Graham CEO: Strong bookings and backlog power bright future

Will Atkinson | May 30, 2008 1:51pm EDT | Comment

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Graham Corp. (AMEX:GHM) CEO James Lines said strong bookings and a robust order backlog prompted the maker of vacuum and heat transfer equipment to increase its 2009 revenue outlook.

“Our positive outlook for the next few years has been constant due to the continued anticipated strength from refining and petrochemical markets,” Lines said.

In an announcement released before Friday’s opening, Graham said it expects fiscal 2009 year-over-year revenue growth of between 15% and 20%, which would translate to a range of $99.4 million to $103.7 million. The Batavia, N.Y.-based firm’s previous revenue growth estimate was a range of 10% to 15%. During fiscal 2008, Graham’s revenue totaled $86.4 million. Wall Street expects $84.8 million in fiscal 2009.

The chief executive said an important indicator of growth in the primary markets Graham serves is the growth in the order backlogs of key engineering procurement and construction contracting companies.

“There has been a very good correlation for the backlog of the [engineering procurement contractors] and our bookings and backlog,” Lines said. “Our activity with these contractors continues to be high and they too are forecasting growth during the next couple years.”

Graham is the amount of price quotes requested also correlates well to bookings, revenue and backlog, Lines said.

“The level of our quotation activity continues to increase and from that, we expect there to be growth from current-year bookings and revenue growth for fiscal 2010,” Lines said. “The value of our trailing 12-month quotation activity is up 30% from 12 months ago. I consider this to be the best barometer for assessing the likelihood of near-term growth.”

Graham is working at identifying new business opportunities throughout the world, Lines said. The company has identified 17 new refineries scheduled to be built in China, the chief executive said. There is also refinery work in Vietnam, Malaysia, Indonesia and Thailand.

“As you can imagine, I remain quite optimistic about the coming couple years,” Lines said. “We are continuing to invest in our operations to expand revenue and improve profitability. Our ongoing investments are showing up in our performance.”

Lines said the firm plans to make greater use of subcontracting in fiscal 2009 with an emphasis in Asia. Graham aims to subcontract between 10% and 15% of production in 2009.

“Looking beyond fiscal 2009, I continue to believe the future for our company is bright,” Lines said. “Beyond the longer-term refining and petrochemical market story, there are opportunities in power generating markets in the United States, which are becoming active. We expect it to be robust globally as well. Other markets that require our products are alternative energy and fertilizer markets.”

Graham also reported early Friday that its fourth-quarter profit jumped 24% to $4.2 million, or $0.83 per share, versus $3.4 million, or $0.69 per share, a year earlier. Quarterly revenue grew 10% to $22.8 million from $20.8 million a year ago.

In afternoon trading, GHM shares are up 8.63% to $67.08.