Arcosa Announces Double-Digit Revenue Growth In Third Quarter
Barge-builder and infrastructure firm Arcosa Inc. reported increased dry barge margins and double-digit growth in revenues in the third quarter but saw a weakness in liquid barge orders, which it ascribed to the demand-driven crisis in the oil industry due to COVID-19.
Arcosa reports its financial results in three principal business segments: the Construction Products Group, the Energy Equipment Group and the Transportation Products Group, which includes barges and railcars.
“Order and inquiry activity was mostly positive during the third quarter, with the exception of liquid barges,” President and CEO Antonio Carrillo said. The company was bolstered by $154 million of wind tower orders and experienced strong demand across utility, traffic and telecom structures, and construction activity remained robust in most of its key markets.
In its Transportation Products division, the company reported third-quarter revenues of $120.7 million, unchanged year-over-year. Barge revenues increased 28 percent, driven by increased hopper barge deliveries. Rail components revenues declined by 51 percent year-over-year but were roughly flat with the second quarter. Barge margins increased due to improved profitability in the backlog and strong operational performance that more than offset weakness in the components business.
Lower demand for refined products including gasoline and jet fuel and low oil prices have negatively impacted order inquiries for liquid barges, Carrillo said, adding, “Recovery in the tank barge market will likely depend on the shape and timing of a broader economic recovery.”
“We have also been encouraged by significantly improved fundamentals in the dry barge market, driven by increased grain movements and higher freight rates. On the other hand, the liquid barge market remains weak as refined products, petrochemicals and crude oil movements have not yet recovered from the pandemic. We are strategically extending our backlog to stay flexible and allow time for a recovery while also investing in innovation to drive additional traffic on the inland river system.”
“Our construction products group reported growth across all key metrics, driven by continued strong performance by Cherry and our aggregates business, and our barge business benefitted from significant operating efficiencies that led to impressive margins.” The company said it was “taking steps to reduce our capacity to align with lower anticipated production levels in 2021 while remaining flexible to allow time for the fundamentals of the barge business to overcome COVID-related weakness in the market.”
The barge business received orders of $18 million in the quarter, consistent with the level received in the second quarter but well below pre-pandemic levels. The company said it has seen “a recent uptick in inquiries, and since the end of the quarter, we have received an additional $32 million of orders for barges to be delivered in 2021.”
“The underlying fundamentals for a dry barge replacement cycle remain in place, and the recent strong harvest and improving grain pricing have improved customer confidence,” the company said. The barge backlog was $177.5 million, compared to $258.7 million at the end of the second quarter.