Aug. 23, 2018

Sioux Falls-based Raven Industries grew net income by 67 percent in its second quarter of fiscal 2019, the company reported.

Earnings were $13.7 million, or 38 cents per share, compared with $8.2 million, or 23 cents per share, for the same time last year. Results include an effective corporate tax rate that was 12 percent lower this year, which lowered expenses by $2 million, and one-time costs of $800,000.

“We are very pleased with the strong second-quarter performances of all three operating divisions,” said Dan Rykhus, president and CEO.

Rykhus credited organic growth in Raven’s Aerostar division, new product success in its applied technology division and benefits of an acquisition in its engineered films division.

“We expect the underlying strength of our business to continue in the second half of the year, and we are on track to deliver another strong year of growth and improved profitability.”

Raven’s end markets are agriculture and energy. The ag sector is in its fifth year of lackluster profitability, according to the company’s earnings statement, which has “heavily influenced” customer demand over time.

The prevailing expectations are that the agriculture market will continue to endure low commodity prices. “Input costs have declined but not enough to materially impact farmer incomes,” it said.

“The company is operating under the assumption that the agriculture market will continue to endure low commodity prices over the short-to-intermediate term. However, the current agriculture equipment replacement cycle appears to be improving.”

The company also said it is closely monitoring the global trade environment and is working with suppliers “to find a viable solution to the impacts of changes in tariffs and is also working with its customers to pass on these higher costs through tariff surcharges,” it said.

“Concurrently with managing our input costs, we are also monitoring end-market demand implications. Although this situation remains dynamic, the company does not expect the new tariffs on steel, aluminum, fiber or electrical components to materially impact the company’s financial results. On the demand side, to the extent that trade policies suppress soybean prices, it could impact demand for the precision agriculture sector.”

Rykhus called Raven’s overall financial performance for the first quarter excellent and said the company is investing heavily in new product development, manufacturing and commercialization.

“We have a strong platform for organic growth, and we are making the right investments and expanding margins. We believe we are on track to deliver another strong performance in fiscal year 2019.”