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Weakness in Specialty Products, High Costs Ail TriMas (TRS)
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TriMas Corporation (TRS - Free Report) recently reported a 40% decline in its fourth-quarter 2023 earnings as improved year-over-year performances in the Packaging and Aerospace segments were offset by unexpectedly weak results in the Specialty Products segment. Higher costs also dampened its bottom line in the quarter. This situation is expected to persist in the ongoing year as well. Let’s delve deeper.
Pickup in Packaging Volumes Raises Hope
TriMas’ Packaging segment has been witnessing negative volumes since the second quarter of 2022, reflecting weak demand due to cautious customer spending. However, there has been a slight pickup in volumes in the fourth quarter of 2023 and the segment reported a 7.5% increase in sales. Sales increases in the Beauty & Personal Care and Life Sciences end markets offset the continued soft demand in closure products, primarily in Food & Beverage-related applications.
Backed by the recent gradual improvement seen in some of these end markets, the company expects the packaging segment’s sales to grow in the range of 5% to 9% in 2024. The segment's adjusted EBITDA margin is projected at around 21.5% to 23.5%, compared with 23% reported in 2023. However, if this volume recovery is not sustained, considering the persisting inflationary pressures, it will put the company’s guidance at risk.
Weakness in Specialty Products to Persist in H124
The Specialty Products segment reported a 31.8% plunge in sales in the fourth quarter of 2023, as general industrial cylinder demand was much weaker than anticipated. Most industrial customers deferred capital expenditure purchases to rebalance inventories. Adjusted operating margin was 12.6% in the fourth quarter of 2023, much lower than 20.2% in the fourth quarter of 2022.
The weakness is expected to persist in the first half of 2024 as customers work through their elevated inventory levels. The segment’s sales growth in 2024 is expected to range from a decline of 4% to growth of 1%. The segment’s adjusted EBITDA is expected to be between 17% and 19%, lower than 21.6% in 2023.
Aerospace Segment Poised Well for Growth
The order intake and backlog remain strong within the Aerospace segment. Also, the acquisitions of Weldmac and Martinic Engineering are expected to contribute to revenues. The Aerospace segment's sales are projected to grow 14-18% year over year in 2024 and the adjusted EBITDA margin is expected to be between 16% and 18%.
Overall, for the year, expected upbeat performances in the Packaging and Aerospace segments will be offset by weaker Specialty Products results. TriMas expects year-over-year sales growth of 5-8% for 2024.
Also, the company has been witnessing higher costs for materials, labor shortages and supply chain challenges. These factors are expected to hurt its earnings performance as well. Adjusted earnings per share are expected to be $1.95-$2.15. The midpoint of the range suggests a year-over-year improvement of 7%.
TriMas belongs to the Metal Products - Procurement and Fabrication industry. Some major players, to name a few, are Norsk Hydro ASA (NHYDY - Free Report) , AB SKF (SKFRY - Free Report) and ESAB Corporation (ESAB - Free Report) . Overall, the industry has been witnessing a deceleration in orders due to subdued customer spending. Companies are managing outputs appropriately amid the order softness. The industry has also been bearing the brunt of supply-chain issues. Elevated input costs have also added to the headwind.
Per the Fed’s latest industrial production report, the aggregate production of fabricated metal products in the United States inched up 0.3% in February 2024, decelerating from the 0.6% growth reported in January. Over the 12 months ended February 2024, the production of fabricated metal products declined 1.2%.
The Institute for Supply Management’s manufacturing index was 47.8% in February, contracting for the 16th month in a row. The New Orders Index again slipped into the contraction territory with a reading of 49.2% in February.
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Weakness in Specialty Products, High Costs Ail TriMas (TRS)
TriMas Corporation (TRS - Free Report) recently reported a 40% decline in its fourth-quarter 2023 earnings as improved year-over-year performances in the Packaging and Aerospace segments were offset by unexpectedly weak results in the Specialty Products segment. Higher costs also dampened its bottom line in the quarter. This situation is expected to persist in the ongoing year as well. Let’s delve deeper.
Pickup in Packaging Volumes Raises Hope
TriMas’ Packaging segment has been witnessing negative volumes since the second quarter of 2022, reflecting weak demand due to cautious customer spending. However, there has been a slight pickup in volumes in the fourth quarter of 2023 and the segment reported a 7.5% increase in sales. Sales increases in the Beauty & Personal Care and Life Sciences end markets offset the continued soft demand in closure products, primarily in Food & Beverage-related applications.
Backed by the recent gradual improvement seen in some of these end markets, the company expects the packaging segment’s sales to grow in the range of 5% to 9% in 2024. The segment's adjusted EBITDA margin is projected at around 21.5% to 23.5%, compared with 23% reported in 2023. However, if this volume recovery is not sustained, considering the persisting inflationary pressures, it will put the company’s guidance at risk.
Weakness in Specialty Products to Persist in H124
The Specialty Products segment reported a 31.8% plunge in sales in the fourth quarter of 2023, as general industrial cylinder demand was much weaker than anticipated. Most industrial customers deferred capital expenditure purchases to rebalance inventories. Adjusted operating margin was 12.6% in the fourth quarter of 2023, much lower than 20.2% in the fourth quarter of 2022.
The weakness is expected to persist in the first half of 2024 as customers work through their elevated inventory levels. The segment’s sales growth in 2024 is expected to range from a decline of 4% to growth of 1%. The segment’s adjusted EBITDA is expected to be between 17% and 19%, lower than 21.6% in 2023.
Aerospace Segment Poised Well for Growth
The order intake and backlog remain strong within the Aerospace segment. Also, the acquisitions of Weldmac and Martinic Engineering are expected to contribute to revenues. The Aerospace segment's sales are projected to grow 14-18% year over year in 2024 and the adjusted EBITDA margin is expected to be between 16% and 18%.
Overall, for the year, expected upbeat performances in the Packaging and Aerospace segments will be offset by weaker Specialty Products results. TriMas expects year-over-year sales growth of 5-8% for 2024.
Also, the company has been witnessing higher costs for materials, labor shortages and supply chain challenges. These factors are expected to hurt its earnings performance as well. Adjusted earnings per share are expected to be $1.95-$2.15. The midpoint of the range suggests a year-over-year improvement of 7%.
TriMas belongs to the Metal Products - Procurement and Fabrication industry. Some major players, to name a few, are Norsk Hydro ASA (NHYDY - Free Report) , AB SKF (SKFRY - Free Report) and ESAB Corporation (ESAB - Free Report) . Overall, the industry has been witnessing a deceleration in orders due to subdued customer spending. Companies are managing outputs appropriately amid the order softness. The industry has also been bearing the brunt of supply-chain issues. Elevated input costs have also added to the headwind.
Per the Fed’s latest industrial production report, the aggregate production of fabricated metal products in the United States inched up 0.3% in February 2024, decelerating from the 0.6% growth reported in January. Over the 12 months ended February 2024, the production of fabricated metal products declined 1.2%.
The Institute for Supply Management’s manufacturing index was 47.8% in February, contracting for the 16th month in a row. The New Orders Index again slipped into the contraction territory with a reading of 49.2% in February.