Wednesday, July 15, 2009

Worthington up despite horrible results (WOR)

AlphaNinja - Worthington Industries (WOR) reported earnings that missed consensus expectations by 5cents on the bottom line (net income) and $6mil on the top line (revenue). The stock is up however, due either to the broad market's gains or the possibility that results in their auto and construction end markets may be bottoming out.

Before I get into segment results, here's the company's breakdown of sales by market (not a ton of detail, but worth sharing). This is from not the current quarter but the previous one:






As one would guess, a firm with 62% exposure to construction and auto markets is having a horribly difficult time. Sales were down dramatically, leading to an operating loss:



The company's comments on segment results include the "adverse" conditions at GM and Chrysler:


Quarterly Segment Results
-In the Steel Processing segment, quarterly net sales were down 57%, to $179.1 million from $412.7 million in the comparable quarter of fiscal 2008. Volumes declined 55% due to drastically reduced demand caused by the recession and the difficulties at GM and Chrysler. The continued decline in the price of steel also negatively impacted average selling prices and resulted in an additional inventory write-down of $5.0 million. The operating loss was $22.1 million for the quarter compared to operating income of $25.5 million in the year ago quarter.

-In the Metal Framing segment, net sales decreased 51%, to $110.5 million from $225.5 million in the comparable quarter of fiscal 2008. This sales decrease was the result of a precipitous drop in demand due to weakness in the commercial construction market. The operating loss was $3.5 million for the quarter compared to operating income of $15.4 million for the prior year quarter.

-In the Pressure Cylinders segment, net sales declined 24%, to $129.0 million from $170.7 million in the comparable quarter of fiscal 2008, primarily due to significantly lower sales in the European operations caused by lower volumes and a stronger U.S. dollar. While sales were also down in the North American operations, there was market share growth in camping cylinders and a seasonally strong fourth quarter for gas grill cylinders. Declining raw material prices and lower manufacturing expenses aided the current quarterly results. Operating income was $9.2 million, versus $20.7 million for the year ago period.

.
Worthington is doing its best to align costs (20% headcount reduction) with the new "run-rate" in its end markets. By that I mean lower annual construction numbers as well as annual auto sales in the 9-10million range, down from the previous (and unsustainable) 14-16million "run-rate." It is companies that react well to these new realities, and Worthington's restructuring activities may help it emerge from this recession leaner.


Worthington still has access to its credit facilities, but those are only good 'til they're not. The company has maintained (though at a lower level) its dividend, likely due to company pride (continued dividends since 1968) rather than prudent business decision-making. The conference call starts in 20minutes, maybe there will be some good additional details...

No comments:

Post a Comment