USA: General Cable Reports Third Quarter Results

General Cable Corporation , one of the most globally diversified industrial companies, reported results for the third quarter ended September 30, 2011. Diluted earnings per share for the third quarter of 2011 were $0.07.

Included in these results were $0.10 per share of non-cash convertible debt interest expense and $0.16 per share of mark to market losses on financial derivatives accounted for as economic hedges. Before the impact of these items, adjusted non-GAAP earnings per share for the third quarter of 2011 would have been $0.33.

Earnings versus expectations in the third quarter of 2011 were further burdened by foreign currency transaction losses of $0.23 per share caused by the strengthening of the US dollar against most major currencies in the latter half of the quarter and an increase to the Company’s estimated full year effective tax rate resulting in $0.13 per share of additional tax expense in the quarter versus expectations as a result of the impact to the first half of the year being reported in the third quarter.

Highlights

* Despite increased economic uncertainty and a rapid fall in metal prices, operating income in the third quarter of 2011 increased 51% or $21.3 million compared to the third quarter of 2010

* Global volume as measured in metal pounds sold in the third quarter of 2011 increased 2% sequentially and 6% year over year, marking the fifth consecutive quarter of year over year growth

* Brazilian growth helped lift ROW sequential metal pounds sold by 15%

* Board of Directors authorized a $125.0 million share repurchase program

Third Quarter Results

Net sales for the third quarter of 2011 were $1,517.8 million, an increase of $190.3 million, or 14%, compared to the third quarter of 2010 on a metal-adjusted basis. Before the impact of favorable foreign currency exchange rate changes of $58.5 million, net sales for the third quarter increased 10% compared to the third quarter of 2010. Volume based on metal pounds sold increased 6% in the third quarter of 2011 compared to 2010 partly as a result of increased aluminum based product shipments for metal intensive, aerial transmission projects in Brazil. Sequentially, volume in the third quarter increased 2% as metal pounds sold in the Company’s Rest of World segment increased 15%, more than offsetting typical seasonal declines in North America and Europe and Mediterranean.

Operating income in the third quarter of 2011 decreased 21% or $16.4 million to $63.4 million compared to $79.8 million in the second quarter of 2011, and was up 51% compared to the third quarter of 2010. Operating income for the third quarter of 2011 reflects the seasonally lower results of the Company’s electric utility and telecommunication businesses in North America following a strong result in the second quarter; the impact of a planned seasonal reduction of inventory quantities globally; and ongoing weakness in Iberia coupled with the summer holiday period in Europe. Partially offsetting these decreases sequentially were operating results in ROW where the Company continues to experience strength particularly in its businesses in Latin America. On a metal adjusted basis, operating margin of 4.2% in the third quarter of 2011 was down 110 basis points as compared to the second quarter of 2011, and was up 100 basis points as compared to the third quarter of 2010.

Gregory B. Kenny, President and Chief Executive Officer of General Cable, said, “Our third quarter results reflect continuing weak conditions in Europe and the impact of significant currency volatility and rapid commodity deflation in the latter portion of the quarter. In ROW, results were generally consistent with expectations through the first couple months of the quarter. However, the extreme volatility experienced in metal prices in the final weeks of September reduced volumes as we believe some distributors and copper rod customers deferred purchases. Copper and aluminum prices declined 20% and 5%, respectively, in the final 15 days of the quarter and 30% and 15%, respectively, from quarterly highs established in July. In North America, volumes were broadly a bit lower than expected but in line with normal seasonal patterns and consistent with buying behavior in a rapidly falling metals market. In Europe, project related activities in our submarine power and terrestrial high voltage and extra-high voltage businesses were more than offset by broader market weakness, particularly in the Mediterranean region.”

In ROW, volume as measured in metal pounds sold increased 14% in the third quarter of 2011 compared to the third quarter of 2010 and was up 15% sequentially as compared to the second quarter of 2011. The sequential increase in volume was broad-based as the uneven order patterns experienced during the second quarter improved during much of the third quarter as projects were released and aerial transmission cables were shipped. Putting aside metal pounds attributable to aerial transmission projects in Brazil, volume increased 9% sequentially and 5% year over year. Sequentially, the Company benefited from higher spending on electrical infrastructure in Brazil and Venezuela, construction and mining activities in Chile and the release of industrial projects in Thailand. These improvements in overall volume were tempered late in the quarter as some customers delayed placing copper rod orders in Zambia and Chile as a result of the significant decline in copper prices at the end of third quarter.

In North America, volume as measured in metal pounds sold decreased 4% in the third quarter of 2011 compared to the third quarter of 2010 and was down 9% sequentially when compared to the second quarter of 2011. The sequential decrease in volume was principally the result of the strong seasonal demand experienced during the second quarter particularly for the Company’s electric utility and telecommunication products. Excluding these products, volume was flat sequentially and up 1% year over year. Demand remains stable for many of the Company’s electrical infrastructure products including cables used in natural resource extraction as well as networking and original equipment manufacturing applications.

In Europe and Mediterranean, volume as measured in metal pounds sold increased 6% in the third quarter of 2011 compared to the third quarter of 2010 and was down 4% sequentially when compared to the second quarter of 2011. Sequentially, volume was lower than expected as conditions were difficult throughout Europe during the quarter particularly in the Mediterranean region. The Company’s backlog continued to build during the quarter for submarine and land based turnkey cable projects and as of the end of the quarter was approximately $600 million.

Other expense was $31.5 million in the third quarter of 2011 which primarily consists of $18.6 million of foreign currency transaction losses and $12.9 million of mark to market losses on derivative instruments accounted for as economic hedges. Foreign currency losses in the third quarter of 2011 reflect the impact of the strengthening US dollar against most major currencies. The mark to market losses on derivative instruments accounted for as economic hedges were principally related to project timing movements.

More info: General Cable

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Source: General Cable, November 01, 2011;