CHICAGO Specialty metals distributor A.M. Castle & Co. hopes to improve profits as it restructures in 2013, but president and chief executive officer Scott Dolan doesnt expect a major pickup in top-line revenue amid a weak demand environment.
The Oak Brook, Ill.-based company posted a full-year net loss of nearly $9.75 million, up more than fivefold from a $1.76-million loss in 2011, on sales that rose 12.2 percent to $1.27 billion.
"We remain cautious based on sentiment from many of our customers and a weaker economic outlook in early 2013 vs. 2012," Dolan said during a Feb. 26 earnings conference call. "We are not anticipating much revenue growth in 2013 compared with the strong start to 2012. What we see (now) is close to the second half of 2012. There is a lot of talk about things getting better, but we are not seeing it yet."
Many Castle customers "clearly ... got into an over-inventoried position," Dolan said, and Castle also built excess stocks last year. "We had too many (mill) orders in place and didnt turn it off fast enough," he said. The company expects to reduce inventories by $50 million by the end of the first half, but Dolan said it wont shed inventories at the risk of losing sales.
The operational restructuring Castle announced last month (amm.com, Jan. 17) is moving quickly, with "one big round of layoffs" affecting some 10 percent of the workforce already executed, Dolan said. "We have executed the initial steps and should see benefits in the first quarter and extending throughout the year.
"We havent lost any key talent in the cost-cutting," Dolan said. As for sales impact, "even in the markets where we announced we will close a warehouse, we have not lost traction in those markets."
The 2012 full-year and fourth-quarter losses were perhaps exaggerated, Dolan said, because Castles customers serve more cyclical markets than do some of Castles competitors.
"It continues to be a difficult environment, but we are optimistic at the levers we do have to pull," he said. "Getting inventory and costs under control sets us up well going forward."