Weak 4Q and FY12 for Harsco

Zacks

Harsco Corporation (HSC) posted GAAP loss per share of $3.27 in the fourth quarter versus a loss of $1.14 in the year ago quarter. Adjusted earnings per share (EPS) were 30 cents in the quarter compared with 36 cents in the year-ago quarter. Adjusted EPS missed the Zacks Consensus Estimate by 3.2%.

For 2012, GAAP loss per share was $3.15 per share versus a loss of 12 cents per share. Adjusted (EPS) was $1.19 compared with $1.31 in the year ago quarter. Adjusted EPS missed the Zacks Consensus Estimate by 1.7%.

Revenue  

Revenues in the quarter amounted to $766 million, down 3.3% year over year. Reported revenues were ahead of the Zacks Consensus Estimate of $745 million. The year-over-year decline in revenues was due to the termination of agreements in the Metals & Minerals segment and discontinuation of Infrastructure segment’s operations in various countries. The foreign currency translation also reduced sales in the reported quarter. In addition, revenue was also adversely impacted by the weak metals and commercial construction markets.

For 2012, revenues were $3.0 billion down 7.8% compared with $3.3 billion in the year ago period.

On a segmental basis, Metals & Minerals generated revenues of $334 million in the quarter, down 10.2% from the year-earlier quarter. The year-over-year drop in the segment’s sales was attributed to the closing of certain under performing agreements, foreign currency translation and lower volume owing to the clouded metal market.

Revenues from the Infrastructure segment came in at $235 million, down 11.5% from the year-earlier quarter, primarily owing to the closing of operations in several countries and foreign currency translation. Additionally, the weak commercial construction markets and soft end-market for industrial maintenance services in the North America and Europe regions also impacted the segment’s sales during the quarter.

The Rail segment generated revenues of $113 million versus $72 million the year-ago quarter. The hike was attributable to high equipment delivery in China, offset by lower volume for replacement parts and contract services.

Revenues from the Industrial segment were $84 million, up 1.5% year over year, driven by strong energy markets.

In terms of business mix, Service revenues were $571.6 million versus $640.7 million in the year-earlier quarter.  Product revenues improved to $194.7 million from $151.9 million in the year-earlier quarter.

Margins

GAAP operating loss was $247 million in the reported quarter versus a loss of $57 million in the year-ago quarter hurt by lower results in Metals & Minerals and the unfavorable impact of the foreign currency translation. Adjusted operating income margin increased 50 basis points to 6.1%.

Balance Sheet and Cash Flow

Harsco ended Dec 31, 2012 with cash and cash equivalents of $ 95.2 million, down from $121.1 in the year-ago period. As of Dec 31, 2012, long-term debt stood at $957.4 million, increasing from $853.8 million in the year-ago period.

As of Dec 31, 2012, net cash provided by operating activities was recorded at $198.8 million compared with $298.7 million in the year-ago period

Guidance

Management expects earnings per share from continuing operations to range from break even to 5 cents per share in the first quarter of 2013.

Metals & Minerals' revenue in the first quarter is expected to be approximately 6% to 8% lower than the prior-year quarter. Management expects steel production to decrease going forward based on the clouded economic conditions. Going forward, the company forecasts continued volatility in its end markets and certain geographies.

Harsco anticipates that its Rail business will witness a decline in its operating performance in the coming quarter on the back of unfavorable equipment delivery, while the company’s Industrial segment and infrastructure revenues are likely to be in line with the year-ago quarter.

Headquartered in Penn, Harsco Corporation is a diversified, multinational provider of market-leading industrial services and engineered products. However, the company operates in an intensely competitive landscape that includes big players such as POSCO (PKS) and Companhia Siderurgica Nacional (SID). Harsco Corp currently has a Zacks Rank #4 (Sell). One of its competitors, Commercials Metals Company (CMC) carries a Zacks Rank #2 (Buy).
 

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