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General Cable Misses on Earnings - Analyst Blog
5/2/2013 12:47:00 PM
General Cable Corporation ( BGC ) reported first-quarter 2013 non-GAAP earnings per share of 23 cents, 11.5% below the Zacks Consensus Estimate of 26 cents. However, earnings were well within management's range of expectations. On the same date the Board of Directors also declared a regular quarterly preferred stock dividend of approximately $0.72 per share. The dividend is payable on May 24, 2013 to the shareholders of record as on April 30, 2013. The Company expects the quarterly dividend payment to be less than $0.1 million.
On GAAP basis the company reported a net loss of 46.5 million or 94 cents per share compared to a net income of 22.7 million or 45 cents per share in the year-ago quarter.
Net sales for the quarter were $1.5 billion, reflecting a 10% rise over last quarter's revenue of $1.4 billion. Total volume based on metal pounds sold also showed an increase of 20% year over year, resulting from the recent acquisitions and strong demand for metal intensive products in North America.
However, net sales of metal pounds declined 5% in the quarter on an adjusted basis compared to fourth quarter 2012. This was accompanied by a volume reduction of 4% sequentially. The quarter-over-quarter decline was due to seasonal demand trends.
Geographical Volume Growth
In North America , volume was down 6% sequentially and 4% year over year. The year over year sales declined in comparison with the exceptionally high sales volume a year ago due to a strong demand in the company's utility cables for construction work. Excluding this, volume increased 12% year over year. Demand for aerial transmission products as measured in metal pounds sold increased 8% year over year. This was an all-time quarterly high. Excluding this, volume increased 3% sequentially, driven by a strong demand for construction and electrical infrastructure products.
In ROW (Rest Of The World) , volume decreased 22% year over year and 13% sequentially. Seasonal decline in Latin America fully offset the benefit of the high demand in Asia Pacific. Order trends in Thailand and the Philippines were derived from construction activities in the region. In spite of the adverse effects of political and economic uncertainty, stronger demands were experienced in Venezuela. The company also benefited from strong shipment orders in Brazil and Chile.
In Europe and the Mediterranean , volume decreased 5% year over year and 2% sequentially. Strong electric utility products shipment in the Mediterranean partially offset the adverse effect of demand weakness in major domestic markets of Europe. On the other hand, the company experienced increased exports of Spanish facilities. This resulted in increased sales volume sequentially.
Income and Expenses
Adjusted operating income in the quarter was $46.2 million, reflecting a $5.7 million or an 11% year over year decline from the previous year's first quarter income of $51.9 million. However, it was well within management's expectations.The decline in operating income is attributable to revised profitability estimates due to Venezuelan currency devaluation. Strong contributions from acquisitions partially offset the effects of seasonal demand weakness in major markets.
Debt and Cash Flow
The company's net debt was $1048.2 million at the end of the quarter, an increase of $236.3 million from the end of the fourth quarter of 2012. Working capital requirement increased during the quarter, as a result of an increase in demand due to seasonal demand patters. Moreover the Venezuelan currency devaluation also increased net debt since the value of cash held in the region was reduced by $45.1 million during the quarter. However, value of the company's net cash and cash equivalents was $499.8 million at the end of the quarter, i.e., a decrease of $138.4 million from that at the end of earlier quarter.
Concurrent with the earnings release, management provided guidance for the second quarter and full year 2013. The company's second quarter 2013 revenues are expected to be in the range of $1.7 to $1.75 billion assuming current metal prices on volume improvement ranging from 10% to 15% sequentially.
Volume has been revised to be flat to marginally high for the full year 2013. The adjusted operating income is expected to be in the range of $70 million to $80 million for second quarter 2013.
Adjusted earnings are expected to be in the range of 50 cents to 60 cents per share. The guidance excludes the impact of non-cash convertible debt interest expense and mark-to-market gains or losses on derivative instruments. The company expects comparatively better second quarter results with an improvement in seasonal trends.
The second quarter outlook reflects a flat seasonal trend in North America and ROW along with ongoing sharp improvement in demand for electric utility. Construction and installation work, particularly in Venezuela is expected to be seasonally better in the second quarter. The work will gradually improve as the weather changes in spring and summer.
General Cable currently has a Zacks Rank #5 (Strong Sell). Other participants in the sector include Insteel Industries Inc. ( IIIN ) and China Merchants Holdings (International) Company Limited ( CMHHY ) both having a Zacks Rank #1 (Strong Buy) and Crane Co. ( CR ), which has a Zacks Rank #2 (Buy).
GENL CABLE CORP (BGC): Free Stock Analysis Report
CHINA MERCHANTS (CMHHY): Get Free Report
CRANE CO (CR): Free Stock Analysis Report
INSTEEL INDS (IIIN): Free Stock Analysis Report
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