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Synalloy Updates Fourth Quarter Outlook

Stocks in this article: SYNL

SPARTANBURG, S.C., Dec. 17, 2013 (GLOBE NEWSWIRE) -- Synalloy Corporation (Nasdaq:SYNL), a holding Company owning subsidiaries that engage in a number of diverse business activities including the production of stainless steel pipe, fiberglass and steel storage tanks, specialty chemicals and fabrication of stainless and carbon steel piping systems, announces that the Company is now projecting a loss on an adjusted net earnings basis for the fourth quarter of this year. During October and November, the Company's BristolFab unit experienced a pre-tax loss of $1.4 million. The loss occurred as we increased the number of production workers from 70 in September to approximately 140 in the past two months in response to a surge in our backlog, with resulting labor efficiencies falling well below profitable levels. We expect to see this continue into December.

While our Ram-Fab unit has maintained targeted levels of efficiency and profitability, both of our fabrication units have had difficulty adding experienced welders to support our current backlog. As a result, we are now working with our customers to assess how we can better align our production capacity with their delivery schedules. This will likely result in downward adjustments to our backlog going forward as we work through these scheduling issues.

The Company, specifically the fabrication management team with the assistance of both the Metals President and the CEO, is highly focused on resolving these issues. We have identified the initiatives and actions to be taken, and we are confident that we will put the fabrication unit back on a profitable course.

With respect to the other Synalloy business units, BRISMET has been winding down the Bechtel nuclear project which will be completed this month. We have seen our stainless steel tons shipped increase by over 5% in both October and November. However, our product mix was adverse. Six-inch and under pipe shipments were up 50% in each of the past two months, while twelve inch and up pipe shipments were down over 25%. Conversion margins are lower in the small diameter pipe than in the large diameter sizes.

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