ST. LOUIS, Aug. 11, 2008 (PRIME NEWSWIRE) -- Zoltek Companies, Inc. (Nasdaq:ZOLT) today reported the financial results for the third quarter of its 2008 fiscal year.
Zoltek's net sales for the quarter ended June 30, 2008, totaled $45.0 million, compared to $40.3 million in the third quarter of fiscal 2007, an increase of 11.7%. However, on a sequential quarter basis, sales in the latest quarter declined from the $49.6 million of sales reported by Zoltek in the second quarter of fiscal 2008.
Operating income from continuing operations was $7.3 million, up 9.0% from $6.7 million in the third quarter of fiscal 2007, but down 12.0% from $8.3 million in the second quarter of fiscal 2008. Zoltek's net income for the recently completed quarter was $2.3 million, compared to $5.0 million in the third quarter of fiscal 2007 and $4.3 million in the second quarter of fiscal 2008. The sequential quarter decline in net income resulted primarily from the decrease in sales and the unfavorable accounting impact of appreciation in the value of the Hungarian Forint which is the functional currency of the Company's Zoltek Rt. subsidiary.
For the first nine months of fiscal 2008, Zoltek's net sales were $134.6 million, compared to $107.3 million in the first nine months of fiscal 2007, an increase of 25.4%, while operating income from continuing operations was $20.4 million, compared to $15.6 million in the comparable period of the previous year, an increase of 30.8%.
"The interruption of the strong growth trends we have experienced over the past several years was disappointing, but we remain extremely confident about our future growth," said Zsolt Rumy, Zoltek's Chairman and Chief Executive Officer. "We are continuing to focus on our long-term goal of achieving annual sales of $500 million by the year 2011, and we are making good progress in executing the primary elements of our strategy. In addition, we are seeing tangible results from our ongoing operational improvement programs, as evidenced by the increase in the gross margin of our carbon fibers business unit to 33.3% in the recent quarter from 29.6% in the second quarter of this year even though ACN, our primary raw material, and energy costs increased to historic highs."
The decline in sales from the second quarter to the third quarter was due in part to the reduced shipments against two major wind contracts, the timing of shipments between the periods and lower technical fiber sales. The Company's sales goal for fiscal 2008 was based upon assumptions which included the successful completion of a new contract from a major wind turbine customer. However, Zoltek experienced a dearth of significant new contracts from customers in the wind energy field over the past year, which the Company attributes to concerns among wind turbine producers regarding the availability and pricing of the high-performance carbon fibers used in making the longest and most powerful wind turbine blades.
"We are working closely with every one of the major wind turbine manufacturers to address their concerns about incorporating carbon fibers in their design and, while we cannot predict the exact timing, we expect to win new contracts leading to resumption of Zoltek's rapid sales growth. All the major wind turbine producers are designing longer blades and at some length, which may be different for each turbine company, carbon fiber reinforcement becomes necessary and economically competitive," Rumy said. "The fundamentals of alternative energy generally -- and wind energy in particular -- are strong and growing, and we expect that growth will continue for many years to come. This business is not going away over the next few years. It's only going to get much bigger," he added.
At the same time, Rumy said, Zoltek is making solid progress in other parts of its long-term strategy to attain its announced expansion goals. The Company is improving its sales team and technical service support team as well as substantially increasing application development activities to assist users in our other primary targeted applications. These applications include deep sea drilling and automotive, as well as the recently added application for non-airframe (secondary) structures in airplanes.
In pushing the development of commercial applications outside of wind energy, Zoltek is now supplying carbon fiber to Aker Solution (formerly Aker Kvaerner) -- the global leader in building umbilical systems used in deepwater drilling -- for a major full-scale demonstration project of potential breakthrough significance in the oil and gas industry. Aker has entered into an exclusive supplier agreement with Zoltek and Epsilon Composite, a French pultruder, for carbon fiber rods to extend deep-sea drilling to new depths in the Gulf of Mexico. "This demonstration project follows a smaller-scale project and, if successful, will bring us a giant step closer to making carbon fiber a critical part of the mix in deep-sea oil and gas production," Rumy said.
In another important development, Zoltek announced that its facility in Guadalajara, Mexico, acquired in September 2007, has now begun to produce test quantities of acrylic fiber precursor raw material. "The plant in Guadalajara is a key building block in rapidly ramping up carbon fibers production over the next several years," he said. Zoltek expects that the Mexican facility will ultimately have the capacity to produce 60,000 tons of precursor material which, in turn, will support production of more than 27,000 metric tons of carbon fibers -- or the equivalent of over $600 million in carbon fiber sales at today's price level for high-performance carbon fibers. Rumy added, "We have been able to successfully retrofit this plant to produce precursor, validating our belief that it represented a unique opportunity to expeditiously add capacity at substantially lower capital costs than new construction. In addition, with profitable operations and ample financial resources, we believe Zoltek is poised to capitalize on the opportunities that await us."
Zoltek will host a conference call to review third quarter results and answer questions on Tuesday, August 12, 2008, at 10:00 am CT. The conference dial-in number is (800) 723-6751. The confirmation code is 8366942. Individuals who wish to participate should dial in 5 to 10 minutes prior to the scheduled start time. This conference call and an accompanying slide presentation by Zsolt Rumy will also be webcast on Zoltek's website -- www.zoltek.com -- under "Investor Relations - Events & Presentations."
This press release contains statements that are based on the current expectations of our company. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors.
