USA: General Cable Corporation Announces Q1 Results
General Cable Corporation, one of the most globally diversified industrial companies, reported today results for the first quarter ended March 30, 2012.
Non-GAAP adjusted earnings per share for the first quarter were $0.48. Operating income of $53.4 million exceeded management’s expectation as metal cost headwinds subsided and volume was better than expected during the quarter. Global volume as measured in metal pounds sold increased 6% sequentially and was up 3% year over year. Diluted earnings per share for the first quarter of 2012 were $0.49. A reconciliation of Non-GAAP earnings per share to GAAP earnings per share is included on page 4 of this release.
Net sales for the first quarter of 2012 were $1,432.5 million, an increase of $93.4 million, or 7%, compared to the first quarter of 2011 on a metal-adjusted basis. Volume based on metal pounds sold increased 3% in the first quarter of 2012 compared to 2011 principally due to global aerial transmission product shipments. Sequentially, volume based on metal pounds sold increased 6% principally due to improved demand in most North American and European businesses.
Operating income in the first quarter of 2012 increased to $53.4 million or 69% compared to $31.7 million in the fourth quarter of 2011. Metal prices increased for much of the quarter helping to mitigate the burden of selling higher average cost inventory into a lower metal price environment that was so strongly evident in the fourth quarter. Operating income for the first quarter of 2012 also reflects improvement in most businesses in North America; normalizing conditions in Thailand following the severe flooding in the fourth quarter of 2011; very weak pricing in Iberian end markets despite sequentially higher volumes and seasonally lower submarine and land-based HV/EHV project activity. Prior year first quarter operating income includes the positive impact of a steadily rising metal price environment in the months leading into the quarter, the benefit of the absorption of overhead costs into inventory as inventory quantities were increased in the first quarter of 2011 and better operating results in Spain. On a metal adjusted basis, operating margin of 3.7% in the first quarter of 2012 was up 150 and down 180 basis points as compared to the fourth quarter of 2011 and first quarter of 2011, respectively.
Gregory B. Kenny, President and Chief Executive Officer of General Cable, said, “We experienced broad-based improvement in a number of our businesses resulting in each segment reporting better than expected operating results in the first quarter as volumes increased and market metal prices were closer to inventory book values computed under average cost. In North America, operating income in all businesses was ahead of expectation. In ROW, operating results improved as business conditions in Thailand normalized following the severe flooding in the fourth quarter coupled with stronger construction activity in Venezuela and the Philippines. In Europe, operating results improved as demand for medium and high voltage cables in France and the supply of offshore specialty cables and support services in Germany more than offset the ongoing weak operating environment in Iberia. In Spain, the benefit of sequentially higher volume and cost improvements were more than offset by very low pricing levels. We also saw good market traction in the communications cable area for our micro sheath fiber optic and data cables. While the impact of fiscal tightening throughout Europe and sovereign debt concerns remain, overall we are encouraged by the start to 2012 particularly as we head into the seasonally stronger second and third quarters. Our businesses in the Americas, Africa and Asia remain a source of stability, collectively, with growth in key markets.”
In North America, volume as measured in metal pounds sold increased 7% in the first quarter of 2012 compared to the first quarter of 2011 and was up 10% sequentially when compared to the fourth quarter of 2011. Excluding aerial transmission product shipments, North America volume increased about 2% year over year and was up 14% sequentially. Sequentially, volume improved across most business units including utility cables as a relatively mild winter and wind farm applications boosted demand. Demand for specialty cables, including those used in natural resource extraction and transportation applications, continued to be a source of strength.
In ROW, volume as measured in metal pounds sold increased 2% in the first quarter of 2012 compared to the first quarter of 2011 and was down 6% sequentially when compared to the fourth quarter of 2011. Excluding metal pounds attributable to aerial transmission project shipments in Brazil, volume was flat year over year and decreased sequentially 8% as compared to the fourth quarter of 2011. Sequentially, strong construction activity in the Philippines and normalizing demand patterns in Thailand following the severe flooding experienced in the fourth quarter were more than offset by a typical and seasonally slower start to the year in many Latin American countries. The fourth quarter of 2011 also included elevated copper rod shipments in Sub-Saharan Africa following the rapid decline of copper prices at the end of the third quarter as well as strong demand for electric utility products in Mexico. The Company continues to expect full year volume growth in ROW driven by higher spending on electrical infrastructure investment as well as construction and mining activity in Central and South America. Growth in Thailand is expected as recovery efforts and investments in the grid advance. Investments in Mexico, South Africa, Peru and Brazil will also continue to mature. Last week, the Company announced another significant milestone as it inaugurated its manufacturing facility in India. This facility, at current installed capacity, is capable of generating annual revenues in the range of $100 to $120 million, complementing the Company’s existing exports into the country.
In Europe and Mediterranean, volume as measured in metal pounds sold decreased 1% in the first quarter of 2012 compared to the first quarter of 2011 and was up 23% sequentially when compared to the fourth quarter of 2011. Sequentially, the first quarter of 2012 reflects stronger demand for medium and high voltage cables in France and the supply of offshore specialty cables in Germany. Metal pounds shipped out of our Spanish facilities increased in the first quarter of 2012 as compared to the significant decline experienced in the fourth quarter of 2011 but were down approximately 5% on a year over year basis. The Company’s backlog of more than $650 million for submarine and land-based turnkey cable projects remains materially unchanged from the end of the year due to relatively low project activity during the first quarter, as expected, due to typical seasonality.
Other income was $6.8 million in the first quarter of 2012 which primarily consists of $8.2 million of mark to market gains on derivative instruments accounted for as economic hedges which are used to manage currency and commodity risk on its project business globally partially offset by $1.4 million of foreign currency transaction losses.
Offshore WIND staff, May 01, 2012; Image: generalcable