1ST QUARTER: RAVEN'S SALES EVEN, NET INCOME FALLS 21%
Jun. 2, 2014
Source: Raven Industries news release
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Raven Industries, Inc. (NASDAQ: RAVN) today reported sales and earnings for its fiscal first quarter ended April 30, 2014.
For the first quarter, sales were $102.5 million, versus $103.7 million in the prior-year first quarter. Sales rose 22 percent in the company's Engineered Films division. This was offset, though, by sales declines in the Applied Technology and Aerostar divisions, and led to net income of $11.0 million, or $0.30 per diluted share, versus year-earlier net income of $14.0 million, or $0.38 per diluted share.
"First-quarter sales and net income fell short of our expectations primarily due to continued softness in the North American agriculture market-this is affecting Raven and our peers in the space," said Daniel A. Rykhus, Raven's President and Chief Executive Officer. "Engineered Films, however, delivered a strong performance, posting double-digit gains both over the prior-year period and sequentially from the fourth quarter. Within Aerostar, order delays on new contracts pushed expected revenues in the first quarter to later in the year.
"Raven continues its move to more proprietary product lines while we intentionally reduce our lower-margin, low-growth contract manufacturing business, which had a marked impact on Aerostar's first-quarter revenue. We're committed to a smart transformation of our business, but we're mindful of the marketplace headwinds we face, particularly in agriculture.
"To that end, we are actively managing the company to optimize our performance for the year. We're narrowing our investment focus to the essential strategic initiatives that will directly drive growth, and we've implemented expense management controls that will lower our operating cost base this fiscal year.
"Importantly, we remain steadfast in our vision to be a leader in providing the world with more food and energy, protecting the environment and allowing people to live more safely by delivering diverse technology solutions."
Engineered Films Posts Double-Digit Gains
For the fiscal 2015 first quarter, sales in Engineered Films rose 22 percent to $42.2 million from $34.5 million a year ago. Operating income was $5.9 million, compared with $4.8 million in the year-earlier quarter.
Commented Rykhus, "As we saw last quarter, sales of barrier films for specific agriculture applications drove first-quarter performance despite the overall slowness in the broader ag equipment market. In addition, energy, construction and industrial film sales were higher in the first quarter of fiscal 2015 than in the comparable quarter last year."
Operating income rose 23 percent during the quarter, despite higher resin costs compared to a year ago and an additional resin price increase that occurred in February. Raven continues work on developing and growing sales of higher-margin barrier films, as well as other lower-cost product formulations that meet customer needs across the product spectrum.
"Looking ahead to our fiscal second quarter, we expect to see continued solid growth in Engineered Films revenues from high-value agriculture, with incremental improvements in the energy, construction and industrial film markets as well," said Rykhus.
Ag Market Impacts Applied Technology
For the first quarter, sales in Applied Technology were $46.3 million, versus $51.2 million last year, reflecting a sluggish ag equipment market. Operating income was $15.9 million, compared to $19.2 million in the prior-year period.
Said Rykhus, "In addition to the weakness in the North American precision ag market, approximately 38 percent of Applied Technology's sales drop stemmed from the anticipated decline of non-strategic legacy customers from our former Electronic Systems Division. Going forward, we are committed to managing spending levels closely for this division, as well as for Raven as a whole. And we intend to drive growth through international market expansion, new products and broadening our OEM relationships."
OEM demand continued to rise for certain key products, including Raven's advanced field computers, planter and seeder controls, and harvest controls. Growth in each of these three product lines resulted from new products introduced over the last several months. The company also remained focused on developing and deepening relationships with its more than 30 OEM partners-expanding market share and extending its innovative technology to a wider range of customers.
As previously disclosed, on May 1, 2014, the Applied Technology division acquired SBG Innovatie BV and its affiliate, Navtronics BVBA. Headquartered in Middenmeer, Netherlands, SBG designs and manufactures advanced GPS steering systems for a variety of agricultural applications. The acquisition broadens Raven's guided steering system product line by adding high-accuracy implement steering applications, and improves distribution to Western and Eastern Europe, as well as the former Soviet states.
Said Rykhus, "SBG specializes in very precise, real time kinematic GPS steering systems with a focus on high-value crops. Their highly accurate implement steering technology expands our existing capabilities and integrates well into the Raven product portfolio.
"Looking ahead to the second quarter, we anticipate continued softness in the North American ag environment. That said, we are confident in the long-term health of the market and that we're well positioned to leverage our technology, expertise and product portfolio once conditions improve, and we continue to develop closely adjacent opportunities to drive growth."