NEW YORK Exide Technologies is adapting to "the new external realities" of the secondary lead market by closing and idling two of its lead recycling plants, the company said, as it recorded a wider net loss for its fiscal second quarter.
The company posted a net loss of nearly $13.9 million for the three months ended Sept. 30, nearly four times the $3.6-million net loss recorded in the same period a year ago, on sales that fell 7.9 percent to $711.7 million from almost $773 million.
"Continued high core (junk battery) costs and lower (London Metal Exchange) base pricing" had impacted the companys bottom line, Exide executive vice president and chief financial officer Phillip A. Damaska said Monday during a conference call on the companys earnings results.
"The fundamental dynamics of lead recycling in North America have changed," with the ratio of the junk battery price to the LME becoming "higher and less predictable" over the past year, Exide president and chief executive officer James R. Bolch said.
The introduction of 400,000 tonnes of capacity to the marketa reference to the opening of plants by Johnson Controls Inc. and Gopher Resource LLChad likely exacerbated high junk costs, he added.
"We believe in this environment it is no longer prudent to maintain capacity in excess of our internal needs," Bolch said, estimating that the closure of the companys Frisco, Texas, plant and idling of its Reading, Pa., facility will remove 150,000 long tons of capacity from Exides operations.
Bolch disclosed that the company will avoid capital expenditures of $50 million to bring the Frisco and Reading plants into compliance with environmental regulations.
The capacity removal also means Exide is exiting third-party lead sales to focus on its internal requirements, with the company noting that "profit on third-party lead sales was down substantially" for the six months ended Sept. 30.
The companys Transportation Americas division produced some 164,000 tons of lead during the six-month period, down about 3 percent from the same period a year earlier. Some 10 percent of this was sold to third parties and another 12 percent was sold under tolling arrangements.
Junk battery supply had improved notably since the end of September, Bolch said, adding that the Milton, Ga.-based company expects a "normal" battery season this winter.
"The scarcity of cores this year has not just been an issue in the price we had to pay, but from time to time we were running very thin, which brings operational issues," he said. "We now have ample supply and are seeing better pricing in the market."
By exiting third-party sales, there would be "less pressure" on the company to acquire junk batteries on the open market.