Carpenter Technology Corporation, Philadelphia, Pennsylvania, USA, today announced financial results for the fiscal 2022 first quarter, ended September 30, 2021. Net sales were $387.6 million, compared with $353.3 million in the first quarter of fiscal year 2021, an increase of $34.3 million (9.7%), on 2% lower volume. Net sales excluding surcharge were $312.9 million, an increase of $5.7 million (1.9%) from the same period a year ago.
“Demand patterns across our end-use markets continue to improve as our backlog finished up 25% sequentially and 49% year over year,” stated Tony R Thene, president and CEO. “We continue to see signs of a broad-based recovery taking hold across the aerospace supply chain with an acceleration of demand conditions expected in calendar year 2022.”
He continued, “Our Performance Engineered Products segment finished ahead of our expectations driven primarily by strong demand for our titanium fasteners in the aerospace and defence end-use market. Within the Specialty Alloys Operations segment, our performance was impacted by short-term operational delays including COVID-19 isolations at key work centres, supply chain disruptions across the world and hiring challenges in a difficult labour environment. The operational delays resulted in a temporary build in inventory during the current quarter, which negatively impacted our cash flow.”
For the quarter, the company reported a net loss of $14.8 million, or $0.31 loss per diluted share. Operating loss was $19.1 million compared to operating loss of $48.8 million in the prior year period. Adjusted operating loss excluding special items was $17.5 million in the recent first quarter (versus a $30.9 million loss a year ago). The year-over-year improvement in operating performance is largely due to higher sales in the current quarter while the first quarter of last year included negative profitability impacts of lower activity levels and targeted inventory reductions.
The special item excluded from adjusted operating loss in the current quarter totalled $1.6 million; this represents COVID-19 costs consisting of direct incremental operating costs including outside services to execute enhanced cleaning protocols, additional personal protective equipment, isolation pay for production employees potentially exposed to COVID-19 and various operating supplies necessary to maintain the operations while keeping employees safe against possible exposure in the company’s facilities. Special items in the prior year period included COVID-19 related costs as well as restructuring and asset impairment charges.
Cash used for operating activities in the first quarter of fiscal year 2022 was $47.0 million, compared to cash provided from operating activities of $88.0 million in the same quarter last year. Negative free cash flow in the first quarter of fiscal year 2022 was $71.2 million, compared to positive free cash flow of $62.6 million in the same quarter last year. The decrease in operating cash flow primarily reflects an increase in inventory following targeted reductions last fiscal year. Inventories during the recent quarter rose as operational activity levels increased to address improving demand as well as the impacts of operational delays associated with COVID-19 isolations at key work centers and labor shortages.
Total liquidity, including cash and available credit facility borrowings, was $507.8 million at the end of the first quarter of fiscal year 2022. This consisted of $213.2 million of cash and $294.6 million of available borrowings under the company’s credit facility.
Thene concluded, “Looking ahead, we plan to continue navigating near-term challenges and partnering with our customers during the recovery. We are well positioned for growth in our core business with a strong financial position, including $508 million in total liquidity, and a positive long-term outlook for our end-use markets. Our soft magnetics and Additive Manufacturing capabilities provide additional opportunities for long-term growth and to deliver increasing returns to our shareholders.”