NEW YORK Specialty metals and stainless steel producer Carpenter Technology Corp. blames increased customer deferrals for lower-than-expected earnings in its fiscal third quarter.
The Wyomissing, Pa.-based company recorded net income of $32.9 million for the three months ended March 31, down slightly from $33 million in the corresponding quarter of 2012.
Third-quarter net sales totaled $581.4 million, up 7.7 percent from $539.9 million in the same comparison, a gain the company attributed to the companys acquisition of Latrobe Specialty Metals Inc. (amm.com, April 16, 2012).
However, overall growth was offset by lower earnings in the companys specialty alloys operations division as a result of mix degradation and increased deferrals, among other things, it said.
The third quarter saw a significant change in market conditions, with a 14-percent spike in customer deferrals, president and chief executive officer William A. Wulfsohn said during a conference call with analysts April 25.
"Increased customer deferrals during the quarter, combined with low sales to distribution customers and a weak defense-related mix, resulted in lower sales and operating income. While the recent pattern of these deferrals has slowed and order intake has increased, we now expect our full-year earnings to be lower than previously forecast," Wulfsohn said. "We are still targeting low double-digit growth in full-year operating income, on an adjusted basis versus prior year. However, if the fourth quarter has similar in-quarter mix and deferrals as we experienced in the third quarter, we may have difficulty achieving this target."
Wulfsohn said the company now has 10,000 tonnes of available capacity to support growth as demand returns, with the startup of the companys Athens, Ala., facility in early 2014 also expected to contribute.
He added that while lead times have dropped significantly, primarily on lower demand, the company is aiming to maintain these shorter lead times even as demand recovers.
"Weve been trying to improve flow within our operations to achieve and sustain lower lead times no matter where we are in the cycle," Wulfsohn said. "Right now theyre between eight and 14 weeks, but if you go back one-and-a-half years ago, they were out to six months. Our goal is to sell an additional 10,000 tons and leverage our Athens capacity and not extend lead times."