Alamo buys another truck maker as industrial sales slip

Alamo Group has added a British road-maintenance truck maker to its industrial division. But its latest quarterly results show that the business it is expanding has lost some momentum.

Industrial Equipment sales fell 5.8% in Q3. Without the contribution from Petersen Industries, acquired in January, the decline would have been about 12.6%, Alamo said.

The other division is providing the cushion

A year ago, industrial sales were growing 17% while Alamo worked to improve its struggling Vegetation Management division, which makes mowing, land-maintenance and tree-care equipment. The latest quarter looks different.

Research by Ticker Byline shows that the vegetation division's profit improvement offset about 62% of the industrial division's decline on Alamo's adjusted EBITDA measure. That measure removes interest, taxes, depreciation, amortization and selected other items.

Industrial adjusted EBITDA fell by $7.1 million to $31.1 million. Vegetation added $4.4 million, reaching $21.3 million. Together, the two divisions generated $52.4 million, down from $55.0 million a year earlier.

Why the industrial margin narrowed

Alamo attributed the industrial sales decline to softer markets and the timing of orders earlier in the year. Higher material and freight costs squeezed margins, and price increases lagged those costs during the quarter. Lower sales also left fewer dollars to cover fixed costs.

There was a better signal in new orders. Chief Executive Officer Robert Hureau said order intake strengthened during Q3, particularly for vacuum trucks and sweepers.

Vegetation's reported sales fell 1.5%, but that included a $7.3 million reduction related to business exits. Excluding that item, sales rose 2.7%. Alamo credited improved manufacturing output in several businesses.

A large charge does not explain everything

Net income fell to $2.0 million from $25.4 million. The quarter included $33.3 million in net pretax charges tied to selling or winding down businesses and product lines, including Dixie Chopper and Boxer.

After Alamo's adjustments, net income was $24.9 million, still below last year's $28.2 million. The business exits explain much of the gap between reported and adjusted profit, but the industrial slowdown remains visible in the adjusted figures.

The acquisition comes after the quarter

Alamo completed its purchase of Econ Engineering on October 27 for a base price of £120 million, about $158.7 million, plus closing adjustments. Econ makes salt-spreading, de-icing and road-repair equipment and operates a rental fleet.

The deal was financed through Alamo's revolving credit facility. The $230.7 million of cash and $232.3 million of debt reported at September 30 precede that borrowing.

The Alamo company profile tracks the divisions, cash flow, order backlog and completed acquisitions as the portfolio changes.