May 20, 2020

Sioux Falls-based Raven Industries reported challenges for all three divisions related to COVID-19, contributing to a nearly 70 percent year-over-year drop in quarterly earnings.

Net income was attributable to Raven for the first quarter of fiscal 2021 was $4 million, or 11 cents per share, compared with $13.2 million, or 36 cents per share, in last year’s first quarter. The company’s investment in Raven Autonomy reduced net income attributable to Raven by $2.9 million, or eight cents per diluted share, in the first quarter of fiscal 2021.

Consolidated net sales for the first quarter of fiscal 2021, which ended April 30, were $86.5 million, down 12.9 percent versus the first quarter of fiscal 2020.

“I am very proud of the resiliency and innovative spirit of our team members during these unprecedented times,” Dan Rykhus, president and CEO, said in a statement. “By adapting to different working conditions and solving challenges every day, our team members have done an outstanding job carrying out the values our company is built upon.”

Consolidated operating income for the first quarter of fiscal 2021 was $3.9 million versus operating income of $15.1 million in the first quarter of fiscal 2020, decreasing 74 percent year-over-year.  The year-over-year decrease in operating income was driven principally by the investment in Raven Autonomy, a significant decline in operating leverage within the engineered films division and delayed fulfillment of stratospheric platform contracts in Aerostar that stemmed from the pandemic.

“The company is placing a strong emphasis on enhancing cash flow and reducing net working capital given the substantial uncertainties brought about by the current economic environment,” Raven said in its earnings statement.

“Across all three operating divisions, the company is taking aggressive actions to reduce inventory levels, extend and optimize payment terms and manage customer credit terms and collections to reduce accounts receivable. The company is also delaying a significant portion of planned capital expenditures until there is more clarity on the duration and extent of this economic downturn.”

Net sales for the applied technology division in the first quarter of fiscal 2021 were $42 million, up slightly versus the first quarter of the prior year.

“Order activity remained strong for applied technology’s core products; however, the company’s enhanced safety precautions temporarily reduced workforce availability and precluded certain orders from being fulfilled during the first quarter,” the company said. “The sales development for the division was relatively strong, especially considering the current economic environment.

“The engineered films division saw net sales drop 24.6 percent year-over-year, with the largest impacts being concentrated in the geomembrane — specifically in the energy sub-market — construction and industrial markets. Historically weak demand for oil, exacerbated by a worldwide over-supply situation, drove West Texas Intermediate prices to lows not previously realized and resulted in a 50 percent decline in rig counts within the Permian Basin. The division’s sales into this end-market declined commensurately in the first quarter.

“Net sales for Aerostar in the first quarter of fiscal 2021 were $11.2 million, down $1 million or 8.5 percent versus the first quarter of fiscal 2020. The decline in net sales was driven by lower stratospheric platform revenue as Department of Defense travel restrictions prevented the execution on certain contracts. The division said it expects travel restrictions to be temporary, but the timing of contract delivery could continue to be pushed out if travel restrictions remain in place for an extended period of time.

“Despite these challenges, the backlog and underlying fundamental demand remains very strong for the division’s radar and stratospheric product platforms and technical services,” Raven said. “Additionally, the division is expected to complete the fulfillment of its current aerostat contract during this fiscal year. This is expected to generate an additional $7 million in sales through the rest of this fiscal year.”

Raven remains committed to sustaining its investment in Raven Autonomy, one of its strategic growth initiatives, in fiscal 2021 and beyond because of its “confidence in the substantial market potential that exists for autonomous ag solutions,” it said.

It is temporarily delaying further investment in Raven Composites, another platform for growth, saying as “economic conditions improve, the company will begin its planned, aggressive investments to drive engineered films to become an industry leader in the reinforced composites market.”

Raven is “prioritizing the health and well-being of our team members through consistent and transparent communications, modifying our policies to encourage remote work, establishing options for team members to take a leave of absence when necessary and adjusting our production processes to enhance social distancing,” Rykhus said.

“Additionally, we have shown our commitment to saving and protecting lives through the production of personal protective equipment for front-line medical personnel. We are very proud of how our team members responded when the need to help arose.”

Rykhus said Raven expects “a relatively strong year” in its applied technology division, although low commodity process, a drop in ethanol production and an anticipated tightening of ag lending will limit growth. He projected obstacles because of pandemic-related impacts to the end markets served by its engineered films division and a stable year for Aerostar even with COVID-related challenges.

“Overall, with conditions constantly changing, the length and duration of this economic slowdown is still uncertain, but we are well prepared to respond to the challenges we will face. The fundamentals of our company remain very strong, and I have great confidence in our long-term success,” he said.