Fastener Stocks Jump 9.7% in First Quarter Plus Alcoa, Fastenal, Anixter, Chicago Rivet, ITW, Paulin, Nucor

Jason Sandefur

The FIN Fastener Stock Index soared 9.7% during the first quarter of 2007, surpassing an index of related industrial stocks that remained essentially flat.
Precision Castparts continued its strong performance with its fifth straight quarterly stock gain, jumping 32% to $104.05 per share. The Portland, OR-based manufacturer became a major player in the fastener industry when it acquired SPS Technologies in 2003 for $893 million, followed by the 2005 acquisitions of Air Industries Corp. and Shur-Lok. PCC”s fastener sales topped $800 million in fiscal 2006.
Other public fastener companies posting double-digit stock gains in Q1 included Alcoa, Anixter, ITW, Nucor, Grainger, B/E Aerospace, Park Ohio and Paulin.
During Q1 Fastenal posted its fourth consecutive share loss, with its price dropping 2.3% to $35.05. During the first quarter of 2006, Fastenal stock jumped 21% to $47.34.
Other fastener companies with stock declines included Danaher and Lawson Products.
Alcoa Fastener Sales Rise on Aerospace Demand
Record aerospace industry demand pushed Alcoa”s Engineered Solutions segment sales, including fasteners, up 6.5% to $1.45 billion during the first quarter of 2007, while segment operating income grew 12% to $93 million.
“The record result was achieved despite the known decline in the commercial vehicle market and continued weakness in the U.S. automotive base,” the company stated.
Major drivers contributing to the quarter were higher aerospace sales and continued productivity improvements.
Consolidated Q1 revenue rose 11% to $7.9 billion, boosted by aerospace orders and higher metal prices. Overall income increased 13% to $673 million, the strongest Q1 income in company history. Cash flow improved by $700 million to $527 million during the quarter.
Fastenal Sales & Income Achieve Double-Digit Gains
The Fastenal Co. reported net sales grew 13.3% to $489.15 million during the first quarter of 2007, while net earnings gained 12.9% to $54.03 million. The news that higher prices and cost-cutting efforts overcame a difficult economic environment at Fastenal drove the company”s stock up 11%.
“We”re going to continue to work hard on growing our business in a slow environment,” CEO Will Oberton stated in a conference call. “And right now, we don”t see anything that makes us believe it”s going to pick up in the near term.”
Fastenal opened 73 new stores in Q1 and increased its site employee work force 6.5% to 7,637 workers.
Declining fuel costs helped Fastenal”s bottom line, with the average price per gallon of diesel dropping 12.4% to $2.59 in Q1.
Fasteners Improve Anixter Revenue
Recent fastener acquisitions pushed Anixter International sales higher, with revenue rising 24% to $1.33 billion during the first quarter of 2007. The increase included $33.6 million from the acquisitions of IMS Inc. in May 2006 and MFU Holdings S.p.A. in October. Q1 operating income grew 52% to $90.4 million, while net income soared 71% to $53.6 million.
The results follow news that Anixter acquired UK-based fastener distributor Total Supply Solutions Ltd. for $8 million in cash and assumption of debt. Anixter predicted TSS would generate $22 million in sales during 2007.
Including Infast, Anixter”s fastener holdings contributed $191.2 million to consolidated revenue during 2006.
CEO Robert Grubbs noted Anixter”s organic growth of 19% during Q1, as the company experienced “very strong customer demand across a broad mix of end markets.”
Sales in North American gained 19% to $927 million, boosted by higher copper prices. North American operating income increased 51% to $70.8 million.
Revenue in Europe climbed 39% to $305.1 million, while sales in Asia and Latin America improved 34% to $96.6 million.
Chicago Rivet Achieves Profit Amid Auto Slump
Chicago Rivet & Machine Co. returned to profitability in 2006, with the company reporting full-year net income rose to $1.12 million compared with a $398,612 loss during 2005. Net sales grew 1.5% to $40.4 million amid a continuing slump in the North American auto industry that worsened during the second half of 2006.
