Synalloy Corp. (SYNL, Financial) filed Quarterly Report for the period ended 2009-07-04.
SYNALLOY CORP. operates in 2 principal industry segments: chemical & metal. The chemical segment manufactures dyes pigments & auxiliaries for the textile industry & a variety of specialty chemicals for the chemical petroleum & pharmaceutical industries. The metals segment manufactures welded stainless steel pipe & highly specialized products most of which are custom-produced to individual orders. Products include piping systems fittings tanks pressure vessels and a variety of other components. Synalloy Corp. has a market cap of $54.4 million; its shares were traded at around $8.7 with a P/E ratio of 72.6 and P/S ratio of 0.3. The dividend yield of Synalloy Corp. stocks is 1.3%.
Management recognizes the importance of maintaining a strong financial position during the chaotic economic conditions we currently face. The positive result of the huge price declines that have taken place in our Metals Segment is that working capital needs are decreased by reduced inventory values and accounts receivable. Even though profits were modest in the first six months, cash flow from operations of $16,082,000 let us pay a $632,000 cash dividend, eliminate our bank debt totaling $10,426,000 and increase cash balances by $3,806,000. Our extremely strong balance sheet positions us well to take advantage of any opportunities that may emerge as the year progresses.
The Metals Segment s business is highly dependent on capital expenditures which have been significantly impacted by the economic turmoil. Falling stainless steel prices, the depressed economy, and distributors reluctance to restock inventories have created a poor pricing environment for our commodity pipe. However, surcharges have increased every month since May 2009, and our steel suppliers implemented a six percent price increase on May 1, 2009 and a second six percent price increase on July 1, 2009, which the industry thinks will be accepted in the marketplace. We are hopeful this signals that the lows in stainless steel prices are behind us which would bode well for future profitability. It is possible that the stimulus spending by the Federal Government, which includes a “Buy-American” provision covering iron and steel, will fund increased activity in the water and wastewater treatment area, a significant part of our piping systems business. Although Management is disappointed with the modest loss in the second quarter of 2009, we remain confident that we are in an excellent position to benefit from the eventual improvement in economic conditions. However, the impact from current economic conditions both domestically and worldwide makes it difficult to predict the performance of this Segment for the remainder of 2009. We believe we are the largest and most capable domestic producer of non-commodity stainless pipe and an effective producer of commodity stainless pipe which should serve us well in the long run. We also continue to be optimistic about the piping systems business over the long term based on our strong backlog, with 80 percent of the backlog coming from energy and water and wastewater treatment projects. Piping systems backlog was $40,300,000 at the end of the second quarter of 2009 compared to $41,007,000 at the end of the first quarter of 2009 and $45,500,000 at the end of 2008. We estimate that approximately 80 percent of the backlog should be completed over the next 12 months. We will continue our efforts to position the Metals Segment to benefit from the significant infrastructure spending that is anticipated in future years.
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SYNALLOY CORP. operates in 2 principal industry segments: chemical & metal. The chemical segment manufactures dyes pigments & auxiliaries for the textile industry & a variety of specialty chemicals for the chemical petroleum & pharmaceutical industries. The metals segment manufactures welded stainless steel pipe & highly specialized products most of which are custom-produced to individual orders. Products include piping systems fittings tanks pressure vessels and a variety of other components. Synalloy Corp. has a market cap of $54.4 million; its shares were traded at around $8.7 with a P/E ratio of 72.6 and P/S ratio of 0.3. The dividend yield of Synalloy Corp. stocks is 1.3%.
Highlight of Business Operations:
Consolidated selling and administrative expense for the second quarter decreased $769,000, or 24 percent, and for the first six months of 2008 decreased $1,330,000 or 21 percent, compared to the second quarter and first six months of last year. The expense was ten percent and eight percent of sales for the quarter and first six months of 2008, respectively, compared to six percent and eight percent for the same periods last year. The decreases for the quarter and first six months resulted principally from reduction in profit incentives incurred during the periods resulting from the reduction in profits earned in the second quarter and first six months of 2009 compared to the same periods last year. Also contributing to the decreases was the elimination of expenses resulting from selling the pigment dispersion business coupled with reduced sales commissions from the lower sales experienced in the quarter and first six months of 2009 compared to the same periods last year.Management recognizes the importance of maintaining a strong financial position during the chaotic economic conditions we currently face. The positive result of the huge price declines that have taken place in our Metals Segment is that working capital needs are decreased by reduced inventory values and accounts receivable. Even though profits were modest in the first six months, cash flow from operations of $16,082,000 let us pay a $632,000 cash dividend, eliminate our bank debt totaling $10,426,000 and increase cash balances by $3,806,000. Our extremely strong balance sheet positions us well to take advantage of any opportunities that may emerge as the year progresses.
The Metals Segment s business is highly dependent on capital expenditures which have been significantly impacted by the economic turmoil. Falling stainless steel prices, the depressed economy, and distributors reluctance to restock inventories have created a poor pricing environment for our commodity pipe. However, surcharges have increased every month since May 2009, and our steel suppliers implemented a six percent price increase on May 1, 2009 and a second six percent price increase on July 1, 2009, which the industry thinks will be accepted in the marketplace. We are hopeful this signals that the lows in stainless steel prices are behind us which would bode well for future profitability. It is possible that the stimulus spending by the Federal Government, which includes a “Buy-American” provision covering iron and steel, will fund increased activity in the water and wastewater treatment area, a significant part of our piping systems business. Although Management is disappointed with the modest loss in the second quarter of 2009, we remain confident that we are in an excellent position to benefit from the eventual improvement in economic conditions. However, the impact from current economic conditions both domestically and worldwide makes it difficult to predict the performance of this Segment for the remainder of 2009. We believe we are the largest and most capable domestic producer of non-commodity stainless pipe and an effective producer of commodity stainless pipe which should serve us well in the long run. We also continue to be optimistic about the piping systems business over the long term based on our strong backlog, with 80 percent of the backlog coming from energy and water and wastewater treatment projects. Piping systems backlog was $40,300,000 at the end of the second quarter of 2009 compared to $41,007,000 at the end of the first quarter of 2009 and $45,500,000 at the end of 2008. We estimate that approximately 80 percent of the backlog should be completed over the next 12 months. We will continue our efforts to position the Metals Segment to benefit from the significant infrastructure spending that is anticipated in future years.
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