Coronavirus hits Berks steelmaker with loss
Coronavirus has been tough on firm in recent quarter
Carpenter Technology Corp. announced that it expects an adjusted operating loss to be $16 million to $21 million for the most recent quarter.
The estimate, subject to finalization and audit, excludes restructuring and other items, the company told investors Tuesday. The company expects to generate $90 million to $100 million of free cash flow in the fourth quarter of fiscal year 2020, which adds to the $317 million of total liquidity as of March 31.
“We fully understand that our decision to reduce inventory further than originally planned will have an adverse impact on our operating income and earningsper-share in the fourth quarter,” President and CEO Tony R. Thene said in a statement. “However, this was a prudent decision to strengthen our already healthy balance sheet and liquidity position in this challenging environment. The COVID-19 pandemic has presented a near-term challenge for Carpenter Technology, as it has for all in the industry. We have met that challenge by relying heavily on our safety culture to keep our facilities continuously operating to address the critical solutions required by our customers. At the same time, we deployed significant cost and cash savings actions to mitigate the near-term headwinds and ultimately strengthen the base for long-term growth.”
In early June, the Philadelphiabased company with deep roots in Berks County announced it planned to reduce its salaried workforce by 20% worldwide. On Tuesday the company disclosed rolling temporary furloughs for certain production, maintenance and salaried employees.
Tuesday the company provided a preliminary outlook for fiscal year 2021 and preliminary results, subject to finalization and audit, for the fourth quarter of fiscal year 2020.
In the near-term, the aerospace supply chain is absorbing significant downward adjustments to forecasted demand. Despite a scaled back production rate, the company has accepted deferrals and order pushouts with select customers in exchange for increased share on key growth platforms, the company said.
For medical customers, Carpenter said it leveraged its portfolio and sales network to quickly respond to critical demand for ventilators and cardiology/trauma devices as well as restocking needs as equipment manufacturers prepare to address pent-up elective surgery demand.
The company has also enriched and extended supply agreements at the request of key aerospace, medical and semiconductor customers who are concerned about the survivability and stability of their other suppliers. In addition, the company has pivoted to be more responsive to less exposed application portfolios like defense hypersonics and electronics, according to the press release.
Among the measures the company reported taking since the COVID-19 crisis:
• Eliminating approximately 20% of global salaried positions, implementing a global hiring freeze and deferring annual merit increases for most salaried employees.
• Reviewing and prioritizing capital investments to target existing and future growth markets, which as a result is expected to reduce capital expenditures by $50 million in fiscal year 2021 compared to fiscal year 2020.
• Exit the Amega West oil and gas business, idling its West Virginia powder facility and selling the Rhode Island powder facility.
Collectively, the actions are expected to generate $60 million to $70 million of annual cost savings starting in fiscal year 2021 in addition to the significant cash benefits expected to be realized.
The company said it expects no change to the current stock dividend.