Castle Reports Strong 2Q Sales
A.M. Castle & Co., Oak Brook, Ill., reported net income of $3.7 million in the second quarter, an increase from both the prior year’s quarter and the first quarter of 2011. The specialty metals and plastics distributor reported net income of $2.7 million during this year’s first quarter and just $400,000 in second-quarter 2010.
Net sales totaled $282.6 million for the three months ended June 30, an increase of 17.7 percent compared to the second quarter of 2010. Net sales were up slightly from the first quarter.
For the first six months of 2011, Castle reported net sales of $555.4 million, an increase of 19.9 percent compared to first-half 2010. This half’s net income of $6.4 million was a big reversal of the $4.2 million loss posted during the same period last year.
“We experienced strong sales volume in the second quarter reflecting continued improvement in demand within several key end-use markets, including oil and gas, mining and heavy equipment, general industrial markets and automotive. Average tons sold per day for the second quarter of 2011 represent the highest level experienced by the company since the fourth quarter of 2008,” said Michael Goldberg, president and CEO.
For the second quarter, sales in the company's Metals segment totaled $252.3 million, 18.3 percent higher than last year. Metals segment tons sold per day were up 18.1 percent from the second quarter of 2010 and up 3.9 percent sequentially compared to the first quarter. Average tons sold per day for the second quarter of 2011 represent the highest level experienced by the company since the fourth quarter of 2008. The increase in sales volume was primarily driven by higher demand for alloy bar and SBQ bar, particularly from oil and gas and general industrial markets.
Additionally, Goldberg said, “the supply side continues to support the positive outlook for our long products business. Carbon alloy bar pricing, which surged over the past six months, appears to be taking a pause before another expected round of increases later in the year. SBQ and alloy bar continue to be on allocation, and customer inventory levels seem to be under control.”
The company’s days sales in inventory was 124 on a trailing three-month basis at the end of the quarter, down from 142 days at the same time last year. The company has been working to build inventory levels while maintaining turnover rates in order to support sales.
“Recent data issued by the MSCI suggests that total industry volumes are about 80 percent of 2008 peak levels, which would be very similar to our own experience,” Goldberg said. “We expect over the next couple of years that we will exceed previous peak volumes, especially given the likely recovery in the aerospace market and the continuing demand from many of the energy markets.”
While the inventory overhang that has plagued the aerospace market for several years has not yet been worked through, there are indications the end is approaching. “Our aerospace activity has increased, month by month, in terms of bookings. That is a good indicator that demand is being pulled through. Once we get to the point where the inventory in the channel normalizes, we would absolutely expect to see a pretty significant uplift in our aerospace business,” Goldberg said.
Overall, he offered a generally positive perspective on the second half of the year. “Given the continued industrial economic outlook, we remain optimistic about the balance of the year. Our markets appear to be in good shape, with increasing optimism that aerospace will continue to gain momentum. Volumes and revenues have been increasing quarter-over-quarter and our operating performance is improving," he said.