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Graham Corp's Q4 profit surges, sales rise 88%

|Includes:Graham Corporation (GHM)

Graham Corporation (AMEX:GHM) said Friday that fourth quarter profit more than quadrupled, boosting the company’s shares as sales climbed 88% during the period due to strong organic growth and acquisitions.

Shares in the company were up 10.62%, trading at $23.44 as of Friday 10 a.m. EST.

In the first three months ending March 31, the Batavia, New York-based vacum and heat transfer equipment manufacturer reported net income of $2.7 million, or 27 cents per diluted share, way up from $0.6 million, or six cents per diluted share, in the prior-year period.

The company more than beat analyst forecasts of 21 cents per share.

Net sales jumped 88% to $25.9 million, compared with $13.8 million in the year ago period, driven by organic growth of 51%.

The company said the December acquisition of Energy Steel & Supply Company, a specialty machining company targeted for the nuclear power industry, also contributed $5.1 million to fourth quarter sales.

Orders during the fourth quarter were $26.8 million, up 47% over orders in the prior year period. Approximately 20% of the total order value in the latest quarter was won by Energy Steel, benefiting the company's nuclear power market segment, said Graham.

According to the company, strong activity in the alternative energy markets allowed Graham to secure orders for geothermal and biomass power-generating facilities in Asia and the U.S.

The company said that sales to the refining industry also accounted for more of total revenue at 38%, reflecting certain large Middle Eastern projects advancing, as well as increased maintenance activity in the US market.

Higher sales and an improving economy drove the improvement of operating margins to 15.4%, compared with 8.6% a year before.

For the next few years, Graham said it expects an increase in orders to come from international customers in its traditional oil refinery and petrochemical markets, while the addition of Energy Steel is expected to continue to improve U.S. order rates from the nuclear power generation market. At quarter-end, the company had a backlog of $91.1 million.

"The first half of fiscal 2011 was the tail end of the trough of the recession for us. The second half of the year clearly demonstrated the early signs of a strengthening market," said president and CEO, James R. Lines.

"Our fourth-quarter results were a strong indication of this early recovery.”

Looking ahead, the company predicts sales for fiscal 2012 to be in the range of $95 and $105 million, an improvement of about 30% to 40% from fiscal 2011. It expects gross margin to be in the range of 29% to 32% for the year.

"While we expect strong growth in fiscal 2012, the health of our markets and the strength and sustainability of the economic recovery can impact our results," added Lines.

Stocks: GHM