Olin Corp. reported sales of Winchester fell 11.5 percent in the first quarter to $162.6 million but a pickup is expected for the second half of the year due to a military contract.
The revenue decline in the quarter primarily reflects lower shipments to commercial customers reflecting lower demand for pistol, rifle and shotshell ammunition. On a conference call with analysts, John Fischer, chairman, president and CEO, said, “Customers reduced their inventory that had been built ahead of the November 2016 Presidential election, in anticipation of a different election outcome. We expect this impact to continue through the second quarter.”
He said Winchester’s commercial sales were down in the range of 15 to 20 percent in the period.
Operating earnings at Winchester were $25.1 million compared to $28.7 million in the first quarter of 2016. The impact of lower commercial volumes was partially offset by lower operating costs in the latest quarter. Winchester will benefit from the 2016 completion of the Oxford relocation project, which will provide an incremental cost savings of $5 million from 2016 levels.
The latest period included depreciation and amortization expense of $4.9 million compared to $4.6 million in first quarter 2016.
Looking ahead, Fischer said Winchester will benefit from increased military sales from its Second Source contract with the U.S. Army during the second half of the year.
“However,” Fischer added, “Because of the lower commercial ammunition demand in the first half of 2017 and higher commodity metal prices, we are forecasting that Winchester full year 2017 results will be below 2016 levels. That said, we continue to believe that the Winchester business can earn a minimum of $125 million of annual adjusted EBITDA in any environment.”
On 2016, Winchester generated income before taxes of $120.9 million on sales of $729.3 million.
Photo courtesy Winchester
