Castle Pleased with Improved Demand

A.M. Castle & Co., Franklin Park, Ill., posted a barely profitable third quarter, but continued its bounce back from a difficult 2009. The specialty metals and plastics distributor reported net income of $100,000, the second-straight quarter of modest profitability following four straight quarterly losses.

Castle reported a net loss of $6.3 million in last year’s third quarter, part of a $26.9 million loss for the full year. For year-to-date 2010, Castle has recorded a loss of $4.1 million.

Castle’s net sales during the third quarter totaled $244.9 million, 33 percent higher than sales reported in last year’s third quarter.

"As the third quarter progressed, we were pleased to see demand in nearly all of our end-markets improve," said Michael Goldberg, president and CEO, in his quarterly report to analysts and investors. "Metals volumes improved sequentially in August and September, with particularly strong demand in the oil and gas and general industrial equipment markets. Alloy bar, carbon bar, SBQ bar and tubing products were some of the best-performing product categories during the last quarter."

Castle’s gross profit margins improved to 25.7 percent, up from 25.2 percent in the same period last year and consistent with the previous quarter. The company has returned to historical inventory-carrying levels in all of its businesses, excluding aerospace. That market continues to make progress in bringing inventories back in line, though the overall supply for aerospace heat-treated aluminum plate remains in excess, Goldberg said.

“Aluminum continues to be overinventoried, and industry sources expect destocking to continue into next year. As a result, the market is extremely competitive, and gross margin recovery to historical levels will continue to be a challenge for the near term,” he said, adding that aerospace demand for non-aluminum products— nickel, titanium and alloy—is solid, and the supply chain is in better balance.

Castle officials are pleased with the general health of most markets. "We believe that underlying demand in the majority of the end-markets we serve will remain steady for the balance of this year. As in the past, the fourth quarter is traditionally our slowest quarter due to fewer shipping days and customer shutdowns. As a result, we would expect to report a small net loss for the fourth quarter," Goldberg said.

“As we think about 2011, we and everyone else are still looking for that catalyst that will spark significant revenue growth. In the absence of that catalyst, most experts predict continued slow and modest growth,” he added.

Pointing to the macroeconomic data, Goldberg said GDP is expected to grow 2.9 percent in 2011, up from 2.4 percent in 2010, while overall industrial production is expected to grow 4.1 percent next year. “So, while these numbers are not as strong as past recoveries, they do show that the recovery still has a lot of life left in it.”

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Wednesday, August 24, 2016