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Carpenter Selling Distribution Biz

by Zacks Equity Research

August 31, 2012 | Comments : 0 Recommended this article: (0)

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Carpenter Technology Corporation ( CRS - Snapshot Report ) is divesting two of its distribution businesses to focus more on manufacturing and selling its core specialty alloy products for high-growth markets.
The Pennsylvania-based company said that it has commenced a process to sell its Latrobe Specialty Steel Distribution (LSSD) and Mexican distribution business “Aceros Fortuna”. KeyBanc Capital Markets Inc. is assisting the company in selling these businesses.
The company acquired LSSD following its takeover of high-performance materials maker Latrobe Specialty Steel in February 2012 for roughly $558 million. LSSD, which logged sales of $113 million in fiscal 2012, offers a vast range of quality steels and value-added services to customers in North America through six distribution centers across the U.S. and Canada.
Aceros Fortuna, which Carpenter bought in 1994, distributes alloyed, stainless and tool steels, specialty alloys and industrial products in Mexico and Brazil. The entity, which had sales of $42 million in fiscal 2012, has eight distribution and sales offices in Mexico.
The divestiture reflects Carpenter’s sustained commitment in growing its specialty alloy business. The company plans to reinvest the proceeds from a sale in its premium product businesses. Carpenter noted that it will continue to service sales of its special alloy products in Mexico and South America by retaining selected warehouses and employees.
Carpenter makes specialty alloys, including stainless steels, titanium alloys and superalloys primarily for the aerospace and energy industries. It is a major player in the metallurgy industry along with Allegheny Technologies Inc. ( ATI - Analyst Report ) .
Carpenter, on July 31, reported its fourth-quarter fiscal 2012 (ended June 30) results. Its profit, as reported, surged 60% year over year to $40.8 million or 77 cents per share. Legacy Carpenter earnings (excluding Latrobe-related income and share dilution) were 80 cents a share. By that measure, it beat the Zacks Consensus Estimate of 78 cents.
Revenues surged 33% year over year to $643.7 million, beating the Zacks Consensus Estimate of $633 million. Sales were boosted by solid growth in the Aerospace & Defense division. Revenues from this segment spiked 49% on the back of strong demand for engine materials and higher airplane build rates.
Carpenter expects a 30% rise in its operating income, excluding pension expenses and costs related to Latrobe acquisition, in fiscal 2013. The company said that its business remains resilient to the global economic slowdown and it is well placed to expand its share in the aerospace market.
Carpenter currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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