Winchester’s profits sunk in the fourth quarter and year due to lower revenues and rising commodity and other material costs.
In the quarter ended December 31, revenues fell 12.0 percent to $165.4 million primarily due to lower shipments to commercial customers. Segment earnings for Winchester fell 61.3 percent to $4.3 million
“The year-over-year decrease is primarily attributed to lower shipments to commercial customers, higher commodity and other material cost of $2 million and a less favorable product mix and lower pricing. These were partially offset by lower operating costs,” said John Fischer, chairman, president and CEO of Olin Corp., Winchester’s parent, on a conference call with analysts.
For the year, Winchester’s sales slid 3.7 percent to $656.3 million. Income before taxes were shaved nearly in half to $38.4 million from $72.4 million a year ago.
For full year 2018, commercial sales declined approximately 10% compared to full year 2017, a trend that is expected to continue into early 2019. For the full year 2018, commodity and other material costs increased approximately $20 million as compared to the full year 2017.
“Looking ahead, we expect military and other government sales to be consistent with 2018 levels while commercial demand is anticipated to decline further in the first quarter as elevated consumer inventories continue to negatively impact the commercial market,” said Fischer. “While we believe that ammunition usage at the ultimate consumer level has remained steady, there is still an excess of personal inventory levels.”
He noted that the large majority of Winchester’s 2019 expected military and other government sales is already under contract.
Fischer noted that the fourth quarter is typically the weakest ammunition demand quarter, and as a result, normal sequential improvement is expected in first quarter 2019 results year over year. For full year 2019, Winchester results are expected to be similar to 2018 levels.
Image courtesy Winchester