PREFORMED LINE PRODUCTS ANNOUNCES SECOND QUARTER 2024 FINANCIAL RESULTS

Rhea-AI Summary

Preformed Line Products Company (NASDAQ: PLPC) reported its Q2 2024 financial results, showing a significant decline in performance compared to the same period in 2023. Net sales decreased by 24% to $138.7 million, primarily due to a slowdown in the communications end market. Net income fell to $9.4 million ($1.89 per diluted share) from $20.5 million ($4.08 per diluted share) in Q2 2023. The company's gross profit margin decreased by 460 basis points to 31.9%. For the first six months of 2024, net sales declined by 23% to $279.6 million, with net income at $19.0 million ($3.83 per diluted share) compared to $41.9 million ($8.35 per diluted share) in the same period of 2023.

Positive

• Cost reduction activities implemented in 2023 have helped maintain solid financial results during the slowdown
• Strong liquidity position maintained
• Continued investment in new product development and streamlining of manufacturing operations

Negative

• 24% decrease in Q2 2024 net sales compared to Q2 2023
• 54% decrease in Q2 2024 net income compared to Q2 2023
• Gross profit margin decreased by 460 basis points in Q2 2024
• 23% decrease in net sales for the first six months of 2024 compared to 2023
• 55% decrease in net income for the first six months of 2024 compared to 2023

Insights

Financial Analyst

Preformed Line Products Company's Q2 2024 results reveal significant challenges, primarily stemming from the communications sector slowdown. The 24% year-over-year decrease in net sales to $138.7 million is concerning, especially when compared to the $181.8 million in Q2 2023. This decline, coupled with a 23% decrease in H1 2024 sales, indicates a persistent market weakness.

The company's profitability has taken a substantial hit, with net income dropping to $9.4 million ($1.89 per diluted share) from $20.5 million ($4.08 per diluted share) in the comparable quarter. The 460 basis point decrease in gross profit margin to 31.9% is particularly worrying, suggesting potential pricing pressures or inefficiencies in cost management.

However, it's worth noting that PLP has implemented cost reduction measures, which have helped maintain "solid financial results" during this downturn. The company's focus on new product development, streamlined manufacturing and expanded customer service could position it well for a market rebound. The mention of strong liquidity is also a positive sign, indicating financial stability despite the challenging environment.

Investors should closely monitor the progress of BEAD stimulus funding and any signs of inventory normalization in the communications sector, as these factors could signal a potential turnaround in PLP's fortunes.

Market Research Analyst

The communications industry's current state presents a complex landscape for Preformed Line Products. The slowdown in spending and inventory de-stocking within this sector are clear indicators of broader market challenges. Three key factors are at play here:

• Higher borrowing costs: This suggests a tightening financial environment, potentially impacting capital expenditure decisions across the industry.
• Delay in BEAD (Broadband Equity, Access and Deployment) stimulus funding: This $42.45 billion program aims to expand high-speed internet access. Its delay is likely causing a ripple effect throughout the supply chain.
• Inventory realignment: The mention of "re-aligning customer inventory levels with current manufacturing lead times" indicates a shift in supply chain dynamics, possibly due to improved efficiency or reduced demand forecasts.

These factors collectively point to a cautious approach by industry players, which could persist in the short to medium term. However, the eventual release of BEAD funding and potential easing of borrowing costs could trigger a significant upturn in the sector. PLP's continued investment in product development and operational efficiency could position it favorably when market conditions improve.

Investors should keep a close eye on macroeconomic indicators, particularly interest rates and government infrastructure spending, as these will likely influence the timing and strength of the industry's recovery.

CLEVELAND, July 31, 2024 /PRNewswire/ -- Preformed Line Products Company (NASDAQ: PLPC) today reported financial results for its second quarter of 2024.

Net sales in the second quarter of 2024 were $138.7 million compared to $181.8 million in the second quarter of 2023, a 24% decrease. The decrease in sales is a continuation of the slowdown in spending in the communications end market.  Foreign currency translation reduced second quarter 2024 net sales by $1.1 million.

Net income for the quarter ended June 30, 2024 was $9.4 million, or $1.89 per diluted share, compared to $20.5 million, or $4.08 per diluted share, for the comparable period in 2023. The second quarter of 2024 net income was impacted by decreased gross profit from lower sales levels, similar to our Q1 2024 results, partially offset by lower period expenses, lower interest expense and reduced income tax expense. Gross profit as a percentage of net sales was 31.9% for the second quarter of 2024, a decrease of 460 basis points versus the same quarter in 2023. 

Net sales decreased 23% to $279.6 million for the first six months of 2024 compared to $363.6 million for the first six months of 2023. The year-over-year decline in sales is due primarily to the slowdown in spending and inventory de-stocking within the communications end market. Foreign currency translation rates reduced net sales by $0.3 million for the six months ended June 30, 2024.

Net income for the six months ended June 30, 2024 was $19.0 million, or $3.83 per diluted share, compared to $41.9 million, or $8.35 per diluted share, for the comparable period in 2023.  YTD June 30, 2024 net income was impacted by decreased gross profit resulting from the decrease in sales which was partially offset by lower period expenses, lower interest expense and reduced income tax expense.

