Zinc producer Horsehead Holding Corp. (NASDAQ: ZINC) reported fourth-quarter results before the opening bell today. While the company produced another loss this quarter, it actually managed to beat expectations. Even better was the fact that the company's underlying profitability is improving as the ramp up of its new Mooresboro facility is beginning to have an impact. Here's a closer look at the company's results during the quarter.
A look at the numbers
Horsehead reported revenue of $106.6 million, which is up 2.9% over the fourth quarter of 2013. While that missed estimates by about $5 million, some of that had to do with a decline in zinc product shipments that was the result of the continued slow ramp up of production at Mooresboro.
As a result of Mooresboro still ramping up the company reported a net loss of $4.1 million, or $0.08 per share. However, that was $0.07 better than analysts were expecting and a much better showing than the $0.15 per share the company lost last quarter, as well as the $0.26 per share loss in the fourth quarter of the preceding year.
The highlight for the quarter is the fact that the company's adjusted EBITDA came in at $7.4 million, which was much better than the $7 million loss last quarter. In the company's earnings press release CEO Jim Hensler said that this was a "milestone for Horsehead" as it "achieved break-even adjusted EBITDA even though the Mooresboro facility only operated at an average utilization of 30% of projected capacity."
As Hensler noted, production at Mooresboro is well below its capacity, however, it did produce 12,000 tons of zinc metal during the quarter, which was almost triple the 4,300 tons it produced just last quarter. Overall, the company's zinc product shipments totaled 27,562 tons during the quarter. While that was 12,432 tons, or 31% less than 2013, that has to do with the shift from the company's now shut down Monaca facility to its new Mooresboro facility. However, the company did make up for most of that loss as it also shipped 23,458 tons of zinc calcine in the quarter. This brought the company's total zinc shipped during the quarter to 39,621 tons, which is roughly flat from 2013.
A look ahead
Horsehead expects production at Mooresboro to continue to ramp up in 2015. The company hopes to have the facility operating at 75% of capacity by the end of the current quarter. However, the company has had some additional start-up issues and it recently needed to shut the plant down for a week to address these problems. Horsehead believes that it will be able to get all of the kinks out so that it can continue to ramp up production.
The company also noted that it recently added $70 million to its balance sheet via an equity offering. That cash will initially provide a cushion should it encounter additional issues as it ramps up Mooresboro. However, Horsehead also noted that it plans to use that cash to support strategic investment opportunities as it is now in a better position to be proactive with Mooresboro up and running.
All things considered Horsehead delivered a solid quarter. The company's underlying business is profitable and that profitability should increase as activity at Mooresboro ramps up. In fact, the company sees that facility generating $90 million to $100 million of incremental EBITDA on an annualized basis once it's running at full capacity. While it might take the company a while to get there, Horsehead appears to be on the pathway to sustained profitability.