Gibraltar Steel Corp. said Thursday its third-quarter earnings more than doubled as the Hamburg-based steel processor reaped the benefits of its extensive investments in its facilities during the last two years.
Those investments in new or upgraded facilities, combined with its acquisitions of Illinois steel processor Hubbell Steel Corp. and Carolina Commercial Heat Treating Inc., a Charlotte, N.C.-based steel heat treating firm, helped Gibraltar sharply increase its profit margins during the quarter.
As a result, the company's earnings soared to a record $4.4 million, or 36 cents per share, from $2 million, or 20 cents per share, a year ago. Gibraltar's earnings easily topped the profits of 32 cents per share that the three analysts who follow the company had been expecting.
"We're pleased," said Brian J. Lipke, Gibraltar's chairman and chief executive officer. "We spent a lot of money in 1995 and early 1996. We've started to achieve the benefits from the significant capital expenditures we made."
One of those benefits was a strong increase in the company's gross profit margins, which shot up to 18 percent from 13 percent a year ago, when the company didn't have its higher-margin Carolina Heat Treating business and was in the midst of its capital spending program.
Walter T. Erazmus, the company's executive vice president and chief financial officer, said Gibraltar enjoyed across-the-board improvement at its operations. "We saw every single operation improve," he said.
The company's sales grew by 18 percent to $88 million from $74.7 million a year ago. Erazmus said the increase was partly due to slightly more than $5 million in revenues from Carolina Heat Treating and growth in its other businesses, including Hubbell Steel.
Gibraltar also managed to trim its interest expense to $852,000 from $1.18 million a year ago because it used the roughly $34 million it raised by selling 2.05 million shares of new stock in a secondary offering to reduce its debt.
Lipke also said the company currently is spending about $12 million to install a 56-inch mill at its Cleveland cold-rolled strip steel business.
That mill, which is being installed in an existing building that will not require the company to hire additional maintenance or support workers, should make Gibraltar the industry's low-cost producer of cold-rolled strip steel when it comes on line during the fourth quarter of next year, Lipke said.
Lipke also said he does not expect Gibraltar, which gets a big chunk of its sales from the auto industry, to feel a big impact from the recent strike in Canada that shut down or slowed production at several General Motors Corp. plants in the United States and Canada.
The 20-day strike, which ended this week, limited Gibraltar's shipments from only one plant. "The impact we're anticipating is very little, if any," Lipke said.
For the first nine months of this year, Gibraltar's profits surged by 59 percent to $11.9 million, or $1.09 per share, from $7.5 million, or 74 cents per share, a year ago. The company's sales rose by 22 percent to $256.5 million from $209.8 million the year before.