Service Centers

AM Castle Losses due to Restructuring/Low Volumes

Written by Sandy Williams

AM Castle reported a consolidated net loss of $16 million for first quarter 2014, compared to net loss of 10.6 million in first quarter 2013. Metals segment net sales were $219.1 million, 15.2 percent lower than Q1 2013 due to decline in average pricing per ton and volume. Net volume improved by 13.4 percent from fourth quarter 2013 and increased sequentially over the period with highest activity seen in March. Although metals pricing improved during the quarter, no impact was seen on gross profit margins in Q1. AM Castle expects higher prices will improve margins as the year progresses.

“According to industry data, the Company trailed first quarter of 2014 metals industry sales volumes,” said CEO Scott Dolan. “However, we did see year-over-year improvement for certain products and our overall Metals sales volumes increased by 13.4% compared to the fourth quarter of 2013.”

Aerospace was the strongest performing segment in the first quarter. The industrial segment was negatively impacted by a decline in demand from mining and heavy equipment sectors. Industrial sales declined 14 percent year over year but increased 9 percent from Q4 2013. Oil & gas was down 26 percent year over year, but up 14 percent from the previous quarter. AM Castle is optimistic that improving rig counts in Q1 will lead to increased drilling in Q2.

In the metals segment, the average sales price per ton decreased 10.5 percent year over year and tons sold decreased 4.5 percent.

AM Castle incurred $.7 million in restructuring costs primarily due to consolidation of Cleveland facilities and related restructuring costs. Additional restructuring costs of $1-2 million are expected for the consolidation of the Wichita, Houston and Edmonton facilities in the remaining year. Additionally, weather related costs of $1 million and temporary frictional costs of $2.5 million impacted operating costs.

In the company conference call, Dolan said he was pleased with progress made on commercial initiatives.  “We remain focused on growing our business and leveraging our facility and trucking footprint to support that growth while improving on-time delivery and optimizing inventory distribution and timing.”

AM Steel expects to increase revenue levels by about 20 percent by the end of the year.  Responding to suggestions that the recovery is taking longer than it should, Dolan said, “We clearly did not anticipate from the time that we started this that our COGS, our overall pricing, would decline to the level it has. The fact that being the late cycle in the specialty markets have continued to be as weak as they have — and the late cycle nature has taken as long as it has. And quite frankly, as I said throughout the course of last year, I underestimated it. I thought we were in a much stronger place from a commercial perspective to be able to pull off what we are trying to do, and that’s why we spent our time in other areas. That became very clear last year that we had to go deeper and be more transformational in what we were doing in our commercial activity. That’s why we made the change in leadership.” 

Latest in Service Centers