The industry will do well to see a rebound in trailer sales by the first quarter of 2002,
and may have to wait until the second quarter, Lufkin Industries President and CEO Douglas Smith told financial analysts at a recent teleconference to discuss the company’s second quarter results.
“There’s a large overhang of used trailer inventory in place,” he said. Moreover, buyers are being buffeted by higher fuel and insurance prices plus a slowdown in freight. “Trucking companies are under a lot of pressure right now, and until they begin to see light at the end of the cash flow tunnel, I expect we won’t hear very much from them.”
In response to a question about trailer manufacturing capacity, Smith said the industry will do well to reach 50% capacity utilization during the next six months. Traditional demand for trailers is around 180,000 to 200,000 units per year, he said. In recent years there has been enough manufacturing capacity to build as many as 300,000 trailers per year. With consolidation and bankruptcies, that has dropped to an estimated 125,000 per year. While Smith admits they’re conservative, he says they don’t expect demand to go much over 150,000 in the next 12 months.
Lufkin’s own second quarter trailer sales were up 40% from first quarter but Smith noted that their backlog was down more than 50%, from $11.6 million at the end of March to $6.9 million at the end of June.
Nevertheless, the company had reason to celebrate. Brisk sales of oil field products boosted second quarter net income to $5.3 million, up 154% from the $2.1 million profit reported for second quarter 2000. Sales for the quarter were $73.2 million, compared to $67.8 million in second quarter 2000. Strong demand for power transmission products also helped offset weakness in the trailer and foundry product markets.
Net income for the first six months of 2001 was $8.4 million, compared with $2.3 million for the same period of 2000. Sales for the first half were $136.6 million, compared to $124.6 million for the first half of 2000.