Precision Castparts Sales Up 16% in Fiscal 2012 First Quarter

Precision Castparts Corp. (NYSE:PCP), Portland, OR, reported sales in its fiscal 2012 first quarter of $1.68 billion, up 16 percent from the prior-year period. Profit from continuing operations was $285.6 million.

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Investment Cast Products year-over-year sales increased by 17 percent to $568.8 million in the first quarter of fiscal 2012, with segment operating income of $187.1 million.

Contractual material pass-through pricing in the quarter was $18 million, or $8 million higher than a year ago. Aerospace sales grew 19 percent year over year and were also up slightly on a sequential basis. Commercial aerospace OEM orders continued to ramp up in line with the acceleration in the base production rates, and commercial aftermarket sales gains were fueled by increased aircraft utilization. Orders to support Boeing 787 production have also been put in place for shipment later in the fiscal year. In addition, the industrial gas turbine (IGT) business is getting some traction, according to Precision, as that end market begins to recover strength, with sales increasing 15 percent year over year and 6 percent sequentially.

Forged Products sales of $758.5 million in the first quarter of fiscal 2012 showed a 20 percent increase. Segment operating income rose to $156.5 million. First-quarter sales included $50 million related to contractual material pass-through pricing, an increase of approximately $10 million over a year ago, and the selling price of external alloy products from the segment's three primary mills was $60 million higher.

During the quarter, Forged Products sales were also ignited by increased shipments of long-lead components to support the accelerating production rate of base commercial aircraft. Demand for 787 components also started to layer in for shipment in the second half of fiscal 2012. Aerospace OEM sales improved 40 percent over the same period last year and were up slightly on a sequential basis. On the seamless pipe front, the segment is seeing improvement in sales and earnings that has been anticipated for several quarters. Seamless pipe sales grew 28 percent year over year and 21 percent sequentially and should continue to trend upward over the course of the fiscal year. The segment was able to improve its operating margins in the face of higher metal prices through solid leverage of increased volumes and returning strength in some of its core products.    

Sales for Fastener Products were $348 million, with segment operating income of $106.8 million. Orders for the segment's core aerospace product lines are now being driven by the announced increases in commercial aircraft build rates, distributor restocking,and the ramp-up of 787 production, with delivery beginning in the third quarter and ramping steadily into the fourth quarter.  

"The momentum continues to build in our casting and forging operations, and, before the year is out, we are convinced that will be the case in our aerospace fastener businesses, as well," said Mark Donegan, CEO of Precision Castparts Corp. 

"Aerospace orders in Investment Cast Products and Forged Products are being spurred by the increased commercial build rates in the base programs, as well as market share gains we've achieved over the past year or so. In addition, these segments are now very definitely seeing the demand for 787 airframe and engine components, and those shipments should grow steadily into the second half of the fiscal year. Fastener orders are lagging, as inventories get exhausted in the supply chain; however, many of our major customers have begun to schedule increased orders for our core products, with delivery beginning in the second half of this fiscal year.

"Our power end markets are also starting to improve. IGT sales have shown some growth, driven by both new orders and aftermarket demand. OEMs are anticipating strong market conditions going forward, and, while we have yet to see an acceleration in our schedules, we are well positioned to benefit from this trend. Seamless pipe is also continuing its climb from the bottom, and shipments during the quarter included much more of our core interconnect product. In addition, as we have previously stated, we are leveraging our extrusion capabilities to enter new power end markets. For example, Rollmet is being acquired to provide some of the cold-work capabilities we require to produce 9 5/8" downhole casing for oil and gas fields. Forged Products' Energy Products Group has now qualified its 9 5/8" nickel downhole casing with three potential customers and is making good progress with a fourth, with several bids currently pending for gas-field applications. In addition, we acquired KLAD during the quarter to enable us to extend our reach into oil & gas subsea applications.

"We have been pursuing several businesses that fit our strategic acquisition model for a long time, and our disciplined approach has paid off very well in the last three months."