SIFCO Industries Q2 Loss Narrower, Stock Declines Post-Earnings

Core Viewpoint - SIFCO Industries, Inc. experienced a decline in share price following its earnings report for Q2 and the first half of fiscal 2025, despite a recent surge in stock performance over the past month, indicating mixed investor sentiment [1] Revenue and Earnings Overview - For Q2 ended March 31, 2025, SIFCO reported net sales of $19 million, a 7.3% decrease from $20.5 million in the same quarter last year, primarily due to raw material sourcing issues [2] - The net loss from continuing operations narrowed to $1.3 million, or $(0.22) per diluted share, compared to a loss of $2.2 million, or $(0.38) per share, in the prior year [2] - Total net loss for the quarter was $1.4 million, an improvement from the $1.6 million loss a year ago [2] Half-Year Performance - For the first half of fiscal 2025, net sales increased by 10.9% to $39.9 million from $35.9 million in the previous year [3] - The net loss from continuing operations decreased to $3.7 million, or $(0.62) per diluted share, down from $6.3 million, or $(1.05) per share, last year [3] - Total net loss for the first six months was $3.7 million compared to $5 million a year earlier [3] Profitability and Operational Metrics - Gross profit for Q2 rose 5.1% to $1.6 million from $1.5 million despite declining revenues [4] - SG&A expenses decreased by 16.6% to $2.4 million from $2.8 million, contributing to reduced operating losses [4] - The operating loss for the quarter was $0.8 million, an improvement from $1.3 million a year ago [4] EBITDA Trends - EBITDA for Q2 improved to $0.4 million from a loss of $0.2 million in the prior year [6] - Adjusted EBITDA swung to a loss of $0.2 million from a positive $0.2 million in the previous year, primarily due to an unfavorable LIFO inventory adjustment of $(0.6) million [6] - For the first half, EBITDA was $(0.4) million compared to $(2.7) million last year, while adjusted EBITDA improved to a loss of $(0.4) million from $(1.7) million previously [7] Management Commentary - CEO George Scherff highlighted operational improvements and emphasized the focus on throughput and margin-enhancing initiatives despite sales challenges [8] - The order backlog reached $129.2 million, indicating solid demand from aerospace and energy markets [8] Factors Behind Financial Results - The revenue decline was attributed to raw material shortages, but cost controls, particularly lower SG&A expenses and interest costs, helped mitigate losses [9] - Interest expenses dropped 47.7% to $0.4 million from $0.8 million in the prior-year quarter [9] Balance Sheet and Asset Management - Current assets fell to $38.1 million as of March 31, 2025, from $54.3 million as of September 30, 2024, largely due to the removal of discontinued operations [12] - The revolving credit facility balance decreased to $8.9 million from $20.1 million, indicating significant deleveraging [12] - Shareholders' equity increased to $32.4 million from $30.4 million, mainly due to positive adjustments in accumulated other comprehensive income [12] Guidance and Future Outlook - SIFCO did not provide specific financial guidance but noted a growing backlog as a positive indicator of sustained demand [13] - Management did not quantify expectations or provide adjusted earnings targets [13] Other Developments - The financials reflected the impact of completed divestitures, with discontinued operations having minimal impact this year compared to the previous fiscal year [14] - No new acquisitions or divestitures were announced during the quarter [14]