MFRI Inc, USA

MFRI Inc, USA

COMPANY WATCH Lydall Inc, USA Key Figures (US$ million) First quarter ended 31.3 2008 MFRI Inc, USA 2007 Net Sales Of Which: Performance Materials ...

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COMPANY WATCH

Lydall Inc, USA Key Figures (US$ million) First quarter ended 31.3 2008

MFRI Inc, USA 2007

Net Sales Of Which: Performance Materials

94.3

83.7

29.8

26.9

Cost of Sales

72.8

65.9

Gross Margin

21.5

17.9

Operating Income Of Which: Performance Materials

5.1

2.1

4.6

3.5

Income before Income Taxes

5.1

2.0

Net Income

3.2

1.3

Key Figures (US$ million) Fourth quarter ended 31.1 2008

2007

Net Sales Of Which: Filtration Products

58.5

48.8

24.4

24.2

Gross Profit Of Which: Filtration Products

7.0

7.7

3.0

3.8

Income/(Loss) from Operations Of Which: Filtration Products

(2.8)

(1.8)

0.5

1.0

Net Income/(Loss)

(3.8)

(0.6)

2008

2007

Net Sales Of Which: Filtration Products

239.5

213.5

97.1

86.4

Gross Profit Of Which: Filtration Products

41.2

44.4

13.8

16.2

2.9

8.9

2.2

5.3

(0.3)

4.6

Year ended 31.1

COMMENT Lydall enjoyed a strong start to fiscal 2008 with its net sales up 13% on a year earlier at US$94.3 million and net income up 146% to US$3.2 million. Gross margin for the quarter was 22.8% compared with 21.3% for the same quarter of 2007. The company changed its internal organisation during the period, with its filtration businesses now reported in the Performance Materials segment together with its industrial thermal insulation operations. During the quarter, the Performance Materials segment’s net sales were US$29.8 million, up 11% on the US$26.9 million from the same period last year. Excluding the impact of foreign currency translation, the segment’s net sales increased by US$1.8 million, equivalent to 7% year-onyear growth. This was helped by a US$1.2 million rise in revenues from air and liquid filtration. Operating income for the segment increased 32% on the year earlier figure to reach US$4.6 million, benefiting from higher sales, as well as improved gross

July 2008

margin as a percent of net sales due to improved absorption of fixed costs. Dale Barnhart, Lydall’s president and CEO, said that he was pleased with the company’s performance during the quarter. “We increased net sales organically by 7% and improved earnings per share despite our core markets being impacted by a general weakness in the US economy,” he said. Looking forward, Barnhart said Lydall expected to continue to be challenged in 2008 by the impact of economic conditions in some of its core markets. “Automobile production is expected to be lower in the USA, and the company’s building products business is expected to continue to be impacted by weakness in the new home and commercial building construction markets,” he said. “However, expected sales from new products and the continued focus on operational excellence initiatives, driven by our Lydall Lean Six-Sigma program, are expected to mitigate some of this impact.” ■ www.lydall.com

Income from Operations Of Which: Filtration Products Net Income/(Loss)

COMMENT MFRI had a mixed final quarter of fiscal 2007 with net sales up 20% on a year earlier at US$58.5 million, while it declared a net loss of US$3.8 million. The corresponding full-year period followed a similar pattern with sales up 12% on the 2007 figure at US$239.5 million, while net income fell nearly US$5 million to a loss of US$0.3 million. The company’s Filtration Products division reflected the company’s overall result, with fourth quarter sales essentially static at US$24.4 million, while income from operations was half the year earlier figure at US$0.5 million. Similarly, the division’s net sales for the full year increased 12% to US$97.1 million, while income from operations fell 58% to US$2.2 million.

Factors that impacted Filtration Products’ performance during the year included an error at its recently acquired factory in South Africa that saw the replacement of a sizeable order, high labour costs along with software implementation expenses at its European pleated filter operation and market pricing pressure in the USA. CEO David Unger said the company’s expansion strategy led to strong sales and backlog growth. “In 2007, 30% of the company’s sales were to customers outside of the USA, up from only 18% in 2006, and sales have approximately doubled since 2003. However, the poor fourth quarter results are not satisfactory or in line with our expectations.” ■ www.mfri.com

Filtration Industry Analyst

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