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Graham Corp. said Friday that profits for its fiscal second quarter were flat from a year ago, as strong gross profit margins offset a drop in sales because of a lower level of new orders.

The Batavia-based maker of parts for oil refineries and nuclear power plants said net income fell 1 percent to $2.59 million, or 26 cents per share, from $2.62 million, or 26 cents per share, in the same period a year ago. Pre-tax income was also flat at $3.85 million.

However, operating profit rose 10 percent to $3.84 million, while earnings before income tax, interest income and expense, depreciation and amortization rose 9.8 percent to $4.39 million.

The company’s board also declared a regular quarterly cash dividend of 3 cents per share, to be paid Dec. 5 to stockholders of record on Nov. 19.

President and CEO James R. Lines attributed the lower revenue to the timing of orders moving over from the backlog but said the improved margin means “fundamentals in our markets continue to strengthen.” Graham makes ejectors, pumps, condensers, vacuum systems and heat exchangers.

“While moderate revenue will carry into our fiscal third quarter, we are encouraged by the recent strong order levels and overall quality of what is being added to backlog,” he said. “The past two quarters have strengthened our degree of confidence in the fundamentals of our markets during this capacity expansion cycle.”

Net sales fell 5 percent to $24.49 million, as the company experienced fewer orders. Sales to U.S. market fell 7.8 percent to $14.1 million, while sales to the Middle East plunged 70 percent to $900,000. But sales to Canada and other markets jumped 37 percent to $6.7 million, helping to offset the other declines. Asian sales rose 3.7 percent to $2.8 million.

By industry, sales to the refining industry nearly doubled on higher demand for made-to-order products, especially ejector systems and spares. But sales to the chemical, petrochemical, power and other commercial and industrial markets fell because of the timing of projects.

Still, the gross profit rose 5 percent to $8.29 million, as the cost of products sold fell 10 percent to $16.2 million. As a result of a better product mix and a higher volume of faster projects, the gross profit margin increased from 30.5 percent to 33.8 percent.

Selling, general and administrative costs were flat at $4.39 million, and the operating profit margin increased to 15.7 percent.

Second-quarter orders soared 89 percent to $48.4 million, reflecting strong demand from the petrochemical and oil refining industries. The backlog at the end of the quarter increased 25 percent to $114.4 million, a record, with 28 percent for refinery projects, 27 percent for chemical or petrochemical work and 14 percent for nuclear and other power jobs. The rest were for other industries, including the U.S. Navy. About 61 percent of orders are from U.S. customers. Officials expect 70 percent to 75 percent of the backlog to be converted to sales in the next 12 months.

For the first six months of fiscal 2014, Graham reported net income of $6.4 million, or 63 cents per share, up 60 percent from $4 million, or 40 cents per share, in the same period a year ago. Net sales rose 9 percent to $52.7 million.

The company spent $900,000 on capital projects in the first half of the year, but expects to spend $6 million to $7 million for the full year, including the planned production expansion in Batavia, which is expected to be finished by September 2014.

email: jepstein@buffnews.com