A worldwide, diversified manufacturer of complex metal components and products
Precision Castparts Corp. Expands Reach Into Power End Markets with Acquisition of Interest in Yangzhou Chengde Steel Tube Company, Ltd.
PORTLAND – January 15, 2010 – Precision Castparts Corp. (NYSE:PCP) has acquired a 49 percent equity interest in Yangzhou Chengde Steel Tube Co., Ltd. (Chengde).
Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas. The company operates from one facility with a manufacturing footprint of nearly 6 million square feet, in the Jiangsu Province of China. Chengde has built a leading position in the Chinese boiler pipe market and has begun to make inroads into export markets.
“Chengde’s founder Zhang Huaide has built a very impressive manufacturing operation, and we are excited to partner with him going forward,” said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. “The strategic fit of the two companies will provide a long runway for continued earnings growth in PCC’s power generation business.
“Over the past several years, Wyman-Gordon has been a major player in providing large-diameter, interconnect pipe for coal-fired power plants and has built a strong market presence,” Donegan said. “However, we lacked the manufacturing capacity for seamless boiler pipe, and we have been forced to walk away from this significant market. Through Chengde, PCC gains immediate access to the boiler pipe market in China, and we will use Wyman-Gordon’s distribution capabilities to pull their products around the world. Working together, Wyman-Gordon and Chengde will be a tough team to beat as we continue to attack power generation opportunities worldwide, with a product offering of boiler pipe, interconnect pipe, and fittings. Down the road, we can also use Chengde’s processing capabilities to build Special Metals’ energy pipe business.”
The cash acquisition is expected to be immediately accretive to earnings. Under the equity method of accounting, PCC will report its share of Chengde’s income on an Equity in Earnings of Unconsolidated Affiliates line in its income statement. Other financial terms were not disclosed.
Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power generation, and general industrial markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, and forged components used in jet aircraft engines and industrial gas turbines. The Company is also a leading producer of highly engineered, critical fasteners for aerospace, and other general industrial markets and supplies metal alloys and other materials to the casting and forging industries.
Information included within this press release describing projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, and general industrial cycles; the relative success of the Company’s entry into new markets; competitive pricing; the financial viability of the Company’s significant customers; the impact on the Company of customer labor disputes; demand, timing and market acceptance of new commercial and military programs; the availability and cost of energy, materials, supplies, and insurance; and the cost of pension benefits and post-retirement medical benefits; equipment failures; relations with the Company’s employees; the Company’s ability to manage its operating costs and to integrate acquired businesses in an effective manner; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; the impact of adverse weather or natural disasters; the availability and cost of financing; and implementation of new technologies and process improvement. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.
Dwight E. Weber