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Chart Industries releases 2Q17 results

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Hydrocarbon Engineering,

Chart Industries Inc. has reported results for 2Q17, including the following highlights:

  • Reported EPS of US$0.09 and adjusted EPS of US$0.21 reflecting improving run-rate cost structure.
  • Sequential order growth of 20% and sales growth of 17% over 1Q17.
  • Selling, general and administrative costs reduced US$2.2 million from 1Q17, resulting from previously announced restructuring actions.
  • Signed definitive agreement to acquire Hudson Products Corp., which adds end-market diversification and expanded aftermarket revenue to the Energy & Chemicals segment.

Net income for 2Q17 was US$2.8 million or US$0.09 per diluted share. 2Q17 earnings would have been US$0.21 per diluted share excluding US$5.0 million of restructuring and US$1.0 million of acquisition-related costs. This compares with a net loss of (US$2.9) million, or (US$0.09) per diluted share, for 1Q17, or US$0.01 per diluted share on a comparable adjusted basis. 2Q16 net income was US$21.2 million, or US$0.68 per diluted share. 2Q16 included several short lead-time replacement equipment sales and contract expiration fees related to projects in the Energy & Chemicals segment.

Sales for 2Q17 increased to US$238.2 million from US$204.1 million in the first quarter of the year, with sequential increases in all three segments. Order activity continues to increase year to date across the three segments, with US$252.6 million in orders received in the quarter, increasing backlog to US$367.2 million from US$348.6 million at 1Q17.

E&C orders increased 70% over the first quarter of 2017, driven by natural gas demand in both petrochemical and LNG export projects. Specifically, order and quotation activity related to equipment for cryogenic gas plant development has generated eleven related orders year-to-date compared to zero in 2016. Natural gas demand is driving new gas transmission pipelines in West Texas and the Northeast Marcellus shale creating additional opportunity for air-cooled heat exchangers. Distribution & Storage orders increased 12% over the first quarter of 2017, driven by strength in Asia LNG applications for on-site power generation and LNG distribution, as well as continued strength in the US packaged gas for use in the industrial gas, medical supply, LNG vehicle tank and beverage CO2 applications.

Gross profit for 2Q17 was US$63.2 million, or 26.5% of sales, which was unfavorably impacted by US$2 million of restructuring costs. Gross profit for the first quarter of 2017 was US$55.7 million, or 27.3% of sales, inclusive of US$2.5 million of restructuring costs. The sequential decline in margin percent was driven by the recognition of a low margin order in E&C, partially offset by the increase in BioMedical gross margins from 32.7% to 37.2% resulting from the first full quarter of benefits from the Buffalo respiratory facility consolidation. The decline from 2Q16 gross margin of US$87.0 million was driven by the significant short lead-time replacement equipment orders and contract expiration fees in E&C in 2Q16.

Selling, general and administrative expenses for 2Q17 decreased by US$2.2 million from the previous quarter of 2017.

“In addition to our strength in orders and bookings across the segments, I am pleased with the progress of our restructuring activities, and the use of our strong balance sheet for both productivity investment and strategic M&A,” stated Bill Johnson, Chart’s Chief Executive Officer and President.

“We are excited about the addition of Hudson to our E&C segment, and expect it to be EPS accretive in 2018. Not only does Hudson expand our service and repair offering, the exposure to a broader set of end-markets including petrochemical and power generation offsets some of our typical LNG cyclicality. Through the accretive margin profile and the expected $7 million of cost synergies, we expect the total E&C margin profile to continue to improve with the addition of Hudson. The approximately 40% aftermarket composition of Hudson revenues complements our growing Lifecycle business, which was expanded earlier this year with the acquisition of Hetsco.”

The Hudson acquisition is expected to close in 3Q17.

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