The drop in oil prices is taking its toll on an East Tennessee plant that produces drilling equipment.
Despite higher sales and profits at most of its company lines, Astec Industries Inc. said Tuesday that it will close its facility in Loudon, Tenn., on May 31 and consolidate all of its GEFCO operations in Enid, Okla., due to the decline in oil exploration activity.
The move will cut 75 jobs. Astec will take a $1 million charge for the closing the 360,000-square-foot plant in the second quarter.
"We will do our best to place those employees with other Astec industries companies as were able to," Astec CEO Ben Brock said. "Orders so far in 2015 have been steady with the exception of products targeted at the oil exploration industry due to the well-publicized decrease in the price of oil."
The main products made in Loudon are oil drill rigs and pump trailers.
Benjamin BrockDespite the drop in oil drilling business, Astec saw continued strength in heaters for gas processing operations and increased sales of wood chippers and grinders, Brock said.
"So despite the tough decision with regards to Loudon, we are optimistic on our outlook in the energy group," the Astec CEO told analysts Tuesday in announcing the company's fourth quarter results.
Astec overall boosted its fourth quarter net income by 2.4 percent from a year ago on stronger sales. The Chattanooga-based paving equipment earned $8.5 million, or 37 cents per share, on sales of $239.5 million in the final three months of calendar 2014. In the same period a year earlier, Astec earned $8.3 million, or 36 cents per share, on sales of $223.9 million.
The earnings results for the quarter were 2 cents a share better than the average consensus of analysts who follow the company. That helped push up Astec shares by $3.01, or 7.6 percent, to close Tuesday at $42.39 per share -- the highest since last July.
Domestic sales for Astec increased 6.5 percent to $151.6 million and international sales were up 7.9 percent to $87.9 million in the fourth quarter.
For all of 2014, Astec earned $34.5 million, or $1.49 per share, on sales of $975.6 million -- a record high.
"We are improving operationally and it is starting to show up in higher gross margins," Brock said. "This, along with our record $332.1 million backlog, has us optimistic on our first half of 2015."
Brock said he also is hopeful Congress can reach an agreement on a new highway funding bill, which would provide road builders more financial security and lead to more sales of Astec equipment, he said.
Astec is urging Congress to adopt a long-term transportation spending measure and is pushing for the measure on a web site the company has created, www.dontletamericadeadend.com.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.