Ben BrockThe $305 billion federal highway bill adopted by Congress at the end of last year is paving the way for higher sales and profits this year for Astec Industries.
But the Chattanooga-based maker of equipment for building, paving and mining industries is facing a bumpier road overseas with currency devaluations and a weakening global energy market cutting international sales this year.
Astec said Tuesday its second quarter earnings jumped nearly 55 percent over a year ago to $18.2 million, or 79 cents per share. Sales for the asphalt machine maker increased 9.9 percent over last year to $294.4 million in the second quarter.
The earnings results beat Wall Street expectations for the second quarter by 4 cents per share. Astec CEO Ben Brock said backlog is growing for the company and he expects company revenues for all of 2016 to be up 5 to 8 percent this year over last, including the addition of a $43 million purchase of Power Flame Inc., expected to close this fall.
In response, shares of Astec on Tuesday jumped by more than 14.6 percent, or $7.68 per share, to close at $60.18 per share - an all-time high for the company. Astec shares, which rose enough Tuesday to add nearly $177 million in market value for Astec in a single day, have surged nearly 58 percent from a year ago.
Brock said "the headwinds of lower oil and natural gas prices, the global mining slowdown and the strong U.S. dollar" cut sales in the company's mining and construction equipment markets and to customers overseas. But Astec boosted asphalt and other road-building equipment sales in the U.S. during the quarter "as a result of the passage of federal highway bill," which provided a more secure outlook for road builders, Brock said.
Domestic sales for Astec jumped 24.5 percent to $242.2 million for the second quarter, more than offsetting the decline in international sales, which fell by 28.9 percent to $52.2 million in the three months ended June 30.
Steve Anderson, vice president of investor relations, said foreign exchange translation cut U.S.-dollar denominated sales by $3.4 million. He also said Astec's mining equipment sales continue to suffer from the weak demand for coal and farm commodities in the current market.
Nonethless, Astec said its backlog of orders as of June 30 was $364.4 million, up 58.8 percent from the same time a year ago.
"Our backlog remains strong mainly as a result of a $122.5 million pellet plant order that we announced during the first quarter," Brock said.
Brock said he expects to book an $80 million pellet plant sale later this year.
But Brock said he expects the international market "will remain challenged for at least the rest of this year."
The Astec CEO also disclosed Tuesday that the company has developed an LTV 1100 material transfer vehicle from its Roadtec division, which is in field testing now. Designed and built in Chattanooga, the new machine will complement Astec's shovel-ready line with a smaller, easier to move material transfer vehicle.
Brock said additional new products are being developed for next year's ConExpo show, where Astec spends around $4 million to display its newest offerings.
"Looking to the whole of 2016, we are optimistic that we will end the year ahead of 2015," Brock said. "The majority of our customers in the United States are experiencing a stable private market and we are focused on selling existing and new products."
Despite the improved results, Astec said it had to cut staff and work hours in some of its operations due to sluggish sales of some mining equipment.
Brock said the purchase of Power Flame, a Parsons, Kan.-based maker of burners for the past 77 years, should add $40 million in revenues next year. The company, which Astec agreed to buy earlier this month, will retain its name and location and will continue to be headed by its CEO, Bill Wiener.
"We believe that Power Flame has very good technology for lower mission burners that we can learn at Astec," Brock said.
Brock said Astec continues to look for other companies to buy.
"Acquisitions remain a key piece of our growth strategy, along with organic growth," he said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.