Zoltek Stumbles As Prospects Remain (ZOLT)

Zoltek Companies, Inc. (NASDAQ: ZOLT) posted some disappointing numbers last night and it is being reflected in the shares this morning.  So much for wind power staying up there as the next major wave, although this has been known for more than one quarter.  Zoltek’s Q2-2009 revenues were $36.0 million, down 27% from $49.6 million in Q-2. Operating income was down 75% to $2.1 million and net income was down sharply to $0.5 million from $4.3 million.

The basic income was posted as only $0.01 EPS, down from $0.13 last year.  These numbers were well under Thomson Reuters estimates of $0.09 EPS and $37.3 million in revenues. The stock may sound cheap in price, but the new earnings miss is actually acting to make this one look pricey.  With such a shortfall, you can expect the few analysts that cover it to trim down their targets for 2009 and possibly 2010.  Still, the long-term prospects for all of these businesses remain attractive if they are smoothed out.

Management said it was disappointed with Zoltek’s performance through the first six months of 2009 as the global economic downturn has affected the industry and interrupted the momentum of revenue growth.

• The company’s CEO, Chairman & Founder, Zsolt Rumy, also noted, “…we firmly believe this situation is no more than temporary – and by no means represents a permanent change in our business prospect or our outlook…. As bad as this year has been so far, there is a strong consensus within the industry that the fundamentals for resumption of historical growth trends as soon as next year are as strong as ever….  In the case of wind power, which we believe offers the most imminent potential for additional growth, the uncertainty of the financial support by the U.S. government has negatively affected the industry. New wind farm activity has slowed as developers, wind turbine equipment manufacturers and their financing sources are waiting to see what government benefits can be expected…”

The company also noted that costs associated with the start-up of Zoltek’s recently acquired Mexican facility were also a factor in causing the company’s gross profit decline. It further noted that governments and public utilities around the world are united in wanting to make wind energy a much bigger part of the overall energy mix as the only renewable energy that economically competes with fossil fuels in generating electricity.

Zoltek’s carbon fibers are used as the primary building material in commercial products for auto, oil, pipes, wind turbines, and more sectors.

The stock is down over 13% at $6.95 pre-market after closing down more than 6% yesterday.  Its 52-week trading range is $4.29 to $33.63; at the peak almost two years ago this was a $50 and briefly a $60 stock.

JON C. OGG