Haynes International, Inc. (HAYN), a leading developer, manufacturer , and marketer of technologically advanced high-performance alloys, has issued an update regarding the recent cybersecurity incident, detailing its estimated impact on the company's financials for the third quarter of fiscal year 2023.
Net Income/Loss Impact
As previously disclosed, the Company encountered a network outage indicative of a cybersecurity incident on June 10, 2023. In response, the Company swiftly engaged third-party specialists to investigate the source of the outage and secure a full system functionality restoration. Within just 11 days, the Company was able to resume manufacturing operations and substantially restore administrative, sales, financial, and customer service functions.
However, during the 11-day disruption period, various aspects of the Company's production experienced significant disruptions. Based on the lost production time, Haynes International estimates that the net revenues for the third quarter were impacted by approximately $18 - $20 million. As a result, the estimated net sales for the third quarter are projected to be in the range of $142 - $145 million.
The lowered production levels also affected the efficiency and absorption of fixed costs, leading to a compression in the gross margin percentage for the quarter and impacting earnings. Additionally, the costs associated with the investigation and restoration efforts contributed to the overall financial impact of the incident.
Taking all these factors into account, the Company currently estimates that the full impact of the cybersecurity incident will result in a decrease of approximately $0.40 - $0.45 on diluted earnings per share for the third quarter of fiscal year 2023.
Revenue Impact
In addition to the direct impact on net income, the cybersecurity incident also had repercussions on revenue. The estimated net sales for the third quarter of fiscal year 2023 are anticipated to be between $142 and $145 million. The disruption caused by the incident played a significant role in this decline, affecting the Company's manufacturing capabilities and overall production efficiency.
The CEO's Response
Mike Shor, President, and Chief Executive Officer of Haynes International expressed his satisfaction with the company's quick and robust response to the cybersecurity incident. He commended the activation of the Enterprise Risk Management planning efforts related to cybersecurity preparedness, which proved to be very effective in handling the crisis.
Shor also expressed optimism about the Company's future performance, stating that they expect to make up for the third-quarter shortfall resulting from the cyber-related issues over the next few quarters. With the cybersecurity incident behind them, the Haynes International team is now refocusing on continued performance improvement.
Haynes International, Inc. has proactively addressed the recent cybersecurity incident, swiftly restoring its operations and minimizing the disruption caused by the outage. Despite the estimated financial impact on net income and revenue for the third quarter, the company remains confident in its ability to recover and maintain its positive momentum in the coming quarters.