PREFORMED LINE PRODUCTS ANNOUNCES FIRST QUARTER 2024 FINANCIAL RESULTS

Rhea-AI Summary

Preformed Line Products Company (NASDAQ: PLPC) reported a 22% decrease in net sales in the first quarter of 2024 compared to the same period in 2023, primarily due to a slowdown in spending in the communications end market. Net income also decreased, with gross profit at 31.3%. The company attributes the decline to market demand, higher borrowing rates, delayed BEAD stimulus funding, and elevated inventory levels.

Positive

• None.

Negative

• 22% decrease in net sales in Q1 2024 compared to Q1 2023

• Decrease in net income for Q1 2024

• Gross profit at 31.3%

• Market demand decline affecting sales

• Higher borrowing rates and delayed stimulus funding impacting sales

• Elevated inventory levels due to overbuying in 2022 and early 2023

Insights

Financial Analyst

Examining Preformed Line Products' reported financials, a 22% decline in net sales compared to the previous year stands out. This can primarily be attributed to the softness in the communications end market, which the company correlates with factors such as high borrowing rates and delayed government funding. Despite a decrease in gross margins, the company managed to mitigate some of the negative impact through cost containment. An adept retail investor would note that the net income per diluted share almost halved, which may reflect a diminished earning power on a per-share basis. Reduced spending and ongoing investments suggest a strategic approach to navigate challenging market conditions, aiming to maintain a lean operation while preserving the capacity for future growth. The company's liquidity position remains strong, which may provide resilience and potential for capitalizing on opportunities once market conditions normalize.

Market Research Analyst

A deeper dive into the market dynamics reveals the communication sector's downturn is not isolated to Preformed Line Products. An emerging trend has been the slowdown in IT and telecom spending, as evident in the company's performance. The mention of 'elevated inventory levels' hints at a possible industry-wide overestimation of demand, leading to an inventory glut. For investors, understanding how sector-wide trends affect a company's performance is pivotal. The mention of actions such as new product development, operational streamlining and customer service expansion indicates an attempt to fortify the company's competitive edge in anticipation of market recovery. This strategic balance between managing current downturns and investing in growth areas is essential for assessing long-term potential.

CLEVELAND, May 1, 2024 /PRNewswire/ -- Preformed Line Products Company (NASDAQ: PLPC) today reported financial results for its first quarter of 2024.

Net sales in the first quarter of 2024 were $140.9 million compared to $181.8 million in the first quarter of 2023, a 22% decrease due primarily to a slowdown in spending within the communications end market. Foreign currency translation increased first quarter 2024 net sales by $0.7 million.

Net income for the quarter ended March 31, 2024 was $9.6 million, or $1.94 per diluted share, compared to $21.4 million, or $4.28 per diluted share, for the comparable period in 2023. Net income for the quarter was lower as a result of decreased gross margins caused by the lower sales level, partially offset by a reduction in selling, general and administrative expenses due to cost containment efforts. Gross profit as a percentage of net sales was 31.3% for the first quarter of 2024.

Rob Ruhlman, Executive Chairman, said, "The decrease in quarterly net sales is a continuation of the decline in market demand that we saw coming mid-2023.  Softness in communications end market demand continues to be caused by the higher borrowing rates, delayed BEAD stimulus funding, as well as elevated inventory levels, largely due to the overbuying that occurred in 2022 and early 2023.  Our spend thrift philosophy as well as cost reduction activities instituted in mid-2023 led to reduced spending in areas not impacting customer service experience.  Our excitement about the prospects of the markets that we serve allows us to continue our investment in new product development, streamlining our manufacturing operations and expanding our customer service portfolio.  These actions, along with our continued strong liquidity, will allow us to take advantage of favorable market conditions when they return.  Our current focus is unchanged:  provide our customers with the high-quality products and timely service they have come to expect from PLP."

FORWARD-LOOKING STATEMENTS

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding the Company, including those statements regarding the Company's and management's beliefs and expectations concerning the Company's future performance or anticipated financial results, among others. Except for historical information, the matters discussed in this release are forward-looking statements that involve risks and uncertainties which may cause results to differ materially from those set forth in those statements. Among other things, factors that could cause actual results to differ materially from those expressed in such forward-looking statements include the uncertainty in global business conditions and the economy due to factors such as inflation, rising interest rates, labor disruptions, military conflict, international hostilities,  political instability, exchange rates and public health concerns, the strength of demand and availability of funding for the Company's products and the mix of products sold, the relative degree of competitive and customer price pressure on the Company's products, the impact of stimulus programs in driving demand, the cost, availability and quality of raw materials required for the manufacture of products, opportunities for business growth through acquisitions and the ability to successfully integrate, and implement appropriate internal controls in, any acquired businesses, changes in regulations and tax rates, security breaches, litigation and claims and the Company's ability to continue to develop proprietary technology and maintain high-quality products and customer service to meet or exceed new industry performance standards and individual customer expectations, and other factors described under the headings "Forward-Looking Statements" and "Risk Factors" in the Company's 2023 Annual Report on Form 10-K filed with the SEC on March 8, 2024 and subsequent filings with the SEC. The Annual Report on Form 10-K and the Company's other filings with the SEC can be found on the SEC's website at http://www.sec.gov. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

ABOUT PLP

PLP protects the world's most critical connections by creating stronger and more reliable networks. The company's precision-engineered solutions are trusted by energy and communications providers worldwide to perform better and last longer. With locations in 20 countries, PLP works as a united global corporation, delivering high-quality products and unparalleled service to customers around the world.

