Lower sales, especially to its chemical and petrochemical markets, led to a 53 percent plunge in Graham Corp.’s third-quarter profits, the Batavia manufacturer said today.
The weaker sales made Graham’s overall operations less profitable, and the drop was made even wider because last year’s earnings were inflated by nearly $1 million from the reversal of an acquisition-related expense.
Even so, Graham executives said the lower earnings are not a sign of a downturn in Graham’s markets, which they stressed can vary widely from quarter to quarter.
Instead, they said the company still is seeing strong bidding opportunities and finished last year with a record backlog of orders. Executives said they are sticking by their earlier forecast that Graham’s sales during the upcoming fiscal year would rise at a double-digit pace to between $115 million and $135 million. And the company also raised its quarterly dividend by a third, to 4 cents per share from the old rate of 3 cents.
“We look forward to fiscal 2015 with optimism, given the strong order activity that we have experienced during this fiscal year,” said James R. Lines, Graham’s president and chief executive officer, in a statement.
Even so, Graham’s third quarter was softer than analysts were expecting. The company’s profits tumbled to $1.4 million, or 14 cents per share, from $3 million, or 30 cents per share, a year earlier. That was well below the 23 cents per share that analysts had expected the company to earn.
Graham executives noted that much of the decline stemmed from the $1 million gain that the company booked last year in an accounting move related to its 2010 acquisition of Energy Steel. Even without that reversal, Graham’s earnings would have dropped by a third from $2.1 million, or 21 cents per share.
Sales slid by 9 percent to $23.4 million during the quarter that ended in December, down from $25.6 million a year ago as lower chemical and petrochemical industry revenues offset improvement in the company’s power industry and commercial and industrial markets. The sales were considerably weaker than the $26.5 million analysts were expecting.
While Graham’s U.S. and Canadian markets were stronger, the rising sales from those regions were more than offset by lower revenues from its Middle Eastern and Asian markets.
Graham’s order flow weakened by 5 percent during the quarter, slipping to $23.5 million from $24.6 million. Lines said the slowdown had been expected after the strong bookings that the company had during the spring and summer. “We continue to be encouraged by the level of quoting activity and our bidding pipeline,” he said.
The company’s backlog of orders grew slightly to an all-time high of $114.6 million at the end of last year, up from $114.4 million at the end of September.