Irrigation and infrastructure OEM and technology provider Lindsay Corp. posted declining year-over-year irrigation revenue as unit volume returns to normal seasonality.
Lindsay’s North American irrigation revenue for the second quarter of 2023 were $90.4 million, down 10.2% from Q2 last year, according to the company’s Tuesday earnings release. Total segment revenue for the quarter was $147.8 million, down 18.2% YoY, with the company crediting the decline to a reduction in unit sales.
“A decline in unit sales volume was partially offset by the impact of higher average selling prices, while prior-year unit volume was bolstered by a pull forward of orders in advance of announced selling price increases,” Brian Ketcham, senior vice president and chief financial officer of Lindsay, said during the company’s earnings call Tuesday. “Current-year unit volume reflected a return to a more traditional seasonal demand cadence as selling prices have stabilized over the past few quarters.”
AgDirect, Diversified Financial and Agricredit Acceptance are three of Lindsay’s preferred equipment financing partners, according to the OEM’s website.
The return to more traditional seasonal demand coincides with a decline in net farm income, the U.S. Department of Agriculture’s broad measure for profits in the farming industry, which is closer to traditional levels following the pandemic.
Net farm income, is forecast at $136.9 billion for the 2023 calendar year, down 15.9% year over year in nominal dollars, according to the U.S. Department of Agriculture.
Net farm income is forecast to decrease 18.2% in 2023 after adjusting for inflation, but in 2023 it would still be 26.6% above its 20-year average (2002–2021) of $108.1 billion in inflation-adjusted dollars.
Infrastructure segment revenue declines slightly
Infrastructure segment revenues, which includes the company’s highway and railroad equipment and products, for the second quarter of fiscal 2023 were $18.5 million, a decrease of 4.6% YoY, according to the release.
A YoY increase in lease revenue for the Road Zipper System, a barrier transfer system that allows barriers to be moved to adjust for traffic flow, was more than offset by lower sales of road safety products and negligible change in Road Zipper project sales.
Lindsay sees Road Zipper leasing as a growth opportunity, but inflation concerns could impact that growth, Ketcham said.
“One of the areas that we expect to see some growth in the second half of the year is in the Road Zipper leasing side of the business, as Road Zipper gets involved with some of those construction projects, but timing can vary,” Ketcham said. “I think the inflation that we’ve seen that’s impacting some of the costs of some of these construction projects that have, in some cases, resulted in the projects going back and getting rebid, that kind of plays into some of the timing.”
Total backlog also declines
The backlog of unfilled orders as of Feb. 28 was $95.2 million, down 14.2% compared with the prior year, according to the company’s earnings release. The irrigation backlog is lower while the infrastructure backlog is higher compared with the prior year, with pull orders from the previous year being the primary difference, Ketcham said.
“A year ago, coming into the [second] quarter, both international and North America, we had stronger backlogs as that pull ahead in orders to try to beat the price increases was going on, and we’ve seen the prices stabilize in both markets,” Ketcham said.
An increase in government activity should also provide a boost to its infrastructure segment, Lindsay President and Chief Executive Randy Wood said on the company’s earnings call.
“As government spending increases in response to the Infrastructure Investments and Jobs Act, states should see additional funding flow from the federal programs,” Wood said. “We are well-positioned in the market to supply state and local government programs as the construction season starts this spring.”
Shares of Lindsay Corp [Nasdaq: LNN] were trading at $127.99 at market close today, down 4.35% or $5.82 from market open. BRP has a market capitalization of $1.41 billion.
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