Art's Way Scientific's Growth Surges Forward for Fiscal 2024; Art's Way AG Utilizes Momentum for Difficult AG Market Ahead

Rhea-AI Summary

Art's Way Manufacturing Co., Inc. (ARTW) announces first-quarter fiscal 2024 financial results with a decline in sales, net loss, and backlog changes. The company experienced a decrease in demand for agricultural products due to lower commodity prices, resulting in a net loss of $424,000. Despite challenges, the Modular Buildings segment saw a 112.4% backlog increase, showing promise for future revenue growth.

Positive

• Modular Buildings segment backlog surged by 112.4% year-over-year, indicating strong growth potential.
• Consolidated net loss of $424,000 for the first quarter of fiscal 2024 compared to net income of $350,000 in the same period in fiscal 2023.
• Agricultural Products segment sales decreased by 22.2% due to lower demand and softening agriculture economy.
• Modular Buildings segment remained profitable despite reduced sales, with expectations of strong sales for the remainder of fiscal 2024.
• Loss per basic and diluted share for continuing operations in the first quarter of fiscal 2024 was $0.09, compared to income per share of $0.07 in fiscal 2023.

Negative

• Consolidated sales decreased by 19.2% compared to the same period in fiscal 2023.
• Agricultural Products segment incurred a loss due to decreased sales and rising overhead costs.
• Order backlog for Agricultural Products segment decreased by 68.2% in fiscal 2024 compared to fiscal 2023.
• Net farm income decrease and lower crop prices impacted sales activity in the Agricultural Products segment.

Insights

Market Analyst

Art's Way Manufacturing Co.'s Q1 financial results reflect a significant downturn, with a 19.2% decrease in consolidated corporate sales and a 22.2% decrease in the Agricultural Products segment. These figures are indicative of a contraction in the agricultural sector, which is often seen as a bellwether for the broader economy. The company's acknowledgment of a decrease in demand and subsequent cost-cutting measures, including layoffs and early retirement incentives, suggest a proactive approach to managing overhead in a challenging market environment.

However, the 112.4% increase in the Modular Buildings segment backlog is a positive signal, potentially offsetting the agricultural segment's performance. The backlog serves as a forward-looking indicator and could point to future revenue streams. Investors may view the backlog as a sign of resilience and diversification within Art's Way's business model, which could be a mitigating factor against the volatility of the agricultural market.

Agricultural Economist

The report highlights a correlation between commodity prices and equipment demand, a key dynamic in the agricultural sector. The decline in corn, soybean, hog and wheat prices has a direct impact on farm income levels, which in turn affects the capital expenditure decisions of farmers. The mention of a 25.5% decrease in net farm income estimated by the USDA is a critical factor that could lead to a more conservative spending approach among farmers, potentially prolonging the sales slump in the Agricultural Products segment.

Furthermore, the company's strategy to focus on operational improvements through increased automation and production efficiency could be a important long-term play. By enhancing efficiency, Art's Way positions itself to be more competitive when market conditions improve. The development of new products, such as the sonar-leveling kit and technological updates, could also help the company maintain a competitive edge in a market that is increasingly driven by technological advancements.

Financial Analyst

The shift from a net income in Q1 of fiscal 2023 to a net loss in Q1 of fiscal 2024 raises concerns about the company's profitability and cost structure. The consolidated net loss of $424,000 underscores the need for the company to continue its cost-cutting initiatives and improve operational efficiency. The financial health of Art's Way Manufacturing will be closely monitored by investors, particularly as it navigates through the slower first fiscal quarter.

The company's stock performance is likely to be influenced by its ability to manage the current downturn in the Agricultural Products segment and capitalize on the growth of the Modular Buildings segment. The backlog in Modular Buildings, if converted to sales, could provide a significant boost to the company's financials. However, the risk of order cancellations and dealer discount arrangements could affect the actual revenue realized from the backlog, which is an important consideration for stakeholders.

ARMSTRONG, IA / ACCESSWIRE / April 9, 2024 / Art's Way Manufacturing Co., Inc. (Nasdaq:ARTW) (the "Company"), a diversified manufacturer and distributor of equipment serving agricultural and research, announces its financial results for the first quarter of fiscal 2024.

Sales: Our consolidated corporate sales from continuing operations for the three- month periods ended February 29, 2024 were $ 5,723,000 compared to $7,087,000 during the same respective period in fiscal 2023, a $1,364,000, or 19.2%, decrease for the three months.

Our first quarter sales in our Agricultural Products segment were $4,236,000 compared to $5,445,000 during the same period of fiscal 2023, a decrease of $1,209,000, or 22.2%. We experienced a decrease in demand on our fall 2023 early order program for the first time in three years. While cattle and sugar commodity prices remain strong through the first fiscal quarter of 2024, corn, soybean, hog and wheat prices are all down significantly from where they were a year ago. With the softening of the agriculture economy, we are expecting decreases in farm income levels from the past two fiscal years and expect that and will continue to affect sales in our Agricultural Products segment. We are also seeing increased inventory on dealer lots compared to a year ago and in turn have seen a slowdown in orders. We have put cost-cutting measures in place to partially mitigate the effect on cash flow from decreased sales. In our first fiscal quarter for 2024, we began right-sizing our staffing, including layoffs of non-production employees and offering early retirement incentives to employees at retirement age. We plan to continue to focus on investments that move our operational improvement strategy towards increased automation and production efficiency. From a sales standpoint, we are working with dealers to help move field inventory to generate more sales opportunities for our products. We are also focused on new dealer acquisitions to penetrate geographic markets that our competitors have a stronghold on. Our engineering team is developing new products for market including a sonar-leveling kit for our beet defoliator, a litter spreader kit for our manure spreaders and technological updates to our grinder mixers.

