Astec Industries (ASTE) Q4 2019 earnings summary

Executive summary

• 2019 was a transition year: leadership introduced the Simplify, Focus and Grow strategy and a more centralized, matrix organization; reported profit rebounded from 2018’s loss, but underlying sales and gross margin weakened.

• Results included a non-recurring $20.0M pellet-plant sale in 2019, while 2019 inventory valuation adjustments and lower volumes weighed on margins; year-end backlog fell 23.6% YoY.

Financial highlights

• FY19 net sales were $1,169.6M, down 0.2% reported; excluding pellet-related transactions in both years, sales declined $97.3M, or 7.8%, YoY.

• FY19 operating income was $25.1M versus an $86.4M operating loss in 2018; net income attributable to controlling interest was $22.3M versus a $60.4M loss.

• Q4 2019 sales were $283.2M; gross profit was $27.4M and net loss was $18.4M, or diluted EPS of $(0.81).

• Operating cash flow was $112.4M versus cash used of $29.8M in 2018; inventory reductions contributed to the improvement.

Outlook and guidance

• Management expected the entire $263.7M year-end backlog to be filled in 2020; segment disclosures likewise expected current segment backlogs to ship during 2020.

• Steel costs were expected to rise seasonally and moderately in early 2020, then weaken in late 2020; forward contracts and advance purchases were used to limit price exposure.

• International expansion, new product development, procurement improvements and operational-excellence programs were priorities under the new strategy.