PITTSBURGH Metalico Inc. is considering selling off its lead fabricating segment to focus on its ferrous and nonferrous scrap recycling division.
Scrap prices are expected to remain relatively stable after a recent run-up, according to the Cranford, N.J.-based company, which typically generates around 68 percent of its revenue and 95 percent of its operating earnings from recycling.
"(Lead fabricating) is improving in profitability and doing well. The board has made a determination to focus our resources on the ferrous and nonferrous aspect of the business," president and chief executive officer Carlos E. Agüero told investors during a quarterly earnings conference call. "While there is no transaction pending at this time, we feel our lead division could benefit from an examination of all options."
An investment bank will be retained to assist in the evaluation.
The lead fabricating segment generated operating earnings of nearly $1.08 million in the second quarter compared with $693,000 in the same period last year.
But Metalicos net income in the three months ended June 30 tumbled 55.8 percent from a year earlier to $2.94 million, dragged down by a bad-debt expense from a bankrupt steel mill coupled with shrinking metal margins. Sales fell 17 percent to $148.21 million in the same comparison.
A one-time gain of $4.6 million from an undisclosed settlement was partially offset by a $1.7-million write-off for receivables owed by a customer that filed for bankruptcy during the second quarter, although the settlement kept the recycler in the black for the quarter.
Metalicos scrap recycling segment posted operating earnings of $1.5 million, down from nearly $9.48 million a year ago. The company shipped 139,800 gross tons of ferrous scrap during the second quarter, down 3.5 percent from 144,800 tons a year earlier, while nonferrous scrap shipments increased 10.7 percent to 43 million pounds from 38.8 million pounds. The companys Buffalo, N.Y., shredder produced 25,000 tons of material, but executives noted that the facility didnt fully ramp up until May and future output will increase.
Agüero said the company is working to cut its costs by $2.5 million in a competitive environment and had achieved $1.5 million in savings so far.