ARC Group Worldwide, Inc., Deland, Florida, USA, has released results for its fiscal third quarter 2019. The company reported continued sales growth, with an increase of approximately $3.8 million for the nine months ended March 31, 2019, compared to the same period for 2018. This was said to be driven primarily by increased sales in the Metal Injection Moulding (MIM) and plastic businesses, due to a combination of sales with higher order volumes for aerospace, medical, firearms and defence, and cost-reduction initiatives undertaken in the Precision Components Group.
Fiscal third quarter 2019 revenue was down slightly at $19.9 million, compared with $21 million in the same quarter 2018. This was said to be due to lower reduced orders in the defence market for the plastics division. The company also began divesting low margin and unprofitable programmes across the Precision Components Group, a process which it expects to continue into its fiscal fourth quarter 2019.
Gross deficit for the third quarter was $0.2 million, compared to a gross margin of $1.7 million in the third quarter 2018. This decrease in gross profit was said to be related to an initial increase in staffing early in fiscal year 2019. as well as the decline in plastics sales.
For the fiscal year to date, gross profit was reported at $4.4 million, compared to $2.6 million for the same period in 2018. This increase in gross profit was said to also be driven by the increase in sales, cost-reduction initiatives and continued diversification into the aerospace and medical industries, which have higher profit margins.
In the third quarter, ARC Group Worldwide finalised the sale of its Additive Manufacturing business, 3D Material Technologies (3DMT), to Aerojet Rocketdyne, Inc. Aerojet was said to have assumed all assets and liabilities of 3DMT, including future operating lease obligations. For the fiscal third quarter 2019, 3DMT had EBITDA loss of $2.8 million and a loss of $3.9 million for the year to date 2019.
Alan Quasha, ARC CEO, commented, “The results of the past quarter were quite disappointing and reflect, in addition to subpar performance in Colorado and Stamping, the implementation of our restructuring efforts which are still ongoing this quarter and beginning to show healthy signs of progress.”
“During the quarter, we concluded the sale of the 3DMT business and ceased other unprofitable business operations. Although our internal restructuring plan will take additional time to fully bear fruit, we believe that we are at a turning point and that management’s financial and strategic decisions will provide a pathway to profitability.”
ARC further stated that it has arranged for $7.5 million in new loans to the company that will permit it to extend the maturity dates on all of its credit facilities, while long-term solutions to address its balance sheet are arranged.
Concluding, Quasha stated, “While our performance in the 3rd quarter was disappointing, we have made management changes to rectify performance. In addition, we took four important measures to restructure the company, each of which is significant by itself. We exited our 3D business which was draining significant cash every quarter.”
“We put in a plan to reduce expenses by over $8 million, almost all of which will be completed by the end of this quarter. We put in place a more stable debt structure which extended the maturity date until the end of 2020 and allows us time, and with our restructuring moves, the opportunity to put much longer term debt in place. Finally, we weeded out our poor loss making clients and have added larger, much higher margin business. The net result it likely to be a relatively poor 4th quarter, but substantially improved performance for our next fiscal year beginning in July.”