Graham posts loss in Q1

Batavia’s Graham Corp. on Tuesday reported lackluster first-quarter results, missing analysts’ expectations. Separately, the manufacturer named a new chief executive to replace long-time CEO James Lines, who plans to retire.

For the first quarter ended June 30, Graham posted a 21 percent increase in sales to $20.2 million. The company reported a net loss for the quarter of $3.1 million. On a per-share basis, the quarterly loss was 31 cents.

GAAP earnings missed Wall Street estimates by 26 cents, while revenue missed by $3.63 million. Results include one month of financials from the company’s acquisition of Barber-Nichols, which was completed on June 1.

“While sales improved as a result of the acquisition, we had a number of projects with lower margins which heavily impacted profitability in the quarter. This partially reflects our initial strategy to aggressively enter the Naval Nuclear Propulsion Program (“NNNP”),” Lines said in a statement. “Given our strong performance on the NNNP projects, we were successful with our strategy and have since earned a sole source position. We expect that the vast majority of the impact of first-order projects will be behind us by the end of fiscal 2022.”

Sales to the defense markets were up 104 percent to $7.1 million and represented 35 percent of total revenue. Sales to the refining markets increased $1.9 million from the prior-year period to $4.6 million and represented 23 percent of total sales. Chemical/petrochemical market sales were $4.6 million, compared with $8 million in the prior fiscal year.

“While the quarter’s results were disappointing, we view this fiscal year as a transition and believe we are better positioned to drive growth and stronger margins for the future,” Lines said.

Lines also early Tuesday said he would retire, following nearly four decades with the company. Daniel Thoren, who currently serves and president and chief operating officer, has been named as president and CEO, effective Sept. 1. He will join the board of directors at that time.

“We first met Dan in 2019 when we were evaluating the acquisition of Barber-Nichols (“BN”), which we completed on June 1, 2021. Dan has proven his strong leadership skills through the rapid growth of BN and, since joining Graham, has demonstrated a robust vision for the future of the company,” said Graham’s board Chairman James Malvaso in a statement. “Dan had built a strong leadership bench at BNI enabling this succession plan to be another key benefit of our transformative acquisition. We are excited to have him take charge of the next phase of Graham’s future.”

Thoren was named president and COO in June. He previously served as BN’s president and CEO since 1997, quadrupling the size of the business during that time.

“I believe these are incredible times for Graham as we work to transform the business and pivot toward growth,” Thoren said. “I am excited to lead the team as we expand our defense business, develop new products and capture a larger share of the defense and energy markets we serve. I am looking forward to working with our combined team and the Board to drive value for customers and shareholders.”

Lines has been with Graham for more than 37 years and led the organization for more than 15 years. Malvaso said that under Lines’ leadership, Graham has improved its cash generation, expanded geographically and created more flexible and efficient production processes while building a culture of quality.

“It has been an honor and privilege to serve as the president and chief executive officer of Graham. I value the relationships developed through the years with our employees, customers and shareholders and I appreciate the support the board of directors has provided all these years,” Lines said. “I am excited about Graham’s future under Dan’s leadership and look forward to watching the company transform into a leading defense industry supplier while further advancing our energy business. We have enhanced our strong leadership team with the BNI acquisition and I expect that supported by our tremendously talented team of employees, they will propel Graham to new heights.”

Graham is a global business headquartered in Genesee County that designs, manufactures and sells critical equipment for the energy, defense, aerospace and medical industries, among others.

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Graham profits up in Q3

Batavia’s Graham Corp. on Thursday reported an improvement in third-quarter sales and earnings, beating Street estimates for revenue.

For the quarter ended Dec. 31, the global designer and manufacturer of critical equipment for the energy, defense and chemical/petrochemical industries posted revenue of $27.2 million, up from $25.3 million in the same quarter last year. Net income for the quarter improved to $1.1 million. On a per-share basis, earnings were 11 cents. In the year-ago quarter, Graham reported no earnings.

