reflected increased tons shipped to most major end markets, with shipments to aerospace up 5%, power generation up 17%, heavy equipment up 27%, and general industrial market up 124%, offset by 23% lower shipments to the oil and gas market, all in comparison to the fourth quarter of 2012.
Chairman, President and CEO Dennis Oates commented, "Our sales, shipment volume and order entry demonstrated sequential improvement in the first quarter of 2013, but they were well below their record levels in the first quarter last year. Demand recovery in most of our end markets is proceeding slowly. Customers within the supply channel continued to closely manage their inventory levels, and inventory correction by customers also continued in the quarter. Lower value shipment mix in a competitive marketplace further affected our performance.
"We maintained our focus and stayed on track with our plan to move to higher margin premium alloys. These efforts have increased costs to achieve industry and customer approvals including maintaining our staffing levels at North Jackson despite low shipment volume and production activity levels. Further, higher depreciation expense reflecting commissioning of the equipment in our North Jackson facility reduced our profit margins in the quarter.
"Despite its challenges, we reached a major milestone in the first quarter with the receipt of the first customer approvals for our premium-grade, VIM-melted products. The qualification process of these products required an intensive effort throughout our organization as we developed and refined processes, practices and support systems. These new processes will make us a better company.
"The outlook for the remainder of 2013 is for continued, gradual improvement in supply channel demand. With the longer-term outlook for our end markets remaining strong, we will stay focused on aggressively seizing immediate market opportunities through excellent customer service and products, on further leveraging the strengths of all our facilities, and on moving to an enhanced sales mix with higher margin products."
As a result of the North Jackson acquisition, the company's operating facilities have become more integrated; resulting in management viewing the company as one unit. Given the progress of the North Jackson integration to date and this change in management's view, the company has moved to one reportable segment beginning with the current period being reported — in line with its previously disclosed plan to do so.
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, oil and gas, 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.
