Harsco Corp. reported income from continuing operations was $23.1 million, compared with $16.9 million last year, an increase of 37 percent. Overall operating margins improved to 7.4 percent in the first quarter 2005 from 6.6 percent in last year's comparable period. First quarter sales totaled $640 million, also a record, up 15 percent from sales of $556 million in the same period last year. Positive foreign currency translation contributed approximately $16 million to this year's first quarter sales and $1.3 million to pre-tax income.
Derek Hathaway, Harsco’s chairman, president and CEO, said, ``We are pleased with the growth of our operations in the first quarter of 2005. Led especially by strong performance from our Access Services and Engineered Products and Services businesses, three of our four major operating groups achieved solid growth in both sales and operating income to begin the year.
In a review of the company’s different businesses, Harsco reported that sales during the quarter for its Mill Services division increased nearly 14 percent to $269 million, up from $236 million in last year's first quarter. Organic growth was responsible for $22 million of the increase, or approximately 9 percent, while positive foreign currency translation contributed $10 million, or approximately 5 percent. Operating income for the quarter rose 7 percent to $27.0 million, up from $25.3 million in the first quarter of last year.
Positive foreign currency translation increased operating income by approximately $1.2 million. Operating margins declined to 10.1 percent from 10.7 percent in the same period last year, reflecting the impact of higher fuel costs, the timing of equipment maintenance costs at certain mill sites, and to a lesser degree the delayed start-up of a new contract at a major mill site. These impacts were somewhat offset by improved margins at certain other mill sites, reflecting higher volumes from customers, the addition of new contracts, as well as ongoing operating efficiencies.
The company expects its Mill Services margins to improve in future quarters and for the full year as fuel escalation clauses at some mills become effective on the respective contract anniversary dates throughout 2005, maintenance costs become more normalized, and the full commissioning of a major contract start-up occurs by the middle of the year.
Additionally, margins are also expected to improve due to ongoing Six Sigma operating efficiencies and new investments.
According to the International Iron and Steel Institute, global steel production for the first quarter of 2005 increased by 6.5 percent compared with this time last year. Excluding China, steel production has grown about 1 percent year-to-date. Any temporary production slowdown that may occur at certain mill sites is expected to be mitigated through further contract signings and by the breadth of the company's Mill Services operations, which encompass approximately 160 mills in over 30 countries worldwide. Approximately 80 percent of the company's Mill Services revenues are generated outside the United States.