Astec faces coronavirus challenges with sturdy money place, buyer work backlogs, CEO says
Astec Industries, whose subsidiaries embrace roadbuilding tools producers Roadtec and Carlson Paving, reported an 11 p.c drop in gross sales within the first quarter in comparison with the identical interval final 12 months.
The corporate foresees additional gross sales declines as a result of coronavirus pandemic; nonetheless, it additionally sees a buyer base with sturdy work backlogs all year long, mentioned CEO Barry Ruffalo throughout a convention name Might 11.
“Though a few of our clients have mentioned suspending cap-ex choices and delaying shipments to future quarters, the bulk are persevering with to work and require vital Astec options,” Ruffalo mentioned. He mentioned the corporate’s factories stay open, and it has not seen any disruption in its provide chain to this point.
“Within the first quarter, we noticed restricted influence from COVID-19,” Ruffalo mentioned. “Nonetheless, we do count on to see some order reductions to the rest of 2020 attributable to clients delaying receivable orders, and potential contract postponement.
“With that mentioned, a lot of our clients are set for 2020 to be as sturdy as or stronger than 2019, with many having a backlog of labor that may take them via the tip of this 12 months.”
Uncertainty stays for the market, in addition to whether or not Congress will come via with elevated funding for infrastructure. The FAST Act, designed to offer long-term freeway and different transportation funding to states, can also be set to run out in September. All of these points will weigh on contractors’ tools buy choices, he mentioned.
“The pace of market restoration and the potential of a federally funded infrastructure invoice are all issues that they are going to use as a foundation for timing their shopping for choices,” Ruffalo mentioned. “As you understand, the scenario stays fluid for the rest of 2020. However basic market drivers are simply as sturdy as they’ve ever been.”
Astec says it’s ready to climate the pandemic, with a considerable amount of money and low debt. The corporate reviews a web money place of $44 million on the finish of the primary quarter and solely $1 million in debt. It says it has obtainable liquidity of $186 million as of March 31.
It additionally expects a $26 million tax refund associated to the CARES Act handed by Congress to assist corporations climate the pandemic. It’s deferring the funds of its workers’ portion of Social Safety taxes, additionally allowed beneath the CARES Act, which is predicted so as to add one other $5 million to $eight million in money this 12 months, mentioned Chief Monetary Officer Becky Weyenberg.
The corporate had already been present process main restructuring attributable to a brand new company technique being applied earlier than the pandemic. The corporate now has two important segments:
The Infrastructure Options division contains roadbuilding, asphalt and concrete plant tools.
The Supplies Answer division contains crushing, screening, washing and materials dealing with tools.
“Whereas we stay cautious given the worldwide pandemic, we’re nicely positioned to navigate the financial challenges forward of us with a extra environment friendly organizational construction, a robust steadiness sheet and ample liquidity,” Ruffalo says.
Measures to carry down prices and protect money embrace a hiring freeze apart from vital positions, reductions in discretionary spending, specializing in accounts receivable and “reductions in pressure as applicable,” the corporate says.
Another highlights from Astec’s first-quarter monetary report:
Home gross sales of $233.9 million decreased 11%. (About 80 p.c of the corporate’s gross sales are within the North American market.)
Backlog as of March 31 of $245.4 million, up $eight.9 million from 1Q 2019. “The backlog enhance was pushed by Infrastructure Options orders, which had been up 19 p.c in comparison with the identical interval a 12 months in the past,” Weyenberg mentioned.
Working revenue of $15.1 million decreased 16.7% in comparison with $18.2 million within the first quarter of 2019.
Gear gross sales decreased 18% within the quarter, whereas half gross sales fell 4%.