Astec provides Q3 2015 results, pellet plant business update

By Anna Simet | October 23, 2015

Astec Industries Inc. has released its Q3 2015 financial results, reporting increases in gross profits, a decrease in net sales and also providing an update on the company’s wood pellet plant business.

Chief Financial Officer, Vice President and Treasurer David Silvious said that this quarter, Astec experienced a 4.2 percent increase or $1.8 million increase in consolidated gross profit from Q3 of last year, and a year-to-date gross profit of $173.4 million compared to $162.2 million last year. Net sales for the quarter were $211.4 million compared to $220.2 million in the third quarter of 2014, a decrease of 4 percent or an $8.8 million decrease.

CEO and President Ben Brock said the company is pleased with its third quarter results, given the challenges of lower oil prices, a global mining slowdown, the strong U.S. dollar and the absence of a long-term Highway Bill in the U.S.

During the call, Brock provided an update on the wood pellet plant Astec built in Hazlehurst, Georgia. “In addition to line one that is running, line two is now running and has also met the production target in early startup,” he said. “Line three is nearly installed, and full and near the testing phase.”

He said a slight delay was experienced in line three as the startup of line two required focus. As in previous financial results calls, Brock reminded investors that pellet plants are “a new product that we chose to finance. As a result, we recognize the revenue for this plant as we are paid. This will have an effect on our cash and our inventory until it is paid in full. And as a reminder, the order for all three lines was for $60 million.”

Brock said that as for the timing of receiving the revenue, the company has verbally agreed with the customer to allow them more time before taking Astec out of the financing. “We anticipate the final agreement to reflect full payment by mid-2017,” he said, adding that the interest rate on the note is six percent. “Our agreeing to the longer-term will help our customer obtain more favorable financing by mid-2017, if not before.”

Later in the call, Brock said the well over 100,000 tons of pellets out of the Hazenhurt plant’s first line have been sold, and  pellets out of line two are already being sold as well.

Brock also provided a brief update on the recent sale of a new $30 million pellet plant to Highland Pellets. “We are working to ship this order in the fourth quarter this year,” he said. Based on Astec’s current pellet plant quote activity and lengths of time it has taken from quote to contract on our previous orders, Brock said the company believes it will sell its next pellet plant in the first half of next year, an order that will be announced to the market when it is secured.