Demand spurs Consolidated Stainless to hike pipe prices
November 11, 1996
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Paul Dillon Staff Writer
Orlando's Consolidated Stainless Inc., a maker and distributor of stainless steel pipe, is raising its prices 10 percent this month in a move to jump-start earnings.
The price hike "follows the direction of the industry" and comes after more than a year of falling pipe supply prices, President and Chief Operating Officer Ronnie Adams says.
Adams hopes "the long-awaited market turnaround" that recently began will help boost the company's profit and stock price, which has been hovering around $5 in recent days, down from an all-time high of $14.63.
While the company projects sales of between $50 million and $55 million in 1996, up from $45.5 million in 1995, it is not clear whether the company will post a profit this year. Most of the revenue growth this year came from acquisitions, not from growth of existing operations, Adams says.
"The good news for us is that we're coming out of a bad market," he says. "Demand looks real strong now."
Industrial goods analyst David Leibowitz agrees "the worst may be over" for Consolidated Stainless and its competitors, who have seen the prices they can demand of their customers drop this year because of the declining cost of imported raw materials.
When selling prices decline, "the company's profit margin narrows as relatively higher-cost inventory is sold," according to documents Consolidated Stainless filed with the Securities and Exchange Commission.
"But it is a bit early to pass judgment on whether any new price increases will stick," says Leibowitz, a managing director at Burnham Securities in New York.
Adams, however, says he is "99.9 percent sure" his company's price increases will be accepted, largely because many competitors are hiking their prices, too.
Consolidated Stainless, traded on the NASDAQ exchange as PIPE, manufactures and distributes stainless steel pipes, valves and other fittings through a national distribution network. The company sells to customers mainly in the manufacturing, food-processing, paper-processing, pharmaceutical and petrochemical industries.
In other news, Consolidated Stainless plans to use $2.5 million in new stock proceeds to offset some of the initial start-up costs the company incurred when it purchased manufacturing machinery from a New York company earlier this year, moved the equipment to Florida and renovated it.
The proceeds were not generated in a stock offering but instead through the issuance of debentures that are convertible into common stock during the next 10 years.
The debentures, convertible at $6.09 a share, were issued to "a leading financial institution" that Adams declines to identify.
Formerly headquartered in Longwood, Consolidated Stainless moved its offices to Orlando in July. The company upped its office space from 2,000 to 5,000 square feet in the process.
With about 300 employees, including 13 in Orlando, Consolidated Stainless has production facilities in Auburndale, Lakeland and Houston. Company distribution/service centers are located in Apopka, Tampa, Jacksonville, Atlanta, Chicago, Houston and Los Angeles.
c 1996, Orlando Business Journal |
