Alloy Steel International (OTC:BB: AYSI, Stock Forum) shares were up 3% on Tuesday, days after the company reported first quarter earnings. The company is readying two new mills to produce its super strong Arcoplate steel.
The company is located in Perth, Western Australia. Last week it reported its fiscal first quarter earnings(ended in December) increased by 214% from a same quarterly loss of $960,000 in 2008 to a whooping pre-tax profit of $2,240,000 during the same quarter in 2009.
The 17.35 million share company reported in previous announcements that its two Australian plants are operating at capacity. However, in a September 8th,2009 announcement, CEO Mr Gene Kostecki indicated that the company has planned two new larger capacity production mills to substantially increase production during the first half of 2010. For guidance over the next three quarters of this fiscal year, AYSI believes that the first quarter concluded Dec 31,2009, was below what expectations for the next three quarters because of the Christmas Holiday downtime. So it seems to be in order to speculate that if the company’s pretax profits for each quarter are the same or greater, it will earn approximately $9 million US pre-tax profit for the year ending September 2010. That's over 50 cents a share. Of note is that the company has previously charged the expenses of opening an Arcoplate plate plant (August 2009) to profits resulting from operations (See Announcement 1/12/2010).
Earnings through September 2010, as two new Arcoplate plants are built and commissioned could be impacted, until those expenses to profits are added in. However, assuming that over the course of the following fiscal year, October 2010 to September 2011, Alloy Steel will have two new Arcoplate plants fully commissioned and operating at full capacity, plus their current two plants, pre- tax earnings of more than a dollar a share are very possible. That would amount to a 100% earnings growth. Arcoplate has a global market, and its growth rate could be sustained for the next few years minimum.
New super alloy Arcoplate was developed to solve problems in mining and construction equipment caused by abrasion, friction and wear, which lead to repeat maintenance and part replacement. The costs are obvious: repairmen, mechanics, materials, and down time of critically important heavy equipment. Mining and construction company operating officers know that they must find ways to continually increase production and decrease expenditures or production costs. Alloy Steel’s believes that Arcoplate is the answer.
Arcoplate is the destructively innovative brainchild of a mechanical/design engineer and a materials chemist. The Arcoplate production mill continues to lead the world in continuous cast fused alloy cladding. It is the only process in the world capable of producing a bi-metallic fused super alloy wear plate in a single pass in a thickness over 20mm (just more than3/4 of an inch) in a single contentious casting operation. Alloy's other main advantage with thicker super alloy material is that it makes it possible to compete with other thick wear resistant steels and castings, some of which may be up to 6 inches or 150mm thick.
A construction or mining outfit can use Arcoplate to obtain three to ten times the wear, plus a lower materials manufacturing cost by using Alloy Steels 3/4 inch or 20 mm material. Arcoplate is significantly cheaper and can also boost productivity by lessening production down timefor repairs or change liners in heavy construction or mining equipment.
Results from the recent Rocky Mountain Master Mechanics Conference in South Dakota on Dec 12th, showed that Arcoplate lasted 3 to 10 times longer than The Standard Materials Competition (see announcement 1/26/2010).
1. An Arcoplate lined shovel bucket lasted in excess of eight million tons. A heavy steel lined shovel bucket lasted for only one million tons before needing replacement or requiring welding.
2. Mining dumb truck bodies using Arcoplate to line the tail area lasted in excess of 30,000 hours. Dump trucks with a standard lining on the tail area required major repairs after 3,000 hours.
3. A D11 Bull Dozer with a normal wear weld facing overlay needed the blade reworked after only 22,000 hours. In the same mining location, an Arcoplate lined bulldozer blade lasted for 45,000 hours, and was expected to continue for another 45,000 more for a total of 90,000 hours.
BHP Billiton recently inked a 5 million dollar contract with Alloy Steel, and over the next five years could has the option to increase that amount ten times.
Disclosure: Allan C.Jackson III and his family own less than 5000 shares of AYSI as of 2/14/2010.