James Lines
James Lines

“We delivered a solid quarter as strong refining sales in Asia offset our weaker domestic refining and petrochemical markets, resulting in 7 percent year-over-year growth. In fact, despite difficult current macroeconomic conditions, our team delivered both top and bottom-line growth,” said Graham President and CEO James Lines. “A significant takeaway in the quarter was our record level of orders and backlog. As we have discussed over the last several years, we have focused significant resources on building our defense business because we believe requirements in that market provide operational synergies and align with our capabilities.”

Those capabilities include vacuum and heat transfer know-how; complex, long-cycle project management; and precision fabrication of large weldments, Lines said.

Orders were $61.8 million in the quarter, including $52.3 million from the defense industry. Graham reported a record backlog of $149.7 million, with 45 to 50 percent expected to ship in the next twelve months.

Geographically, refinery projects in Asia drove international sales to 61 percent of total sales, compared with 47 percent in the prior-year period. Domestic sales in the fiscal 2021 third quarter were 39 percent of total sales, compared with 53 percent in the third quarter of fiscal 2020.

Fluctuations in Graham’s sales among geographic locations and industries can vary measurably from quarter to quarter based on the timing and magnitude of projects, officials said, and the company noted that year-over-year trends are more accurate.

Capital spending was $700,000 in the third quarter of fiscal 2021 and was $1.5 million in fiscal 2021 year-to-date. The company expects capital expenditures for fiscal 2021 to be between $2 million and $2.5 million, of which 80 to 85 percent is expected to be for machinery and equipment and the remainder to be used for other items.

As of Dec. 31, 2020, Graham had no debt.

For the full year, Graham expects revenue to be $93 million to $97 million, with a gross margin between 21 and 22 percent.

“Importantly, we believe defense markets offer long-term growth potential, provide improved visibility that reduces investment and planning risk, and are less cyclical than our historic core markets. Notably, more than 80 percent of the $62 million in new orders in the quarter and approximately 70 percent of the record $150 million in backlog are from the U.S. Navy,” Lines said. “We intend to consistently intensify our focus on sales to the stronger and more stable defense market while staying committed to our core markets. We are also actively participating in the energy transition into renewable fuels and other areas of growth in alternative energy markets.”

Shares of company stock (NYSE: GHM) were down nearly 8 percent to $14.35 mid-afternoon Thursday.

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Graham reports improved sales, earnings

Graham Corp. this week reported an improved second-quarter bottom line, beating Street estimates for sales and earnings.

For the quarter ended Sept. 30, the Batavia manufacturer reported revenue of $28 million, up from $21.6 million in the second quarter last year. Net income for the quarter improved to $2.7 million from $1.2 million in the previous year. On a per-share basis, earnings were 27 cents, up from 12 cents last year.

Analysts had expected earnings of 7 cents on sales of $23.2 million.

James Lines
James Lines

“Results in the second quarter benefited from strong defense industry sales, including a materials only order. We also had the benefit of improved efficiencies in both our supply chain and our production facilities, which enabled us to accelerate conversion of both large and short cycle orders in the quarter,” said President and CEO James Lines. “As a result, higher volume drove operating leverage, which is inherent in our business model.”

Domestic sales were 62 percent of total sales, compared with 73 percent in the second quarter of fiscal 2020. International sales were 38 percent of total sales, compared with 27 percent in the prior-year period.

“We had strong orders in the quarter of $35 million. This order level was driven by our strategy to further our geographic market reach and diversify our end markets, which includes increasing our participation in the defense industry,” Lines said. “We remain confident in our ability to achieve the long-term goal of significantly growing our business organically, as well as continuing to consider acquisition opportunities.”

Graham is increasing revenue guidance for fiscal 2021 while raising expectations for gross margin and tightening the range for SG&A expense. The company expects revenue between $93 million and $97 million and gross margin between 21 percent and 23 percent.

Shares of company stock (NYSE: GHM) closed Tuesday at $13.33 and climbed to $13.91 following Wednesday’s reporting. Graham stock was trading at $13.63 midday Friday.

