Gibraltar Steel Corp. said Tuesday its third-quarter profits fell by 14 percent, although the Hamburg-based steel processor's stock rose because the decline wasn't as steep as analysts had been expecting.
Gibraltar said its earnings tumbled to $3.79 million, or 31 cents per share, from $4.41 million, or 36 cents per share, a year ago as the company was stung by rising steel prices and slower-than-expected sales growth.
But Gibraltar's profits were at the high end of the range that the company had predicted a month ago, when it warned that its earnings would decline, rather than rise to about 39 cents per share as had been expected at that time.
As a result, the earnings slightly exceeded the 30 cents per share that analysts had been expecting in the wake of Gibraltar's warning, which caused the company's stock to plunge by as much as 19 percent on the day it was issued.
Gibraltar's stock subsequently recovered about a third of its losses and regained even more ground on Tuesday, when its shares rose by 1 to 24. But it still is down from 26 1/4 the day before the company issued the profit warning. Brian J. Lipke, Gibraltar's chairman and chief executive officer, said the company began to see some positive signs late last month that could reverse some of the problems that led to the lower earnings in the third quarter.
Gibraltar's automotive business, which accounted for about 36 percent of its total revenues last year, was unexpectedly weak during the third quarter because of some auto plant strikes. But Lipke said that business stabilized during September and has begun to show signs of renewed growth.
In addition, the rising steel prices that had squeezed the company's profit margins also have shown signs of receding, with some steel producers lowering their prices recently. Those price cuts "if sustained, bode well for our business," Lipke said.
Gibraltar also said it is trying to boost its profit margins by controlling or cutting its costs, as well as by improving the efficiency and productivity of its operations.
The company's sales rose by 30 percent to $114.2 million from $88 million a year ago.
Gibraltar also said it expects the new 56-inch mill at its Cleveland cold-rolled strip steel business to begin running late this year. The new mill, which will be the nation's widest and allow Gibraltar to process an additional 120,000 tons of steel each year, could add $80 million to $85 million in sales if it reaches full capacity, as Gibraltar hopes, within three years.
The company also said it has expanded its credit facility with its banks by $60 million to $185 million, which gives the firm access to extra funds to finance internal expansion projects, acquisitions and new sites. About $100 million of the expanded credit facility was available at the end of the third quarter.
"With the moves we have made and are making to aggressively grow our top and bottom lines -- and the trends we're seeing -- we look to 1998 with a great level of anticipation and excitement," Lipke said.
For the first nine months of the year, Gibraltar's profits rose by 9 percent to $12.9 million, or $1.05 per share, from $11.9 million, or $1.09 per share, a year ago, when the company had fewer shares outstanding. Sales grew by 33 percent to $341.7 million from $256.5 million.