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FIN STOCK REPORT
Stock Report: CARPENTER TECHNOLOGIES

2014

Hurt by ongoing “weakness” in the oil and gas market, Carpenter Technology announced restructuring actions in early 2015 to “reduce fixed overhead costs and position the company to drive long-term, profitable growth.”

The actions, which include eliminating 200 salaried jobs (10% of its workforce) and an additional 60 outsourced positions, are expected to yield approximately $30 million of annual fixed overhead cost savings.

“We are clearly disappointed with our performance over the last several quarters and are taking decisive actions to return to the level of operational and financial performance we are capable of achieving,” stated CEO Gregory Pratt.

Other actions to boost company performance in recent months include spending $50 million to repurchase 1.2 million additional shares, targeting a $50 million inventory reduction by the end of fiscal 2015, and trimming capital spending to $100-$120 million for fiscal 2016.

While lowering its overall fiscal third quarter outlook, Carpenter Technology made clear that its fastener supply operation remains strong.

“Aerospace market revenue is expected to grow year over year in the quarter due to increased engine and fastener activity,” the company stated.

In January, Carpenter Technology reported revenue for the second fiscal quarter of 2015 grew 9% to $548.4 million, while operating income slipped 5.3% to $45 million and net income dropped 18% to $24.1 million.

Aerospace and Defense segment sales, including fastener materials (titanium and nickel), rose 6% to $189.2 million during the quarter.

2013

Carpenter Technology reported Aerospace & Defense market sales, including fastener material, declined 6% to $202.5 million in the third quarter of fiscal 2014. Sequentially, segment sales gained 14%.

Titanium fastener revenues were up 25% year-over-year. Revenue per ton was down due to greater sales volume of structural component materials and continued demand weakness for nickel engine and fastener materials.

Overall sales in fiscal Q3 declined 2.6% to $566.3 million on 8% higher shipments. Operating income slipped 6.6% to $49.5 million, while net income fell 7% to $30.6 million.

“Earnings were significantly impacted by approximately $8 million of additional weather-related expenses,” the company stated. “This was primarily due to a spike in electricity rates.”

Nine-month Aerospace & Defense market sales declined 6.8% to $563.2 million.

Overall nine-month sales fell 5.5% to $1.57 billion, with operating income down 8.7% to $152.8 million and net income down 10% to $94.7 million. 

“Looking forward, we expect sales volume to grow, but gradually. Demand has increased in each of our end markets. Our Specialty Alloy Operations sales backlog grew 19% during the quarter.”

2012

Carpenter Technology reported net sales of $581.4 million in the third quarter of fiscal 2013, excluding raw material surcharges up 12% over the third quarter of fiscal 2012 due to the inclusion of Latrobe. 

Aircraft build rate increases drove demand growth for engine related materials and titanium fasteners versus prior year and prior quarter. 

Demand and mix for Premium and Ultra-Premium nickel and stainless fastener and structural materials was down versus the prior year.

Fiscal Q3 operating income rose 2.5% to $61 million.

“However, increased customer deferrals during the quarter, combined with low sales to distribution customers and a weak defense related mix, resulted in lower sales and operating income.”

Nine-month sales increased 20% to $1.66 billion, with operating income gained 16.5% to $167.3 million and net income up 31% to $105.6 million.

Net sales for the second quarter of fiscal 2013 rose 24% to $533.5 million on a 28% jump in volume. Net income  rose 40% to $33 million.

In February 2012 Carpenter Technology acquired Latrobe Specialty Metals for $558 million. 

Latrobe manufactures and distributes high-performance materials for aerospace, defense and energy applications with manufacturing operations in Pennsylvania, Ohio, Texas, and the UK, and seven U.S. distribution centers.

Carpenter Technology reported Aerospace & Defense market sales, including fastener material, rose 49% to $293.9 million in the fourth quarter of fiscal 2012. Excluding surcharge revenue, aerospace & defense sales jumped 55% on 105% higher volume (or up 24% on 21% higher volume without Latrobe Specialty Metals). 
“Aerospace results reflect strength in all areas as airplane build rates remain high,” the company stated. 

“Demand for titanium fastener material grew again in the quarter and is now well above prior peak levels. Nickel and stainless fastener demand has led to eight straight quarters of year-over-year growth and is approaching prior peak levels.”

Full-year aerospace and defense market sales rose 30.5% to $668.8 million.

Industrial & Consumer market sales edged up 3% to $139 million in the fourth quarter. Excluding surcharge revenue, sales increased 13% on 4% higher volume.

Energy market sales gained 13% to $79.2 million. Excluding surcharge revenue, energy market sales increased 26% on 34% higher volume.

Transportation market sales grew 11% to $41.2 million. Excluding surcharge revenue, transportation sales increased 22% on 2% higher volume.

Medical market sales climbed 11% to $38.3 million. Excluding surcharge revenue, medical market sales increased 13% on 5% higher volume.