 

PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
		March 31, 2024		December 31, 2023
(Thousands of dollars, except share and per share data)		(Unaudited)
ASSETS
Cash, cash equivalents and restricted cash		$                       45,859		$                        53,607
Accounts receivable, net		111,527		106,892
Inventories, net		141,508		148,814
Prepaid expenses		8,314		8,246
Other current assets		7,053		7,256
TOTAL CURRENT ASSETS		314,261		324,815
Property, plant and equipment, net		203,242		207,892
Goodwill		28,603		29,497
Other intangible assets, net		11,868		12,981
Deferred income taxes		7,379		7,109
Other assets		20,756		20,857
TOTAL ASSETS		$                     586,109		$                      603,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable		$                       41,748		$                        37,788
Notes payable to banks		1,487		6,968
Current portion of long-term debt		7,078		6,486
Accrued compensation and other benefits		23,348		28,018
Accrued expenses and other liabilities		26,043		32,057
TOTAL CURRENT LIABILITIES		99,704		111,317
Long-term debt, less current portion		47,928		48,796
Other noncurrent liabilities and deferred income taxes		25,109		26,882
SHAREHOLDERS' EQUITY
Common shares – $2 par value per share, 15,000,000 shares authorized, 4,918,036 and 4,908,413 issued and outstanding, at March 31, 2024 and December 31, 2023		13,711		13,607
Common shares issued to rabbi trust, 238,641 and 243,118 shares at March 31, 2024 and December 31, 2023, respectively		(10,214)		(10,183)
Deferred compensation liability		10,214		10,183
Paid-in capital		61,408		60,958
Retained earnings		528,733		520,154
Treasury shares, at cost, 1,937,150 and 1,894,419 shares at March 31, 2024 and December 31, 2024, respectively		(123,701)		(118,249)
Accumulated other comprehensive loss		(66,782)		(60,306)
TOTAL PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS' EQUITY		413,369		416,164
Noncontrolling interest		(1)		(8)
TOTAL SHAREHOLDERS' EQUITY		413,368		416,156
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$                     586,109		$                      603,151
See notes to consolidated financial statements (unaudited).

 

PREFORMED LINE PRODUCTS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
	Three Months Ended March 31,
	2024		2023
(Thousands of dollars, except share and per share data)
Net sales	$               140,904		$               181,824
Cost of products sold	96,773		115,541
GROSS PROFIT	44,131		66,283
Costs and expenses
Selling	11,900		12,388
General and administrative	16,608		18,609
Research and engineering	5,431		5,193
Other operating expense, net	(1,367)		1,112
	32,572		37,302
OPERATING INCOME	11,559		28,981
Other (expense) income
Interest income	972		304
Interest expense	(708)		(1,066)
Other income, net	35		40
	299		(722)
INCOME BEFORE INCOME TAXES	11,858		28,259
Income tax expense	2,255		6,840
NET INCOME	$                   9,603		$                 21,419
Net income attributable to noncontrolling interests	(7)		(21)
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS	$                   9,596		$                 21,398
AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Basic	4,915		4,937
Diluted	4,944		4,997
EARNINGS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS:
Basic	$                     1.95		$                     4.33
Diluted	$                     1.94		$                     4.28
Cash dividends declared per share	$                     0.20		$                     0.20

 

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SOURCE Preformed Line Products

FAQ

What was the net sales for Preformed Line Products Company in the first quarter of 2024?

Net sales in the first quarter of 2024 were $140.9 million.

What was the net income for Preformed Line Products Company in the first quarter of 2024?

Net income for the quarter ended March 31, 2024 was $9.6 million.

What caused the decrease in net sales for Preformed Line Products Company in the first quarter of 2024?

The decrease in net sales was primarily due to a slowdown in spending within the communications end market.

What factors contributed to the decline in net income for Preformed Line Products Company in the first quarter of 2024?

Factors contributing to the decline in net income included decreased gross margins caused by lower sales levels, partially offset by a reduction in selling, general and administrative expenses.

What is Preformed Line Products Company's current focus amidst the market challenges?

Preformed Line Products Company's current focus is unchanged: provide customers with high-quality products and timely service.