Chief positives coming out of CC Q&A: in next 5 years expect substantial increase in % of revenue coming from Asia (from 8%to 20's) and Eastern/middle Europe (from 20's to 30's); Ashupura expects to double sales over next 2 years; continuing positive lab results on anti-viral properties of their nanoclays, talking to potential customers, and could be significant in a few years; just now getting ramp up of production from new investments in China and Australia, and expect Turkey to be major exporter of clays.
Chief negatives: CFO is neither articulate, or precise; receivables and inventory, year over year, up as % of sales without any real explanation (CFO says they will be down by end of year, but sure, sales in 4th qtr. would be down seasonally so receivables will be down). Still don't seem to be making much progress in oil field services outside of America's, although do operate world wide.
It seemed like the large component metal casting business was weak this quarter, but PCP (Precision Castparts) reported that their casting business was quite strong this quarter. Could just be their particular product mix and ACO may not be a supplier. I don't know if PCP's products are made the same way that large sand castings are made or not.
Excerpt from article: Investment Cast Products: In the first quarter of fiscal 2008, continued commercial aerospace strength, coupled with heightened industrial gas turbine (IGT) sales, drove the Investment Cast Products segment to record sales of $530.3 million, a 23.9 percent increase over sales of $428.1 million in last year's first quarter. Operating income grew by 33.2 percent year over year, hitting a new high of $122.4 million in this year's first quarter, or 23.1 percent of sales, versus $91.9 million, or 21.5 percent of sales last year. During the quarter, the segment installed two more airfoil furnaces and further expanded its output of large titanium structural components, adding further capacity to handle increasing production schedules.
The above results include a full quarter of GSC Foundries for fiscal 2008.
Forged Products: Propelled by its strong presence in both aerospace and non-aerospace markets, Forged Products increased its first quarter sales year over year by 96.1 percent, achieving record sales of $755.3 million this year, compared to sales of $385.2 million in the first quarter of fiscal 2007. In the first quarter of fiscal 2008, metal pass-through added approximately $190 million to the segment's top line, versus approximately $45 million last year. The segment's operating income also reached new levels, climbing 210.8 percent to $167.5 million, or 22.2 percent of sales, in the first quarter of fiscal 2008, compared to $53.9 million, or 14.0 percent of sales last year. Similar to Investment Cast Products, this segment's growth is being fueled by the growing requirement for both OEM and aftermarket components resulting from the solid commercial aerospace cycle. In addition, non-aerospace sales of forged nickel alloy mill forms to the oil and gas, chemical processing, pollution control, and power industries continue to present sizeable upside opportunities. Driven by a strong resurgence in the China market, the extruded pipe backlog now well exceeds $400 million, with significant potential to grow throughout the fiscal year. During the quarter, the installation of the second isothermal forge in Worcester, Massachusetts, was completed, and qualification of engine discs for production began in the second quarter.
The above results include a full quarter of Special Metals and nearly a full quarter of McWilliams Forge for fiscal 2008.
Steve, industries cited were aerospace and turbines, and I don't think either has been mentioned as an important source of demand for ACO. Heavy trucks, I think, is more important, and that is down big due to new emission standards. There will be another enhancement of standards in 2010(?), driving another up cycle for heavy trucks.