UPDATE 3-A.M. Castle sees Q2 loss, shares drop

Tue Apr 27, 2010 12:50pm EDT

* Sees real aerospace business recovery only in 2011

* Says pricing in aerospace business remains soft

* Sees positive H2 2010

* Shares fall 19 pct (Adds analyst comments, details from conference call, share movement)

By Krishna N. Das and Antonita Madonna Devotta

BANGALORE, April 27 (Reuters) - A.M. Castle & Co (CAS.N) reported a wider-than-expected first-quarter loss, and said it expects to remain in the red for the second quarter as well, sending its shares down as much as 19 percent.

The specialty metals and plastics distribution company added that it hopes of a profitable second half, if economic recovery continues.

Shares of the Franklin Park, Illinois-based company fell 19 percent to a low of $15.33, and were among the top percentage losers Tuesday on the New York Stock Exchange.

On a conference call with analysts, A.M. Castle, which counts Lockheed Martin Corp (LMT.N) among its customers, said aerospace business will continue to be a drag.

"Real recovery in aerospace is expected only in 2011," the company said, adding that capacity continued to exceed demand and pricing remained soft.

"They have more exposure to aerospace and businesses that tend to be bit slower to recover versus lot of others," Hudson Securities analyst Nat Kellogg said.

"Their expectation for the second quarter continues to be challenging," he added.

Kellogg currently expects the company to post a small profit or breakeven in the second quarter.

Analysts on average expect A.M. Castle to post a loss of 2 cents a share in the second quarter, followed by profit of 12 cents each in the third and fourth quarter, according to Thomson Reuters I/B/E/S.

The company, however, said it sees gross profit margins improving throughout the balance of the year.

Lower sales and margins of 24.2 percent, which A.M. Castle said was below its own expectations, weighed on the company in the first quarter.

"Reported gross profit margins were lower than we had expected primarily due to the competitive pricing environment," it said.

For the first quarter, the company reported a loss of 20 cents a share, wider than analysts' estimates of a loss of 12 cents a share.

Net consolidated sales fell about 12 percent to $223.0 million, marginally above estimates of $221.1 million. (Reporting by Krishna N. Das and Antonita Madonna Devotta in Bangalore; Editing by Jarshad Kakkrakandy, Maju Samuel)

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