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Sypris Solutions Inc. has reported financial results for its third quarter ended September 30, 2018. While net revenue for the third quarter was relatively flat compared with the year-earlier quarter, the company's overall gross margin improved versus the third quarter of 2017 and the net loss for the period narrowed significantly. These improvements continue to reflect the successful implementation of strategic initiatives to better align the company's revenue and cost structure and diversify the company’s book of business, both in terms of customers and markets.
“We were pleased with the year-over-year revenue growth and margin expansion at Sypris Technologies,” commented Jeffrey T. Gill, president and chief executive officer. “Shipment volumes remained strong in the quarter to support demand coming from the automotive and commercial vehicle markets, which experienced a 17% increase in shipments on a year-over-year basis. And with Class 8 order rates at record levels, we expect demand will remain high through 2019.
“We also experienced substantial strength in demand for our energy-related products, where orders increased 50% on a year-over-year basis. The strength in customer demand, however, did not translate into increased shipments during the quarter, which actually declined sequentially during the period as we confronted a number of production, supply and other issues that resulted in shipments being delayed into the fourth quarter.”
“We were challenged by continued customer delays on certain programs and material availability at Sypris Electronics, as well as the timing of the ramp-up on a large program that began late in the third quarter. Together, these challenges resulted in lower shipment levels than were otherwise planned. As the timely receipt of electronic components improves, customer product designs are tested and finalized, and with a new program now ramping up, we expect to see higher levels of shipments going forward, supported by our backlog.”
Third Quarter Results
For the nine months ended September 30, 2018, the Company reported revenue of $64.0 million compared with $60.8 million for the first nine months of 2017. The Company reported a net loss for the current nine-month period of $3.3 million, or $0.16 per share, compared with a net loss of $9.6 million, or $0.47 per share, for the prior-year period. Results for the nine months ended September 30, 2018, included an insurance recovery gain of $2.3 million, which was partially offset by a net loss of $0.2 million on the sale of excess equipment and costs of $1.1 million related to preparing the Broadway facility for sale or other use. Results for the nine months ended October 1, 2017, included net gains of $2.7 million related to the sale of excess equipment, which was partially offset by severance, relocation and other costs of $2.2 million.
Revenue for Sypris Technologies was $14.9 million in the third quarter compared with $13.5 million for the prior-year period, primarily reflecting an increase in demand from customers in the automotive and commercial vehicle markets. Gross profit for the quarter was $1.3 million, or 8.9% of revenue, compared with a loss of $0.6 million, or 4.2% of revenue, for the same period in 2017. Gross profit benefitted from the increase in volume as well as cost improvements realized following the transfer of production from the company's Broadway Plant, which was completed as of the end of 2017.
Revenue for Sypris Electronics was $6.2 million in the third quarter of 2018 compared with $7.8 million for the prior-year period. Revenue for the quarter was impacted by delays on certain programs, as the customer designs are tested and finalized, and shortages of certain electronic components in the electronics manufacturing industry. Gross profit for the quarter was a loss of $0.1 million compared with profit of $1.3 million for the prior-year period, primarily reflecting the lower volumes and changes in revenue mix.
Commenting on the future, Gill said, "Alongside current volume growth, we are poised to capitalize on additional opportunities across our markets for healthy, revenue expansion as we close 2018 and head into 2019. New contract awards and market expansion are expected to occur in each of our targeted markets for energy, automotive, commercial vehicle, and aerospace and defense products, as well as new electronics programs."