Art's Way Scientific's Fiscal 2024 Performance Continues to Build Off 2023; Art's Way Ag Continues to Fight the Headwinds of the North American Farm Sector

Rhea-AI Summary

Art's Way Manufacturing reported its financial results for Q2 and the first half of fiscal 2024, highlighting significant challenges in its Agricultural Products segment due to a predicted 25% decline in farm income by the USDA. Q2 sales were down 18.2% YoY, with agricultural product sales specifically declining 28.5%. The company recorded a consolidated net loss of $5,000 for Q2 and $429,000 for the first six months of fiscal 2024, compared to net income in the same periods last year. The Modular Buildings segment showed positive growth, with a 17.2% increase in Q2 sales and a 4.7% increase for the first half of 2024. Cost-cutting measures, including layoffs and participation in a voluntary workshare program, have been implemented to mitigate financial strains. The company anticipates continued sales challenges in the agricultural segment but expects positive performance from the Modular Buildings segment due to a strong backlog.

Positive

• The Modular Buildings segment showed a 17.2% increase in Q2 sales.
• For the first half of 2024, the Modular Buildings segment sales increased by 4.7%.
• Strong backlog in the Modular Buildings segment suggests continued positive performance.
• The company is implementing cost-cutting measures to mitigate financial strain.

Negative

• Q2 consolidated sales decreased by 18.2% YoY.
• Agricultural Products segment Q2 sales declined by 28.5% YoY.
• Consolidated net loss of $5,000 for Q2 and $429,000 for the first half of fiscal 2024.
• Lower commodity prices are impacting farm income and agricultural product demand.
• High interest rates are putting additional pressure on the company's bottom line.

Insights

Financial Analyst

The financial results for Art's Way Manufacturing Co., Inc. show a significant decline in sales and net income from continuing operations for the second quarter and first six months of fiscal 2024. For the three-month period ended May 31, 2024, consolidated corporate sales dropped by 18.2% compared to the same period in fiscal 2023, while the net income turned into a modest loss. Over the six-month period, sales decreased by 18.7%, while the net income saw a more substantial decline, leading to a net loss.

One of the primary factors behind this financial downturn appears to be the forecasted decrease in farm income by 25% for 2024, as reported by the USDA. Lower commodity prices for crops such as corn, soybeans and wheat are notably impacting the Agricultural Products segment, which saw a sales decrease of 28.5% in Q2 2024. High interest rates also exert additional pressure, raising the cost of debt servicing and diminishing overall profitability.

However, the company's Modular Buildings segment provides a bright spot, showing a sales increase of 17.2% in Q2 and 4.7% over the six-month period, driven by a strong backlog of research projects. This segment's positive performance may offer some resilience against the overall challenging market conditions.

Short-term, investors might remain cautious given the negative trends in the Agricultural Products segment and the overall net losses. Long-term, the company's strategic focus on cost control, efficiency improvements and targeting new dealer acquisitions could potentially stabilize and enhance performance once market conditions improve.

Market Research Analyst

The broader market dynamics for Art's Way Manufacturing are currently less favorable, particularly within its core Agricultural Products segment. The USDA's projection of a 25% decline in farm income due to weaker row crop prices directly impacts farmers' purchasing power for new equipment, evidenced by the significant sales decrease.

The company's strategy to mitigate these headwinds through cost-cutting measures—including layoffs, early retirements and participation in the Iowa Work Force Development's workshare program—demonstrates prudent fiscal management. However, these measures also underscore the challenging environment in which the company operates.

The Modular Buildings segment’s growth offers a counterbalance, showing the importance of diversification. The increase in sales driven by large research projects is a positive indicator of the segment's potential, especially given the strong backlog and demand.

Understanding these dynamics can help investors appreciate the nuanced performance across different segments of the business. It highlights the critical need for a well-balanced portfolio and diversification as key strategies in managing business risks.

ARMSTRONG, IA / ACCESSWIRE / July 3, 2024 / Art's Way Manufacturing Co., Inc. (Nasdaq:ARTW) (the "Company"), a diversified manufacturer and distributor of equipment serving agricultural and research needs, announces its financial results for the second quarter of fiscal 2024 and six months ended May 31, 2024.