International sales in the fourth quarter jumped 36% to $205.3 million, driven by a 74% increase in Asia/Pacific sales and a 28% increase in European sales. Growth in Asia/Pacific was led by sales into the aerospace and oil & gas end-markets. Growth in Europe was led by increased demand for materials used for aerospace, oil & gas and high value automotive applications. Total international sales in the quarter represented 32% of total Company revenue.

Consolidated net sales for the fourth quarter improved 33% to $643.7 million. Excluding surcharge revenue, net sales were $506.7 million, up 44% from a year ago on 31% higher volume. Operating income nearly doubled to $66.5 million, with Latrobe accounting for $17 million of that total.

Full-year sales gained 21% to $2.03 billion, with operating income more than doubling to $210.1 million.

2011
Carpenter Technology reported net sales for the third quarter of fiscal 2012 climbed 16% to $539.9 million, while operating income soared 58% to $55.7 million. Fiscal Q3 net income increased 15% to to $33 million.   
Aerospace market sales gained 21% to $240.5 million, driven by increased demand for materials used in fastener, engine and structural components. 

“Demand for titanium fastener material is now exceeding prior peak levels, and nickel and stainless fastener demand has shown significant growth over the prior year,” the company stated.

Industrial market sales declined 3% to $128.7 million, while Energy market sales increased 28% to $68.6 million.

Transportation market sales grew 6% to $38.2 million.   

International sales climbed 30% to $178.7 million. 

In 2011 Carpenter Technology reported “order activities and shipments for our titanium fastener wire business is nearing prior peak levels as demand for titanium fasteners is picking up in anticipation of significant Boeing 787 needs.” The 787 uses eight times more titanium fasteners by weight than the 737.

In February Carpenter Technology acquired Latrobe Specialty Metals for $558 million. Latrobe manufactures and distributes high-performance materials for aerospace, defense and energy applications with manufacturing operations in Pennsylvania, Ohio, Texas, and the UK, and seven distribution centers located throughout the U.S.

2010

Carpenter Technology reported sales, including fasteners, increased 37.7% to $464.2 million during the third quarter of fiscal 2011. Operating income doubled to $44 million, and net income soared to $28.2 million.

“We believe the aerospace market is at the beginning of a long and robust up cycle,” CEO Bill Wulfsohn stated. “Demand for titanium fastener materials is nearing its prior peak high of 2008.”

“And finally, we are beginning to see order activity pick up for nickel and stainless aerospace fasteners.”

“Order activities and shipments for our titanium fastener wire business is nearing prior peak levels as demand for titanium fasteners is picking up in anticipation of significant Boeing 787 needs.”

The 787 uses eight times more titanium fasteners by weight than the 737, Wulfsohn explained.

Carpenter sales outside the U.S. were $142 million, an increase of 35% over the third quarter a year ago. Sales in Europe were up 40% on 36%-higher volume, driven mainly by increased demand in aerospace and energy and positive mix shifts in automotive. Sales backlog in Europe remains at a three-year high.

2009
Carpenter Technologies reported aerospace market sales, including fasteners, rose 2% to $149.4 million in the third quarter of fiscal 2010. Excluding surcharge revenue, aerospace sales were down 4% on 2% lower volume.

“Aerospace results reflect increased sales of engine components, which were more than offset by lower demand for fasteners. Aerospace volumes increased 36%, reflecting a surge in quarter-to-quarter demand for engine components.”

Industrial market sales, including fasteners, were flat at $74.4 million. Excluding surcharge revenue, industrial sales decreased 6% on 25% higher volume.

However, volumes increased by 37% as Carpenter benefited from shorter lead-time orders on lower value products.

Overall sales rose 2% to $336.9 million, with tonnage sold in the third quarter up 20%. Operating income fell 20% to $12.8 million, while net income declined to $2.1 million.

Aerospace market sales, including fasteners, dropped 28% to $113.5 million during the second quarter of fiscal 2010, hampered by excess inventory.

“Although aerospace volume in total was flat with the first quarter, it appears that engine super alloy materials are now in balance while it will take several more quarters before surplus fastener inventories in the supply chain are used up.”

Industrial market sales, including fasteners, decreased 26% to $62.3 million during fiscal Q2.

2008
Carpenter Technologies reported aerospace sales declined 29% to $146.7 million during the third quarter of fiscal 2009, while net income increased 80% to $120 million.

“In the aerospace fastener segment, we observed for the first time a weakened demand for nickel-based and titanium fasteners,” the company reported.

Overall Q3 sales plunged 34% to $330 million, with net income declining 89% to $13.1 million.

Nine-month aerospace sales dropped 15% to $458.5 million, hurt by lower fastener demand.

Overall nine-month sales fell 21% to $1.1 billion.

HISTORY
Based in Wyomissing, PA, Carpenter Technology manufactures and distributes heading wire/rod and bar products in specialty alloys, including stainless steels, titanium alloys, superalloys, and various engineered products.

Corporate Office: 2 Meridian Blvd., Wyomissing, PA 19610-1339. Tel: 610 208-2000 Fax 610 208-3716
Web: cartech.com
CEO: William Wulfsohn
Employees: 4,800
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