Graham Corp. CEO James R. Lines says the Batavia manufacturer is ready for the recovery.

It just can’t come soon enough.

Graham’s first-quarter profits plunged by 75 percent as weakness in its key oil-refining market caused sales to slump by 34 percent.

The steep drop in sales and profits was in line with the expectations of company executives, who repeated their warning Thursday that Graham’s markets, especially in the United States, would remain sluggish through the summer.

But Lines also believes that the market is poised to rebound, and that when it does, Graham would bounce back strongly after the company’s steps last year to trim costs and increase productivity.

“We’re ready for the recovery,” Lines said during the company’s annual shareholders meeting. “We believe we will expand more rapidly than we did during the last cycle.”

Lines, Graham’s president and chief executive officer, said he believes the oil-refinery market, which accounted for a little less than a quarter of Graham’s sales during the quarter that ended in June, is near its bottom and should begin to rebound soon.

As the economy recovers and energy demand increases, Lines believes, there will be a jump in orders for the equipment that Graham makes for oil refineries and other energy-related projects, as well as petrochemical plants, especially in developing countries and the Middle East.

For now, though, Graham is grappling with what Lines described as “a very harsh environment.”

The company’s profits tumbled to $878,000, or 9 cents per share, from $3.5 million, or 35 cents per share, a year earlier.

Sales slumped to $13.4 million, from $20.1 million, mostly because of a 64 percent plunge in revenues from its oil-refining market. Sales in the United States slid by 46 percent, while international revenues were off by 20 percent, primarily because of a drop in business in Asia, which Graham executives blamed on the timing of particular projects.

Still, the company said that it is sticking with its earlier prediction that sales during the current fiscal year will improve slightly, to between $65 million and $72 million, which would be about a 10 percent increase from Graham’s $62.2 million in revenues last year, when sales tumbled by 39 percent.

But because more of those sales will come from overseas, coupled with more intense competition, Graham executives believe those sales will be less profitable during the current fiscal year. While the company earned gross margins of more than 40 cents on the dollar in 2009, those margins are likely to shrink to between 27 cents and 31 cents for every dollar of sales during the fiscal year that ends next March.

Still, making money during a steep downturn is a major accomplishment for Graham, which for much of the last two decades has been battered by steep losses when its markets turned sour.

“We’ve planned for when the markets would turn the wrong way, so we can be profitable during that cycle,” said Jeffrey Glajch, Graham’s chief financial officer.

Graham’s backlog of work stood at $89.1 million at the end of June, largely because of a more than $25 million order from the Navy. Because several of those orders, including the Navy contract, are not expected to be delivered until 2011 and beyond, only about half to 60 percent of the backlog is expected to ship in the next 12 months.

The flow of new orders slipped by 8 percent, to $8.1 million, from $8.8 million, a year ago.

drobinson@buffnews.comnull