Universal Stainless and Alloy Products Inc

Universal Stainless Starts Radial Forge Operation

$104.5-million acquisition adds high-margin products

Universal Stainless & Alloy Products has started operations at the Ohio radial forging plant it paid $104.5 million to acquire in 2011. The plant, in North Jackson, OH, was incomplete when the purchase was made, and Universal completed the development over recent months.

The Patriot Special Metals project was begun by Republic Special Metals Inc. in 2008, but construction was delayed. The 200,000-ft2 greenfield development near Youngstown, OH, includes the radial forge and a vacuum induction melting (VIM) operation, two vacuum arc remelt (VAR) furnaces, heat treating operations, and various long-products finishing equipment. After the acquisition, Universal chose to add an electro-slag remelt (ESR) furnace.

The news of the start-up was announced with the Universal Stainless second-quarter income statement. The company reported 2Q 2012 sales of $67.9 million, a decrease of 9% from Q1, but a 7% increase from the second quarter of 2011.

Operating income for the second quarter of 2012 was $7.3 million, 25% below Q1 2012 income and a 14% decline from the second quarter of 2011.

Universal Stainless stated it narrowed its negative cash flow from operations during the quarter $500,000, despite investment in working capital and in the start of North Jackson operations; Capital expenses during the quarter were $10.3 million, including $7.2 million for the North Jackson operation.

"Despite continued end-market strength, we experienced changes in our customers' buying patterns as the second quarter progressed,” chairman, president, and CEO Dennis Oates offered. “Falling raw material prices and the prospect of lower future surcharges combined with growing economic caution influenced customers to reduce their order quantities, negatively impacting our shipment volume, order entry and backlog.”

Universal expects that the North Jackson operation will broaden its product range, adding “higher-margin products” and giving it access to new markets. The radial forge, described as “the largest hydraulic radial forge in the Western Hemisphere,” will produce large and long forged squares, rounds, bars, and custom shapes for aerospace, power generation, petrochemical, and general industrial tool steel and shafting applications.

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