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Globe results pounded by low prices, outages, write-offs

Keywords: Tags  Globe Specialty Metals, Jeff Bradley, earnings report, maintenance outages, lower selling prices, writedowns, silicon, Alden Resources Alabama Sand & Gravel

CHICAGO — Globe Specialty Metals Inc. fell deeply into the red in its fiscal third quarter as higher revenues weren’t enough to stem losses from longer-than-expected maintenance outages, overseas write-offs and lower selling prices.

But the New York-based silicon producer said it expects results to improve in coming quarters as benefits from the outages are realized, even if selling prices for its products remain flat.

"We are disappointed with our financial results for the (fiscal) third quarter," chief executive officer Jeff Bradley said in a statement released with earnings data. "While we anticipated a reduction in earnings caused by lower average selling prices, we did not anticipate the extent of the cost impact of the maintenance outages and other cost increases."

Globe posted a net loss of nearly $40.14 million for the three months ended March 30 vs. net income of more than $11.61 million in the same period last year despite a 12.9-percent jump in sales to $195.85 million. A $30.78-million net loss of the first nine months of the fiscal year was in contrast to net income of $45.75 million a year earlier on sales that rose 12.2 percent to $576.49 million.

The losses came in part as silicon metal contracts for 2012 were replaced by 2013 contracts with selling prices that were an average 4 percent lower, the company said. Also hurting results was a shift toward more silicon metal production as a result of Globe’s June 2012 acquisition of operations in Bécancour, Quebec (, June 6), the company said.

Also impacting the results were higher production costs related to maintenance outages and "other inefficiencies" at Globe plants in Alloy, W.Va.; Beverly, Ohio; Bridgeport, Ala.; and Niagara Falls, N.Y.; as well as at facilities in Argentina. In addition, Globe saw a smaller contribution from Alden Resources LLC, Corbin, Ky., because of higher costs and lower coal production, and Alabama Sand & Gravel Inc., Billingsley, Ala., saw increased costs from the addition of another quartz wash plant.

Another big hit to earnings came from write-downs on the value of Globe operations overseas, including a $16.9-million pre-tax charge for the write-off of Nigerian exploratory mining licenses, Globe said. Because of "local instability and security risks," that project is "no longer a viable business opportunity."

Globe said it had taken a $20.4-million pre-tax write-down on equipment acquired to make solar-grade silicon because the technology is "no longer commercial viable." The company also suffered a $7.1-million pre-tax charge from its electrode factory in China operating at less-than-full capacity and a $6-million write-down on its business in Argentina.

Globe executives said during a conference call that about 80 percent of production from the company’s operations in Argentina is shipped to Europe, where the economy continues to struggle and prices are depressed.

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