GE stall, Asian slump nip Park Electrochemical

Engine trouble: The bottom line is not soaring at aerospace-supplier Park Electrochemical, which has suffered another off quarter.

A weakened Asian market contributed to year-over-year and quarterly drops in net sales and earnings for Park Electrochemical Corp. – though an international aerospace rebound may have the Melville manufacturer regaining altitude soon.

Reporting June 29 on the first quarter of its 2017 fiscal year, Park Electrochemical – a producer of printed circuit boards and composite materials for aerospace manufacturers – noted net sales of $31.49 million. That’s down from the $37.83 million reported for the first quarter of FY2016 and the $35.75 million reported in 4Q 2016, which ended Feb. 28.

Also down in the first quarter were the Melville company’s net earnings. For the quarter ended May 29, Park Electrochemical reported earnings of $2.95 million – significantly off the $4.78 million reported in 1Q 2016 and the $4.57 million reported in 4Q 2016.

Brian Shore: Aerospace segment gives Park wings.

Brian Shore: Aerospace segment gives Park wings.

The declining sales and net earnings knocked down Park Electrochemical’s diluted earnings per share, which stood at 23 cents for both 1Q and 4Q 2016 but dipped to 15 cents in 1Q 2017.

Speaking June 29 to investors, CEO Brian Shore referenced several causes for the quarterly and year-over-year declines, including an ongoing “inventory burn-off” at GE – projected to dent Park Electrochemical’s revenues throughout the 2016 and 2017 calendar years – and a faltering Asian market, led by decreased demand from Chinese customers.

The formula is simple: Electronics represents 76 percent (roughly $23.8 million) of Park Electrochemical’s first-quarter sales, and “for us, electronics is really an Asia story,” according to Shore.

“We’re very Asia-centric, very China-centric, in terms of electronics,” the CEO noted. “The China economy isn’t great. I’m sure I’m not giving you any newsflash there.”

Adding to Park Electrochemical’s Asian-market concerns: Original equipment manufacturers “are starting to dominate in Asia,” leaving less room for international vendors like Park, while Shore also noted “trade skirmishes that haven’t helped.”

Brighter days may lie ahead, however. Telecoms, Internet infrastructure and wireless technologies will continue to be strong verticals, Shore predicted, while electronic components for domestic military use will also add significantly to Park Electrochemical’s sales.

And the Melville manufacturer’s aerospace division, the CEO added, is really poised to take off. When it comes to Park Electrochemical’s aerospace fortunes, “it’s really a GE story,” according to Shore, who foresees a significant turnaround in GE’s aerospace-component demand “after the burn-down is over.”

“It will ramp really quickly, because two things are going to happen that will accelerate revenues,” Shore said. “One is the burn-down will be done. Second is that some of the big problems, particularly the A320, are going to start to really move up.”

The CEO was referencing hydraulics and software flaws discovered in the A320neo, the latest version of the Airbus A320, a family of short- to medium-range passenger jets produced by international conglomerate Airbus.

Once those problems are addressed, rising demand for Airbus products combined with Park Electrochemical’s other aerospace contracts – including work on GE’s Passport 20 program, with new jet engines scheduled to enter service this year – will give the Melville maker some much-needed thrust, according to Shore.

“So we get to 2018, that’s when things are going to start to move up very quickly,” the CEO said. “We’ll be at our maximum revenue level probably by about year 2020, maybe 2021 based on the forecast we have.”


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