Art’s Way, a manufacturer and distributor of niche farm machinery, modular buildings and tools, reported on Feb. 4 that its consolidated net sales for the fiscal year ended on Nov. 30, 2018, declined by 4.8% to $19.7 million vs. $20.7 million in 2017.

According to the company, the decrease in revenue is due to decreased sales in its Agricultural Products and Tools segments. The company it experienced fairly steady demand in the 2018 fiscal year in our Agricultural Products segment and attribute the sales decrease to our decision to terminate a relationship to sell passthrough beet equipment and to liquidate its Canadian operations. The decrease in its Tools segment was due to the loss of a high volume customer.

Art’s Way’s consolidated gross profit decreased as a percentage of net sales to 17.8% in the 2018 fiscal year from 19.7% of net sales in 2017. The company’s gross profit was down in all three segments for the 2018 fiscal year, mainly due to increased material costs. The increased material costs drove price increases at the end of the 2018 fiscal year to help mitigate this concern for the 2019 fiscal year. In its Modular Buildings segment, it put new assets held for lease into service in the 2018 fiscal year. Depreciation of these buildings had a large negative effect on gross profit. Consolidated operating expenses increased by 13.8%, from $5,804,000 in 2017 to $6,607,000 in 2018. This was due largely to one time non-cash expenses in the Agricultural Products segment.

Consolidated net loss for the 2018 fiscal year was $3,336,000)for continuing operations compared to net loss of $1,369,000 in the 2017 fiscal year for continuing operations, an increase in loss of $1,967,000.

For 12 Months Ended (Continuing Operations Consolidated)

  Nov. 30, 2018 Nov. 30, 2017
Sales $19,726,793 $20,715,080
Operating (Loss) $(3,095,270) $(1,722,042)
Net (Loss) $(3,336,049) $(1,369,359)

Chairman of the Art’s Way Board of Directors, Marc H. McConnell reports, “Fiscal 2018 at Art's Way was quite a challenge, and the fourth quarter was certainly no exception. During the quarter we experienced weak demand as persistent low commodity prices combined with unprecedented uncertainty associated with interruption in international trade, tariffs, the much-delayed Farm Bill and an election year. Together, these elements created an atmosphere that gave customers serious economic challenges and little confidence to invest in their operations. 

The sales volume that we did have during the year was highly impacted by increased material prices, compressing margins for much of the year before price increases could be implemented,” said McConnell. “In nearly every respect, headwinds persisted in our industries for yet another year, and we have thus made significant overhead reductions, placed increasing emphasis on continuous improvement, and replaced personnel in key operations and production functions as we move forward into fiscal 2019.

“We enter the new year with a marketplace that remains unsettled, but we feel that the major steps we have taken to improve our business have lowered our breakeven point and will allow for better results under similar conditions and substantially increased opportunity for profitability in an improving market.”