Surging profits from its processed metal products business helped Gibraltar Industries' first-quarter earnings jump by 15 percent, the company said Tuesday.
While the Hamburg-based metal and building products manufacturer's two other businesses -- building products and steel heat treating -- generated either flat or declining earnings, the strong growth by the processed metal products unit allowed Gibraltar to set records for sales and profits during the quarter.
Gibraltar's profits rose for the 13th straight quarter to $10.7 million, or 36 cents per share, from $9.3 million, or 32 cents per share, a year ago. Its sales rose by 34 percent to $274 million from $204 million.
The rising profits topped the 34 cents per share that analysts surveyed by Thomson Financial/First Call were expecting. Gibraltar also said it expects its profits during the current quarter to range between 54 cents and 57 cents per share, which is in line with the average analyst estimate of 55 cents per share, according to Thomson Financial/First Call.
The impact of steep steel price increases last year continues to filter through Gibraltar's businesses, which have been phasing in price increases to compensate for the higher raw material costs. Those increases have been slower to take effect than the impact from the higher steel prices, which has cut into Gibraltar's profit margins, especially in its heat treating and building products business.
As those price increases take hold as this year progresses, the profitability of Gibraltar's building products business is expected to improve, although it will take much of the year before margins return to more normal levels, said Brian J. Lipke, Gibraltar's chairman and chief executive officer.
Gibraltar executives also are pushing to reduce costs and become more efficient by combining some purchasing functions and sharing other services, such as payroll and information technology, between its far-flung businesses. An initiative earlier this year to combine purchases of boxes and packaging reduced Gibraltar's costs by 10 percent, or more than $1 million, Lipke said.
"We believe we're in a position to extract further improvements from our existing businesses," he said.
Sales in Gibraltar's processed metal products business swelled by 65 percent to $127.6 million from $77.2 million as the company added new accounts and increased volumes, while the business also became more profitable. Operating profits soared to $14 million from $8 million as operating margins improved to 11 percent from 10.4 percent a year ago. About 70 percent to 75 percent of the increase in sales was due to higher selling prices, spurred by the rising raw material costs, Lipke said.
Revenues in the building products business grew by 17 percent to $119 million, but profits increased by only 1 percent to $10.5 million as the unit's operating margins shrunk to 8.8 percent from 10.2 percent a year ago due mainly to the lag in phasing in price increases.
The company's thermal processing business increased its sales by 5 percent to $27 million, but its operating profits dropped by 14 percent to $3.4 million as margins narrowed to 12.7 percent from 15.5 percent a year earlier. Gibraltar executives blamed the weaker margins on a less favorable product mix caused by slow starts to the year in its agricultural and automotive markets.