<<OTOH, for a cyclical business and in a sector that has had - in past anyway - chronic overcapacity, I'd say most people would say earnings aren't sustainable and so the stock deserves a low p/e>>
the times, they are a-changin'....
Less profitable product lines have been discontinued (e.g., nails), higher margin opportunities have been pursued (e.g., engineered structural mesh), productivity has increased, and LT debt is being reduced with a vengeance (and may be eliminated entirely by YE 2005).
Furthermore, financing costs associated with operations have been substantially reduced as a result of the new credit facility (the benefit of which will only really be appreciated in this qtr's numbers).
The supply constraints identified by mgmt in the last CC have been relieved to a great degree by the reopening of the Georgetown/ISG facility.
Additionally, the demand side should increase significantly looking ahead to 2005 as the commercial construction sector begins to pull itself up off of the floor, and Congress appropriates the hundreds of billions of dollars necessary to upgrade our nation's crumbling infrastructure (TEA-21).
In the dramatic industry downturn from 2000 to 2003, many competitive suppliers were wiped out or shut down. To my knowledge, only 3 significant competitors are still operating: IIIN, American Spring Wire and Sumiden Wire. Moreover, much of the foreign competition has effectively been denied access to the U.S. market by onerous anti-dumping duties imposed earlier this year
concreteproducts.com
w/r/t pc strand in particular, IIIN is the largest player in the market (and the number of competitors has grown quite small in recent years due to the abysmal economy of 2000-2003), and is 3x larger than the next largest supplier
now that the market is heading back up, even modest increases in demand should translate into very healthy profits for the three remaining players
also, if you look at CAT's forward guidance (as recently reported) -- as well as other construction industry sources -- you will see that demand for IIIN's products should pick up appreciably going forward
BTW, make sure that you study the recent insider transactions .... there is gold in them thar hills..... |
