Operating income for the Industrial Materials segment was $8 million in
the second quarter of 2013, as compared to $42 million in the second
quarter of 2012. The reduction in operating income is largely attributed
to lower graphite electrode and needle coke pricing.
Mr. Shular commented, "The environment for our Industrial Materials
products remains very difficult as steel production outside of China
continues to decline year-over-year. This weakness is further
exacerbated by overcapacity in the graphite electrode industry. We will
continue to leverage our low-cost business model to optimize our
performance in this extremely challenging environment."
Engineered Solutions Segment
Net sales for the Engineered Solutions segment increased 31 percent to
$70 million in the second quarter of 2013 compared to $53 million in the
second quarter of 2012. Continued success and growth in our advanced
consumer electronics product offerings drove the increase in revenue.
Operating income for the Engineered Solutions segment was $8 million in
the second quarter of 2013, or twelve percent of sales. This compares to
operating income of $5 million, or nine percent of sales in the same
period in 2012. The increase is due to a more favorable product mix as
we penetrate high-growth end markets with attractive margin profiles,
offset in part by significant weakness in advanced graphite material
products serving industrial sectors including transportation, chemical
and metallurgical industries.
Mr. Shular commented, "Our Engineered Solutions segment achieved record
sales of $70 million in the second quarter, representing nearly 25
percent of total Company revenue. Additionally, the segment delivered
double-digit operating income margin performance, ramping from the first
quarter of 2013, as the infrastructure investments to support growth are
more effectively absorbed at a higher revenue level. As this business
continues to gain traction, it is better positioned to provide a
sustainable base for diversification in tough steel cycles."
Total company overhead expenses were $33 million versus $38 million in
the second quarter of 2012. The decline in overhead was largely driven
by rightsizing initiatives, reductions in discretionary expenses and
lower incentive compensation expense in a difficult operating
Interest expense in the quarter was $9 million, versus $5 million in the
second quarter of 2012. The increase was largely driven by the issuance
of the Senior Unsecured Notes in November 2012.
In its July 9th report, the International Monetary Fund (IMF)
reduced its estimate for 2013 global GDP growth to 3.1 percent,
representing the third consecutive downward revision this year. The IMF
also states that global growth has not accelerated as expected and has
underperformed relative to its prior expectations due to several factors
including protracted recessionary conditions in Europe, weaker than
anticipated economic expansion in the United States and slower growth in