Calgon Carbon Corporation (CCC) posted a loss of $4.5 million or 8 cents a share in third-quarter 2012 compared with a profit of $14.5 million or 25 cents a share a year ago. Excluding a restructuring charge of $8 million, the Pennsylvania-based pollution control company earned 6 cents a share in the quarter, which missed the Zacks Consensus Estimate of 12 cents.
Revenues dipped 5.6% year over year to $135.5 million, and missed the Zacks Consensus Estimate of $143 million. Currency translation had a negative impact of $3.2 million on sales, stemming from a stronger dollar.
Revenues from the Activated Carbon and Service segment decreased 11.6% to about $115 million, due to lower demand for activated carbon in the municipal drinking water, environmental air, and wastewater markets.
Equipment revenues shot up 57.5% to $18.2 million on higher sales from ballast water treatment systems and ion exchange equipment. Consumer sales increased 13.3% to $2.3 million in the quarter, supported by higher demand for activated carbon cloth.
Margins and Expenses
Gross margin fell to 27.3% in the quarter from 33.8% a year ago, impacted by maintenance issues, delays associated with a capital project, and hurricane damage at the company’s Pearl River plant. Moreover, the company incurred a charge of $1.7 million related to the write-off of obsolete inventory.
Selling, administrative and research (SG&A) expenses rose 7.5% to $25.8 million. The company attributed the increase to a $1.7 million pension charge and $1.7 million related to an agreement with its former chief executive officer in July 2012.
Calgon Carbon ended the quarter with cash and cash equivalents of $18.7 million, compared with $13.6 million as of December 31, 2011. Total long-term debt stood at $0.3 million as of September 30, 2012, compared with $1.1 million as of December 31, 2011.
Outlook and Recommendation
Calgon Carbon remains confident in its ability to balance the need for future investment with its responsibility to provide short-term returns. Despite some challenges, the company expects to continue to capitalize on its growth opportunities. Healthy sales gains and strategic initiatives will be beneficial in the longer term. We, however, remain concerned about the economic challenges that it might face in the remainder of 2012. Moreover, escalating costs remain a headwind.
We currently have a long-term (more than 6 months) Neutral recommendation on Calgon Carbon. The company, which competes with MeadWestvaco Corporation (MWV), retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating.
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