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Graham secures $17.5 million in orders

Batavia’s Graham Corp. has landed $17.5 million in orders for two defense projects and two oil refining projects. One of the oil refining projects is in India and the other is in North America.

James Lines
James Lines

“We continue to execute well on our defense strategy. Orders for the defense industry continue to represent more than 50 percent of total backlog,” said company President and CEO James Lines in a statement Thursday. “The defense industry provides terrific visibility into procurement schedules, which translates into improved multiyear planning for our operations. We expect to continue to build defense backlog across the remainder of the current fiscal year.”

The defense projects are existing component orders for new naval vessels in two of the three programs that Graham already participates in. The majority of revenue from the navy orders is expected to convert beyond fiscal 2022. The project in India is a major refinery expansion that will increase throughput capacity 50 percent, while the other oil refining order is a metallurgical upgrade to equipment supplied by the company some 20 years ago.

“In our commercial markets, we are successfully leveraging our large installed base and continue to create follow-on revenue demand,” Lines said. “These projects can arise quickly without much visibility and can have conversion cycles that are between 6 to 12 months. The India order is the result of our restructuring and establishing a subsidiary in India enabling us to secure our second large refining order for that region.”

The projects will all be recognized in backlog during the second quarter of fiscal 2021. The company expects roughly 5 percent of the new order total to convert to revenue during the remainder of fiscal 2021 and 25 percent to convert in fiscal 2022, with the remainder converting to revenue beyond fiscal 2022.

Graham is a global business that designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. Graham designs and manufactures custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems.

Shares of company stock (NYSE: GHM) closed down more than 5 percent Wednesday at $12.55.

[email protected] / 585-653-4021
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Graham reports Q1 loss

Genesee County’s Graham Corp. on Thursday reported a $4 million decline in first-quarter sales and an 18-cent loss on the bottom line.

For the quarter ended June 30, Graham reported revenues of $16.71 million, a 19 percent drop from $20.59 million in the year-ago quarter. The company reported a net loss of $1.82 million, or 18 cents per diluted share, missing Street estimates by 4 cents per share

James Lines
James Lines

“Our first quarter was heavily impacted by the COVID-19 pandemic, the economic downturn it generated and the effect of the actions we implemented to provide for the safety of our employees and our community,” Graham President and CEO James Lines said in a statement. “Our team has been resilient and, although we began the quarter at just 10 percent of normal staffing capacity, we successfully increased gradually back to normal capacity by early June. We averaged about 50 percent of normal staffing capacity during the quarter because of our proactive response to the COVID-19 pandemic. As a result, our margins and bottom line were heavily impacted.”

Sales to the defense markets were up $1.4 million to $3.5 million and represented 21 percent of total sales. Sales to the chemical/petrochemical market increased $900,000 to $8 million. Sales to the refining market declined $4.8 million to $2.7 million and sales to other commercial markets were down $1.4 million to $2.5 million, the company reported.

Domestic sales were 56 percent of total sales compared with 70 percent in the first quarter of fiscal 2020. International sales were 44 percent of total sales, compared with 30 percent in the prior-year period.

“As we think about fiscal 2021, our expectation is that our second quarter will improve sequentially. Due to the timing of backlog conversion, we expect the back half of fiscal 2021 to be significantly better than the first half generating a larger contribution of total expected revenue. Approximately 60 percent of our backlog will convert to revenue this fiscal year, which reinforces our guidance,” Lines said. “In addition, we are encouraged by the pipeline activity that we are addressing in both the defense industry and emerging markets, specifically India. Despite challenging energy and petrochemical markets, we believe that our opportunities in the defense industry will enable our backlog to grow in fiscal 2021 which will position us well for a stronger fiscal 2022.”

Based in Batavia, Graham is a global business that designs, manufactures and sells critical equipment for the oil refining, petrochemical and defense industries. Shares of company stock (NYSE: GHM) were up slightly at $12.56 midday Thursday.

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer