Raven: ‘We have overcome significant obstacles’ with plan to invest for growth

Aug. 27, 2020

Sioux Falls-based Raven Industries is recommitting to its long-term growth strategies as it reports signs of improvement across the company.

Raven’s earnings for the second quarter, which ended July 31, were $5.8 million, or 16 cents per share, compared with $8.8 million, or 24 cents per share, one year ago.

Net income was reduced by $3.1 million, or 9 cents per share, because of the company’s investment in Raven Autonomy, its initiative to achieve fully autonomous farm equipment solutions, as well as negative impacts from the coronavirus pandemic.

“Through leveraging our strong business model, we have overcome significant obstacles and performed very well while keeping our highly talented team intact and investing significant capital to advance Raven Autonomy,” Dan Rykhus, president and CEO, said in a statement.

“The past few months have brought greater clarity and signs of market stabilization, leading to our decision to restart planned investments in Raven Composites. This platform, combined with Raven Autonomy and Aerostar’s stratospheric platforms, are the key drivers of our company’s long-term growth.”

In the second quarter, net sales in the applied technology division increased nearly 30 percent year-over-year, leading to a 34 percent increase in profit for the division that was driven by demand for its new technology.

“We continue to overcome challenges facing the ag market by designing innovative products that deliver exceptional value and return on investment for our customers and partners,” Rykhus said. “Over the last few months, we have created momentum and an increase in collaboration around substantial opportunities with our strategic partners. This will serve as a key foundation for delivering growth in the future.”

The Aerostar division achieved year-over-year revenue growth despite limits on conducting customer flight campaigns as a result of the Department of Defense staff travel restrictions that were in place for much of the quarter, Raven said.

“In fiscal 2021, we are expecting year-over-year revenue growth as the division is able to once again execute on contracts associated with customer flight campaigns,” Rykhus said. “We are actively investing in advanced solutions and technical services within Aerostar. These investments have the division well-positioned for growth in fiscal 2022 and beyond.”

The engineered films division, hit especially hard by the pandemic, saw net sales drop 37 percent but was awarded a $4.8 million contract from the Federal Emergency Management Agency for the delivery of film-based medical supplies.

“Engineered films managed through severe economic difficulties during the second quarter. While we have seen stabilization in a few areas, we expect challenging market conditions for engineered films to persist throughout the remainder of fiscal 2021,” Rykhus said. “With that timing, we are executing on opportunities to leverage our world-class extrusion lines and fabrication capabilities. In addition, we will continue to manage expenses to help offset the impact from the decline in revenue.”

Raven called its balance sheet “a pillar of strategic strength” with strong cash flow generation and no interest-bearing debt. Total liquidity, defined as cash plus available committed borrowing capacity, is $120 million, and the company is confident it will maintain a strong liquidity position in the future.

Raven’s board of directors voted to suspend the company’s quarterly dividend on common stock indefinitely, allowing it to retain $20 million in capital annually. That will be used to supplement and accelerate investments in Raven Autonomy and Raven Composites, where the company said it sees substantial opportunity to drive long-term growth in shareholder value.

“We are fully committed to boldly investing in the future of our company, and now is the time to accelerate investment into Raven Autonomy and Raven Composites,” Rykhus said. “This decision speaks greatly to the tremendous opportunities in front of us and is being taken from a position of strength, with utmost confidence in our future.”

Over the next five years, Raven expects to aggressively invest in the platforms to capture what it called significant market opportunities.

“We are extremely excited about each of our strategic platforms, and we are committed to aggressively investing in them to drive long-term growth and value creation,” said Steven Brazones, vice president and CFO. “We are in a very unique market position to successfully capitalize on these opportunities, and we are confident in our ability to execute our strategic plan.”

Raven Autonomy has integrated its acquisitions and is readying its technology platforms for full commercialization in 2021, Rykhus added.

“Our ability to effectively manage through unprecedented challenges was evident throughout the first half of fiscal 2021 by our ability to generate strong cash flows while aggressively investing in Raven Autonomy,” he said. “We have started to see signs of economic conditions stabilizing. As we navigate the remainder of fiscal 2021, we will capitalize on the opportunities that exist and set the foundation for substantial, long-term growth for our company.”

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Raven: ‘We have overcome significant obstacles’ with plan to invest for growth

Sioux Falls-based Raven Industries is recommitting to its long-term growth strategies as it reports signs of improvement across the company.

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