LOS ANGELES Metal stocks
have built up faster than expected in the supply chain as A.M.
Castle & Co. "moderates" its own inventory levels.
The Oak Brook, Ill.-based
service center saw the year start out "robustly, but weve
seen a softening in the past six weeks," president and chief
executive officer Michael Goldberg told securities analysts
during a quarterly earnings conference call.
A.M. Castle had reported earlier
that despite a $4.3-million first-quarter net loss associated
with a convertible note issue, its metals business chalked up a
strong sales increase over the same period last year, with
higher rates of tons sold per day, paced mainly by the energy
and general industrial markets.
But vice president and
chief financial officer Scott Stevens told analysts that
Castles days sales of inventory (DSI) grew to 155.1 days
in the first quarter from 144.8 days at the end of last year.
He noted that while A.M. Castle expected an increase, this was
nevertheless "a bit higher" than anticipated, and before the
first quarter was over "we began to take steps to moderate our
Goldberg said A.M. Castles
sales rate in March was slightly lower than in February,
reflecting a slowdown that began in the middle of the month and
continued into April. Such a slowdown in March was "unusual"
compared with previous years, he noted.
Goldberg, who estimated the
sales slowdown at 3 to 4 percent, said A.M. Castle also had
seen the emergence of "holes in some of our suppliers
scheduling," which he regards as a "telling signal of a softer
He emphasized that the
comparative weakness wasnt due to any decline in
manufacturing activity or to an "adjustment in underlying
demand," but rather to heavy supply chain restocking earlier in
the year. He pointed out that A.M. Castles customers
dont expect a "significant slowdown." But Goldberg now
sees a "pause or softening to reflect higher inventory levels
throughout the supply chain."
While he still expects sales to
end 2012 about 10 percent ahead of last years $1.1
billion, Goldberg acknowledged that hes "more cautious"
today than he was a couple of months ago. "People are very
conscious now of building up too much inventory, even when
their outlook is good," he said.
Energy and oil and gas, as well
as industrial markets, still have a "significant upside,"
Goldberg said. He cited strength in special bar quality (SBQ)
and alloy steel bar, carbon and alloy plate, and stainless
steel products. Castles plastics business also is
healthy, the company said, although start-up costs for some
automotive projects have squeezed profit margins.