Art's Way Manufacturing Improves Results in Q1 2025 Despite Ag Market Turmoil
ARMSTRONG, Iowa — Art's Way Manufacturing Co. Inc., a diversified manufacturer and distributor of equipment serving agricultural and research needs, announces its financial results for the first quarter of fiscal 2025.
President, CEO and Chairman Marc McConnell reports, "We are pleased to finish the first quarter with meaningful operational and profitability improvements despite challenging conditions that persist. While headwinds continue to affect overall demand in the ag equipment space, we see strength in product categories that are benefitting from favorable beef and dairy prices.
"In our modular buildings segment, the momentum continues, and we are very pleased with both our operational performance and the strong demand we are seeing. In both segments we are keeping a close eye on the impact of tariffs on both our costs and demand profile. Amid quite a lot of uncertainty we do remain optimistic for how we will perform the balance of the year."
Consolidated - continuing operations
- Sales of $5,141,000 for Q1 2025, 10.2% decline from Q1 2024.
- Gross profit improvement of 3.4% compared to Q1 2024.
- Operating expenses reduced by 19.4% from Q1 2024.
- Net loss of $56,000 for Q1 2025, $368,000 improvement from Q1 2024
Agricultural Products
- Sales of $2,948,000 for Q1 2025, a 30.4% decline from Q1 2024.
- Gross profit declined 0.2% from Q1 2024.
- Operating expenses reduced by 25.6% from Q1 2024.
- Net loss of $346,000, improvement of $107,000 from Q1 2024.
The company provided the following statement on the quarter:
After a period of heightened demand in fiscal 2023, we started to see a decline in demand for our agricultural products in Q1 2024 due to rising interest rates, declining commodity prices and decreases in expected net farm incomes as high as 30% compared to the previous year. The leveling off of demand in this period drove the decrease in sales from Q1 of fiscal 2024 to Q1 of fiscal 2025. In Q1 of fiscal 2025, we are still battling high interest rates and low row-crop commodity prices but are starting to see improvement in dealer equipment stock levels. Equipment dealer lots were oversaturated for much of fiscal 2024 and slowed incoming demand for us. We expect destocking to continue in fiscal 2025, which we believe will increase demand for our products moving forward. The agriculture market is highly cyclical, and we believe fiscal 2024 was the bottom of the cycle. We spent the majority of fiscal 2024 right sizing our production and administrative staff to help us weather the agricultural downturn. We believe we are at staffing levels where we can see positive earnings and cash flow based on sales levels we have seen in past years of agricultural downturns as long as similar demand persists.
While the Federal Reserve most recently held interest rates, they reported anticipation of two interest rate cuts for fiscal 2025 and further cuts for fiscal 2026, which we believe will help stimulate all economic growth. We have seen relatively steady demand for our grinder mixer products and beet harvesting equipment in the first fiscal quarter of 2025. We plan to release some product specific programs in fiscal 2025 to continue to turn inventory and unlock cash from product lines where our inventory levels are high. Despite the 30.4% decrease in sales and less variable margin to cover our fixed costs, our gross margin percentage held steady, comparatively, for the first fiscal quarter of 2025 due to cuts to manufacturing expenses we made during fiscal 2024. We expect to see some short-term cost increases until the U.S.-based steel manufacturers are able to meet increased American Steel demand that could be induced from retaliatory tariffs. The United States currently imports approximately 25% of steel used by industry with Canada, Brazil and Mexico being the top suppliers. The majority of our manufacturing components are sourced in the U.S., however, some of our suppliers do source some of their components from China and other countries. We have been notified of expected tariff charges from some of these suppliers and expect some minor impact from these tariffs on our gross profit.