Raven Industries reported net sales for fiscal 2019 were $406.7 million, up 7.8% vs. fiscal 2018. This is a new record sales year for the company, surpassing the previous record from fiscal 2013. The current mix of sales vs. fiscal 2013 is more strategic as evidenced by contract manufacturing sales consisting of less than 2% of total sales in fiscal 2019, down from 16% in fiscal 2013.
Operating income for fiscal 2019 was $55.1 million, down 6.8%, vs. $59.2 million in fiscal 2018. The current year operating income was reduced by an expense of $4.5 million related to a gift to South Dakota State University ($4.5 million) and an increase in Project Atlas related expenses of $3.1million. Excluding these items, operating income increased significantly more than reported results year-over-year. Additionally, investment in research and development activities within Applied Technology (precision farming) and other segments also increased.
Net income for fiscal 2019 was $51.9 million vs. net income of $41 million in fiscal 2018.
Applied Technology Division
Net sales for Applied Technology in the fourth quarter of fiscal 2019 were $29.2 million, down 4.1% year-over-year. Geographically, domestic and international sales were each down approximately 4% year-over-year. These decreases were primarily driven by a slower spraying season for ag retailers, which reduced demand.
The AgSync acquisition was completed on Jan. 1, 2019. AgSync, headquartered in Wakarusa, Ind., develops software solutions for ag retailers and aerial applicators to overcome challenges related to managing large fleets, multiple locations, limited personnel and disconnected software systems in their operations. Applied Technology expects to leverage this acquisition to enhance its Slingshot platform by delivering a more seamless logistics solution for ag retailers, custom applicators and enterprise farms. This strategic expansion of the Slingshot platform is an effort to provide further value to the end customer and grow the division's subscription-based service model.
Division operating income in the fourth quarter of fiscal 2019 was $6.6 million, up $0.8 million or 13.1% vs. the fourth quarter of fiscal 2018. Division operating margin increased 340 basis points year-over-year, from 19.1% to 22.5%. The division continues to achieve strong profitability while continuing to invest in research and development activities to drive new product innovation. Division operating income in the fourth quarter of fiscal 2018 included expenses related to the resolution of two legal matters.
Sales and Operating Income by Segment
|Consolidated net sales||$406,668||$377,317||7.8%|
|Total segment income||$86,902||$82,723||5.1%|
|Consolidated operating income||$55,133||$59,170`||(6.8)%|
For Applied Technology, the company does not expect a significant ag market rebound in the next 12-18 months. Corn surplus remains near an all-time high, and U.S. farm income has decreased over each of the past 5 years. Offsetting these general ag market challenges is the growing demand for machine replacements that have been deferred for several years, international growth initiatives, which will help diversify exposure of end market conditions, and the growing need and desire for technology adoption across the agricultural industry.
Fiscal 2019 Recap and Fiscal 2020 Outlook
"We are very pleased with how all three divisions executed according to their long-term strategic plan in fiscal 2019," said Dan Rykhus, president and CEO. “Despite operating in the fifth year of a lackluster ag market, Applied Technology continued its growth in sales and achieved a significant year-over-year increase in operating profit. Leveraging previous investments in research and development, the division realized significant sales growth on RS1, its new steering platform.
“The acquisition of AgSync provides a proven logistics solution uniquely designed for the ag retail market. It helps strengthen the division's Slingshot platform and focuses on serving ag retailers, which are Applied Technology's core customers. We believe the division is well-positioned to execute on its long term strategy during fiscal 2020, leveraging this acquisition and the continual investment in research and development to provide a consistent cadence of new product innovation delivered to the market.
Additionally, Applied Technology is diligently entering year two of driving international growth through its Latin American headquarters in Brazil.