Graham Corp.'s earnings resumed their climb after an unexpected stumble during the summer, rising by 19 percent as the Batavia manufacturer worked through its growing pains.
Graham executives, who blamed much of its 58 percent drop in second-quarter profits on having more work that it could handle efficiently, said Friday that the company has made progress in improving the company's capacity and finding other contractors to handle some of its workload.
"We did face our challenges over the last six months and we did a good job getting through those challenges," said James R. Lines, Graham's president and chief operating officer.
While Lines said demand for Graham's ejector systems and condensers remains strong within the oil and natural gas industry, as well as in the petrochemical business, growth rates have slowed.
Graham's sales grew by 7 percent during the third quarter, and Lines said the company expects its revenues for the full year, which ends in March, to be in the mid-$60 million range, which is at the low end of the company's scaled-back forecast from October for $65 million to $70 million in sales.
Graham's profits during the third quarter rose to $666,000, or 17 cents per share, from $560,000, or 15 cents per share, a year earlier. The company's sales grew to $14.5 million during the quarter that ended in December from $13.5 million a year earlier -- an increase that Lines said was "somewhat below expectations."
Graham's earnings continued to be depressed by marginally profitable contracts booked during the first half of last year, as well as rising raw material prices and the dampening effect that outsourcing more work has on its profit margins.
But Lines said work on those less-profitable contracts should be completed by summer. "We have been more selective in the orders that we take," he said.
Graham expects to outsource about 20 percent of its production hours during the current quarter, up from 7 percent in the previous quarter, while increasing the capacity of its Batavia factory by about 10 percent.
The company, which employs about 130 people at its Batavia factory, expects to further increase the facility's capacity by about 4 percent this year and is looking to expand its welding and assembly staff, Lines said.
"More skilled labor in our plant would be fantastic so we can handle more work," Lines said. "Right now, and over the next couple of years, we'd like to have more people."
Lines said demand from refineries for Graham's ejector systems has not slowed as oil prices have declined, but he indicated that the strong demand for condensers from the petrochemical industry has returned to more normal levels.
Even so, Graham's backlog of orders grew by 6 percent during the third quarter to finish the year at a record $47.6 million. Graham booked $17 million in orders during the fall quarter, up 19 percent from a year ago.