Commonwealth Industries, Inc. announced results for the first quarter ended. The company's report for the period marked the first year-over-year increase in aluminum shipment volume since the first quarter of 2000, as Commonwealth's aluminum shipments rose 11 percent to 209.5 million pounds in the first quarter of 2002 compared with 189.3 million pounds in the year-earlier period.
Improved volumes notwithstanding, the quarter's results reflected ongoing losses caused by lower material margins for the aluminum business unit due to tight scrap spreads combined with selling prices that remained significantly lower than in the first quarter of 2001.
Partially offsetting the pressure on its aluminum business and continuing the trend seen throughout 2001, Commonwealth's electrical products business, Alflex, posted an improved operating profit for the quarter versus the same period last year even as shipments declined 2 percent to 126.0 million feet versus 128.4 million feet in the first quarter of 2001.
Net sales for the first quarter declined 4 percent to $221.9 million from $230.2 million in the same period last year. Gross profit for the quarter fell 3 percent to $10.5 million from $10.9 million in the year-earlier quarter. The net loss for the first quarter of 2002 was $4.4 million compared with a net loss of $6.1 million in the prior-year period.
Mark Kaminski, CEO, said, "We were pleased to see improving volume for aluminum products during the first quarter, the first time in two years we have seen an upturn in demand, even though overall business conditions remained challenging. Demand for aluminum products increased across our markets, particularly the distribution market where significant inventory de-stocking occurred over the past two years. Also, we saw encouraging signs of firming order volume in the transportation market, which has been very weak for some time, while the building and construction market remained quite strong. Overall, our customer and market insight supports our general observation that the economy is beginning a gradual rebound from its recent down cycle." Kaminski noted that the slight decline in Alflex volume reflected generally flat market demand in the electrical products sector.
Kaminski noted that while Commonwealth's aluminum volumes and prices have begun to firm, the company continued to see pressure on material margins during the first quarter, stemming from the seasonal decline in the availability of post-consumer scrap and a cyclical decline in industrial scrap availability related to the recent economic slowdown, combined with strong competition for available scrap units from secondary aluminum processors. These factors are expected to continue to affect aluminum material margins in the second quarter. Aluminum material margins declined to $0.303 from $0.338 in the year-earlier quarter.
Commonwealth's gross profit margin for the first quarter increased to 4.8 percent compared with 4.7 percent in the year-earlier period. Selling, general and administrative expenses totaled 5.1 percent of net sales in the first quarter of 2002, the same as in the first quarter of 2001. However, on an absolute basis, selling, general and administrative expenses declined 4 percent to $11.3 million in the first quarter of 2002 from $11.7 million in the same period last year.