Local munitions maker Allied Defense Group Inc. is on the verge of bouncing back from two years of losses, the Vienna, Va., company said last week.
But shares of Allied Defense closed down 40 cents at $8.50 on the American Stock Exchange yesterday, despite recent news that the company negotiated several new orders worth about $170 million over three years.
The firm has received contracts from clients in Europe, North America and other markets for more than $90 million, it announced Wednesday. The orders involve a variety of ammunition types, including 25 mm cannon and recoilless rifle ammunition as well as 105 mm Howitzer projectiles.
About $80 million in additional options to these orders is subject to formal awards, which Allied Defense expects to receive next year.
Company executives declined to comment for this article, but in a statement last week, Chief Executive Officer John J. Marcello, a retired U.S. Army major general, said: “We are emerging from a two-year depressed business cycle due to a delay in the receipt of these large contracts.”
In the meantime, the company has “made progress to improve operational processes so that we can operate more profitably going forward,” he added.
Much of the Allied Defense’s ammunition business — specializing in medium to heavy caliber ammunition — comes from its Belgian subsidiary, MECAR S.A. In addition, the company’s other subsidiaries provide electronic security products such as fire detection or management systems.
The company has been waiting for a large award from a major foreign customer, and the delay “has caused a lot of internal problems,” said Brian J. Butler, a research analyst with Friedman, Billings, Ramsey & Co. Inc. in Arlington.
“The ammunition business is lumpy in nature, but historically, they’ve been able to smooth it out,” Mr. Butler said. “This delay has been pretty meaningful.”
Last month, the company refinanced $30 million in debt and settled default claims with creditors.
In its most recent financial results for the first quarter ended March 31, Allied Defense reported a loss of $17.9 million ($2.76 per share) compared with a loss of $3.7 million (62 cents) a year ago.
Allied Defense “has always been a company with great opportunities in front of it,” said Mr. Butler, whose company doesn’t have an investment banking relationship with the firm.
But the company, whose ammunitions business abroad focuses on niche artillery such as 90 mm, needs to do a better job of executing on other segments such as its newer U.S. subsidiary, MECAR U.S.A., and its battlefield effects business, which simulates the flash, noise and smoke of battle, he said.
“They really need to make the effort and go to all the base commanders and say, ’Look, this is a better product than you have and the money is out there to buy it,’ ” Mr. Butler said. “It’s been a tough one, but I really feel at some level they’ve moved past the low point and are kind of on the up-cycle, but it’s going to take some time for them to rebuild confidence with investors.”
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