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Castle upbeat on aerospace sector’s demand for metals

Keywords: Tags  A.M. Castle, earnings report, aerospace, Scott Stephens, corinna petry

CHICAGO — While A.M. Castle & Co. executives have seen second-half demand weaken across numerous metals-consuming sectors, including energy, aerospace stands out as a bright spot for the next two years.

The Oak Brook, Ill.-based company posted net income of nearly $3.2 million for the three months ended Sept. 30, down 16.6 percent from $3.8 million in the same period last year despite a 3.1-percent rise in sales to $304.04 million from $294.86 million. Castle’s third-quarter performance was affected by declines in both scrap and metals pricing.

"The results were in line with our expectations despite the reduction in demand," vice president of finance and chief financial officer Scott Stephens said Thursday during a conference call with investors.

Metals segment tons sold per day fell 9.2 percent compared with the third quarter of 2011, excluding Tube Supply Inc., which the company acquired last year, and were 7.6 percent lower than in the second quarter of this year.

"Most key end-use markets experienced softer demand as customers adjusted inventory levels due to a more cautious outlook," Stephens said.

Looking ahead, "pricing levels, inventory and product mix will be important through the balance of the year," he said. The fourth quarter will present a seasonally slower period with fewer shipping days and customer plant shutdowns.

"We remain cautious based on our customers’ outlooks and sentiment about the global economy. Based on our outlook, getting to a pre-tax profit will be a bit of a challenge," Stephens said. "Our goal is to get to breakeven for (the fourth quarter)."

Castle will cut inventory value by $38 million this quarter, in line with its stated goal of slashing the value by $50 million during the second half.

Next year, "we are most optimistic for the aerospace segment. That business showed meaningful growth second to third quarters, and looks to continue to ramp up and grow into 2013," Stephens said.

In its industrial markets, automotive production should rise again next year, but outside that "you’re into a mixed bag. Meaningful (metals demand) growth is required to overstep 2012 on an annual basis," he said, "and we’re not seeing indications of that at this point. That is a more cloudy picture with not a lot of catalysts for growth yet."

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