All,
Talked to Alex Lagerborg yesterday. I would say Alex and company are still as bullish as ever, although a bit disappointed with the current scrap market. Following are a few of his comments based on my questions.
Here is what I'll call the "bad news"
Ferrous scrap prices have dropped further to a 21 year low of about $108/ton. Even though they work on margin by managing cost, price and inventory, this is creating some squeeze. This is down from $140 a ton a couple quarters ago.
However, they feel scrap pricing has leveled out, but may stay down a bit - perhaps through year end.
Volume is about steady, maybe down just a bit.
Non ferrous, which is about 23 to 25% of business has firmed a bit. Don't know any details here.
IMO - I don't expect the growth in EBITDA they had last Q.
In the acquisition arena -
Talks are still on with the typical 20 or so companies in the pipeline.
Should close on those announced towards first of the year, perhaps sooner. This was not real firm and I don't think he is able to provide this exactly.
They are renegotiating some of their agreements given the scrap market now. Without much detail, it sounds to me like they will be more performance based.
Refinancing -
Is a priority - they are working on it hard. I got the feeling no results yet.
Now, some better news:
Cost savings - efforts are being accelerated.
Have consolidated and centralized payroll and purchasing, some accounting.
Have saved « million on insurance.
Looking to save in energy costs through a national energy contract. (I'm in the power industry - this has great potential)
Looking at consolidated waste.
Have reduced total personnel.
More good news.
I missed a couple names, but he said that since June 30, they have had institutional buying. For example:
T Rowe Price - 279K
Canyon? 122K - but may have sold some.
Ryback? May buy more- they have a million shares now.
A couple others.
Guess these institutions know a bargain when they see one.
He stated Peter Marcus of Payne Webber has stated people should now own metallics. That scrap is gold.
I asked about insider buying or selling.
He said their blackout is pretty extensive. Last go round, some (McKibbin, Botica, Rouster, 1 other) BOUGHT shares. Price was at FOUR.
They are still very bullish about the stock.
Asked about earnings
Sept 30 is the end of the fiscal year. They will (unfortunately IMO) take the full 90 days. Historically, they have always waited till the last day. With all the operations to consolidate, it will take some time.
These levels may be a buying opportunity, but we may have to wait for the big rise. I look at this like the oil industry now. Down, but you know it will be back.
Don't forget to keep up to date on the dumping suit filed by the steel industry.
Dan
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