CEO: Kadant remains optimistic in challenging economy
Kadant Inc. (NYSE:KAI) CEO Bill Rainville said the world economy remains more challenging than the company, which supplies equipment to the papermaking and recycling industries, originally envisioned for the second half of the year. Rainville made the comments during a midday Thursday conference call with investors and analysts.
“Several large projects in Asia on which we had expected to recognize revenue in 2008 have been pushed into 2009 and a few China projects have been shelved, although none of these were in our backlog,” Rainville said. “Some economists have suggested signs of a moderate cooling in Europe’s economy as well. These events have caused us to reevaluate our outlook for the second half of the year but we remain optimistic about our performance and prospects in a challenging business environment.”
Kadant said in a release that it expects third-quarter GAAP earnings from continuing operations to range from $0.36 to $0.38 per share on revenue of between $86 million and $88 million. The outlook falls shy of Wall Street’s expectation of earnings of $0.52 per share on revenue of $102 million.
There are four major factors that benefit Kadant during a slower economy, the chief executive said. First, the company’s consumables and parts business, which makes up about half of sales, is stable during slowdowns, he said. Second, Kadant is geographically diverse. Third, the firm’s global manufacturing and sourcing capabilities allow Kadant to manage its cost as currencies and other factors change costs from region to region, he said. Finally, he said Kadant has a strong balance sheet and access to capital that allows the company to pursue acquisitions.
“Overall, our strategy for maximizing the business remains the same and that is, to deliver products and technical solutions that provide our customers a good return on their investment through energy savings and fiber yield improvements,” the CEO said.
The Westford, Mass.-based company said late Wednesday that its second-quarter profit rose 41% to $6.9 million, or $0.50 per share, from $4.9 million, or $0.35 per share, a year earlier. The results topped Wall Street’s expectation of earnings of $0.42 per share.
Quarterly revenue rose 4% to $92.4 million versus $89.1 million during the same period of 2007. The results fell short of Wall Street’s estimate of $94 million.
Rainville said order backlog remains strong and rose 26% to $110 million during the second quarter.
In Thursday afternoon trading, KAI is down 5.42%, or $1.22, to $21.28.
