Engineered Films and Applied Technology Drive Results
Raven Industries, Inc. today reported record sales and earnings for its fiscal 2013 first quarter ended April 30, 2012.
The sales and earnings trends Raven experienced in the 2012 fiscal year continued in the 2013 fiscal first quarter, with sales up 16 percent to $117.9 million, from $101.5 million in the prior-year period. First quarter net income rose 21 percent to $19.0 million, or $1.04 per diluted share, versus fiscal 2012 first-quarter net income of $15.7 million, or $0.86 per diluted share. Growth was driven by the Engineered Films and Applied Technology Divisions, where double-digit sales gains were accompanied by even stronger increases in operating income.
"We are capitalizing on favorable market dynamics in agriculture and energy," said Daniel A. Rykhus, president and chief executive officer. "This produced a strong start to the year with excellent top- and bottom-line performances in our Engineered Films and Applied Technology Divisions. A difficult federal spending environment affected Aerostar. However, the company as a whole posted impressive results, demonstrating the benefits of our diversification strategy.
"In each of our chosen markets, we're committed to helping our customers solve great challenges—hunger, safety, environmental protection and energy independence. Our ability to meet these challenges and aggressively expand and pursue new opportunities in our growth markets requires important capital investments. Despite significant investment spending in the first quarter, Raven still reported record performance."
Engineered Films Builds Sales and Margins
Raven's Engineered Films Division posted first quarter sales of $41.1 million, which was up 37 percent from $30.1 million in the fiscal 2012 first quarter. Operating income more than doubled to $9.2 million, from $4.1 million in the prior-year period. Both sales and earnings figures were at record levels.
Noted Rykhus, "Continued strength in the energy and agricultural markets, and deliveries of geomembrane films for environmental protection, fueled increased demand in the first quarter. Moreover, we further enhanced margins through a combination of several factors. We continued to sustain an attractive cost/price spread for raw materials. We also improved operating efficiencies and plant utilization, and reduced scrap. Finally, margins benefited from a more favorable product mix.
"New products continue to support our growth and we're actively investing in R&D to build a pipeline of growth opportunities. We are tracking at our expected pace for utilizing the extrusion capacity brought on-line in the fourth quarter last year."
Ag Market Growth and Strong Execution Drive Applied Technology Results
For the first quarter, sales in the Applied Technology Division grew 29 percent to $50.5 million versus $39.1 million last year. Operating income increased 39 percent, to $20.9 million from $15.1 million. As in Engineered Films, both sales and earnings set records.
Said Rykhus, "We are in the midst of a strong domestic agricultural market, and our record performance and continued growth reflect that. Our expanded offerings in field computers, application controls, information management and, in particular, guided steering systems that enhance farm yields and reduce operating costs, helped generate increased sales. We're committed to further product development in fiscal 2013.
"International sales also continued to grow at a strong pace, delivering 27 percent of division revenues. Underlying our success outside of North America is the rapid adoption of guidance and steering systems. On the OEM front, we continue to make progress with our key partners, cultivating and deepening our existing relationships and developing new ones. We're starting to realize benefits, and as a result, our market position is improving."
Order Timing, Volatility Impact Aerostar Growth
Aerostar's sales in the first quarter were down 29 percent to $10.8 million from $15.1 million in the previous year's first quarter. The company reported an operating loss of $1.2 million, versus income of $4.1 million a year earlier.
"The quarter-to-quarter variability for aerostat orders can lead to significant fluctuations in our Aerostar Division," said Rykhus. "That, combined with a difficult spending environment at the federal level, drove the anticipated first-quarter decrease in sales and operating income. To manage the short-term responsibly, we're carefully monitoring discretionary spending, staffing levels and R&D. While the quarterly variability in aerostat orders can be expected going forward, our focus at Aerostar is to continue to strengthen the business foundation for the long term to accommodate our future growth plans.
"To that end we continued to make progress integrating Vista with Raven. We also began new pursuits with Vista that broaden our customer base to include more programs and government agencies. As we continue to collaborate, bringing the great talent of both organizations together, we believe the potential to sell into new markets, including those overseas, will be enhanced."
Responsibly Managing the Short Term, Focused on Longer-Term Opportunities
Concluded Rykhus, "We anticipate continued positive trends in Engineered Films and Applied Technology. Order variability will likely persist in Aerostar going forward—and we'll manage that responsibly. For the company overall, we believe that we can meet our long-term target of 10-15 percent earnings growth.
"With favorable market dynamics anticipated in agriculture and other key market segments, we are focused on leveraging our market position, technology and differentiated products to build sales and income. Moreover, we're continuing to invest for the long term, expanding both our base of fixed assets and portfolio of product lines.
"The drive to solve great challenges guides our vision today. Customer needs are always evolving and Raven has the willingness to embrace change, flexibility to shift our operational focus and innovative drive to meet market demand."