The oil boom led to a "phenomenal" first quarter for Graham Corp.
Buoyed by strong demand for the condensers and ejector systems it makes for oil refineries and petrochemical plants, Graham's profits more than doubled during the spring quarter while its sales jumped by 37 percent.
"This was a phenomenal first quarter," said James R. Lines, Graham's president and chief operating officer.
And Lines said he expects the growth to continue this year, although not at the same pace as the first quarter. Lines said sales for the entire year likely will be at the higher end of the 10 percent to 15 percent growth the company previously predicted.
"Our second quarter is developing well," Lines said. "By no means do I believe our first quarter is going to be our best quarter this year."
That news caused a surge in Graham's stock, which soared 32.5 percent to $8.70 on Monday, to a 52-week high of $35.50.
Lines said Graham's profits were enhanced by the company's efforts to avoid less lucrative projects and control its material costs. Most of the low-margin projects that were a drag on Graham's earnings in recent quarters now have been completed, Lines said.
As a result, Lines said he expects Graham's profits to keep rising faster than its sales during the coming quarters. Graham is continuing to work to increase the capacity of its Batavia plant, which should enhance profitability in the future, he said.
"We're not looking at expansion of the physical plant. We're looking at investing in our plant operations with new equipment to expand our capacity," Lines said during a conference call. "Production efficiency today is superior to what it was 12 to 18 months ago."
Graham, which grappled with a surge in work last year, said it outsourced about 15 percent of its work during the quarter that ended in June and Lines said he expects about 12 percent to 14 percent of its work this year to be done by outside contractors.
Despite the surge in sales, Graham still was able to keep building its backlog of pending projects. Graham's backlog of orders hit an all-time high of $59.2 million at the end of June, up from $38.6 million a year earlier. Most of the sales increase came from projects in Asia, Canada and South America, Graham said. Projects in the United States accounted for 46 percent of Graham's sales during the quarter, compared with 13 percent apiece for Asia and Canada.
Almost half of its sales went to the refining industry, with almost a quarter going to the chemical and petrochemical industry.