Longview

What: Horsehead Holding Corp's (NASDAQOTH:ZINCQ) stock plunged more than 17% in early morning trading on Monday. While the overall down market sentiment due to the Greek referendum certainly contributed to the sell-off, the news that really fueled Horsehead's drop was an update on its Mooresboro facility.

So what: Horsehead Holding reported that Mooresboro only produced 3,700 tons of zinc metal during the month of June. This was actually a step back for the facility after it produced 4,100 tons in May and 2,800 tons in April. The production decline suggests that the company's newest facility still is a long way from ramping up to its full production capacity as it continues to deal with start-up issues.

These problems are not only costing the company additional money for repairs, but also keeping the facility's production low, which is affecting its overall profitability. Given that the company still has some issues to address, it now expects the entire facility to be offline this week as it performs needed maintenance work. Further, it anticipates needing to install several additional upgrades later this summer, which will impact production.

Now what: The Mooresboro facility continues to take a lot longer than initially planned to ramp up to its full production capacity. That's holding back the company's earnings potential, as the facility is expected to add $90 million to $100 million of incremental EBITDA to its bottom line once it reaches full production capacity. Given the continued problems it's having as it ramps up toward full capacity, there is no timeline as to when the facility will be able to deliver its promised financial benefit to shareholders. That said, once the company can get through these start-up issues, it still expects the facility to deliver on its promised financial targets. 

 

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Horsehead Holding. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.