U.S. Silica Holdings, Inc. SLCA has announced annualized selling, general and administrative (SG&A) cost reductions worth roughly $20 million. The company’s latest move is in response to the decrease in oil prices as well as an expected decline in drilling and completion activities in North American shale in the upcoming quarters.
U.S. Silica also intends to idle its Sparta, WI-based facility, which will make 1.5 million tons of Oil & Gas proppant capacity offline. It will continue to monitor the industry proppant demand and align costs with market conditions.
The company stated that the difficult decisions stemmed from the headwinds created by the recent OPEC actions. Moreover, consistent earnings and cash flows of its Industrial & Specialty Products unit along with the strategic actions will enable U.S. Silica to remain the industry leader and continue providing its customers with outstanding products and services.
Shares of U.S. Silica have plunged 91.3% in the past year compared with the industry’s 30.1% decline.
In February, it stated that for the Industrial and Specialty Products business, it is shifting toward higher-margin products. U.S. Silica is also pursuing many growth initiatives like using innovative technology in milling, which will expand its capabilities and differentiate products.
The company plans to increase the base Industrial and Specialty Products business through market share gains, price hikes, focus on new, higher-margin products and small, bolt-on acquisitions.
Zacks Rank & Key Picks
U.S. Silica currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the basic materials space are Newmont Corporation NEM, Franco-Nevada Corporation FNV and Novagold Resources Inc. NG, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Newmont has an expected earnings growth rate of 72% for 2020. The company’s shares have gained 33.1% in the past year.
Franco-Nevada has an expected earnings growth rate of 37.6% for 2020. Its shares have returned 46.1% in the past year.
Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 90.3% in the past year.
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