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Ameron's Q2 profits drop sharply

Published: 20:04 08 Jul 2011 BST

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Ameron International Corp. (NYSE:AMN) said Friday that its second quarter bottom line fell sharply due to feeble construction markets and a temporary lull in Asian fiberglass pipe markets, as well as unusually high legal expenses.

For the three months ending May 29, Ameron, which makes water transmission lines and fabricated steel products, posted profits of $1.0 million, or 11 cents a share, compared to $9.5 million, or $1.03 a share, one year ago.

Revenue fell to $134.7 million in the quarter, compared to $136.5 million a year before.

In afternoon trade, shares in the company fell 19 cents, or 0.22%, to $85.21 on the New York Stock Exchange.

Ameron’s chief executive, James S. Marlen, said: "The company's businesses continued to suffer from margin pressure related to weak construction markets and a lull, which is expected to be temporary, in Asian fiberglass pipe markets."

The Pasadena, California-based company’s fiberglass-composite pipe business posted sales of $66.9 million, up from $64.7 million in the second quarter of 2010.

Ameron said sales in its U.S. and European operations grew due to strong oil prices and related oilfield demand, partially offset by reduced sales from Asian and Brazilian operations.

The decline in Asia came from the slowdown of marine and offshore markets, while Brazil had slower-than-expected acceptance of products from its new Brazilian factories, it said.

The unit's profits were impacted in the second quarter by a shift in sales away from higher-margin marine, offshore and mining projects and by higher raw material costs.

Additionally, margins were lower as competitors fought for fewer available projects, including industrial projects in the Middle East.

Meanwhile, Ameron expects the fiberglass-composite pipe business to perform well for the balance of the year due to high energy prices. Sales into Asian marine and offshore markets are also expected to increase later this year.
But unforeseen events like the strife in the Middle East and Libya are likely to restrain the group's upside potential, it added.

Ameron expects the infrastructure product segment to remain hampered by the slowdown in residential and commercial construction spending throughout the year. Sales from the segment declined 3%, while income plunged 70%.

The company's water transmission business also reported weak sales and was unprofitable as a result. Pipe sales declined to $24.8 million, down from $29.1 million just a year ago due to reduced activity in California.

For the second quarter, water order backlog was $49.7 million, while wind tower backlog declined to $19.8 million, down from $32.1 million at the end of the first quarter.

"The water pipe business is experiencing soft market demand as the timing of bid activity continues to be negatively affected by the economy, municipal budgets and the availability of financing," the company said in a statement.

Ameron said earnings are dependent on improvements in construction-related markets but “such improvements have not materialized to date", according to Ameron. The company continues to focus on controlling costs.

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