March 30, 2020

Raven Industries Inc. reported a drop in net income for fiscal 2020 driven both by a drop in sales as well as investments to position the company for future business.

Net income was $35.2 million, or 97 cents per share, compared with $51.8 million, or $1.42 per share, in fiscal 2019.

Consolidated net sales for fiscal 2020, which ended Jan. 31, were $382.5 million, down 5.9 percent from fiscal 2019.

Net sales growth in both the Aerostar and applied technology divisions was offset by a decline in engineered films.

In engineered films, the decrease in year-over-year net sales was driven by lower demand in its geomembrane market, in addition to a $12.6 million decline in hurricane-recovery film sales.

“While we are extremely excited about our long-term future, we cannot ignore the global economic uncertainties brought about by recent world events,” Dan Rykhus, president and CEO, said when earnings were reported last week.

“This is generating concerns from many market participants, and the likelihood of a global economic slowdown for the next several months is high. How extensive and how long this will persist are indeterminable, but I am very confident in our ability to respond to the challenges this is creating.”

Raven is in a “very strong relative position,” he added.

“We serve diverse end-markets, we have strong competitive positions, we generate robust operating margins, and we have a solid balance sheet and cash flow profile. We will effectively manage the short-term uncertainties and financial performance while continuing to fund our strategic platforms for growth, although not nearly as aggressively as we planned prior to the recent events.”

Rykhus said the company is pleased with its fiscal 2020 results given “the unique market challenges that presented themselves.”

The year included multiple new investments, including autonomous agricultural solutions through Raven Autonomy and greenfield investments through Raven Composites.

“Applied technology is moving towards becoming a market leader in autonomous agricultural solutions in fiscal 2021,” he said. “We are making significant investments to commercialize autonomous agricultural solutions while also continuing to release innovative precision ag products that solve challenges for our ag retailer and OEM partners.”

Those investments in autonomy will negatively impact profits and margins in the coming fiscal year although the underlying historical business is strong, he said.

“While the global economic environment will impact the ag market, the underlying historical business has a very strong product offering, which generates compelling returns for its end customers.”

On March 30, Raven announced it has an agreement to acquire the remaining equity in DOT Technology Corp., a Canada-based company that specializes in autonomous solutions for agriculture. Raven had previously invested in the company and said the acquisition indicates its confidence in the move.

“We see tremendous synergies between our current business and in the investments we have made in DOT and Smart Ag, an Iowa-based autonomy company which we acquired last November,” said Wade Robey, executive director of Raven Autonomy.

“We are very excited to be a leader in ag autonomy, and we are committed to working with our customers and partners to help bring these exciting new technologies to ag markets around the globe. Developing solutions for ag autonomy expands the total addressable market served by the Applied Technology Division by several billion dollars and positions the business for tremendous growth over the next several years.”

Raven’s engineered films division will focus on maximizing the returns on past investments given weaker anticipated end-market demand.

“We expect to see continued challenges in our geomembrane market — specifically in the energy submarket —  as recent global economic developments have significantly impacted oil prices and will drive reductions in domestic drilling activities. We believe the division’s diverse market exposure will help insulate it from certain market dynamics, and the division is prepared for challenging end-market conditions.”

The Aerostar division has and will be executing on its noteworthy government contracts while advancing its technical services and integrated hardware and software solutions, he said.

“I am very pleased with Aerostar’s financial performance and execution on its core stratospheric platforms and radar systems,” Rykhus said. “The division expects to build on this year’s strong performance in fiscal year 2021.”

The coming year will be an interesting and challenging one for the company, he added.

“While we are in such a unique position to capitalize on significant opportunities in the marketplace by advancing Raven Autonomy and Raven Composites, we are not going to be as bold as we would prefer in fiscal 2021,” he said.

“We face great uncertainty, and we must be prudent. We will be emphasizing the following four strategic priorities: upholding the Raven Way in all the decisions we make, emphasizing cash flow and liquidity from a position of strength, protecting the core business and our strong market positions, and continuing to invest in Raven Autonomy, a strategic platform with tremendous long-term growth potential. We are a strong company with a bright future, and we will prudently monitor and respond to whatever short- to intermediate-term economic conditions we face to ensure continued long-term success.”