Sales: Our consolidated corporate sales from continuing operations for the three- and six-month periods ended May 31, 2024 were $6,730,000 and $12,454,000 compared to $8,224,000 and $15,311,000 during the same respective periods in fiscal 2023, a $1,494,000, or 18.2% decrease for the three-month periods and a decrease of $2,857,000, or 18.7% decrease for the six-month periods.

Our second quarter sales in our Agricultural Products segment were $4,555,000 compared to $6,368,000 during the same period of fiscal 2023, a decrease of $1,813,000, or 28.5%. For the six months ended May 31, 2024, our sales were $8,792,000 compared to $11,813,000, a decrease of $3,021,000, or 25.6% for the same period of 2023. In February of 2024, the US Department of Agriculture reported a 25% expected decline in farm income levels for 2024 due to weaker row crop prices and expected increases in production expenses. Our sales year to date have mirrored the USDA's sentiments on projected farm income. Incoming orders on the fall 2023 and spring 2024 early order programs declined for the first time in three years. As we approach mid-year of calendar 2024, live cattle, lean hogs, sugar beet and milk commodity prices are all exceeding their five-year averages while corn, soybeans and wheat commodity prices are all down significantly from where they were a year ago. High interest rates are putting additional pressure on farmers' bottom lines and also reducing the amount of inventory dealers are able to carry on their lots. We expect sales are going to be more speculative in the near future and product availability will be a key factor in sales success moving forward. We began cost cutting measures in the first quarter of fiscal 2024 to partially mitigate the effect on cash flow from decreased sales, including layoffs of non-production employees and offering early retirement incentives to employees at retirement age. We also entered the Iowa Work Force Development's voluntary workshare program in April 2024 which eliminates the need for additional production layoffs by allowing us to cut employee's hours while employees receive unemployment benefits for lost hours. We will be putting additional focus on investments that move our operational improvement strategy towards increased automation and production efficiency as we move forward in fiscal 2024. From a sales standpoint, we continue to work with dealers to help move field inventory to generate more sales opportunities for our products. We are targeting new dealer acquisitions to penetrate geographic markets in which we lack a substantial presence.

Our second quarter sales in our Modular Buildings segment were $2,175,000 compared to $1,856,000 for the same period in fiscal 2023, an increase of $319,000, or 17.2%. For the six months ended May 31, 2024 our sales were $3,662,000 compared to $3,498,000 for the same period of fiscal 2023, an increase of $164,000, or 4.7%. Two large research projects are driving the sales increase for the three- and six-month periods. We anticipate seeing increased sales quarter on quarter for the remainder of fiscal 2024 due to the strength of our backlog.

Net Income (Loss): Consolidated net loss from continuing operations was $5,000 for the three-month period ended May 31, 2024, compared to net income of $330,000 for the same period in fiscal 2023. For the six months ended May 31, 2024 our consolidated net loss was $429,000 compared to net income of $680,000 for the same period of fiscal 2023. While we had positive operating income from continuing operations for the three months ended May 31, 2024, high interest rates on our debt, have put strain on our bottom line in fiscal 2024. We expect that our sales in the Agricultural Products segment will continue to follow the 25% farm income decrease trend predicted by the USDA. We will rely on inventory reduction, debt retirement and cost cutting to minimize losses in an attempt to again generate net income from this segment. The Modular Buildings segment recorded revenue increases and profitability for both the three and six months ended May 31, 2024. We anticipate continued positive performance from this segment due to strong backlog for the remainder of fiscal 2024.

Income (Loss) per Share: Loss per basic and diluted share for the second quarter of fiscal 2024 was $0.00, compared to income per basic and diluted share of $0.07 for the same period in fiscal 2023. Loss per basic and diluted share for the first six months of fiscal 2024 was $0.09, compared to income per basic and diluted share of $0.13 for the same period in fiscal 2023.

"Our Modular Building segment continues to flourish as we finalized contracts and began full production on new projects in the first six months of fiscal 2024," said David King, Chief Executive Officer. "We expect increased revenue for the remainder of the year and a strong start to fiscal 2025 as the backlog remains at historic levels and demand continues to be high as evidenced by quoting activity."

King added, "Lower commodity prices continue to affect farm income, resulting in demand softness and putting pressure on the Agricultural Products segment. We are committed to navigating these challenging market conditions by focusing on operational efficiency and prudent fiscal management. We have adjusted our production output to meet current demand and help manage inventory levels. As we move forward, we remain dedicated to supporting our dealers and customers, ensuring we are well-positioned for future growth once market conditions improve."

