HIGHLAND HEIGHTS, Ky. — General Cable Corporation reported results for the first quarter ended April 1, 2016. For the quarter, the Company generated adjusted earnings per share from continuing operations of $0.19 and adjusted operating income from continuing operations of $42 million. Reported loss per share from continuing operations for the quarter was $0.17 and reported operating income from continuing operations was $15 million.
Michael T. McDonnell, President and Chief Executive Officer, said, “We are very pleased with our sequentially improved first quarter results which reflect both an improving demand environment in certain businesses, particularly in North America, and the benefits from our business improvement and restructuring initiatives. Our first quarter results demonstrate that our business is heading in the right direction as we mobilize on our strategic roadmap and launch additional cost saving, efficiency and growth initiatives that will contribute to substantial value creation ahead.”
First Quarter Summary
- First quarter adjusted operating income was $42 million, up $14 million sequentially and $16 million above guidance mid-point, reflecting improvement in demand for electric utility cables in North America, strong performance of the subsea turnkey project business in Europe and savings from restructuring initiatives
- Metal prices negatively impacted results for the first quarter of 2016 by $4 million (which was $4 million less than guidance estimate) as compared to the $8 million negative impact experienced in the fourth quarter of 2015. Metal cost impact is calculated as the difference between the price at which we buy metals and the price at which we sell the metals as a pass through component of our products
- Year over year, adjusted operating income was down $6 million due to weakened demand for oil and gas cables and lower subsea project activity in Europe in the first quarter of 2016
- Definitive agreement signed to sell operations in Egypt; sale of India operations completed; divestiture program has generated $187 million of proceeds from sales with more to come
- Company remains on track to meet restructuring savings target of $80 to $100 million; generated restructuring savings of $9 million in the first quarter
North America – unit volume was up 18% versus the fourth quarter of 2015 principally due to the sharp rebound in demand for electric utility products following the sluggish finish to the prior year. Year over year unit volume was down 3% primarily due to demand for specialty cables particularly for those products tied to oil and gas applications.
Europe – unit volume was up 8% versus the fourth quarter of 2015 as demand improved across the region led by shipments of cables for land turnkey projects. Excluding the impact of restructuring activity including the exit from certain low value add end markets, unit volume year over year was flat.
Latin America – excluding aerial transmission product shipments in Brazil, unit volume was up 2% versus the fourth quarter of 2015 as demand stabilized across the region in the first quarter. Year over year, unit volume excluding aerial transmission product shipments was down 11% as end market demand remains under pressure throughout the region due to the ongoing difficult economic conditions and reduced government spending.
Other expense of one million for the first quarter consisted of mark-to-market gains of $3 million on derivative instruments accounted for as economic hedges and foreign currency transactions losses of $4 million, of which $2 million relate to foreign currency transaction losses in Asia and Africa.
Net debt was $1,060 million at the end of the first quarter of 2016, an increase of $73 million from the end of 2015. The increase in net debt is principally due to the timing of collections from subsea turnkey projects of $43 million which is expected to be collected in the second quarter. Putting aside these project payments, the increase in net debt of $30 million is principally the result of higher accounts receivable driven largely by the increased unit volume in North America for the first quarter. The Company continues to tightly manage inventory levels.
Second Quarter 2016 Outlook for continuing operations of North America, Latin America and Europe
“In the second quarter, we expect sequentially improved seasonal volumes and further benefits from restructuring and business improvement initiatives, partially offset by the easing performance of our subsea turnkey project business. We are encouraged by the demand experienced in our utility, non-residential construction and communications end markets to start the year as unit volume rebounded sharply following the soft finish to 2015. However, demand in our specialty end markets, specifically mining, oil and gas, remain weak. While the operating environment continues to be challenging, we are sensing some optimism in our customer base, and end-market demand is consistent with our expectations as we think about the first half of 2016. We are excited about the progress we are making as we focus on mobilizing on our strategic roadmap and driving business and operational improvements,” McDonnell concluded.
Revenues in the second quarter are expected to be in the range of $950 to $1,000 million. Unit volume is anticipated to be up mid-single digits sequentially. Adjusted operating income is anticipated to be in the range of $40 to $55 million for the second quarter. Adjusted earnings per share are expected to be in the range of $0.15 to $0.35 per share for the second quarter. The movement of metal prices is not anticipated to have a material impact on the second quarter outlook which assumes copper (COMEX) and aluminum (LME) prices of $2.25 and $0.70, respectively. Foreign currency exchange rates are assumed constant in the second quarter outlook. The second quarter outlook does not include operating results from Asia Pacific and Africa.
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