Synalloy (SYNL) Reports Q4 Loss of $0.09 on Revenues of $67.9M; Offers FY20 Revenue Outlook

Synalloy (NASDAQ: SYNL) reported Q4 EPS of ($0.09), versus $0.22 reported last year. Revenue for the quarter came in at $67.9 million, versus $72.67 million reported last year.

"We witnessed extremely tight inventory controls on the part of customers across Synalloy\'s operating companies during the fourth quarter," said Craig C. Bram, President and CEO. "On a sequential basis, the Metals Segment sales fell 8% in the fourth quarter over the third quarter of the year, while the Chemicals Segment sales for same period comparisons fell 7%. While the order books indicated the potential for higher shipments in the fourth quarter, customers were reluctant to take on additional inventory at year-end. Whether this behavior was driven simply by working capital management, or concerns about the direction of the manufacturing economy in 2020, remains to be seen. January sales tracked closely to the forecast, while operating profits and adjusted EBITDA exceeded the forecast. February sales were also in line with our forecast," said Bram.

"It was a challenging year for the Company," said Bram. \"While market and pricing dynamics were primarily negative, execution in both operations and sales, helped to mitigate the damage. We gained market share in stainless steel pipe and tube, as well as our heavy wall seamless carbon tube. We have taken significant steps in recent months to further lower our costs across the Company. I am particularly pleased with our cash flow management and the reduction of our debt since the acquisition of ASTI last January," said Bram.

GUIDANCE:

Synalloy sees FY2020 revenue of $295-310 million.

The Company has limited visibility on the direction of the manufacturing economy in 2020. Trade with China remains an issue as does the outcome of the Presidential election. Capital spending is under pressure, particularly in the energy markets. We do not expect a recession in 2020, but we do anticipate a period of flat to softening demand across our more industrial focused markets. With this backdrop, over the last 60 days of 2019, we initiated a cost cutting program across the entire Company. In addition to the work done at our vessel storage business in the fourth quarter, the Company implemented over $6 million in annual cost savings, which will be fully realized in 2020. The cost reductions cover everything from personnel, raw materials, other manufacturing costs and professional services.

Our forecast for 2020 includes the following:

• Sales - $295.0 million to $310.0 million
• Operating Income - $5.2 million to $8.0 million
• Adjusted EBITDA - $17.0 million to $20.0 million(1)
• Year-end 2020 Total Borrowings - $64.0 million to $68.0 million

(1) The Adjusted EBITDA projections include estimated inventory pricing losses for 2020 of $5.4 million due to surcharge and base metal pricing declines carried over into 2020.

For earnings history and earnings-related data on Synalloy (SYNL) click here.

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