Twin Disc reported a “significant decline” in fiscal 2016 first-quarter sales, from $64.8 million to about $37.4 million, because of a global decline in oil and natural gas prices, along with softening demand in Asia for the company’s commercial marine products.
The company reported a loss of $4.3 million, or 39 cents a diluted share, for the quarter that ended Sept. 25, compared with a profit of $4 million, or 36 cents a share, a year earlier.
Twin Disc said demand from customers in Europe remains weak and overall demand in North America remains stable for the company's commercial marine and industrial products.
Currency had an unfavorable effect on first-quarter sales, compared with the prior year, totaling $4,496,000 because of a strengthening of the U.S. dollar against the euro and Asian currencies. Adjusting for constant currency, first-quarter sales declined 35.4 percent, compared with the prior-year’s quarter.
"Sustained lower oil and gas prices have severely impacted demand for our oil and gas pressure-pumping transmission systems,” Twin Disc president and CEO John Batten said in a statement.
“We took initial actions during the fourth quarter of fiscal 2015 to lower costs and to improve efficiencies, but demand continued to erode in the first quarter. As a result, we will be taking additional actions throughout the year to reduce costs and adjust for challenging global market conditions within our oil and gas and pleasure craft markets. We remain dedicated to these markets and will continue to invest in our leading product portfolio and service organization.”
Gross first-quarter profit was 21.9 percent, compared with 34.5 percent in the quarter a year earlier. Twin Disc said the decrease in first-quarter gross profit was the result of lower volumes, a less profitable product mix, an unfavorable currency effect and reduced absorption primarily at the company's U.S. manufacturing operation.