MFRI reports lower gross proft, but higher sales in 3Q

Marketwire

NILES — MFRI Inc. said its third quarter gross profit declined nine percent due to lower demand overseas, however sales increased rose 21 percent during the same period.

The gross profit of $12.4 million fell from $13.6 million during the same period last year. While the supplier of piping systems for the oil and gs industries said gross profit increased significantly in industrial process cooling and filtration products. the decrease was considerably due to lower volume at the United Arab Emirates facility and no large project-related activity at the India facility, partially offset by an increase in domestic oil and gas products.

Gross margin decreased to 17 percent of net sales in the current quarter from 23 percent of net sales in the prior-year quarter, which the company said was due to extreme competitive market conditions.

Despite that, MFRI saw net sales rise 21 percent to $71.3 million from $58.8 million in the prior-year quarter, as it said all company sectors saw increases.

“Although margins remain competitively constrained, we believe that maintaining our diversified product mix and geographic reach during the difficult economic climate of recent years has benefited our company,” said MFRI CEO David Unger. “In 2011, new orders in North America, Europe and the Middle East increased over prior periods. We will continue to make strategic investments to facilitate growth for the long term.”

Company expenses for the quarter fell to $10.2 million from $10.5 million from last year. The reduction was mainly due to lower profit based management incentive and deferred compensation expenses, partially offset by additional sales commission expense associated with higher volumes, the company said.

“The third quarter again delivered year-over-year improvement in our filtration and industrial process cooling segments,“ Brad Mautner, president and COO, said. “Our piping systems business saw an absence of large project revenue from international activities and the continued prolonged downturn in the Dubai district cooling market. These factors, coupled with ramp up costs for the Saudi and India markets, drive a very weak 2011.

“2011 includes significant investment in the piping segment to develop our India and Saudi Arabia initiatives,” he added. “With the recent completion of the domestic oil and gas projects, the 2011 fourth quarter should be similar to the 2010 fourth quarter. Although the large noncash tax impact described above significantly lowered reported earnings, we believe the right programs are in place to resume profitable growth in 2012.”