Building products company Headwaters Inc. (HW) Friday reiterated its forecast for fiscal year 2010 earnings before interest, tax, depreciation, amortization, or EBITDA. Going ahead, the company said it is focused on three primary initiatives, new product development, lean management and sustainability.
Headwaters said it continues to expect fiscal year 2010 EBITDA to be in the range of $95 million to $105 million. The forecast is based on an assumption of flat revenue and at least $22 million in cost savings.
The South Jordan, Utah-based company noted that new products and brands in light building products have increased 20% of revenues in 2009 from 4% of revenue in 2005, reflecting the increased importance of new products in the revenue stream. Due to the success of lean management initiatives, the company said it is ahead of plan on realizing its $22 million in cost savings slated for 2010. The company now expects there may be as much as $16 million of cost savings opportunities which could be recognized over 2010 and 2011.
The company said Light Building Products segment does not expect to have divisional positive year-over-year revenue comparisons until late in the fiscal year when there is further improvement in the new residential construction market. Management commented that the performance of this division typically lags new housing starts by about six months.
At the Heavy Construction Materials segment, the company expects revenue improvement in the second half of 2010. The company said, analysts are currently forecasting annual growth in cement consumption of 5.2% in 2010 rising to 16.5% and 14.5% in 2011 and 2012, which should benefit Headwaters.
Headwaters' Energy Services segment continues to see narrowing losses due to the integration of its coal cleaning business and coal combustion products businesses last year. The company noted that cost improvements continue to drive performance, but the coal cleaning business has started to make some metallurgical coal sales, which should increase its sales price per ton and result in improving margins.
Headwaters added that since its business is highly seasonal, achievement of its EBITDA guidance is dependent upon performance in the June and September quarters. Additionally, the Company is targeting free cash flow of about $37 million in 2010.
HW closed Thursday's regular trading at $5.34 per share on the NYSE.
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