29.07.2010

Losses mount at Harsco Infrastructure

Harsco Infrastructure –previously SGB, Hünnebeck and Patent Scaffold has reported its second quarter and first half results and forecast that all four quarters of 2010 will be in negative territory.

The company saw revenues slide by 14 percent in the first six months to $513 million and by 15 percent in the second quarter to $262.6 million.

The lower volumes generated an operating loss in the first six months of $32.8 million compared to a profit in the same period last year of $43.8 million. The second quarter was of a similar magnitude with a loss of $13.5 million compared to a profit in 2009 of $24.9 million.

The company said: “Extremely difficult end-market conditions for this operating segment are now expected to continue for both the third and fourth quarters, with operating losses expected in both, albeit at somewhat reduced levels from the first and second quarters of 2010.”

“A lack of any meaningful new non-residential construction activity, project deferrals and pricing pressures all continue to negatively impact results and the Company’s near-term outlook. Visibility in this business remains limited and very difficult due to economic uncertainty, the high level of project deferrals and ongoing pricing pressures.”

“Despite the operating losses for the first half of 2010, the Harsco Infrastructure business posted positive free cash flow during this period. It is also expected to show positive free cash flow for the entire year.”

The Harsco group as a whole fared much better, with first half revenues up by more than four percent to $1.53 billion. Pre-tax profits were 59.7 million – down almost 24 percent on the same period last year.

Chief executive Salvatore D. Fazzolari said: “While earnings for the second quarter were within our guidance, they were again negatively and significantly impacted by continuing losses from our Harsco Infrastructure business, where poor market conditions more than offset strong year-over-year results from our Harsco Metals and Harsco Minerals businesses.”

“We were also pleased with another strong quarterly performance from our Harsco Rail business, which closely matched last year’s excellent operating income results, but exceeded last year’s operating margins by 170 basis points. Our Harsco Industrial group turned in a respectable quarter, with sales and earnings slightly below last year, but 180 basis points in higher margins.

"While we expect all operations to remain profitable in the second half of the year, with the exception of our Harsco Infrastructure business, certain headwinds remain.

“With our new senior management team in the Harsco Infrastructure Segment now fully on-board, we will further evaluate our cost structure and strategy to address both current and long-term market conditions.

“At our Harsco Rail business, a significant pull forward in the timing of unit deliveries in the first half of this year, as requested by a major customer, will cause second half results to be substantially lower. Lastly, while overall profitability of our Harsco Industrial group remains solid, unfavorable LIFO cost will be evident in second half results.

“As a result of the foregoing factors, we are reducing our full year guidance for earnings per share to $0.80 to $0.90, from previous guidance of $1.55 to $1.65. This excludes any significant restructuring actions that may be required once the new CEO of Harsco Infrastructure has fully assessed the business.”