Graham Corp. profits decline by 67%
Batavia firm expects 35% drop in sales but is encouraged by pick-up in new orders
The slumping energy industry and the overall recession took a heavy toll on Graham Corp. during the second quarter, with the Batavia manufacturer’s profits tumbling by 67 percent as its revenues slid by a third.
While Graham executives said Friday they were encouraged by a pick-up in new orders during the quarter, they warned that the company’s markets remain erratic, and they narrowed their sales forecast for the year toward the lower end of their previous guidance.
Graham’s profits plunged to $1.5 million, or 15 cents per share, compared with $4.4 million, or 43 cents per share, a year ago. Sales dropped to $16.1 million during the quarter that ended in September, down from $23.9 million a year earlier.
In response to the weakness, Graham, which eliminated about 50 full-time and contract employees at its Batavia factory earlier this year, chopped its work force by another 7 percent during September, eliminating 18 more jobs. The company now has 245 employees, with all but 10 at its Batavia headquarters and factory.
The latest job cuts are expected to save Graham $1.6 million, bringing the total cost reductions from the two rounds of restructurings to $4.3 million, said Jeffrey Glajch, Graham’s chief financial officer.
“I believe we can remain profitable at the bottom of the cycle, which we expect will be in the next few quarters,” said James R. Lines,
Graham’s president and chief executive officer, during a conference call.
While Graham’s new order bookings jumped by 69 percent during the quarter to $29.6 million because of strength in Middle Eastern refinery markets, the company said it now expects its sales this year to drop by 35 percent to 40 percent to around $60 million to $65 million, down from its previous forecast of $60 million to $70 million.
With Graham’s sales already at $36 million through the first half of its fiscal year, the forecast implies a further slowing in the company’s revenues over the next two quarters. That likely will translate into even greater weakness in earnings over that six-month period, as Graham’s profitability erodes further, with gross profit margins sliding to the high 20 percent range, down from 36 percent in the second quarter, Glajch said.
The company also is grappling with delays on some of its projects. A $3.3 million order that had been scheduled to ship by the end of March 2010 was put on hold during the quarter, delaying the expected shipment date until September 2010. In all, four of Graham’s orders, valued at $7 million, now are on hold, the company said. In addition, a $500,000 order that had been on hold was canceled during the quarter.
In addition, some of the significant orders that Graham booked during the second quarter, including a pair of Middle Eastern refinery projects and an Asian fertilizer project valued at a total of more than $16 million, are not expected to be shipped, in large part, until late next year or early 2011.
“We do not think our markets are in full recovery,” Lines said.
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