Castle Reports Profitable Third Quarter > Metal Center News

Castle Reports Profitable Third Quarter

Nov. 14, 2012

Castle Reports Profitable Third Quarter

A.M. Castle & Co., Oak Brook, Ill., returned to profitability in the third quarter, posting net income of $3.2 million during the three months ended Sept. 30. The distributor of specialty metals and plastics had reported a net loss of $3.0 million the previous quarter. Net earnings were off 7.8 percent from third-quarter 2011.

Net sales during the quarter totaled $304.0 million, an increase of 3.0 percent from the same period in 2011, but down 7.7 percent from the previous quarter.

"We made progress toward our goal to improve operating margins," said Scott Stephens, vice president-finance and chief financial officer, who also served as interim CEO during the third quarter. "Through strong gross material margin execution and effective cost management, we achieved the third-quarter profit levels that we had anticipated, despite external headwinds, including declining scrap and commodity prices and continued uncertain customer demand."

In the company’s Metals segment, third-quarter net sales of $272.4 million were 3.0 percent higher than last year, primarily due to the acquisition of Tube Supply last December. The acquired operation contributed net sales of $39.9 million in this year’s third quarter. Metals segment tons sold per day, excluding Tube Supply, were down 9.2 percent in the recent quarter, compared to third- quarter 2011.

“Most key end-use markets experienced softer demand as customers adjusted their inventory levels due to a more cautious outlook,” Stephens said. However, volumes increased by 8.5 percent from July to September, suggesting a strengthening in the markets.

"We remain cautious heading into the fourth quarter, which has historically been seasonally slower for the company. Nevertheless, we expect daily sales in the fourth quarter of 2012 to be comparable to third-quarter levels and expect gross material margins in the fourth quarter of approximately 27 percent,” Stephens said. “We continue to be optimistic about our global growth opportunities in our targeted end markets, and we are committed to expanding our business as we focus on cost management and improved operating efficiency for the balance of 2012 and into 2013."

Just prior to quarter’s end, A.M. Castle’s board of directors hired Scott J. Dolan to serve as the company’s president and CEO. "Scott Dolan possesses the qualities we sought in a CEO to execute A. M. Castle's strategy, engage our employees and deliver improved results for shareholders," said Brian P. Anderson, chairman of the board.

Dolan, who most recently worked as a vice president for the combined United and Continental Airlines, said he is in the process of reviewing the entire company from top to bottom. “I plan to evaluate all aspects of the business over my first 90 days, and act very quickly to implement process improvements, organizational changes and an overall execution culture that will enable us to drive performance,” he said.

Also during the quarter, Castle’s board dealt with reports of a possible takeover from the Platinum Equity group, a minority shareholder. Castle’s board is determined to rebuff any attempts from the private group.

“We evaluated Platinum’s stated intentions and the strategic alternatives available to our company. Based on this assessment, the board determined it is in the best interest of Castle and its shareholders to pursue Castle’s business plan as a standalone entity,” said Anderson.