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Horsehead Hldg Corp Reports Operating Results (10-Q)

May 11, 2009 | About:

Horsehead Hldg Corp (ZINC) filed Quarterly Report for the period ended 2009-03-31.

Horsehead Holding Corp. is the parent company of Horsehead Corporation a leading U.S. producer of specialty zinc and zinc-based products. Horsehead headquartered in Monaca Pa. employs over thousand people and has six operating locations throughout the U.S. HORSEHEAD HOLDING CORP. has a market cap of $237.96 million; its shares were traded at around $6.75 with a P/E ratio of 17.76 and P/S ratio of 0.53.

Highlight of Business Operations:

Net sales. Net sales decreased $74.6 million, or 65.2%, to $39.8 million for the three months ended March 31, 2009 compared to $114.4 million from the three months ended March 31, 2008. The decrease was a result of a $30.9 million decrease in price realization, due primarily to a lower average LME zinc price for the first quarter of fiscal 2009 versus the first quarter of fiscal 2008, a $37.8 million decrease in sales volume reflecting decreases in shipments across all product lines and a decrease in EAF dust receipts. Our net sales were further decreased by $3.4 million relating to our hedging activity

Net sales of zinc metal decreased $29.2 million, or 63.3%, to $16.9 million for the three months ended March 31, 2009 compared to $46.1 million for the three months ended March 31, 2008. The decrease was attributable primarily to a $17.1 million decrease in price realization and a $12.1 million decrease in sales volume. The decrease in price realization was attributable to both a lower average LME zinc price for the first quarter of fiscal 2009 versus the first quarter of fiscal 2008 and a lower average premium to the LME on zinc products sold for the first quarter of fiscal 2009 versus the first quarter of fiscal 2008. The decrease in shipment volume reflects the weakened demand for our products that began in the fourth quarter of fiscal 2008 and continued throughout the first quarter of fiscal 2009.

Net sales of zinc oxide decreased $31.1 million, or 66.5%, to $15.7 million for the three months ended March 31, 2009, compared to $46.8 million for the three months ended March 31, 2008. The decrease was attributable to an $18.4 million decrease in sales volume and a $12.7 million decrease in price realization. The volume decrease was caused primarily by decreased shipments to our largest tire customers reflecting the general slowdown in the market that began in fiscal 2008 and continued into 2009. The decrease in price realization reflects the reduction of the average LME zinc prices over the past twelve months partially offset by the lag effect of pricing a majority of our zinc oxide shipments on prior months’ average LME zinc prices. The average LME zinc price was $0.54 per pound for the three months ended December 31, 2008 compared to $1.19 per pound for the three months ended December 31, 2007. Net sales of zinc and copper-based powder decreased $2.6 million, or 65.0%, to $1.4 million for the three months ended March 31, 2009 compared to $4.0 million for the three months ended March 31, 2008. The decrease was attributable primarily to decreases in prices and shipment volumes, most notably of our copper-based powders.

Revenues from EAF dust recycling decreased $5.9 million, or 43.4%, to $7.7 million for the three months ended March 31, 2009 compared to $13.6 million for the three months ended March 31, 2008. Decreased volumes caused revenues to decrease by $5.7 million. A 1% decrease in price realization on EAF dust recycling fees for the three months ended March 31, 2009 compared to the three months ended March 31, 2008 resulted in a decrease in net sales of $0.2 million. EAF dust receipts for the three months ended March 31, 2009 declined 42.1% to 80,403 tons compared to 138,955 tons for the three months ended March 31, 2008, reflecting the sharp drop in steel production that began in the fourth quarter of fiscal 2008 and continued into 2009. According to data from the American Iron & Steel Institute, reported steel production for the three months ended March 31, 2009 declined 51.8% from the three months ended March 31, 2008.

The cost of zinc material and other products sold decreased $36.7 million, or 41.0% to $52.9 million for the three months ended March 31, 2009 compared to $89.6 million for the three months ended March 31, 2008. The decrease was primarily the result of a $25.4 million decrease in shipment volume across all major product lines, a $6.0 million decrease in the cost of products shipped and a $5.3 million decrease in recycling and other costs. The decreases reflect lower feed costs and lower conversion costs for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Purchased feed costs were reduced by $24.4 million, reflecting both the lower LME average zinc price as well as the lower cost of purchased feeds we pay expressed as a percentage of the LME. The reduction in our purchased feed costs also reflects a 48.6% reduction in the number of tons of purchased feed consumed and a reduction in the percentage of purchased feed used in our feed mix.

Our conversion costs were $12.8 million lower in the three months ended March 31, 2009 than in the three months ended March 31, 2008. The reduction reflects a $5.9 million decrease in utility costs, a $2.7 million reduction in labor costs and a $2.0 million reduction in maintenance and supplies costs. These reductions were driven primarily by lower production levels for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 in response to the economic slowdown that accelerated in the fourth quarter of fiscal 2008 and continued into 2009. Additionally, the conversion costs for the three months ended March 31, 2008 included start-up costs for the kiln placed in service in early January 2008 at our Rockwood, Tennessee facility, as well as costs incurred in an unplanned outage at our power plant located in Monaca, Pennsylvania. Finally, our cost of sales for the three months ended March 31, 2009 reflects a $2.8 million LCM adjustment relating to the write-down of inventory values

Read the The complete ReportZINC is in the portfolios of Mohnish Pabrai of Pabrai Mohnish.

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