Replies to post #4435 on Alloy Steel Inc. (fka AYSI)

[b9molecule]

ambulance - it seems deliberately ambiguous to me, but I read it as the new mills will be bigger, able to produce more product than the current Super Arcoplate mill (meaning the 2nd one). I am still wondering where these two new mills are to be built...near home or near the customer(s)?

[b9molecule]

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[b9molecule]

on revenue... PR said that they had "product releases" of over $5 million in the last seven weeks, which pretty much covers the quarter we are in up to now, and all of that was part of the new BHP Billiton supply contract. The original mill is also running at full capacity...last year they were able to generate $3.5 million in Q3 2008, before the bottom fell out of the market. I think we can add a guesstimate of 3.5 million to the 5+ million, and then add - ? - for the four weeks remaining in the quarter. It is gonna be good, my friend. OTOH, there could very well still be lumpiness in the results going forward, especially if BHP only calls for chunks of product when they need it...and the longer the product lasts, the more time it will take to replace it. OTOOH (!), I imagine the next couple of years orders will be miners swapping out the old wear plate and beginning use of Super Arcoplate. Orders should start to pile up. There will be a tapering off at some point, but Alloy Steel has such a small slice of the market right now that ramp up could be substantial. I am very bullish on this scenario. JMVHO

[cleverrox]

I think they can do about $0.10 a quarter with two mills going full steam. If the gross margin on the high end arcoplate is better then earnings will be better. I would say $0.10 is probably a bit conservative. I have to dig up some old spreadsheets to run new estimates. I have no idea what the capacity of the new mill is. I'm guessing $4M - $6M.

[littlefish]

I think with both mills running at capacity for a Q they could generate $7-$8 mill in a Q ballpark (guessing).
Keep in mind, there are currency differences to remember in this calculation and also Super Arcoplate carries higher margins and sales price IMO. They have some holiday time too in the Oct-Dec Q.
I'm not sure if the mills run Super at the same rate as traditional Arcoplate or not. That too may make a difference.

As for the 2 eventual new mills, I am not reading it as meaning they will be substantially more productive than current mills but rather that they will likely double (or maybe a bit more than double with some probable modest improvements) current capacity and that is substantial overall obviously. This seemed clear to me but maybe I'm wrong.

Was disappointed to learn one investor I was really hoping would hang on got out at a bad time and got hit real hard. It was an indirect result of some negative posts that were way off the mark. Probably a few people out there really kicking themselves.

It was too bad we got a wave of uninformed posts talking up BK and all with this company just a few months back when those posters knew/know next to nothing about the company and Arcoplate.
As I've said before, IMO the main thing that might potentially risk BK for these guys is if the product becomes obsolete or we have some catastrophic economic environment for an extended amount of time.

But as it stands, the company has the best product in their niche and this kind of product (wear plate) has been around for decades without some inventing-the-wheel breakthru to something other than wear plate. So my bet is that chance for obsolescence
is quite low. Plus they seem to be doing quite well even in these rather turbulent economic times.

Good luck.

[littlefish]

Margins should go higher- Something I have not seen posted in bringing up with margins is that IMO they should improve simply because overhead will be less from fewer people per rev dollar.

The 2nd mill is paid for. The labor work force doesn't have to double in size (and cost) to double production bringing online 2nd mill.
Much of the laborers are polishing plate, packaging it for shipping, etc. So while they likely would need to add some workers I doubt it would be close to double and of course they don't double the SG & Admin costs IMO.

That would improve margins plus Super should carry bigger margins for being the more superior product.
So as revs climb so should margins IMO.

Therefore I think it is oversimplifying as some have done to just double their best EPS Q #s to come up with an upper end range of what they can do with both mills. It should be higher than that IMO. Not sure what it might be but the annual will show us how many people they had to add and give us some hints.