Astec Industries(US:ASTE)2019-04-23 17:21Financial Data and Key Metrics Changes - Net sales for Q1 2019 were $325.8 million, flat compared to Q1 2018, and approximately $10 million to $15 million short of the guidance of 3% to 6% growth [12][19] - Gross profit percentage decreased to 23.5% in Q1 2019 from 24% in Q1 2018, with an under-absorption variance of $7.3 million in Q1 2019 compared to $4.5 million in Q1 2018 [13][14] - Earnings for Q1 2019 were $14.3 million, down from $20.3 million in the same period last year, resulting in a decrease in earnings per diluted share from $0.87 to $0.63 [15][19] Business Line Data and Key Metrics Changes - Domestic sales increased in the energy group but decreased in the infrastructure and Ag and mining groups [12] - Part sales increased by 5.1% to $92.6 million in Q1 2019 compared to $88.1 million in Q1 2018, with increases across all groups [13] - International sales increased primarily in Canada, Australia, and Japan, while decreases were noted in Russia, Africa, and Brazil [12] Market Data and Key Metrics Changes - The backlog at March 31, 2019, was $236.5 million, down 37.8% from $380 million in the previous year, with domestic backlog significantly impacted [16] - Rental fleet utilization rates were low, estimated at 56%, affecting dealers' ability to convert rentals into sales [7][10] - The effective tax rate for Q1 2019 was 21%, down from 23% in the same quarter last year [15] Company Strategy and Development Direction - The company is focused on increasing operational efficiency, reducing costs, and improving profitability through strategic purchasing initiatives [6][11] - Investment in the international sales network is expected to yield benefits in the future, with a focus on core product lines [11][19] - The company anticipates that strategic purchasing initiatives will positively impact gross margins in the second half of 2019 [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the second quarter and the remainder of the year due to unexpected changes in backlog [18] - Customers remain optimistic about their businesses, with good backlogs and active quoting despite slow order materialization [18][19] - The company expects revenues to decline by approximately 5% to 15% in Q2 2019 compared to the previous year [19] Other Important Information - The Bauma Trade Show in March was well attended, showcasing new products and generating positive feedback [9] - SG&A expenses increased to 17.9% of sales in Q1 2019, up from 16% in Q1 2018, driven by consulting fees and trade show expenses [14][15] Q&A Session Summary Question: What is the visibility on demand given the weather disruptions? - Management indicated that the shortfall in revenue was attributed to weather impacts, but there is uncertainty whether this is a lull or a dip in demand [22][24] Question: Is there a sense of cyclical downturn in the market? - Management believes the domestic markets are strong, and the slowdown was sudden, primarily due to weather [29][30] Question: How is the asphalt side performing compared to concrete? - The weakness was more pronounced in the road building and aggregates side, while the concrete side remained stable [35][36] Question: What is the outlook for SG&A expenses? - SG&A is expected to remain elevated in Q2 but should decrease to a more normalized level in the second half of the year [15][49] Question: How does the company view pricing pressure? - Management noted that competition is aggressive, but they are holding their own in terms of quoting activity [40][42] Question: What is the impact of oil prices on the energy segment? - The energy segment has low direct exposure to oil prices, but weather conditions have impacted equipment usage [81][82] Question: What factors could lead to a better revenue outcome in Q2? - Increased quoting activity and improved weather conditions are seen as key factors for potential revenue recovery [85]