SEGUIN, Texas — Alamo Group Inc. (ALG) (NYSE: ALG) has reported results for the first quarter ended March 31, 2017. Highlights for the quarter:
- Record net income for a first quarter of $12.2 million, up 40.5%
- Record net sales for a first quarter of $215.4 million, up 2.1%
- Industrial Division up 2.1%
- Agricultural Division up 6.4%
- European Division down 3.2%
- Backlog at $147 million was flat vs. year-end, down 3.8% vs. previous year's first quarter
- Total debt, net of cash at $56.9 million, down $66.5 million from prior year first quarter
Alamo Group's net sales for the first quarter of 2017 were $215.4 million compared to net sales of $211 million for the first quarter of 2016, an increase of 2.1%. Net income for the quarter was $12.2 million, or $1.05 per diluted share, compared to net income of $8.7 million, or $0.75 per diluted share in 2016, an increase of 40% in both net income and earnings per share. Both net sales and net income were records for a first quarter for Alamo Group.
Sales by Division
Alamo's Agricultural Division net sales in the first quarter of 2017 were $51.8 million compared to net sales of $48.7 million in 2016, an increase of 6.4%. Despite continuing weakness in the overall agricultural market, the Division's results benefited from the broad market appeal for its range of products and were further aided by new product introductions.
Net sales for Alamo's Industrial Division were $125.8 million in the first quarter of 2017, an increase of 2.1% compared to net sales of $123.3 million in the first quarter of 2016. While mild winter weather conditions constrained sales for the company's snow removal units, the rest of the Division's products held up well. Sales of vacuum truck products, which have been particularly weak the past few quarters, exhibited signs of rebounding, though results for the first quarter were still below the previous year's first quarter.
Alamo Group's European Division net sales were $37.8 million in the first quarter of 2017 vs. $39 million in the prior year's first quarter, a decrease of 3.2%. While Division sales were down in U.S. dollars they were up over 5% in local currency as they continued to experience improvements that began in late 2016.
Ron Robinson, Alamo Group's president and chief executive officer, commented, "We are very pleased with our performance in the first quarter of 2017 and glad to have a good start to the current fiscal year. Given the headwinds which we have faced in a number of our markets, we were pleased to have some sales growth and more importantly, to have so much of this growth flow straight to the bottom line. This provided record results for our company even compared to last year's first quarter which was itself a record quarter.
"The results for the quarter benefited from further margin improvement which has steadily contributed to our bottom line results, outpacing growth in top line sales. Our balance sheet has also benefited from these same operational improvement initiatives, which has led to improved inventory turns, better asset utilization and significant reductions in debt.
"All three of our operating divisions contributed to the first quarter's improvements. Alamo's Industrial Division results, which were off in the second half of 2016, showed a nice return to form. Even our vacuum truck products, whose sales to non-governmental entities were particularly weak the last several quarters, showed indications of a rebound, though the market for these products remain soft. However, sales of snow removal products in this Division remained weak as a result of mild winter conditions for the last two years.
"Our Agricultural Division once again had a good quarter despite ongoing soft market conditions. We benefited from broad applicability of our range of products combined with several marketing initiatives and results were further enhanced by new product introductions. We believe this Division should further benefit from improved market conditions, which are anticipated in either late 2017 or 2018.
"Alamo's European Division also exhibited improvement in the first quarter of 2017 in local currency, though down in U.S. dollars due to the unfavorable changes in exchange rates which were weaker than those in the first quarter of 2016. In the UK, our markets showed some return to normal levels, which have been off since the Brexit vote last June. Our operations in France continued to show improvement, following a trend that started last year, aided by internal initiatives such as the plant consolidation we completed in early 2016.
"All in all, we are pleased with the improved results across all parts of our business in the first quarter, despite the lingering effects of the market challenges with which we have had to contend. Looking ahead, we remain concerned these headwinds will continue to constrain sales growth, though it is encouraging that our backlog has remained steady at a healthy level since the end of 2016. We are also concerned that cost increases, particularly with inputs such as steel, could become a factor as the year progresses. Still, we remain optimistic about the outlook for Alamo Group in 2017 and beyond."
About Alamo Group
Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for infrastructure maintenance, agriculture and other applications. Our products include truck and tractor mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements and related after-market parts and services. The company, founded in 1969, has approximately 2,970 employees and operates 24 plants in North America, Europe, Australia and Brazil as of March 31, 2017. The corporate offices of Alamo Group Inc. are located in Seguin, Texas, and the headquarters for the company's European operations are located in Salford Priors, England.