Samuel Manu-Tech Inc. (Samuel) (TSX - SMT), a leading North American industrial products and technology company, today reported third quarter results for the three months ended September 30, 2008.
Sales
Sales for the third quarter ended September 30, 2008 were $265.6 million, which represents an increase of $39.0 million or 17% over the $226.7 million achieved in the comparable period of last year. The increase results from the contribution of recent acquisitions and start-up operations as well as increased selling prices. These positive factors more than offset continued weaker end user demand in certain key sectors resulting from the economic slowdown in North America.
Earnings
Net earnings from continuing operations for the third quarter were $22.4 million or $0.70 per share compared to $4.1 million or $0.12 per share in the comparable quarter of last year. On August 29, 2008, the Company sold its Nanticoke, Ontario steel pickling operations to U.S. Steel Canada for $37.5 million, subject to normal closing adjustments, resulting in an estimated after tax gain of $10.4 million or $0.32 per share. The results for the third quarter this year also included a pre-tax restructuring charge of $2.7 million, or the equivalent $1.9 million after tax or $0.06 per share, related to the closure of the Scarborough, Ontario strapping manufacturing facility.
"We are pleased with our results this quarter as they indicate that both our acquisition strategy and our recent new business expansions are positive for the Company," said Mark C. Samuel, Chairman and CEO. "While difficult economic conditions will negatively impact our business in the fourth quarter, we believe that opportunities for growth will continue to exist," he added.
Outlook
Carbon steel pricing levels began to decrease late in the third quarter of 2008 after substantial increases earlier in the year. The increases were driven by reduced imports and higher raw material input costs. The weak North American and global economies and the strengthening of the U.S. dollar have all been factors in the more recent overall decline in demand. The outlook for the fourth quarter is for demand to weaken further. Carbon prices are weakening due to the significant decline in base metal prices and the weak economy. This will likely be offset with production cuts by several of the North American steel mills, which may help to mitigate further price decreases.
Stainless steel surcharges decreased in the third quarter along with some reduction in base prices, driven by weak demand, particularly in the automotive and housing markets. Surcharges will decrease significantly in the fourth quarter due in part to continuing lower demand and the reduction in the price of nickel, iron and other base metals used in the production of stainless steel.
In addition, the Canadian dollar started to weaken relative to the U.S. dollar in the latter part of the third quarter having a net positive impact on the Company's results. Continued decline in the Canadian dollar relative to the U.S. dollar would also be anticipated to have a positive impact on the Company's results.
In summary, more challenging market conditions are anticipated for the balance of the year, including the current global liquidity crisis, which will have a significant negative impact on the fourth quarter results. While faced with the prospect of an extended economic slowdown, the Company is confident that it is well positioned and capitalized to weather this difficult period. -- www.cnxmarketlink.com
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