Chicago Rivet said results in 2006 were hurt by costs related to closing its fastener manufacturing facility in Jefferson, IA, which it shuttered during the fourth quarter. Production is being transferred to its plant in Tyrone, PA. The company recorded a charge of $422,934 related to the plant closing.
Fastener segment sales grew 1.4% to $34.42 million during 2006, boosted by double-digit gains during the first six months. Chicago Rivet described second half fastener results as “particularly weak,” with sales in the third and fourth quarters declining 8.4% compared to the prior year.
“The up and down results were tied to changes in demand from our larger automotive customers,” the company stated. “Production cuts by domestic automotive companies, in response to high inventory levels and reduced sales forecasts, were largely responsible for the weakness we experienced in the second half of the year.”
Fastener segment profit soared $2.3 million to a total of $2.45 million during 2006, aided by higher sales volume and the decline of two expense items that had large increases in 2005. Tooling expense declined by more than $1 million during 2006, as cost controls were emphasized and better tool life was achieved during the year. Tooling expenses had risen by $518,000 in 2006. In addition, expediting costs during 2006 declined by $130,000, returning to more normal levels after a $253,000 spike in 2005 for costs related to “shortened customer lead-time requirements.” Likewise, material cost of sales declined $396,000, primarily due to lower average steel prices during 2006.
The company noted challenges it faces in 2007.
“Customer demand for higher quality and lower prices continues unabated. While we have obtained sales from customers that supply the import brands, we will need to further penetrate that market to offset production cuts of the domestic brands. Our ability to increase revenues as well as diversifying our customer base will be a significant factor in our future growth.”
Chicago Rivet ended 2006 with no outstanding debt.
ITW Fastener Sales Slow
Amidst lagging North American markets, Illinois Tool Works Inc. reported revenue at its North American Engineered Products segment, including fasteners, declined slightly to $1.03 billion during the first quarter of 2007. ITW said auto-based revenue slipped 7% during Q1 and industrial sales declined 1%. Overall operating income for North America dropped 11.5% to $153.3 million.
International Engineered Products sales soared 33% to $833.1 million, which included a 7% increase in industrial revenue. Segment operating income gained 29% to $97.5 million.
For the quarter, ITW consolidated revenue increased 14% to $3.76 billion, while net income rose 10% to $402.2 million.
“While a number of North American end markets continued to be challenging, our strong acquisition activity and expanding international presence were important contributors to our revenue and net income growth in the first quarter,” commented CEO David Speer.
Paulin Profit Declines
H. Paulin & Co. reported net sales declined slightly to CAD 149.6 million (US$129.76 million) in 2006, while net income slipped 16% to CAD 5.03 million (US$4.4m).
During the fourth quarter of 2006 sales dropped 6% to CAD 32.15 million(US$27.8m), with net income declining 51% to CAD 552,000 (US$478,795).
Paulin warned that changes at the Home Depot related to its fastener suppliers “will have a material adverse impact on revenues and profits in 2007.” The company said it expects to finalize a supply agreement with Home Depot Canada.
Nucor Cold Finished Steel Sales Drop
Nucor Corp. reported cold finished steel sales, including fasteners, decreased 6% to 90,000 tons during the first quarter of 2007.
Consolidated sales grew 6% to $3.77 billion during, while Q1 net earnings rose to a record $381 million for the fourth consecutive year.
Average sales price per ton increased 6% from the first quarter of 2006 and decreased 2% compared to the fourth quarter of 2006. The average scrap and scrap substitute cost per ton increased 9% to $259, representing a 7% jump since Q4. Total energy costs decreased approximately $3 per ton.
Nucor said steel production declined 4% to 5,585,000 tons, while total steel shipments dipped 1% to 5,660,000 tons.
“Our outlook for the second quarter remains positive with rising prices for most of our products favorably impacting our margins as we work through our higher cost scrap inventories,” the company stated. \ �2007 FastenerNews.com