AZZ (AZZ), a provider of galvanizing services, has announced a 15.85 percent decline in profit for the quarter ended Aug. 31, 2014. The company earned $13.77 million or $0.53 a share in the second-quarter compared with $16.36 million or $0.64 a share a year ago. Analysts on average had predicted net income of $0.63 a share.
Revenue during the second-quarter went up marginally 1.91 percent to $193.42 million from $189.78 million in the last year period. Gross margin contracted by 769 basis points over the last year period to 21.77 percent. The company reported operating income of $22.95 million, compared with $29.72 million in the previous year period.
Tom Ferguson, president and chief executive officer of AZZ said, ''Financial results for the second quarter were mixed as bookings grew and the revenue levels reflected the seasonal nature of our business, but the margins were disappointing. Although I am not satisfied with the results for this quarter, I do recognize that margins were impacted by a number of operating inefficiencies within our Energy Segment. We have identified and corrected those items under our control, and do not expect them to recur.''
Cash Flow
AZZ has generated cash of $53.83 million from operating activities during the first half, down 2.46 percent or $1.36 million when compared with the last year period. The company has generated 13.14 cents of operating cash flow in every sales dollar for the first half, down from 14.80 cents in the same period last year.
The company has spent $21.90 million cash to meet investing activities during the first half, as against cash outgo of $298.66 million in the last year period. It has made net capital expenditure of $11.40 million during the first half, which was lower by 50.36 percent or $11.56 million, from a year ago.
The company's free cash flow accounted for 78.83 percent of operating cash flow for the first half, compared with 58.39 percent in the last year period.
The company has spent $18 million from financing activities during the first half, as against cash inflow of $229.95 million in the last year period. It has made net repayment of $11.21 million debt during the first half.
The company's cash dividend payment increased 0.65 percent or $0.05 million to $7.18 million.
As on Aug. 31, 2014, the company's cash balance stood at $41.63 million.
Working Capital
Days' sales outstanding moved down to 27 days for second quarter compared with 62 days for the last year period. This indicates the company has shortened credit period to clients for making payment.
The company's days' inventory outstanding decreased to 35 days for second quarter compared with 73 days for the last year period. This suggests the company took less time to convert the inventory into sales.
The company's days' payable outstanding went down to 15 days for second quarter from 30 days for the last year period. This reflects that the company has made early payment to vendors compared to prior year period.
Debt Position
As on Aug. 31, 2014, total debt stood at $394.41 million. The company total debt was 40.67 percent of total assets as on Aug. 31, 2014. Azz debt to equity ratio was at 0.98 as on Aug. 31, 2014.
Shares of the company declined $4.99 or 11.95 percent to trade at $36.78 on Tuesday (9:04AM).
