Horsehead Holding Corp. has a market cap of $427.28 million; its shares were traded at around $9.86 with and P/S ratio of 1.97. ZINC is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, Chuck Royce of Royce& Associates.
Highlight of Business Operations: Market Price for Zinc and Nickel. Since we generate the substantial majority of our net sales from the sale of zinc and nickel-based products, our operating results depend greatly on the prevailing market price for zinc and nickel. Our principal raw materials are zinc extracted from recycled EAF dust, for which we receive revenue from the carbon steel mini-mill companies, and other zinc-bearing secondary materials (purchased feedstock or purchased feed) that we purchase from third parties. Costs to acquire and recycle EAF dust, which, during the first three months of 2010, comprised approximately 70% of our raw materials, are not directly impacted by fluctuations in the market price of zinc on the LME. However, the cost for the remaining portion of our raw materials is directly impacted by changes in the market price of zinc. The price of our finished products is also impacted directly by changes in the market price of zinc and nickel, which can result in rapid and significant changes in our monthly revenues. Zinc prices experienced a period of general decline between 2000 and 2004, primarily due to increased exports from China and declines in global zinc consumption. During 2004, however, zinc prices began to recover, primarily due to increases in global zinc demand, including in China and to declines in global production due to closed or permanently idled zinc mining and smelting capacity. Zinc prices rose throughout 2005 and 2006 to a historical high of $2.08 per pound on December 5, 2006 then began a steady decline to $0.47 per pound on December 17, 2008 for an average of $0.85 per pound for 2008. Zinc prices began to strengthen in 2009 reaching a high of $1.17 on December 31, 2009 for an average of $0.75 for the year.
Zinc prices have moderated in the first quarter of 2010, reflecting the gradual improvements in economic conditions and continued investor activity in the metal markets. For the three months ended March 31, 2010, the LME average zinc prices ranged from $0.98 per pound to $1.10 per pound and averaged $1.04 per pound. For the three months ended March 31, 2010, LME nickel prices ranged from $7.73 per pound to $11.32 per pound and averaged $9.11 per pound.
We have experienced fluctuations in our sales and operating profits in recent years due to fluctuations in zinc prices. Historically, zinc prices have been extremely volatile, and we expect that volatility to continue. For example, the LME price of zinc rose from $0.58 per pound on December 31, 2004 to $2.08 per pound on December 5, 2006 and fell to as low as $0.47 per pound on December 17, 2008. In 2009, the LME price of zinc ranged from a low of $0.48 per pound on February 20, 2009 to a high of $1.17 per pound on December 31, 2009. The average price was $1.04 per pound for the first quarter of 2010. Changes in zinc pricing have impacted our sales revenue since the prices of the products we sell are based primarily on LME zinc prices, and they have impacted our costs of production, since the prices of some of our feedstocks are based on LME zinc prices. Therefore, since a large portion of our sales and a portion of our expenses are affected by the LME zinc price, we expect that changing zinc prices will continue to impact our operations and financial results in the future and any significant drop in zinc prices will negatively impact our results of operations. We employ various hedging instruments in order to attempt to reduce the impact of decreases in the selling prices of a portion of our expected production.
Net sales relating to Horsehead increased $42.7 million, or 107.3%, to $82.5 million for the three months ended March 31, 2010 compared to $39.8 million from the three months ended March 31, 2009. The increase was a result of a $27.5 million increase in price realization, due primarily to a higher average LME zinc price for the first quarter of 2010 versus the first quarter of 2009, a $12.7 million increase in sales volume reflecting increases in shipments across all product lines and an increase in EAF dust receipts. Our net sales were further increased by $3.5 million relating to our hedging activity. Net sales were decreased by a $0.8 million decrease in co-product and miscellaneous sales. The $3.5 million increase in net sales relating to our hedging positions consisted of unfavorable non-cash mark to market adjustments of $0.7 million and $4.2 million for the three months ended March 31, 2010 and March 31, 2009, respectively. The average premium to the LME on zinc products sold for the three months ended March 31, 2010 versus the three months ended March 31, 2009, declined for zinc metal and for zinc oxide. Zinc product shipments were 33,408 tons for the three months ended March 31, 2010, or 30,119 tons on a zinc contained basis, compared to 27,661 tons, or 25,107 tons on a zinc contained basis, for the three months ended March 31, 2009.
quarter of 2009 and continued into 2010. The increase in price realization reflects the increase 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 $1.00 per pound for the three months ended December 31, 2009 compared to $0.54 per pound for the three months ended December 31, 2008. Net sales of zinc and copper-based powder increased $1.9 million, or 135.7%, to $3.3 million for the three months ended March 31, 2010 compared to $1.4 million for the three months ended March 31, 2009. The increase was attributable primarily to increases in shipment volumes and prices, most notably of our copper-based powders.
Cost of sales (excluding depreciation and amortization). Consolidated cost of sales increased $21.7 million, or 39.2%, to $77.1 million for the three months ended March 31, 2010, compared to $55.4 million for the three months ended March 31, 2009. The increase includes a $12.8 million increase in cost of sales for Horsehead and $8.9 million in cost of sales related to INMETCO. As a percentage of consolidated net sales, consolidated cost of sales was 79.5% for the three months ended March 31, 2010, compared to 139.2% for the three months en
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