Raven points to challenging ag market as earnings drop

Aug. 23, 2019

Citing the worst spring planting season in at least 12 years, Raven Industries Inc. saw earnings drop 36 percent year-over-year in its fiscal second quarter.

The Sioux Falls-based company reported net income of $8.8 million, or 24 cents per share, for the quarter that ended July 31, compared with $13.7 million, or 38 cents per share, for the same time last year.

Conditions in the ag market “deteriorated significantly” compared to expectations in Raven’s applied technology division, the company said in its earnings release.

The U.S. Department of Agriculture reported farmers were unable to plant on more than 19 million acres this year, the highest number since the department began recording the statistic in 2007.

“Given these challenges, several key OEMs responded with greater than expected plant shutdowns in order to recalibrate production levels to align with a lower forecast of new machine sales,” Raven said.

“This temporarily halted sprayer unit production and reduced demand for precision ag technology. As a result, Applied Technology’s OEM and aftermarket demand in the second quarter of fiscal 2020 experienced a significant decline.”

Sales dropped 10 percent during the quarter, but the division’s competitive position remains strong, Raven said, adding it is positioned to gain market share by leveraging its technology development when market conditions improve.

“At this time, we expect the division’s fiscal 2020 second-half sales and division profit to exceed the prior year’s second-half results,” Raven CEO Dan Rykhus said. “Additionally, we believe our strong OEM relationships and best-in-class technology have positioned us for significant growth and success over the long term.”

Raven also reported success in its Aerostar division, where its partnership to develop and manufacture stratospheric balloons for Google’s Project Loon resulted in a balloon flying for a record 223 days.

“Aerostar continues to achieve new milestones and lead the industry with its stratospheric balloon capabilities,” Rykhus said.

“The division showed strength in its core markets during the first half of the year and invested more aggressively in research and development to support long-term growth opportunities. We are excited about the division’s future as it continues to invest in both its product and technical service offerings.”

There have been no significant changes in how Raven is monitoring the global trade environment and tariff developments from both a supplier and customer perspective, the company said.

It added it believes it has effectively managed its supply chain with minimal impact to financial results.

“While the company experienced unexpected near-term challenges in the second quarter, the fundamentals of the company remain very strong, and we continue to improve our competitive positioning in each of our operating divisions,” Rykhus said.

“We will continue to invest for the long term through research and development to drive new product innovation, capital equipment to improve and augment our unique production capabilities, and the pursuit and closure of additional strategic acquisitions.”

While Raven said it will not achieve the growth in sales and profit in every division this fiscal year as previously expected, it projects a stronger year-over-year sales performance for each division in the second half.

“More importantly, I firmly believe we are much better positioned today to face end-market challenges due to the investment discipline we maintained during the previous end-market challenges we experienced,” Rykhus said.

“Our disciplined approach to continual investment is supported by the confidence we have in our ability to improve our market-leading positions and drive long-term growth.”

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Raven points to challenging ag market as earnings drop

Citing the worst spring planting season in at least 12 years, Raven Industries Inc. saw earnings drop 36 percent year-over-year in its fiscal second quarter.

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