Nortech Swings to Loss on Plant Sale
MINNEAPOLIS -- Nortech Systems today reported net sales of $28.3 million for the first quarter ended Mar. 31, down 2.4% from a year ago.
For the quarter, operating income was $120,000, versus $221,000 in 2016. The net loss was $15,000, compared with net income of $63,000 in the prior-year period, due in part to plant divestitures and program transfers.
“Our first quarter revenue came in as expected due to lower backlog levels to start the quarter,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our overall 90-day backlog began the first quarter down sequentially as our customers adjusted orders to their current demand.” He added, “By the end of the first quarter, backlog had rebounded nicely across our three core markets, rising 15% overall.”
During the quarter, gross margin and profits were impacted by expenses related to the Wisconsin facility closure and startup costs associated with the large number of product transfers, as well as delays with several new medical product launches planned for first quarter production. After closing the plant in Augusta, WI, late last year, Nortech sold the facility at the end of the quarter and reported a gain of $354,000, offseting the majority of the additional expenses incurred during the quarter.
“We’re optimistic in the outlook for the remainder of 2017 with these expenses and delays behind us and our backlog increasing,” Wasielewski stated. “Our medical market continues to show the strongest growth potential and the positive momentum being generated from our industrial customers adds to our confidence.” The new China operation received production validations in April from a major medical customer and the plan is to be accretive starting in the second quarter.
“Nortech’s strategy to expand our global footprint is improving our competitiveness with multinational customers looking for partners to provide in-region manufacturing support and a global supply chain,” Wasielewski said. He expects the company’s facilities in China and Mexico to post significant revenue growth in 2017.
