A revived market for airplanes and a rebound in U.S. auto production has Foothill Ranch-based Kaiser Aluminum Corp. expecting a sales jump in two key business segments in the first half of this year.
The company—which makes various aluminum parts and components for autos, planes and other uses—projects a 20% first-half spike in sales for its custom aerospace segment, which had revenue of about $150 million in the year-ago period.
In Kaiser’s custom auto segment, a 10% first-half increase is projected, up from about $115 million in revenue in the first six months of 2010.
The custom segments make specifically designed parts and components. Together they accounted for about half of Kaiser’s $1.1 billion in annual sales last year.
The rest of the company’s revenue came from more basic products sold to large metal distributors and other manufacturers.
Analysts on average expect sales gains in the custom segments to help Kaiser post an adjusted profit of $21 million and revenue of about $604 million in the first six months of the year.
Those expectations come as auto industry analysts project a 7% increase in U.S. auto production to some 12.6 million cars in 2011. Kaiser stands to get a boost from automakers opting for more aluminum to replace steel as they aim for lighter, more fuel efficient vehicles.
Airlines Recovering
An ongoing recovery in the airline industry also helps. A number of airlines are adding 737s from Chicago-based Boeing Co. and A380 jumbo jets from Europe’s Airbus SAS to their fleets.
“We believe 2010 was the bottom of our aerospace plate shipments,” Kaiser Chief Executive Jack Hockema said in a recent conference call with analysts and investors. “Demand for our products is steadily improving.”
global market forecast by Airbus projected industrywide sales of 26,000 new jetliners and cargo aircraft in the next 30 years.
Production of the A380 is central to Kaiser’s growth plans, said Tim Hayes, an analyst at Davenport & Co. in Richmond, Va.
Each of the doubled-decked aircraft uses about 2.5 million pounds of aluminum. Airbus had 240 orders backlogged as of January.
“For Kaiser, the A380 is of particular importance,” Hayes said.
Kaiser’s products also are used on hundreds of Boeing 737s produced annually.
A couple of recent acquisitions by Kaiser are expected to help spur growth. The company last year bought Chandler, Ariz.-based Alexco LLC, a maker of plane parts, and Alabama’s Nichols Wire, a maker of wire products, nails and aluminum rods for the aerospace and auto industries.
A new $100 million plant to produce rods and bars in Kalamazoo, Mich., is expected to boost Kaiser’s automobile business and bring down costs companywide.
“These strategic investments will contribute to top line and bottom line growth starting in 2011 and continuing in future years,” Hockema said.
The Kalamazoo plant has run into cost overruns, according to Hayes.
“But it’s a very good facility and will help them lower their cost overall,” he said. （Business Journal Digital Network）
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