Our first quarter sales in our Modular Buildings segment were $1,487,000 compared to $1,642,000 for the same period in fiscal 2023, a decrease of $155,000, or 9.4%. Despite a larger backlog in the first fiscal quarter of 2024 compared to the prior year, we saw a decrease in sales for the fiscal quarter. Delays on stamped drawings with state agencies hindered further progress on our contracts for the quarter. The drawings were approved in the second quarter of fiscal 2024 and we don't expect further delays on the contracts. We reduced some of our workforce's hours when faced with these delays in the first fiscal quarter of 2024 and also built a stock agricultural building for future sale. Our Modular Buildings segment is carrying the largest backlog we have seen in 10 years as we progress into the second quarter of fiscal 2024.

Net Income (Loss): Consolidated net loss from continuing operations was $424,000 for the three-month period ended February 29, 2024, compared to net income of $350,000 for the same period in fiscal 2023. Our Modular Buildings segment remained profitable for the first fiscal quarter of 2024, despite the reduced sales. We are expecting strong sales in this segment for the remainder of fiscal 2024 as we work through our large backlog. Our Agricultural Products segment incurred a loss for the first fiscal quarter of 2024 due primarily to decreased sales and rising overhead costs. While first quarters of fiscal 2022 and 2023 brought heightened demand in the Agricultural Products segment due to strong commodity prices sales and operating results in the first fiscal quarter of 2024 were down due to lower commodity prices and resulting decreased demand. In addition, historically, the first fiscal quarter is the slowest quarter of our fiscal year. We expect the second fiscal quarter of 2024 to be improved over the first quarter as we work through our beet equipment backlog and begin to realize some of our more recent cost savings initiatives.

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

Backlog: The consolidated order backlog net of discounts for continuing operations as of April 3, 2024 was $11,416,000 compared to $12,007,000 as of April 3, 2023, a 4.9% decrease.

The Agricultural Products segment order backlog was $2,476,000 as of April 3, 2024 compared to $7,798,000 in fiscal 2023, a 68.2% decrease. Our incoming orders slowed in the fall of 2023 as backlog of the previous year's pent-up demand was filled. In February 2024, the USDA estimated a 25.5% decrease in net farm income tied to lower crop and livestock cash receipts and continued increases in production costs. We will rely on our brand reputation and product availability to drive sales activity for fiscal 2024.

The backlog for the Modular Buildings segment was $8,940,000 as of April 3, 2024, compared to $4,209,000 in fiscal 2023, a 112.4% increase. Two large research projects make up the bulk of our current backlog. We expect completion of these projects in fiscal 2024 which would put us on track for nearly a 48% revenue increase from the 2023 fiscal year. We have additional contracts and quoting activity that we expect could provide additional upside for fiscal 2024.

Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

"Despite a minor downturn in first quarter revenue attributable to contract delays, our Modular Buildings segment remains firmly on track to surpass growth expectations for fiscal year 2024, boasting a remarkable 112.4% surge in year-over-year backlog," stated David King, Chief Executive Officer. "We continue to witness robust interest in the Modular Buildings segment, evidenced by a high volume of ongoing quotes."

King further remarked, "While the challenges posed by reduced commodity prices and diminished farm income projections impacted first-quarter revenue within our Agriculture Products segment, we remain steadfast in our pursuit of strategic initiatives fostering growth and operational efficiency. Our emphasis remains on cost reduction through our realignment program, while concurrently positioning ourselves for progressive enhancement via new product launches, integration of technology, and continual expansion of our dealer network. As we move forward in fiscal 2024, we expect the increased demand of the Modular Buildings segment to help offset the recent softness of the Agriculture Products segment."

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 in 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) beliefs regarding the Company's rebranding efforts and improved customer experience activities and the potential benefits resulting therefrom, and (vi) 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 was the net loss for Art's Way Manufacturing Co., Inc. in the first quarter of fiscal 2024?

The net loss for the company in the first quarter of fiscal 2024 was $424,000.

How did the sales in the Agricultural Products segment change in the first quarter of fiscal 2024 compared to fiscal 2023?

Sales in the Agricultural Products segment decreased by 22.2% in the first quarter of fiscal 2024 compared to fiscal 2023.

What was the backlog change for the Modular Buildings segment in fiscal 2024 compared to fiscal 2023?

The backlog for the Modular Buildings segment increased by 112.4% in fiscal 2024 compared to fiscal 2023.

What was the loss per share for continuing operations in the first quarter of fiscal 2024?

The loss per basic and diluted share for continuing operations in the first quarter of fiscal 2024 was $0.09.

How did the order backlog for the Agricultural Products segment change in fiscal 2024 compared to fiscal 2023?

The order backlog for the Agricultural Products segment decreased by 68.2% in fiscal 2024 compared to fiscal 2023.