SEGUIN, TX -- Alamo Group Inc. reported results for the second quarter ended June 30, 2024.
Highlights for the Quarter
• Net Sales of $416.3 million, down 5.5% versus prior year
◦ Industrial Equipment net sales of $204.8 million, up 14.2%
◦ Vegetation Management net sales of $211.5 million, down 19.1%
• Income from operations of $43.3 million, 10.4% of net sales
• Net income of $28.3 million
• Second quarter fully diluted EPS of $2.35 per share; EPS results of $2.35 per share include the unfavorable impact of Gradall strike of approximately $0.22 per share
• Total debt net of cash improved $60.5 million or 25.7% compared to second quarter 2023
• Backlog remained healthy at $768.9 million at the end of the second quarter 2024(1)
• Trailing twelve-month EBITDA of $236.6 million, at 14.1% of Net Sales(1)
• Cost reduction actions taken expected to achieve approximately $10 million of savings in the remainder of 2024, net of restructuring costs
Results for the Quarter
Second quarter 2024 net sales were $416.3 million compared to $440.7 million in the second quarter of 2023. Gross margin was $108.2 million, or 26.0% of net sales, compared to $118.1 million, or 26.8% of net sales in the comparison period of 2023. Strong Industrial Equipment Division results partially offset the Vegetation Management headwinds.
Net income was $28.3 million, or $2.35 per diluted share, compared to $36.4 million, or $3.03 per diluted share, in the second quarter of 2023. The Company's backlog at the end of the second quarter remained healthy at $768.9 million. While Vegetation Management backlog normalized to pre-Covid levels, Industrial Equipment backlog continues to grow and is 16% higher versus the end of the second quarter 2023.
Comments on Results
Jeff Leonard, Alamo Group’s President and Chief Executive Officer commented, “The second quarter, as expected, proved to be challenging for us despite a very strong performance from our Industrial Equipment Division. Global softness in the markets for our Vegetation Management equipment continued, and channel inventories remained above normal levels. Order activity remained strong in the Industrial Equipment Division as both governmental and industrial customers continued to invest in their maintenance equipment fleets at an elevated pace.
“We were pleased that our Industrial Equipment Division had another outstanding quarter with second quarter net sales of $204.8 million, up 14%, versus the second quarter of 2023. The strong sales growth came despite the five-week strike by the unionized workers at the Company's Gradall manufacturing facility. The Division’s profitability was excellent with second quarter operating income of $27.3 million,13.3% of net sales. This Division booked new orders valued at nearly $194.0 million during the quarter, up 10% compared to the second quarter of 2023. Division backlog at the end of the quarter was $550.9 million versus $475.5 million at the end of the second quarter of 2023. While activity was strong across all of the Division’s product lines, snow removal was exceptionally strong, especially for the second quarter, which is historically a slower period. The Division also benefited from another solid performance from our Royal Truck business where demand for its crash attenuator trucks remained healthy.”
“The Vegetation Management Division experienced market headwinds in the second quarter. Net sales were $211.5 million and operating income was $16.0 million, or 7.6% of net sales. This Division booked new orders valued at $150.2 million, on par with orders received in the second quarter of 2023. Division backlog at the end of the quarter was $218.0 million versus $415.7 million at the same point in 2023, normalizing to pre-Covid levels. Activity remained soft in the Forestry, Tree Care and Agricultural end markets. Governmental mowing was a bright spot for this Division with sales, operating income and backlog all moving higher compared to the second quarter of 2023. While progress was made with destocking during the period, channel inventories constrained this Division’s sales and order bookings again in the second quarter.”
“As a result of the market situation in Vegetation Management, we have taken actions to improve our operating efficiencies, reduce costs and eliminate excess capacity. In the first six months of 2024, the Company has reduced its global employee population by nearly 7% with most of the reduction made in the second quarter. We have also accelerated planning for several additional facility consolidations, and plans are underway to convert one of our Vegetation Management manufacturing facilities for the production of industrial products. Savings associated with efficiency and cost reduction actions taken in the first half of 2024 are expected to be approximately $10 million on a full year basis, net of the associated restructuring costs.
"Our outlook for the third quarter and the balance of 2024 remains somewhat cautious. While progress is being made and dealer inventories are moving lower, more work remains to be done to reduce channel inventory. However, the prospects for our Industrial Equipment Division remain excellent for the remainder of 2024 and into the first quarter of 2025, given this Division’s robust order backlog and healthy pipeline of active sales opportunities. Despite the cautious near-term outlook, we are encouraged by the cost reduction measures we have already taken and the further actions we plan to implement in the coming months, which we expect will benefit our results in the second half of 2024 and beyond."