Rob Ruhlman, Executive Chairman, said, "The decline in net sales continues to be primarily related to the softness in the communications end market, caused primarily by a reduction in deployment due to higher borrowing costs, a delay in BEAD stimulus funding and continued inventory de-stocking to re-align customer inventory levels with current manufacturing lead times.  Our cost reduction activities implemented in 2023 have helped us maintain solid financial results during this expected temporary slow-down within our end markets.  We remain optimistic about the prospects of the markets that we serve and will 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, political instability, exchange rates and lingering effects of COVID-19, 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 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 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
STATEMENTS OF CONSOLIDATED INCOME
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Thousands of dollars, except per share data)
Net sales	$               138,720		$               181,813		$               279,625		$               363,637
Cost of products sold	94,447		115,486		191,220		231,026
GROSS PROFIT	44,273		66,327		88,405		132,611
Costs and expenses
Selling	11,928		13,013		23,828		25,401
General and administrative	15,250		18,220		31,858		36,830
Research and engineering	5,358		5,760		10,789		10,953
Other operating expense, net	445		1,186		(921)		2,298
	32,981		38,179		65,554		75,482
OPERATING INCOME	11,292		28,148		22,851		57,129
Other (expense) income
Interest income	346		419		1,318		723
Interest expense	(568)		(1,134)		(1,276)		(2,199)
Other income, net	91		108		126		147
	(131)		(607)		168		(1,329)
INCOME BEFORE INCOME TAXES	11,161		27,541		23,019		55,800
Income tax expense	1,794		7,077		4,049		13,917
NET INCOME	$                   9,367		$                 20,464		$                 18,970		$                 41,883
Net income attributable to noncontrolling interests	(1)		8		(8)		(13)
NET INCOME ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS	$                   9,366		$                 20,472		$                 18,962		$                 41,870
AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Basic	4,915		4,944		4,915		4,940
Diluted	4,964		5,024		4,955		5,013
EARNINGS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS:
Basic	$                     1.91		$                     4.14		$                     3.86		$                     8.48
Diluted	$                     1.89		$                     4.08		$                     3.83		$                     8.35
Cash dividends declared per share	$                     0.20		$                     0.20		$                     0.40		$                     0.40

 

PREFORMED LINE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
		June 30, 2024		December 31, 2023
(Thousands of dollars, except share and per share data)		(Unaudited)
ASSETS
Cash, cash equivalents and restricted cash		$                       47,424		$                        53,607
Accounts receivable, net		101,460		106,892
Inventories, net		141,812		148,814
Prepaid expenses		7,394		8,246
Other current assets		6,983		7,256
TOTAL CURRENT ASSETS		305,073		324,815
Property, plant and equipment, net		200,441		207,892
Goodwill		27,901		29,497
Other intangible assets, net		11,059		12,981
Deferred income taxes		7,721		7,109
Other assets		20,392		20,857
TOTAL ASSETS		$                     572,587		$                      603,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable		$                       42,945		$                        37,788
Notes payable to banks		6,938		6,968
Current portion of long-term debt		2,812		6,486
Accrued compensation and other benefits		24,398		28,018
Accrued expenses and other liabilities		26,891		32,057
TOTAL CURRENT LIABILITIES		103,984		111,317
Long-term debt, less current portion		28,820		48,796
Other noncurrent liabilities and deferred income taxes		23,565		26,882
SHAREHOLDERS' EQUITY
Common shares – $2 par value per share, 15,000,000 shares authorized, 4,913,496 and 4,908,413 issued and outstanding, at June 30, 2024 and December 31, 2023		13,711		13,607
Common shares issued to rabbi trust, 238,787 and 243,118 shares at June 30, 2024 and December 31, 2023, respectively		(10,233)		(10,183)
Deferred compensation liability		10,233		10,183
Paid-in capital		62,361		60,958
Retained earnings		537,079		520,154
Treasury shares, at cost, 1,941,690 and 1,894,419 shares at June 30, 2024 and December 31, 2023, respectively		(124,269)		(118,249)
Accumulated other comprehensive loss		(72,664)		(60,306)
TOTAL PREFORMED LINE PRODUCTS COMPANY SHAREHOLDERS' EQUITY		416,218		416,164
Noncontrolling interest		-		(8)
TOTAL SHAREHOLDERS' EQUITY		416,218		416,156
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$                     572,587		$                      603,151

 

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SOURCE Preformed Line Products

FAQ

What were Preformed Line Products' (PLPC) Q2 2024 net sales?

Preformed Line Products reported net sales of $138.7 million for Q2 2024, a 24% decrease from $181.8 million in Q2 2023.

How did PLPC's net income change in Q2 2024 compared to Q2 2023?

PLPC's net income for Q2 2024 was $9.4 million ($1.89 per diluted share), down from $20.5 million ($4.08 per diluted share) in Q2 2023, representing a 54% decrease.

What factors contributed to PLPC's sales decline in Q2 2024?

The sales decline was primarily due to a slowdown in spending in the communications end market, higher borrowing costs, delays in BEAD stimulus funding, and inventory de-stocking by customers.

How did PLPC's gross profit margin change in Q2 2024?

PLPC's gross profit margin decreased by 460 basis points to 31.9% in Q2 2024 compared to the same quarter in 2023.