Alloy Steel International (OTC BB: AYSI.OB) filed its 10KSB annual report today.
A few notes on it:
- Fiscal 2008 net income was $0.15 per share1, versus $0.08 in 2007, an 87.5% year-over-year increase.
- The company's second mill is completed, and the company expects it to go into commercial production in February.
- The company plans to hire two more manufacturing employees in 2009.
- The company is now looking into the possibility of licensing production of its Arcoplate wear plates in other countries2.
- The balance sheet shows finished goods valued at $765,446. If this represents sales that will be recognized in the next quarter (as was the case with the finished goods that were listed on the 3Q08 10K), and if the company's gross margins remain stable, this could represent approximately $1.4 million in 1Q09 sales.
A more general comment, about the prospects of a "picks & shovels" business such as Alloy Steel's during a steep correction in the prices of mined commodities follows. In a recent article in the Financial Times ("Engineers feel impact of cancelled projects"), the reporter asked the CEO of the British conveyor belt manufacturer Fenner about the impact of the decline in commodity prices. This was the CEO's response:
“Conveyer belts carry materials based on volume and tonnage. If you are producing a commodity, we are driven by volume, not its price,” says Mark Abrahams, chief executive of Fenner.
Of course, if the price of a commodity drops far enough, i.e., below its cost of production, production volume will plummet, but above that price point, a picks & shovels business such as Fenner or Alloy Steel International ought to be less sensitive to fluctuations in price of the underlying commodity.
The photo above, of a truck bed lined with Alloy Steel's wear plate, comes from the Investors Hub page for Alloy Steel.
1This is quite close to a commenter's recent estimate of $0.148, based on the revenue figures in Alloy Steel's last 8K.
2This is a departure from the company's previous position on licensing that we noted in an earlier post ("Answers from Alloy Steel's CFO").