Lindsay Corporation, a global manufacturer and distributor of irrigation and infrastructure equipment and technology, has announced results for its second quarter ended on Feb. 28, 2023.
- Second quarter net earnings increased 24 percent to $18.1 million and EPS improved to $1.63
- Irrigation operating income increased 33 percent despite lower revenues
- Infrastructure operating income improves on increased Road Zipper System® lease revenue
"We are pleased with the significant earnings improvement we achieved in the second quarter, as we were able to deliver expanded profitability despite a decline in our top line compared to last year," said Randy Wood, president and CEO. "Lower revenues in our irrigation business were due to international project business in the prior year that did not repeat as well as seasonal volume shifts in North America and Brazil. However, improved price realization as a result of commercial pricing actions and reduced inflationary headwinds compared to the prior year contributed to operating income growth and margin expansion in both of our business segments."
"Our teams around the world continue to adapt to dynamic market conditions and remain focused on serving our customers, improving the quality of our business and driving innovation and value creation though our advanced technologies."
Revenues for the second quarter of fiscal 2023 were $166.2 million, a decrease of $33.9 million, or 17%, compared to revenues of $200.1 million in the prior year second quarter. Almost all of the decrease came from the irrigation segment as infrastructure revenues were down slightly.
Operating income for the quarter was $27.3 million, an increase of $9 million, or 49%, compared to operating income of $18.3 million in the prior year second quarter. Operating margin was 16.4% of sales, expanding 720 basis points compared to 9.2% of sales in the prior year quarter. The operating margin expansion was driven by strong gross margin improvement in both of our business segments. The increase was partially offset by higher operating expenses compared to the prior year second quarter, including higher employee compensation costs and increased investments in new product development.
Irrigation segment revenues for the second quarter of fiscal 2023 were $147.8 million, a decrease of $32.9 million, or 18%, compared to $180.7 million in the prior year second quarter. North America irrigation revenues of $90.4 million decreased $10.3 million, or 10%, compared to the prior year second quarter. The top-line decrease resulted from lower unit sales volumes as the prior year quarter experienced a pull forward of orders in advance of announced selling price increases, while the second quarter of 2023 reflected a return to a more traditional seasonal demand cadence. The impact of lower unit sales volumes compared to the prior year was partially offset by the positive impact of higher average selling prices.
International irrigation revenues of $57.4 million decreased $22.6 million, or 28%, compared to the prior year second quarter. The decrease resulted primarily from the completion of a large project in the prior year that did not repeat and lower sales volumes in Brazil, Ukraine and Russia compared to the prior year second quarter. Sales and order activity in Brazil were temporarily reduced as a result of the federal government transition following the October 2022 presidential election.
Irrigation segment operating income for the second quarter of fiscal 2023 was $32.8 million, an increase of $8.1 million, or 33%, compared to the prior year second quarter. Operating margin was 22.2% of sales, compared to 13.7% of sales in the prior year second quarter. Increased operating income and the 850 basis points of operating margin expansion was driven primarily by improved price realization, lower inflationary impact on input costs and a more favorable sales mix of international irrigation revenues compared to the prior year second quarter.
Wood concluded, "We are encouraged by the earnings and operating income results captured through the first half of our fiscal year, and we continue to see strength in U.S. net farm income. While domestic net farm income is projected to decline in 2023 from record levels in 2022, overall income remains at a historically high level and we believe it is supportive of continued investment in irrigation equipment. Demand strength across our international markets continues to be supported by expanded production driven by positive agricultural market fundamentals and continuing global concerns over food security and global grain supplies. Looking ahead to the balance of the year, we expect some impact from the market delays in Brazil to continue into our third quarter, however our full year outlook remains unchanged."
"We remain encouraged with the outlook for our infrastructure business due to anticipated increases in U.S. infrastructure spending and the strength of our sales funnel. While the timing of project execution can be difficult to predict, we will continue to actively manage the projects in our sales funnel and believe we are positioned to support continued growth in the infrastructure segment."
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