Calgon Carbon Corporation's (CCC) first-quarter 2012 earnings of 14 cents a share beat the Zacks Consensus Estimate by a couple of cents while trailing the year-ago earnings by a penny. The Pennsylvania-based pollution control company's profit fell 8.7% year over year to $7.7 million as higher costs more than offset top-line growth.
Revenues climbed 9.8% year over year to $136.6 million, ahead of the Zacks Consensus Estimate of $132 million. Currency translation had a negative impact of $0.3 million on sales, stemming from a stronger dollar.
Revenues from the Activated Carbon and Service segment rose 3.9% to $117.2 million. The growth was fueled by increased demand for activated carbon products and services across four markets.
Equipment revenues zoomed 76.8% to $16.1 million riding on higher sales from ballast water treatment systems and ion exchange equipment. However, the company saw lower sales from carbon adsorption equipment in the quarter.
Revenues in the Consumer segment spiked 36.7% to roughly $3.3 million. The growth was aided by higher demand for activated carbon cloth.
Margins and Expenses
Gross margin fell to 31.3% in the quarter from 33.3% a year ago, impacted by higher plant maintenance expenses, unfavorable mix and raw material inflation. Moreover, costs associated with the repair of two new reactivation facilities in Belgium and China affected margins.
Cost of products sold increased 13% year over year to $93.8 million in the quarter. Selling, administrative and research (SG&A) expenses rose 7.2% to $23.9 million. The company attributed the increase to higher employee related expenses, including new recruitments at its Hyde Marine ballast water treatment business.
Calgon Carbon ended the first quarter with cash and cash equivalents of $11.8 million, down 56% year over year. Total long-term debt was $3.5 million, down 87% year over year.
Outlook and Recommendation
Moving ahead, Calgon Carbon said that it will actively focus on improving margins across all regions. Despite some challenges, the company expects to continue to capitalize on its growth opportunities. It continues to regard ballast water treatment, reactivation services, disinfection by-products, and mercury removal as the very basis for sustained growth.
Healthy sales gains and strategic initiatives adopted by the company will bring benefits in the longer term. We, however, remain concerned about the economic challenges that the company might face in 2012.
We currently have a long-term Neutral recommendation on Calgon Carbon. The company, which competes with MeadWestvaco Corporation (MWV), retains a Zacks #4 Rank, which translates into a short-term Sell rating.