Co. expects sales by its steel business to jump between 12 and
17 percent this year from 2013, driven by greater demand in the
oil and gas and industrial end-market sectors.
This will occur at the
same time that the steel business is spun off as Timken Steel
Corp., president and chief executive officer James W. Griffith
said during a conference call Jan. 30 to discuss its
"We are expecting
improved profitability based on volume and mix, and (steel
selling prices)," chairman Ward J. "Tim" Timken Jr. told
analysts during the call. "(Steel sales increases) will be
solidly in the double digits. If you look at (a rise of) 14
percent, half would come from volume and product mix and the
other half from improved surcharges," he said, predicting that
scrap surcharges will continue to run higher "throughout the
The chairman cited a
number of demand bright spots. "The mobile (equipment) business
is doing pretty well; on-highway is up. Oil and gas are seeing
solid growth, and that will build throughout the year. Within
the industrial sector, some sectors will do better than others.
Some will be very solid," he said.
The company has spent
about $110 million to expand special bar quality (SBQ)
steelmaking capacity, improve throughput, and expand the
product range and differentiate it from those of competitors,
Griffith said. A big piece of the capital investment, the jumbo
bloom caster at the Faircrest Steel Plant in Canton, Ohio, will
start up during the second half of the year.
"Well turn it on
during the late second or early third quarter and ramp up in
the late third or early fourth quarter," Timken said, although
revenue improvements as a result of the capital project
probably wont show up in financial results until
Asked by an analyst
about domestic SBQ supply, Timken said that "the industry is
relatively balanced based on strength in specific markets. It
was balanced in 2013 and we are keeping a close eye on (the
supply-demand balance) in 2014."
The company is "making
solid progress in separation," Griffith said. It began working
to spin off the steel business, at the board of directors
request and based on activist shareholders agitating for it,
Timken has worked to right-size certain operations, lower
costs, pay down pension benefits and other debts, and free up
cash so that the chief executive officer of each company can
develop a capital allocation strategy.
The separation should
occur in mid-2014. Executives will conduct investor
presentations in advance of the spin-off. The company estimates
the spin-off will cost $105 million but it will realize savings
elsewhere, Griffith said.