Friday, specialty metals company Carpenter Technology Corp. (CRS), said its sales and operating margins for the second half of its fiscal year are now expected to be lower than the previously issued estimate. Revenues, excluding raw material surcharges, would be 20-25% lower than the second half of fiscal 2008 with low double-digit operating margins.
The company expects the revenue at the end of the current fiscal year to decline further, resulting in a fourth quarter operating loss, primarily from the impact of U.K. facility closing costs, lower volume and accelerated inventory reduction activities.
Commenting on the outlook, the company's Chairman and Chief Executive Officer, Anne Stevens said, "We are reducing our costs everywhere we can, lowering inventory levels and cutting back on capital expenditures. Our objective continues to be to generate positive free cash flow for this fiscal year."
The Wyomissing, Pennsylvania-based company said that it would shut its Crawley, UK, metal strip manufacturing unit as part of cost reduction measure and to utilize efficiently its production capabilities. Operations at the Crawley strip facility would be wound down during the next several months with final closure targeted for June 30.
The Crawley strip facility has 33 workers and manufactures soft magnetic nickel-iron and cobalt-iron alloys in strip and bar form. The facility's customers will be serviced by operations in Reading, Pennsylvania, and through arrangements with other suppliers.
The company expects to have a one-time profit impact of about $8 million, and will incur a cash charge of $2 million related to the closure of the U.K. strip operation. The expense is expected to be offset next year by expected savings from the closure. Part of the charges associated with the plant closing will impact the third fiscal quarter with the majority of the costs affecting fourth quarter results.
The company expects to report an operating loss for the fourth quarter due to the increased impact of the UK facility closing costs, and increasing effects from the lower volume and accelerated inventory reduction activities on operating inefficiencies and accounting effects under LIFO.
CRS is currently trading at $14.47, down $1.17 or 7.48%, on a volume of 1.25 million shares on the NYSE.
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