TAMCO's Q3 performance sinks on dismal US rebar market

Ameron International Corp., 50 percent owner of Southern California minimill rebar producer TAMCO, reported a drop in third quarter profits Thursday, which the firm says was largely due to the significant decline in demand for steel rebar in the western US.

Net income of Pasadena, California-based Ameron fell to $5.9 million compared to $15.0 million earned in the third quarter of 2008. Sales were down 23 percent from last year.

Commenting on the results, Chairman James Marlen said, "The earnings decline in the quarter can be attributed equally to the decline in core businesses and to the challenging market conditions experienced by TAMCO. While TAMCO's quarterly net loss was lower than earlier in 2009, the year-over-year decline was significant."

Tamco's sales dropped 78 percent y-o-y due to the drop in rebar demand, which caused a decline in both selling prices and volumes. Ameron cited the significant decline in infrastructure spending in the western US as the main reason for the decline in TAMCO's business. Shipments from TAMCO during the third quarter totaled 53,000 net tons, which represents approximately 40 percent of production capacity. TAMCO's Q3 2009 net loss totaled $0.7 million, compared with net income of $9.3 million in the third quarter of 2008.

Ameron said in a release that demand for steel rebar in TAMCO’s key markets in the western US is not expected to recover in the short term, adding that the business has not experienced any increase in demand associated with the federal economic stimulus package or had any indications of higher state and local governmental spending on infrastructure projects. In addition, commercial construction remains at the lowest level in years. “Should the stimulus package start becoming a reality, TAMCO would be expected to benefit,” concluded Ameron.

The company also produces water transmission lines and fabricated steel products such as wind towers, fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids and specialized materials and products used in infrastructure projects. Despite the weak short-term outlook for TAMCO, Ameron says it remains optimistic about the long-term performance of the company (Ameron) as a whole due to its involvement in key infrastructure investment sectors, including water, wastewater, wind energy, highways and bridges and oil exploration and production.