Shiloh Partners With Velocys - Analyst Blog

Steel manufacturer, Shiloh Industries, Inc. SHLO entered into a manufacturing agreement with London-based Velocys, plc. The agreement makes Shiloh the preferred fabricator of microchannel cores and future products being explored.

These cores form part of the company's modular reactors that help the small scale distributed gas-to-liquid systems. These systems convert unconventional, remote and problem gas into valuable liquid fuels.

Shiloh will produce the cores with the help of Velocys' advanced laser welding technology. Velocys addresses the smaller gas-to-liquid solutions, which caters to an untapped market of up to $25 million.

Shiloh will carry out the above production through its Innovation Drive Plant in Valley City, Ohio. In return, Shiloh will acquire roughly 600,000 shares of Velocys. The initiative complements the company's strategy of expanding its capabilities and diversifying the customer base.

Recently, Shiloh reported improved year-over-year results for the first quarter of fiscal 2014 (ended Jan 31, 2014). Earnings per share rose 93.3% to 29 cents and revenues improved 26.2% to $183.5 million. The improved results were due to increased productivity from the North American car and light truck industry. The company has been growing through product launches as well as inorganically.

Shiloh Industries is a full service manufacturer of blanks and stamped components for the automotive and light truck, heavy truck and other industrial markets.

With a market capitalization of $299.5 million, Shiloh currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include AK Steel Holding Corporation AKS, CaesarStone Sdot-Yam Ltd. CSTE and United States Steel Corp. X. While AK Steel Holding and CaesarStone Sdot-Yam hold a Zacks Rank #1 (Strong Buy), United States Steel sports a Zacks Rank #2 (Buy).