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Accuride Corp. Reports 29.5% Sales Rise in Q1

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April 27, 2011 by   Leave a Comment

Accuride Corp., a leading manufacturer and supplier of commercial vehicle components, has announced its financial results for the first quarter ended March 31.

According to a news release, net sales in first quarter of 2011 were $218.8 million compared with $169.0 million in the prior year, a 29.5% increase. The increase in sales was primarily the result of increased demand from customers in the commercial vehicle industry. For the first quarter of 2011, the company reported a net loss of $5.2 million compared to a net loss of $2.2 million for the same period in 2010. Adjusted EBITDA in the quarter was $17 million compared to $13.4 million in the prior year quarter. Cash and cash equivalents was $31.7 million at quarter end.

“We are pleased with the increase in our top line sales, which grew by almost 30% year-over-year,” said Rick Dauch, Accuride president and CEO. “Our Wheels business continues to perform solidly at this point in the cycle. We are, however, facing some short-term operational challenges on the Components side of the business, which is temporarily offsetting the strong performance in our Wheels division. We are aggressively addressing critical equipment issues and adding key management resources with machining and process engineering expertise to fix the root causes creating our operational challenges.”

Industry Overview

As the general economy improves, the three major segments Accuride supplies (North America Class 5-8 vehicles, U.S. trailers, and the related aftermarket channels) continue to improve year-over-year.

During the first quarter, production across all segments rose. Class 8 production rose approximately 49% year-over-year whereas Class 5-7 and U.S. Trailer rose 41% and 121%, respectively.

OEMs continued to ramp up production during the first quarter in line with increasing net orders, particularly within the Class 8 and Trailer segments. Fleet profit margins continue to improve as freight rates rise in response to tightening capacity within the industry. Class 8 net orders for March showed an increase of 156% year-over-year, the highest order level for the Class 8 segment since May 2006.

The trailer segment also continues to experience increasing demand as fleets look to replace older equipment and improve productivity within their operations. General demand for Class 5-7 equipment is also trending upward, but at a more modest pace due to continuing weakness in residential construction and municipal budgets. Some industry analysts are concerned that 2011 production increases could be potentially constrained by the industry’s ability to increase capacity quickly; however, Accuride has ample capacity to keep pace with the rising projections across all market segments.

While gains continue to be modest, the economy continues to show improvement as GDP is expected to increase 2% to 3% in the first quarter of 2011, following a 3.1% increase during the fourth quarter of 2010. Other key commercial vehicle industry indicators that continue to show positive growth include:

  • Diesel fuel consumption, measured by the Ceridian-UCLA Pulse of Commerce Index (PCI), increased 3.6% year-over-year in March which indicates increasing trucking activity and utilization;
  • The Institute for Supply Management (ISM) Index continued to expand for the 20th consecutive month with a reading of 61.2 for March; and
  • Personal Consumption Expenditures (PCE) continued to grow for the 6th consecutive quarter at 4% in the fourth quarter of 2010. Demand for trucks is positively correlated to PCE.

As commercial vehicle indicators improve in line with improving economic conditions, we expect freight to continue its steady recovery throughout 2011. It is anticipated that 2011 equipment demand will continue to strengthen and show significant growth over 2010 levels; however, the on-going weakness in residential and commercial construction along with municipal spending cuts will delay the recovery of Class 5-7.

Overall, conditions in the commercial vehicle industry continue to improve. Freight tonnage is forecasted to experience strong growth over the next several years, which will continue to drive increased demand for trucks and trailers.

Company Outlook

“We continue to be encouraged by the positive industry trends and the outlook for the full year. Accuride is well positioned to capitalize on the industry upturn and has sufficient capacity to meet the increasing demands of our customers,” said Dauch. “While industry trends are encouraging, raw material prices continue to increase across all major segments of our business. We have well-defined mechanisms with our customers to pass these costs through, which we will actively execute throughout the year. While we are able to pass along price changes in raw materials to our OEM customers, our ability to pass through non-material cost increases in our Gunite business, has been limited over the past several years. These cost increases must also be addressed.”

“We are increasing our full year revenue guidance to a range of $925 to $975 million for 2011, versus our previous guidance of $875 to $925 million,” continued Dauch. “We expect Adjusted EBITDA for 2011 to be in the range of $110 to $120 million, compared to our previous guidance of $100 to $115 million.”

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