Fushi Copperweld Inc.
(FSIN) reported second-quarter earnings of 25 cents per share, above the Zacks Consensus Estimate of 22 cents, but 24% below the 33 cents reported last year. Quarterly net sales fell 22.8% to $48.3 million, primarily driven by a 29.3% drop in average selling prices and partially offset by a 9.5% increase in sales volumes.

Volume at the company’s Dalian facility in China increased 25.0% year over year, reflecting higher 3G-related demand, better government spending on infrastructure projects in China and continued expansion into the utility market. We believe the 3G build out in China will provide tremendous opportunities for Fushi over the next few years.

Apart from the telecommunications market, Fushi is witnessing increased shipments to the utility market. The company believes that the Chinese electrical utility market for bimetallic is underdeveloped and provides significant growth potential for the Dalian facility. In addition, the company expects to benefit from ongoing infrastructure projects resulting from the $586 billion government stimulus package in China.

To take advantage of the rapid growth in CCA, Fushi added 6,000 metric tons of CCA capacity at its Dalian facility in April. The company also plans to install another 8,200 metric tons of annualized CCS cladding capacity online at its Dalian plant. It expects the first 4,100 metric tons of annualized CCS cladding capacity to be fully operational by the end of the third quarter and the remaining 4,100 metric to be ready by the end of first quarter 2010.

For the third quarter, management expects adjusted EPS in the range of 26 cents to 30 cents. The company sees profitability improving sequentially throughout the second half of the year due to continued growth in demand for CCA-based telecom products, utility applications, increased profitability at the Fayetteville facility from cost-saving initiatives and increased sales from China’s 3G infrastructure investments and the government’s stimulus package.

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