Global Brass and Copper Holdings says demand for its products did not grow as anticipated in Q2

Global Brass and Copper Holdings says demand for its products did not grow as anticipated in Q2

Company’s financial performance improves despite softer demand.

August 10, 2017

Global Brass and Copper Holdings Inc., Schaumburg, Illinois, has reported its financial results for the second quarter of 2017, ended June 30, and announced a quarterly dividend of 6 cents per share.

Global Brass and Copper Holdings Inc., through its wholly owned principal operating subsidiary, Global Brass and Copper Inc., is a converter, fabricator, processor and distributor of specialized nonferrous products in North America. The company is involved in metal melting and casting, rolling, drawing, extruding, welding and stamping to fabricate finished and semifinished alloy products from processed scrap, virgin metals and other refined metals. Its products include a wide range of sheet, strip, foil, rod, tube and fabricated metal component products sold under the Olin Brass, Chase Brass and A.J. Oster brand names. Its products are used in a variety of applications across diversified markets, including the building and housing, munitions, automotive, transportation, coinage, electronics/electrical components, industrial machinery and equipment and general consumer markets.

Volume for the second quarter of 2017 decreased 4.2 percent to 126.2 million pounds compared with 131.8 million pounds in the second quarter of 2016 because of decreased demand in the munitions, building and housing and coinage markets.

“In the second quarter, overall demand for our products did not grow as anticipated, but we believe we held customer share by providing our customers with best-in-class product quality and delivery performance,” says John Wasz, GBC president and CEO. “Our financial performance improved despite softer demand as we continued to create value through focused initiatives impacting supply chain, productivity and margin management. We are encouraged by the internal improvements across GBC, which we expect will further strengthen our business and provide long-term value for our customers and shareholders.”

Wasz also says the company resolved its claim for insurance proceeds related to the 2016 hot mill outage at Olin Brass during the quarter. The company collected an additional payment of $4.4 million, bringing the total recoveries to $7.4 million, he says.

“In July, we also repriced our term loan B facility to strengthen our capital structure and increase our flexibility and today announced a 60 percent increase in our quarterly dividend,” Wasz adds.

Net sales for the second quarter of 2017 increased to $377.4 million from $337.9 million in the second quarter of 2016. The increase in net sales was attributable to an increase in pass-through commodity costs of the company’s products, according to Global Brass and Copper. Adjusted sales, its non-GAAP (generally accepted accounting principles) financial measure that reflects the value-added premium over metal replacement cost recovery, decreased $4.7 million compared with the prior year, reflective of the decrease in volume, the company says.

Net income attributable to Global Brass and Copper Holdings for the second quarter was $16.1 million in 2017, or 73 cents per diluted share, compared with $8.4 million, or 39 cents per diluted share, in 2016. Net income for the current quarter was favorably impacted by the following items: reduced interest expense; a $4.4 million recovery of insurance proceeds; improved pricing; and the absence of the costs incurred as a result of the production outage at Olin Brass, which occurred in the second quarter of 2016. These items were partially offset by unfavorable fluctuations in unrealized gains / losses on derivative contracts, decreased volumes and an increase in the provision for income taxes.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $37.3 million for the second quarter of 2017 compared with $25.9 million in 2016. The increase was primarily because of the previously mentioned insurance proceeds, improved pricing and the fact that the prior year results were unfavorably impacted by the temporary production outage at Olin Brass, partially offset by decreased volumes.

Adjusted diluted earnings per common share, another non-GAAP measure, was 82 cents for the second quarter of 2017 compared with 43 cents in the prior year. The growth in adjusted earnings per share was a result of the aforementioned items affecting adjusted EBITDA, the decrease in interest expense and the corresponding tax impact of these items.

For the six months ended June 30, 2017, the company generated $17 million from operating activities largely because of cash from earnings.

The company ended the quarter with cash of $83.9 million, $317.6 million outstanding under its term loan facility, and $197.9 million of borrowings available under its asset-based revolving loan facility.

The company has revised its full-year guidance based on the results from its second quarter:

  • Shipment volumes are expected to range from 500 million pounds to 530 million pounds compared with earlier guidance of 530 million pounds to 560 million pounds.
  • Adjusted EBITDA will range from $120 million to $130 million compared with earlier guidance of$115 million to $125 million.

Aug. 2, 2017, Global Brass and Copper’s board of directors declared an increase in the quarterly cash dividend from 3.75 cents per share to 6 cents per share on its common stock for the second quarter of 2017, an increase of 60 percent. The dividend will be paid Aug. 24, 2017, to stockholders of record on the close of business Aug. 14, 2017.