Standard Pacific Profit Off 58% : Consumer Reluctance to Buy Cited for Poor Second-Quarter Results

Citing consumers’ continuing reluctance to make big-ticket purchases in the face of a turgid economy, Standard Pacific Corp. on Tuesday posted a 58% decline in second-quarter profit.

The home-building and financial-services company, based in Costa Mesa, said net earnings came to $1.56 million, or 5 cents a share, down from $3.76 million in the same period a year earlier. Revenue dropped 15% to $80.59 million from $94.75 million.

Standard Pacific converted from a partnership to a stock corporation at the end of 1991, so the 1991 revenue and earnings tallies were compiled as if the company had been publicly traded during that year.

Chairman Arthur E. Svendsen said several weeks ago that Standard Pacific’s second-quarter figures would be disappointing.

Despite the early warning, however, investors apparently were not prepared for such a big drop in profit. The company’s share price dropped 12% on the New York Stock Exchange Tuesday to $7.13, a low for the year. Monday’s closing price had been $8.13. When the company reincorporated and went public on Jan. 1, its stock was priced at $12 a share.

April J. Morris, Standard Pacific’s vice president and chief financial officer, said of the latest quarterly performance: “I think it was below general expectations.”

But disappointing as second-quarter profit might have been, it is still a profit--something many home builders today can only dream about.

Morris said Standard Pacific has posted annual profits for 24 years in a row.

Although the company does not report earnings by division, she noted that its Standard Pacific Savings subsidiary, based in Newport Beach, contributed about half of the second-quarter’s earnings.

Low interest rates helped the thrift increase the number of mortgage loans made in the first half of the year by 65% from loan originations in the first six months of 1991.

The company’s manufacturing division, however, did not fare so well. At Panel Concepts, an office-furnishings maker in Santa Ana, sales and revenue were hurt by recessionary forces that included increasing price competition and a large supply of used office furniture available in the marketplace, Svendsen said.

Standard Pacific’s home-building unit accounted for the rest of the company’s profit, although the 222 new homes delivered to buyers in the second quarter were 27% fewer than the 305 homes delivered in the same period last year.

Svendsen said inclement weather in Dallas and Houston, where Standard Pacific also builds, delayed work during the second quarter and prevented the company from delivering as many completed homes in those markets as it had expected.

For the first six months of this year, he said, Standard Pacific delivered 383 new homes, down 22% from 494 in the first half of 1991.

Orders for new homes were also down. Standard Pacific booked 218 orders in the three months ended June 30, down 5% from 230 a year earlier. For the first half, sales agents booked 512 new home orders, down 14.5% from 599.

Net earnings for the six-month period came to $3.26 million, or 11 cents a share, down 42% from $5.59 million a year earlier. Revenue was $143.25 million, down 14% from $166.32 million.

Like many builders whose fortunes have flagged in the recession that has gripped Southern California for the past two years, Standard Pacific is “taking a very cautious approach through the rest of 1992,” Morris said. That means, among other things, that the firm will hold back on new home construction until it perceives that consumers are moving back into the market, a strategy that conserves corporate cash but helps keep housing in Orange County and elsewhere in short supply.

Standard Pacific now has about 45 projects underway in California, including developments in Orange, Laguna Niguel, Rancho Santa Margarita, Irvine and Corona.

Hammered by Recession

Standard Pacific Corp.’s second-quarter revenues are up nearly 30% from the previous quarter. However, a lingering recession and falling home prices have caused a 27% decrease in revenues and 90% drop in profits from second-quarter 1990 to the same period in 1992.

Sales: (In millions of dollars) 2nd qtr., 1992: $80.6

Profits: 2nd qtr., 1992: $1.6 million

Stock Prices: Tuesday’s Close: 7.13

NOTE: Standard Pacific was a master limited partnership until Dec. 31, 1991, when it reincorporated.

Home Prices Fall

Though the prices of Standard Pacific homes in California dropped from 1990 to 1991, they were up in Texas.

Number Average Division of Projects Homes Sold Selling Price 1990 1991 1990 1991 1990 1991 Orange County 16 15 482 310 $339,096 $324,065 San Diego County 10 11 67 81 390,900 345,871 Ventura County 2 2 60 42 317,596 306,846 San Francisco Bay Area 16 12 268 269 340,914 294,849 Houston 9 9 129 133 94,458 96,860 Dallas 4 7 16 13 107,028 122,855

Source: Dow Jones News Retrieval, Standard Pacific Corp.