Despite an increase in sales and a growing backlog of orders this spring, Astec Industries lost money in the second quarter as inflationary costs outpaced price increases for the Chattanooga-based asphalt equipment maker.
For the three months ended June 30, Astec reported a net loss of $3.9 million, or 17 cents per share, compared to net income of $8.3 million, or 36 cents per share, in the second quarter of 2021. Astec said Tuesday that its adjusted operating income of $6.6 million was only half of what the company earned a year ago even with sales up by 14.6% to $318.2 million in the second quarter.
Earnings were below what Wall Street analysts had predicted and shares of Astec plunged Tuesday by more than 15.2% in trading on the Nasdaq exchange. Astec shares fell Tuesday by $7.46 per share to close at $41.50 per share, or 39.8% below what the company's stock was trading at when the year began.
"Despite strong sales, I'm disappointed we are not able to deliver better profitability," Astec CEO Barry Ruffalo told industry analysts during an earnings call Tuesday. "Second quarter financial results were negatively impacted by several factors that reduced our margins. Among them were continued inflation and manufacturing inefficiencies associated with the industry-wide supply chain and logistics constraints in the temporary absorption of expenses in order to support customer needs."
Ruffalo said supply chain problems continue to affect business operations and higher steel, labor and other equipment costs outpaced price increases for some products.
"Demand for Astec products continued and our backlog remained at record levels," Ruffalo said in Tuesday's earnings report. "However, financial results were negatively impacted by lingering supply chain disruptions. We will continue to realize prior pricing actions as we ship our backlog and, if necessary, take additional pricing actions to combat new inflationary pressures."
Ruffalo said highway spending should continue to increase and keep demand high, spurring Astec to make further investments and add to its production.
"In response to industry-wide strong demand, we are implementing strategic actions to expand capacity increase throughput," he said. "In addition to capital investments, we are successfully hiring and training employees, and positioning our workforce for higher levels of production."
Becky Weyenberg, chief financial officer for Astec, said the company believes Astec stock is undervalued and additional stock repurchases are possible.
"We believe that given our long-term growth prospects that the year-to-date downturn in our stock price implies a discounted valuation of our real worth and therefore we remain committed to delivering returns to shareholders through funding our 12 cents per share quarterly dividend and conducting opportunistic share repurchases subject to market conditions under the 2018 authorization of which $126 million remains available," she said.
- Compiled by Dave Flessner