The price of zinc declined sharply during the third quarter, which had a very significant impact on Horsehead Holdings (NASDAQ: ZINC). Those prices, when combined with a number of other issues, resulted in the company's third-quarter loss widening significantly over last year's third quarter. While the quarter wasn't totally devoid of positive news, Horsehead is doing what it can to keep its head above water while it works out the kinks at its new Mooresboro facility. 

Horsehead Holding results: The raw numbers


Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)


$107.0 million

$111.0 million


Net income (loss)

($27.4 million)

($7 million)






 Data source: Horsehead Holding.

What happened with Horsehead Holding this quarter? 
Horsehead Holding was hit by weakening commodity prices and higher costs:

  • Zinc finished product and calcine shipments increased 6% to 46,456 tons for the quarter. However, EAF dust receipts declined 17.5% to 129,152 tons due to a reduction in production from the steel industry.
  • The price of zinc averaged $0.84 per pound during the quarter, which is a substantial drop from the $1.05 per pound it averaged during the third quarter of last year.
  • That said, the company did use commodity hedges to mitigate some of this price weakness. While zinc sales were down $12.2 million year over year due to lower commodity prices, the company realized $8.3 million from hedge settlements.
  • Cost of sales increased $16.3 million to $120.5 million, which contributed to the wider loss. Costs were affected by increased shipments of finished zinc products, higher conversion costs at EAF dust recycling plants, and maintenance outages as well as increased production at the Mooresboro facility. The company also had $4 million in additional costs due to a writedown of inventory and a number of other employee-related cost adjustments.
  • On a more positive note, production at its Mooresboro facility more than doubled year over year to 9,700 tons of zinc. That said, the facility is still ramping toward full capacity and had additional outages during the quarter. There is still not time table for when full capacity will be achieved.

What management had to say 
CEO Jim Hensler, commenting on the company's results, said:

The quarter was adversely affected by a sharp decline in commodity prices, lower EAF dust receipts reflecting weaker steel production and some one-time charges primarily related to inventory and LME-related price adjustments. This was offset partially by a 6% increase in shipments on a zinc-contained basis and a 25% increase in shipments of nickel remelt alloy compared with the prior year's quarter.

Unlike in prior quarters where production was held back by issues at Mooresboro, this past quarter was affected primarily by weaker commodity prices. Those price not only hurt sales, but forced the company to write down some of its inventory. That said, its main focus is getting Mooresboro ramped up to peak capacity, which is expected to significantly improve its financial results. 

Looking forward 
Due to the steep decline in commodity prices during the quarter, liquidity has become a focal point for Horsehead while it works through its issues at Mooresboro. To that end, the company has announced an at-the-market program to issue up to $50 million in common stock to provide flexibility. In addition, it might consider additional financing to meet its needs. At the moment, it has adequate liquidity totaling $68 million of cash on hand as well as availability under its credit facility, which will more than handle its current cash burn rate that saw it use $2.3 million to fund operations and use another $2.1 million net from financing activities during the quarter.