PHILADELPHIA, Pa. – “The last year was challenging but successful for our company. The worst is behind us, and the recovery has begun,” Tony R. Thene, president and CEO of Carpenter Technology, told analysts during a webcast Thursday.
Although Carpenter, which has several manufacturing facilities in Berks County, showed negative results compared to the previous fiscal year’s fourth quarter, the company continued to show improving results when looked at sequentially versus the previous fiscal quarter.
Wall Street appeared to support Thene’s assessment. Carpenter stock was up 4.39%, or $1.67 per share in mid-morning trading.
In a statement Thene said, “Our fourth quarter results finished ahead of our expectations as overall end-use market conditions showed further signs of recovery. We continued to actively manage our business. We generated $43 million in free cash flow in the quarter and finished the fiscal year with $582 million in total liquidity, including $287 million of cash on hand.”
Thene said the company achieved both cost reductions and productivity gains, and generated over $130 million of free cash flow.
The company reported that demand conditions across its end-use markets are strengthening, and the beginning of a broad-based recovery is taking shape.
Corporate Financial Results
Carpenter said that results finished ahead of expectations as conditions improved in the aerospace and defense and medical end-use markets. The company also completed commissioning of the hot strip mill at the Reading campus.
The impact of the pandemic just started to hit the company in the fourth quarter of fiscal 2020 and full-force in the first two quarters of fiscal 2021.
Net sales for the fourth quarter of fiscal year 2021 were $421.6 million compared with $437.3 million in the fourth quarter of fiscal year 2020, a decrease of $15.7 million, on flat volume. Net sales were $351.9 in the third quarter of fiscal 2021. Net sales excluding surcharges were $348.1 million, a decrease of $27.8 million from the same period a year ago but up $50.0 million from sales of $298.1 million in the third quarter of fiscal 2021.
Operating loss was $70.7 million compared to operating loss of $148.2 million in the prior year period and $40.0 million the prior quarter. Adjusted operating loss excluding special items was $12.5 million in the recent fourth quarter compared to an adjusted operating loss of $8.9 million a year ago and $29.7 million in the third quarter.
Special items excluded from adjusted operating loss in the current quarter totaled $58.2 million.
Diluted loss per share was $1.18 in the fourth quarter of fiscal 2021 compared to a loss of $2.46 per share in fiscal fourth quarter 2020 and $0.84 per share in the third quarter. Adjusted diluted loss per share was $0.28 in the fourth quarter of fiscal 2021 compared to a loss of $0.16 per share in fiscal fourth quarter 2020 and $0.54 per share in the third quarter.
Total liquidity, including cash and available credit facility borrowings, was $582.0 million at the end of the fourth quarter of fiscal year 2021. This consisted of $287.4 million of cash and $294.6 million of available borrowings under the company’s credit facility.
Segment Results
Carpenter has two reportable segments, Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP).
The SAO segment is comprised of Carpenter’s major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama.
The SAO segment sold 47.712 million pounds in the quarter for net sales, excluding a surcharge, of $289.9 million compared to $308.6 million in the same period of 2020. SAO operating loss was $47.3 million compared to an operating profit of $5.3 million in 2020.
The PEP segment is comprised of the Company’s differentiated operations. This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. Effective July 1, 2020, the Company's Carpenter Powder Products business was merged into the Carpenter Additive business. The Amega West business was also part of the PEP segment, however the business was divested during the quarter ended September 30, 2020.
The PEP segment sold 2.912 million pounds in the quarter for net sales, excluding a surcharge of $75.6 million, compared to $76.0 million in the same period of 2020. PEP operating loss was $2.3 million compared to an operating loss of $8.4 million in 2020.
By end-use markets, net sales excluding surcharge in the quarter were $165.5 million for Aerospace and Defense; $38.1 million for Medical; $36.5 million for Transportation; $13.4 million for Energy; $67.8 million for Industrial and Consumer; and $26.8 million for Distribution.
Outlook
Thene commented: “We remain a critical solutions provider for our customers and have successfully deepened our relationships during the downturn. The long-term outlook for our end-use markets remains attractive and we are well positioned given our mission-critical solutions coupled with leading capabilities and established supply chain position.”
“Looking ahead, our focus is centered on capitalizing on emerging opportunities across our end-use markets as conditions further improve. We are a leaner and more flexible company and remain a critical solutions provider across our end-use markets. Our strong position in our core business is supported by our capabilities in key emerging areas including electrification and additive manufacturing that further support our long-term growth profile.”
About Carpenter Technology
Carpenter Technology Corporation (NYSE:CRS) is a producer and distributor of premium specialty alloys, including titanium alloys, nickel and cobalt based superalloys, stainless steels, alloy steels and tool steels. Carpenter’s high-performance materials and advanced process solutions are an integral part of critical applications used within the aerospace, transportation, medical and energy markets, among other markets. Carpenter’s powder technology capabilities support a range of next-generation products and manufacturing techniques, including additive manufacturing and 3D Printing.
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