Art's-Way Manufacturing Co., Inc.

Art's Way Manufacturing is a small, publicly traded company that specializes in equipment manufacturing. For over 65 years, it has been committed to designing and building high-quality machinery for all operations. It has approximately 125 employees across two branch locations: Art's Way Manufacturing in Armstrong, Iowa and Art's Way Scientific in Monona, Iowa. Art's Way manure spreaders, forage boxes, high dump carts, bale processors, graders, land planes, sugar beet harvesters and grinder mixers are designed to optimize production, increase efficiency and meet the growing demands of customers. Art's Way Manufacturing has two reporting segments: Agricultural Products and Modular Buildings.

For more information, contact:
David King, Chief Executive Officer
712-208-8467
davidk@artsway.com

Or visit the Company's website at www.artsway.com/

Cautionary Statements

This release includes "forward-looking statements" within the meaning of the federal securities laws. Statements made in this release that are not strictly statements of historical facts, including the Company's expectations regarding: (i) the Company's business position; (ii) demand and potential growth within the Company's business segments; (iii) future results, including but not limited to, revenue and margin expectations, expectations with respect to the impact of price increases, and expectations with respect to backlog and product mix; (iv) the Company's ability to increase production with capital investments and other activities, (v) future agricultural sales and plans to enter into building contracts; (vi) cash flows and plans to fund strategic initiatives and pay down debt; and (vii) the benefits of the Company's business model and strategy, are forward-looking statements. Statements of anticipated future results are based on current expectations and are subject to a number of risks and uncertainties, including, but not limited to: customer demand for the Company's products; credit-worthiness of the Company's customers; the Company's ability to operate at lower expense levels; the Company's ability to complete projects in a timely and efficient manner in accordance with customer specifications; the Company's ability to renew or obtain financing on reasonable terms; the Company's ability to repay current debt, continue to meet debt obligations and comply with financial covenants; inflation and its effect on the Company's supply chain and demand for its products, domestic and international economic conditions; the Company's ability to attract and maintain an adequate workforce in a competitive labor market; any future COVID-19 setbacks; factors affecting the strength of the agricultural sector; the cost of raw materials; unexpected changes to performance by any of the Company's operating segments; obstacles related to liquidation of product lines and segments; and other factors detailed from time to time in the Company's Securities and Exchange Commission filings. Actual results may differ markedly from management's expectations. Readers are cautioned not to place undue reliance upon any such forward-looking statements. The Company does not intend to update forward-looking statements other than as required by law.

SOURCE: Art's-Way Manufacturing Co., Inc.

View the original press release on accesswire.com

FAQ

What were Art's Way Manufacturing's Q2 2024 sales?

Art's Way Manufacturing's Q2 2024 sales were $6,730,000, an 18.2% decrease from the same period in fiscal 2023.

How did the Agricultural Products segment perform in Q2 2024?

The Agricultural Products segment saw Q2 2024 sales decline by 28.5% to $4,555,000 compared to the same period in fiscal 2023.

What was Art's Way Manufacturing's consolidated net loss for Q2 2024?

Art's Way Manufacturing recorded a consolidated net loss of $5,000 for Q2 2024.

What were the sales figures for the Modular Buildings segment in Q2 2024?

The Modular Buildings segment reported Q2 2024 sales of $2,175,000, a 17.2% increase compared to the same period in fiscal 2023.

What cost-cutting measures did Art's Way Manufacturing implement in early 2024?

Art's Way Manufacturing implemented layoffs of non-production employees, offered early retirement incentives, and joined the Iowa Workforce Development's voluntary workshare program.

What is the stock symbol for Art's Way Manufacturing?

The stock symbol for Art's Way Manufacturing is ARTW.

How did Art's Way Manufacturing's net income compare between the first half of fiscal 2023 and 2024?

Art's Way Manufacturing had a consolidated net loss of $429,000 for the first half of fiscal 2024, compared to net income of $680,000 for the same period in fiscal 2023.

What were the main contributors to the sales increase in the Modular Buildings segment?

Two large research projects were the main contributors to the sales increase in the Modular Buildings segment.