Winchester’s income before taxes declined 37.9 percent in the second quarter to $11.8 million compared to $19.0 million in the second quarter 2017, according to the gun maker’s parent, Olin Corp.

Adjusted EBITDA fell 28.9 percent to $16.7 million.

The decrease was primarily due to higher commodity and other material costs and a less favorable product mix, partially offset by lower operating costs. Year-over-year commodity and other material costs increased by $6.5 million.

Olin Corp’s officials had warned during the company’s first-quarter conference call that the company did not expect Winchester’s 2018 results to be better than 2017.

Winchester second quarter 2018 results included depreciation and amortization expense of $4.9 million compared to $4.5 million in the second quarter 2017.

On a conference call with analysts, John Fischer, chairman, president and CEO, said that for the full year, Olin expects commodity and other material costs at the Winchester segment to increase approximately $20 million from 2017 levels.

Winchester’s sales in the second quarter dipped 2.1 percent to $165.9 million. During the second quarter, lower commercial ammunition sales were partially offset by higher sales to the military and law enforcement agencies.

For the six months, the Winchester segment’s income before taxes reached $23.8 million, down 46.0 percent compared to the same period a year ago. Revenues inched up 1.4 percent to $336.8 million.

Said Fischer, “We’ve seen commercial ammunition demand decline by approximately 8 percent during the first half of 2018, which followed a 17 percent decline in commercial demand in 2017. However, we do expect commercial demand to improve sequentially in the third quarter of 2018 from the second quarter level due to normal seasonal demand.

“As a result, we expect Winchester’s results to improve in the third quarter compared to the second quarter due to higher commercial sales. Throughout the first half of 2018, our efforts to recover higher commodity metal prices through higher selling prices have met with limited success.”

In the Q&A session, Olin Corp’s officials were asked about Winchester’s long-term profitability potential given the pricing pressures and whether management would be able to still reach the company’s goal of $125 million in annual EBITDA management set relocating when the unit was relocating from Illinois to Mississippi.

Fischer answered, “If you look back historically, commercial volumes tend to decline somewhere around six consecutive quarters off of a peak. The second quarter of this year would have been the sixth quarter. So, we have expectations that commercial volumes will stabilize here. The higher commodity cost, we’ve been able to offset some of that with better military volumes, which for us should continue for several years and we’ve got to improve our operating costs. I would say, right now, as we look at the world, I think the $125 million was probably too high. But I definitely think that once we get to a more stable market environment, we will do better than what we did in 2017.”

Photo courtesy Winchester