Astec loses $2.7 million from cost of wood pellet plant upgrades

Staff file photo / Astec Industries logo
Staff file photo / Astec Industries logo

Astec Industries lost $2.7 million, or 12 cents per share, in the third quarter, due to the cost of design upgrades made for Georgia and Arkansas wood pellet plants needed to meet full production.

The improvement in the wood pellet plants cut earnings by 59 cents per share and the results were in line with Wall Street expectations, according to the average estimate of five analysts surveyed by Zacks Investment Research.

The maker of equipment for building, paving and mining posted revenue of $252.1 million in the period, which missed Street forecasts. Five analysts surveyed by Zacks had expected revenues of $262.3 million in third quarter.

As previously announced, the company initiated design upgrades this fall to wood pellet plants sold in Georgia and Arkansas in order to meet full production rates. The cost of those upgrades cut earnings by about 59 cents per share.

"During the quarter, we executed well across the business driving earnings in line with our expectations, and adjusting for the previously announced pellet plant investment costs, improved gross margin performance year-over-year," Astec CEO Ben Brock said.

Astec said its backlog of orders as of Sept. 30 was up 1 percent over a year ago to $389.3 million. But Brock said he expects fourth quarter results likely will be below year ago levels.

"While we exited the third quarter with a strong backlog, product mix and contracted delivery schedules have tempered our expectations for the fourth quarter," he said.

Brock said the company "still has a good opportunity to drive slight year-over-year sales growth for 2017," but the originally anticipated uptick in sales and earnings growth during the fourth quarter "will be pushed into 2018 " and fourth quarter earnings will be below a year ago., adjusting for the wood pellet investment.

"As we look to 2018, we are very optimistic on our outlook given our backlog, quote activity and conversations with our customers," Brock said.

Astec Industries shares have declined 23 percent since the beginning of the year. The stock has fallen 12 percent in the last 12 months.

But the company's stock opened today up nearly 1.5 percent in response to the third quarter earnings results.

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