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Graham reports 27% sales growth; Acquisition credited for jump

Graham Corp.'s third-quarter profits more than doubled as the acquisition last year of a Michigan company that makes equipment for nuclear power plants accounted for more than half of the Batavia manufacturer's 27 percent sales growth.

Graham's profits jumped to $1.6 million, or 16 cents per share, compared with $759,000, or 8 cents per share, a year earlier.

The company's sales rose to $24.3 million during the quarter that ended in December, up from $19.2 million a year ago. The acquisition of Energy Steel & Supply Co. in December 2010 accounted for $3.4 million of the revenues, with sales from Graham's existing businesses rising by 13 percent.

"We had a solid quarter," said James R. Lines, Graham's president and chief executive officer, during a conference call Friday.

Graham also narrowed its sales forecast for the full fiscal year that ends in March, narrowing its revenue prediction to $105 million to $108 million, compared with its earlier estimate of $104 million to $110 million.

During the third quarter, Graham's traditional market in the petrochemical industry continued to expand, with revenues from those customers jumping by 47 percent because of expansion projects related to low natural gas prices and growth in emerging markets.

That growth offset flatness in Graham's key refinery markets, which Lines said he believes is due to new orders being delayed into the current quarter. Lines estimated that between $5 million to $10 million in orders were pushed back.

"In the early stages of a recovery, it's difficult to predict the timing of orders," he said.

Lines said he believes some recent orders that were won by competitors have been for prices that were not profitable enough for his tastes. Lines said he believes it would be a mistake for Graham to try to fill its backlog with orders that did not meet its profitability targets.

The company's new order bookings grew by 23 percent to $21.9 million, with 44 percent of orders coming from Energy Steel. Bookings from Graham's existing businesses fell by 28 percent because of a steep drop in orders from the refining industry.

The company's backlog of orders stood at $72.6 million at the end of December, down from $75.1 million at the end of September and $90.5 million a year ago.

"The decline in the refining industry was apparent in the organic business, despite a surge in orders from the petrochemical industry," Lines said. "We continue to operate in what we believe is the early stages of a global industrial recovery."

Graham, which cut almost a quarter of its jobs in Batavia during the recession, has been gradually building its local workforce as business has rebounded. The company, which saw its Batavia workforce drop from 320 before the recession to a low of around 245, has since increased its local employment to about 285. Lines said the company expects to hire another 10 to 15 workers this year.