MFRI Reports Record Sales and Earnings for the Quarter and Six Months
September 19, 2008
MFRI, Inc. is a multi-line company engaged in the following businesses: the manufacture of pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling and other applications; custom-designed industrial filtration products to remove particulates from dry gas streams; thermal transfer equipment to remove heat from molding, printing and other industrial processes, and the installation of energy efficient heating, ventilation and air conditioning (“HVAC”) for large buildings.
MFRI, Inc. (the “Company”) announced record sales and earnings for the second quarter 2008 and the six months ended July 31, 2008. For the second quarter 2008, Company net sales were $77.6 million, 31.7% greater than the $58.9 million for the prior-year’s second quarter. Net income was a record $2.4 million compared to $1.4 million in the prior-year’s second quarter. Earnings per share increased 59.1% to $0.35 per share basic and $0.35 diluted, from $0.22 per share basic and $0.21 diluted, for the second quarter of 2007.
Second quarter 2008 net sales changes: for the Piping Systems business increased by 37.2%, the Filtration Products business increased by 35.1%, the HVAC business (included in Corporate and Other) increased by 443.5%, while the Industrial Process Cooling business decreased by 14.8%.
For the six months ended July 31, 2008, Company net sales also set a new record at $143.6 million, up 23.9% from $115.9 million for the corresponding period in 2007. Net sales increased due to the higher starting backlog, the growing success of the Piping Systems business in the United Arab Emirates, the fact that buildings in the HVAC backlog are far enough along so work can begin, and the implementation of a more global strategy. Net income for the first six months of 2008, also a record, was $2.8 million versus $2.5 million in the prior-year’s first six months. Earnings per share increased to $0.42 per share basic and $0.41 diluted, up 10.5% compared to $0.38 per share basic and $0.37 diluted for the first six months of 2007.
Continued cost increases for steel and petroleum-based plastic resins have adversely affected margins. Due to the seasonal nature of the Piping Systems’ domestic district heating and cooling business, sales and earnings are typically higher during the late spring, summer and early fall months (second and third quarters), due to favorable weather for construction over much of North America and are correspondingly lower during the late fall, winter and early spring months (first and fourth quarters).
There were substantial year-over-year backlog increases with Piping Systems up 59.9%, the new HVAC business up 34.1%, and Filtration Products up 31.3%, while the Industrial Process Cooling Equipment decreased by 5.9%. Compared to the previous year, the total backlog at July 31, 2008 increased by $57.3 million or 43.7% to $188.6 million over the backlog level a year earlier.
As previously announced, MFRI’s Perma-Pipe business received an order to perform the insulating and jacketing services for a 600 kilometer (370 mile) long, 600 millimeter (24 inch) diameter heat traced heavy crude oil pipeline now under construction in India. The pre-insulation services are being performed at a new Perma-Pipe facility in Mundra, India on the premises of Jindal Saw Ltd. Jindal, one of India’s largest steel pipe producers, is manufacturing the pipe for the project. The Company began production of this order in July 2008.
David Unger, CEO said, “Our expansion strategy led to strong sales, earnings and backlog growth. In 2007, 30% of the Company’s sales were to customers outside of the United States, up from 18% in 2006, and sales have approximately doubled since 2003. Many changes have been made and are continuing in an effort to return to more historic margins. Even though we expect continuing pressure from soft U.S. and European economies, operating margin improvement is a high priority. We anticipate continued sales growth due to our increased order backlog, which is $57 million higher than a year ago.” Form 10-Q for the period ended July 31, 2008 will be accessible at http://www.sec.gov/. The Company welcomes all inquiries at (847) 966-1000. For more information, visit the Company’s web site www.mfri.com.