Canam shares plunge after it missed expectations with slight Q3 earnings increase

MONTREAL – Structural steel fabricator Canam Group insists it didn’t have a bad third quarter even though missed expectations on earnings sent its share price plunging on Wednesday.

“Trust me, we’ve seen bad quarters and this isn’t one of them,” CEO Marc Dutil told analysts during a conference call. “It’s just not good enough to be a good quarter and expect us to keep striving for better.”

The Quebec-based company earned $10.4 million or 25 cents per share in the quarter ended Sept. 27. That compared to $10 million or 24 cents per share in the prior year.

Revenues increased 15.5 per cent to $329 million.

The company had been expected to earn 30 cents per share on $330 million of revenues, according to analysts polled by Thomson Reuters.

Higher revenues came mainly from joist and steel deck activities as well as light and heavy structural steel construction activities. However, profits were in line with the 2013 quarter because of compressed margins for joist and steel deck activities in Canada and its bridge and light structural steel business.

Sara O’Brien of RBC Capital Markets called the results “slightly negative” given the flattish earnings despite a strong top line.

On the Toronto Stock Exchange, shares of Canam (TSX:CAM) closed down nearly 14 per cent, losing $1.57 to $9.67 in Wednesday trading.

Canam said its outlook remains strong as its order backlog reached a record $909 million, up six per cent from the second quarter and 43 per cent from a year ago.

The structural steel supplier said its prospects have improved since a weak second quarter because of a rebound in non-residential construction in the United States, which accounts for about 70 per cent of its order backlog.

Analysts had expected a big improvement in results in the second half as large contracts booked earlier in the year are converted to revenue and improve margins.

Leon Aghazarian of National Bank Financial estimated that about 70 per cent of Canam’s 2014 pre-tax operating earnings (EBITDA) will come in the third and fourth quarters.

He said signs point to improving building construction in the U.S., which should help Canam.

As a major supplier of steel components for highway, railway and bridges, Canam stands to benefit from the growing number of U.S. transportation projects, including more than $90 million on new contracts booked in August for two major bridge replacements in New York.

Canam Group is the largest fabricator of steel components in North America. It operates 21 plants across North America and employs 3,900 people in Canada, the United States, Romania, India and Hong Kong.

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