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Home » Precision Castparts 3Q Sales Fall

Precision Castparts 3Q Sales Fall

By    MDM  Staff 
January 21, 2010
More about:  Fasteners,  Industrial
Precision Castparts CEO: Some end-market stability is returning.
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Precision Castparts Corp. (NYSE: PCP), Portland, OR, reported third-quarter sales of $1.37 billion, down from $1.61 billion in the same period last year. Profit from continuing operations was $228.7 million.

Investment Cast Products. Investment Cast Products sales were $454.7 million in the third quarter of fiscal 2010, versus sales of $537.5 million last year. Contractual material pass-through pricing was $9.8 million during the quarter, compared to approximately $18.1 million in the third quarter of fiscal 2009. Segment operating income grew to $137.5 million this quarter, or 30.2% of sales, compared to $135.3 million, or 25.2 percent of sales, in the same period a year ago. 
 
Significant commercial aerospace OEM and aftermarket destocking primarily accounted for the year-over-year decrease in the top line. Sequentially, aerospace OEM customer orders in the third quarter were stable to slightly up versus the previous quarter, countered by flat sequential demand in the airfoil aftermarket and destocking by European IGT customers. Orders in these two end markets are not expected to begin recovery until the second quarter of fiscal 2011.  
 
Forged Products. Total sales for the Forged Products segment were $587 million in the third quarter of fiscal 2010, versus sales of $702.8 million last year. Year over year, Forged Products’ third quarter sales were negatively impacted by $57 million due to lower contractual material pass-through pricing and lower selling prices of external alloy sales from the segment’s three primary mills. These results also reflect nearly a full quarter of Carlton Forge, which, as previously disclosed, was impacted by planned preventative maintenance on its major presses. The segment’s operating income totaled $136.4 million, or 23.2% of sales for the quarter, versus $154.8 million, or 22% of sales, in the third quarter of fiscal 2009. 
 
Similar to the Investment Cast Products segment, Forged Products was negatively impacted year over year by substantial aerospace OEM destocking and lower aftermarket sales, in addition to dealing with unexpected equipment outages in two facilities during the third quarter. On a sequential basis, general industrial sales continued to recover slowly, while, as with Investment Cast Products, aerospace OEM stopped eroding and showed some slight upside, and aftermarket production schedules stayed flat sequentially, with some recovery anticipated during the second quarter of fiscal 2011.
 
Fastener Products.  In the third quarter of fiscal 2010, Fastener Products sales totaled $331.1 million, compared to sales of $370.4 million a year ago. The segment’s operating income was $105.6 million, or 31.9% of sales, in the quarter, versus operating income of $109.4 million, or 29.5% of sales, in last year’s third quarter. Year over year, Fastener Products’ sales decline was largely due to significant order decreases in its large distributor base, tempered by share gains. 
 
Compared to the previous quarter, aerospace OEM schedules began to improve slightly during the third quarter, while distributor demand for aerospace fasteners remained depressed but sequentially flat, a situation not expected to change until late in the first half of fiscal 2011.
 
“In the third quarter, we saw the return of some end-market stability with our long lead-time products like large structural castings, offset by continuing challenges elsewhere,” said Mark Donegan, CEO of Precision Castparts Corp. “Our large structural casting businesses served as the leading indicator of the past year’s aerospace destocking activity, and now their OEM orders are beginning to creep back slowly. However, aftermarket orders are getting absolutely no traction, limiting upside opportunity at a number of our casting and forging operations, and the fastener distributor base continues to work through the inventory it has on hand. 
 
"The current upward trend in flight hours is encouraging going forward, but we really don’t expect any meaningful recovery on the aftermarket or distributor front until into the second quarter of fiscal 2011.
 
“On the power side, we have established a solid base in all of our end markets. We continue to gain market share at our European industrial gas turbine customers; however, they began to destock in the third quarter, and this activity is expected to extend into the first quarter of fiscal 2011. Seamless pipe sales are holding their own, and demand in the oil and gas market continues to see some slow, but steady sales growth."

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