Taylor Devices chief executive Douglas P. Taylor has a message for the North Tonawanda shock absorber manufacturer’s shareholders in the wake of the company’s record-breaking profits last year: Don’t expect history to repeat itself.
“We’ve got plenty of business right now. We’ve got a good backlog of business,” Taylor said after the company’s annual shareholder’s meeting on Friday. “We’re looking forward to another decent year in 2014.”
Mark McDonough, the company’s chief financial officer, echoed Taylor’s message, warning shareholders that the all-time high of $2.5 million in profits last year is a record “that will probably hold up for the next couple of years.”
While Taylor Devices executives said they expect the company’s business to be solid, they told shareholders the sluggish economy is making developers and government entities reluctant to commit to big projects, which are still hard to finance because of tighter bank lending standards.
And while the company’s aerospace and defense products business grew solidly last year, the threat of lower defense spending because of sequestration is adding to the uncertainty about funding levels for the military projects that Taylor Devices works on. That’s prompting the company to step up its efforts to find sales from foreign military projects.
Sequestration “is the elephant in the room,” said Paul Tutobene, the sales manager for Taylor Devices’ aerospace business. “Our biggest customer is going to be shrinking.”
Those factors were apparent during the summer. Taylor Devices’ profits tumbled by 67 percent during its first fiscal quarter, while sales shrunk by 28 percent, as its key construction and aerospace markets both weakened.
Sales of the equipment that it makes to protect buildings and bridges from earthquake and wind damage plummeted by 37 percent during the quarter that ended in August. Aerospace sales, primarily to the defense market, dropped by 9 percent. Revenues from industrial projects slid by 15 percent.
The weakness was especially intense in the company’s Asian markets, which have become a big source of business for its construction products, especially in the wake of the 2011 Japanese earthquake. Taylor Devices’ Asian sales plunged by 46 percent, while U.S. revenues were down by 14 percent during the summer quarter.
“It seems the excitement over the 2011 earthquake has been forgotten,” Taylor said.