Twin Disc said today that it had lower fiscal first-quarter sales than it did last year, but the loss the company reported was lower than in the quarter a year earlier.
The Wisconsin-based company said it lost $2.7 million, or 24 cents a diluted share, in the quarter that ended Sept. 30, compared with $4.3 million, or 39 cents a share, in the year-earlier period.
Sales in the quarter this year totaled $35.8 million, down from $37.4 million last year. Twin Disc attributed the decline primarily to lower demand in Asia for its commercial marine products.
The company said demand for its oil- and gas-related products remained depressed through the first quarter, in line with a global decline in oil and natural gas production.
“Over the past six quarters we have taken a number of meaningful actions to align our cost structure for a period of prolonged weakness across many of our end markets,” Twin Disc president and CEO John H. Batten said in a statement. “These actions have been difficult and impact many aspects of our business and communities, but are necessary for Twin Disc to weather this challenging cycle.
“Our proactive approach helped us improve our gross profit percent significantly during the first quarter despite lower volumes. We continue to pursue opportunities to improve efficiencies and reduce costs, with additional workforce reductions recently completed in the second fiscal quarter. It is important to note that these ongoing cost reduction activities do not sacrifice quality or our commitment to our customers, and are solely focused on improving efficiencies and realigning our operations for lower volumes. Based on our conscious decisions to hold strategic inventory, invest in R&D and maintain a high level of customer service, we expect to gain share in many of our markets as they eventually recover.”
Twin Disc said its first-quarter gross margin was 25.6 percent, compared with 21.9 percent in the year-earlier period last. The 370-basis point increase in gross profit percent was primarily attributable to improved operating efficiencies and a global reduction in fixed manufacturing costs, which more than offset the impact of lower volumes, the company said.
The company said marketing, engineering and administrative expenses declined by $2.8 million to $12.5 million in the first quarter, compared with $15.2 million last year. The company said the 18.1 percent decline in ME&A expenses was primarily attributable to cost-reduction actions it took during the past four quarters, along with reduced pension expense and reduced spending on corporate development.
During the first quarter the company recorded restructuring charges of $258,000, related to headcount reductions at some of its foreign operations.
“Our six-month backlog at September 30, 2016, was $33,082,000, compared to $35,709,000 at June 30, 2016, and $37,526,000 at September 25, 2015. As a result of weaker global economic growth and lower oil production, the conditions of many of our markets remain challenging and continue to impact our six-month backlog,” Batten said.
“However, since the end of the first quarter, activity from customers within our oil and gas market has started to pick up as oil prices have stabilized. While it is too early to declare a turn in our oil and gas cycle, I am encouraged by trends we are beginning to see from customers in this market. Twin Disc has a strong product line of pressure-pumping transmissions, and we expect to improve our leadership position as the market recovers.”