Friday, February 13, 2009

Alloy Steel's Q1

Alloy Steel International (AYSI.OB) filed its 10-Q today for its fiscal Q1 (the fourth calendar quarter of 2008). The company essentially broke even on sharply lower sales on a year-over-year basis. From the 10-Q:

Alloy Steel had sales of $1,845,504 for the three months ended December 31, 2008, compared to $3,180,339 for the three months ended December 31, 2007. These sales consist solely of the sale of our Arcoplate product. Substantially all of our sales during the periods were denominated in Australian dollars. Sales were converted into U.S. dollars at the conversion rate of $0.67306 for the three months ended December 31, 2008 and $0.8905 for the three months ended December 31, 2007 representing the average foreign exchange rate for the respective periods.

The decrease in sales for the period is representative of the general downturn being experienced in the world economy. During the quarter, the Company's orders declined as demand for our product reduced with various mining companies announcing that new mining projects were being delayed and/or existing mining projects were being wound back until demand for commodities again increased.

This was worse than my optimistic guestimate of 1 cent per share in earnings, but not wholly unexpected, given the global economic downturn, and particularly, the downturn in the metals sector. On the plus side, the company managed to stay in the black during a difficult quarter. Back to the 10-Q:

The Company has continued to promote its product in the market place as a superior option for maintenance, as well as seeking entry into other markets which were previously limited by the Company's ability to meet the demand existing prior to the economic downturn. The Company is confident of being able to present its product well in these new markets, and anticipates additional orders will be generated from these new locations.

One of those new locations referred to above is North America, as the 10-Q notes that the company has incorporated two North American subsidiaries to handle business in this region. It would be encouraging to see the company generate some sales from companies involved in infrastructure/excavation, since those companies' bulldozer blades and truck beds are subject to wear as well.

I picked up a few more shares of AYSI earlier this week at .361.

The photo above, from Alloy Steel's website, is of an Arcoplate fan liner of the sort used in cement plants and coal-fired power plants, according to the site. I don't believe this application has been a significant source of sales for Alloy Steel yet, but perhaps this is an area its new salesmen can pursue.


Paul Price said...

Dave, you are going to ride this puppy to zero , I cannot believe this!!
Christine and I were talking last night about your obsession with micro-caps.(She thought it was something like micro-minis, i have some real teaching to do)

- Paul

The real stockdoc said...


The comment above is from my clone who seeks to piss both you and me off.

The real...
Paul Price

Anonymous said...

So are you going to continue buying more, or wait for the sector to turn around?

DaveinHackensack said...

There have been some tentative signs that the sector might be turning, e.g., the recent increase in the Baltic Dry Index. I'll probably wait for more Alloy Steel-specific news to buy more though. I'd like to see some indication that the company will be able to work off some of its inventory (an 8-K announcing a major new order, or a positive update on the status of its Mongolian joint venture, etc.).