Arcosa Reports Strong First Quarter, Withdraws 2020 Guidance
Barge-builder and infrastructure company Arcosa reported a strong first quarter, with double-digit growth, thanks in large part to its barge business, but it withdrew its guidance for the rest of 2020 due to uncertainties created by the coronavirus crisis.
In the first quarter ending March 31, revenues increased 19 percent to $488.2 million, and net income was $31.6 million, with diluted earnings per share of $0.65. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 29 percent to $75.6 million.
Commenting on first quarter performance, Arcosa President and CEO Antonio Carrillo said, “Our first quarter results demonstrate Arcosa’s outstanding earnings power when infrastructure markets are strong. Our construction products businesses had an excellent quarter, with the Cherry acquisition exceeding our expectations.” Arcosa bought Houston-based Cherry Industries Inc., which produces natural and recycled aggregates and has 12 Houston locations, in a deal worth $298 million in December.
“The performance of the Cherry acquisition exceeded our expectations, reflecting strong Houston market fundamentals and outstanding execution during the integration,” the company said.
In the first quarter, Carrillo said, “Energy equipment executed very well, and our barge business continued to ramp up to meet higher levels of demand. Our experienced management team has led our businesses through numerous cycles. As the macroeconomic outlook changed during the quarter, we responded quickly to conserve cash by minimizing non-essential capital expenditures, tightening our working capital management around receivables, payables and inventory, and reducing our SG&A spending. We will continue to take appropriate actions on our cost structure.”
Barge Revenues Drive Growth
First quarter revenues in the transportation segment increased 20 percent to $117 million, driven by an 80 percent increase in barge revenues. Deliveries were higher for both dry and liquid barges during the first quarter. Barge margins increased from improved profitability in the backlog, strong operational performance and the 2019 start-up of the company’s Madisonville, La., plant.
The barge business received orders for $90 million, representing a book-to-bill ratio of 1.0. New orders consisted of both dry and liquid barges, with liquid barges constituting the largest portion of new orders. The barge backlog was $348.3 million, compared to $346.9 million at year end 2019. Approximately 90 percent of the backlog is scheduled to deliver in 2020.
Like other companies, Arcosa is observing new practices and precautions due to COVID -19. “Our highest priority is the health and safety of our employees and communities; protocols are in place at plants and offices that meet or exceed Centers for Disease Control (CDC) and other guidelines,” the company said. “Our businesses support critical infrastructure sectors, as defined by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.”
Plants have continued to operate throughout the crisis.
“Above all else, we are committed to the health and safety of our employees and the communities in which we operate,” Carrillo said. “Our facilities are following the highest standards of health and safety, as we continue to produce products that are critical for North American infrastructure.
“We have entered this period of economic uncertainty in a strong financial position,” he continued. “We have low leverage, ample liquidity and a lean operating model to respond quickly to changes in demand. Our strong balance sheet will help us manage through this crisis and seek disciplined acquisition opportunities, where appropriate. I am extremely proud of our team’s dedication and resilience during this challenging period.”
“As demonstrated by our strong first quarter performance, we were on track to meet our full year 2020 revenue and adjusted EBITDA guidance,” Carrillo said. “In addition, our backlog businesses benefit from solid production visibility, and 2020 expectations for these businesses remain largely unchanged.
“However, given the macroeconomic uncertainty from COVID-19 and the unknown duration and impact of the slowdown, we are withdrawing our 2020 revenue and adjusted EBITDA guidance,” he said In particular, “The [construction] outlook for the rest of 2020 will depend on the duration and magnitude of the COVID-19 economic slowdown and its impact on public and private construction activity in our key markets.”