In July and August, the Reading, PA mill experienced unanticipated startup issues after scheduled summer shutdowns and earlier this month its Latrobe facility had an unplanned outage due to a cracked dome on its primary press. As a result, the plants experienced higher labour costs, increased maintenance/supply expenses and reduced output levels.
As a result, the facilities will sell less premium product in the quarter than anticipated, which will negatively impact overall segment mix.
"While we expected this to be a challenging quarter, it has been more difficult than anticipated,” said William A Wulfsohn, Carpenter's president and CEO. Given SAO's difficulties, Carpenter as a company had break-even performance in July and August, which was well below our expectations. Thus far in September, we are seeing clear signs that SAO is back on track as sales volume, mix, and production costs show strong signs of improvement.
Back online
"Looking forward, Reading production is now at targeted levels and the Latrobe press is expected to be back online early in October. We need this capacity as we continue to see strength in our core markets. As of the end of August, SAO's overall backlog was 31% higher than on January 1 and up 8% since the start of our fiscal year on 1 July. In addition, the backlog for our premium forged bar and billet product line was up approximately 32% this calendar year. Mill orders with Q2 FY15 ship dates have significantly higher profit per pound than orders expected to be shipped in Q1, due to a higher concentration of aerospace, defence, and energy products.
"Based upon our strong incoming order profile, positive trends in our core end markets and an expected return to previously demonstrated levels of operational performance, we are committed to achieving our targeted financial performance for the balance of our fiscal year and beyond."
