SEGUIN, Texas — Alamo Group Inc., the manufacturer of Bush Hog, RhinoAg and Dixie Chopper, (NYSE: ALG) today reported results for the fourth quarter and year ended December 31, 2023.
Highlights
- Ninth consecutive quarterly record for sales and earnings
- Fourth quarter net sales of $417.5 million, up 8%
- Fourth quarter operating income of $44.8 million, up 5%
- Fourth quarter net income of $31.5 million, or $2.63 per diluted share, up 8%
- Full year net sales of $1.69 billion, up 12%
- Full year operating income of $198.0 million, up 33%
- Full year net income of $136.2 million, up 34%
- Full year diluted EPS was $11.36, up 33%
- Record EBITDA of $246.6 million, up 26%
- Year-end 2023 backlog at $860 million
Fourth Quarter Results
Fourth quarter 2023 net sales were $417.5 million compared to $386.6 million in the fourth quarter of 2022, an increase of 8%. Gross margin improved in the quarter versus the fourth quarter of 2022 by $11.1 million or 11%. Fourth quarter net income improved 8% to $31.5 million, or $2.63 per diluted share, compared to net income of $29.2 million, or $2.44 per diluted share in the fourth quarter of 2022. The Company’s backlog at the end of 2023 was $860 million.
Full Year Results
Full year 2023 net sales increased to almost $1.7 billion, up 12% compared to $1.5 billion for the full year 2022. Gross margin for 2023 increased $77.1 million or 20% versus the full year 2022. Net income for 2023 was $136.2 million, or $11.36 per diluted share, compared to net income of $101.9 million, or $8.54 per diluted share in 2022, a year-over- year EPS improvement of 33%.
Comments on Results
Jeff Leonard, Alamo Group’s President, and Chief Executive Officer, commented, “We are pleased that our fourth quarter results established new records for sales and earnings for the ninth consecutive quarter. The fourth quarter is normally seasonally softer for us, and this year was no exception as sales growth moderated relative to the pace set in the third quarter.
“It was great to see that our fourth quarter gross margin expanded by 80 basis points reflecting the durable quality of our backlog. Improvements in supply chain performance and labor availability drove operating efficiency higher and contributed to the favorable gross margin. The combined benefits of the higher gross margin and better operating efficiency were partially offset by higher employee-related administrative expenses during the quarter. Fourth quarter operating income of $44.8 million was five percent higher than the comparison period of 2022.
“The Industrial Equipment Division had a very strong fourth quarter with sales that were 32% higher than the fourth quarter of 2022. Governmental and industrial demand for this Division’s products remained robust although order bookings were 9% lower due to a challenging comparable caused by an unusually large snow-removal equipment order that we received in the fourth quarter of 2022. Year-end backlog increased by 18% compared to 2022.
“The Vegetation Management Division faced challenging conditions in several of its markets in the fourth quarter. Forestry and Tree Care activity remained constrained by the combined effects of price pressure for domestic wood pellets, slowing demand for land clearing equipment and sluggish housing starts. The farm and ranch market also remained soft due to lower cattle prices, less favorable commodity prices and declining agricultural exports. Channel inventories remained above optimal levels in the fourth quarter and dealers were reluctant to place new stock orders while interest rates remained elevated. The bright spot in the Vegetation Management Division was its governmental mowing business which enjoyed very strong, historically high sales in the fourth quarter and for all of 2023. Vegetation Management Division fourth quarter order bookings declined 34% and year-end backlog was 39% lower compared to 2022. The Division’s backlog has now returned to a more normal level from a historical perspective.
“The Company’s solid performance in the fourth quarter capped a very strong performance in 2023. Full-year sales were up 12% and net income improved by 34% versus the prior year. As we expected, recent softness in several of the Vegetation Management Division’s markets was largely offset by increasing demand for the Company’s Industrial Equipment from governmental agencies and contractors. We continue to like the way the Company is positioned as we enter 2024. At nearly $860 million, the Company’s backlog remains at a very healthy level and we believe that the quality of the backlog remains excellent. Although the noted softness in Vegetation Management may persist through the first quarter, anticipated relief in the form of modestly lower interest rates later in the year should help clear the inventory overhang and invigorate dealer demand. We expect that the Industrial Equipment Division will continue to display strength in 2024 driven by its sales to governmental agencies. Taken together, we remain confident regarding the Company’s performance in 2024 and believe it will be another excellent year for us.
