Q3 Sales In Line with Prior year, Rebound Expected in Q4, Transformation Plan Underway
American Vanguard Corporation (NYSE: AVD) today announced financial results for the third quarter and nine months ended September 30, 2023, and a transformation plan for future growth, operational efficiency and profitability.
Flat Quarterly Sales in Spite of Global Destocking
Chairman and CEO, Eric Wintemute stated: “With respect to our financial performance, in spite of global destocking by customers to limit inventory carrying costs, we recorded sales that were about even with those of the prior year quarter. With channel inventory at historic lows, sales of our premier corn soil insecticide Aztec were strong, as were those of soil fumigants used on high-value crops in the Pacific Northwest. Within our US non-crop business, we are seeing more normalized trends in nursery, ornamental and professional products. Our International businesses are still feeling the effects of low-priced generic products in certain regions (especially Central America), while Mexico and Australia remain strong.”
Fourth Quarter Expected to Rebound
Mr. Wintemute added, “As we reported in our last earnings call, we anticipate improved sales and profitability in the fourth quarter as compared to the first nine months of this fiscal year. Even now, early in the quarter, we are experiencing strong sales, particularly within our US Crop business. This is the quarter in which many of our customers make commitments in order to qualify for program discounts, including early pay. In light of stronger US crop demand, more normalized US non-crop demand and continued international pressure, we are targeting full year financial performance as per the table in the link below.”
Company Announces Three-Part Transformation Plan for Growth and Profitability
Mr. Wintemute continued, “We are committed to returning greater value to investors despite current market conditions. To that end, members of the board and senior management have developed a three-pronged plan to improve operating leverage and align people and processes with enhanced profit. First, we have taken time one on-one with each functional group to scrutinize operating expenses and identified approximately $15 million in operating profit and interest savings to which we will be holding our managers accountable. These measures include enhanced working capital management, greater factory efficiency, reduced operating expenses, decreases in freight and raw materials expense and lower debt and interest expense.”
“Second, working with our ERP sponsor, QAD, and global business consultant, Kearney, we are implementing a complete digital transformation across all business centers and processes. Through this initiative, we will improve data integrity, enhance accounting efficiency and improve management reporting so that we can make faster, better-informed decisions in the face of volatile markets, supply chains, climate and geopolitical shifts.”
“Third, we are launching an organizational transformation in which we evaluate how we are structured, how we are incentivized to operate and how we can best gain the greatest efficiencies and operating leverage. To that end, the Company has initiated a search (led by our newly-appointed Senior Vice President of Human Resources, Shirin Khosravi) for a Chief Transformation Officer who, working with both our internal team and external consultants, will lead the transformation project, recommend and implement appropriate changes and define key performance indicators to achieve better business results.”
2024 Targets Significant Improvement
Mr. Wintemute continued, “There is a general sense of optimism for 2024 within the Agriculture industry. Commodity prices remain relatively stable, the farm economy is sound, interest rates appear to have peaked, and we have observed strong demand for proprietary products, of which we have many in our portfolio. For that reason, we are targeting 8% - 12% growth in sales and 25% - 35% growth in adjusted EBITDA for full year 2024. We will provide greater clarity on our outlook for 2024 and beyond this January.”
Mr. Wintemute stated further, “In light of higher interest expense and in order to ensure that we have ample borrowing capacity from our senior credit facility, we reached out to our senior lenders, led by BMO, to negotiate an expansion of our financial covenants. I am pleased to report that our senior lenders were, as usual, very supportive and have agreed to an amendment that gives us a secure runway through September 2024. We thank BMO and our other lenders for their support.”
Mr. Wintemute concluded, “Times like this call for more effort, more innovation and more openness to change. We will continue to draw from our experience to provide high value products to our customers, to exercise strict financial discipline and to invest in our digital platform while transforming our global business into an optimized, agile and efficient enterprise. Please join us for our upcoming earnings call, during which we will give you more detail on our plans, our performance and our outlook.”
Eric Wintemute, Chairman & CEO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results and strategic themes at 5 pm ET on November 8, 2023. Interested parties may participate in the call by dialing 201-493-6744. Please call in 10 minutes before the call is scheduled to begin and ask for the American Vanguard call. The conference call will also be webcast live via the News and Media section of the Company’s web site at www.american-vanguard.com. To listen to the live webcast, go to the web site at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the Company’s web site.
About American Vanguard
American Vanguard Corporation is a diversified specialty and agricultural products company that develops, manufactures, and markets solutions for crop protection and nutrition, turf and ornamentals management, commercial and consumer pest control. Over the past 20 years, through product and business acquisitions, the Company has expanded its operations into 21 countries and now has over 1,000 product registrations in 56 nations worldwide. Its strategy rests on three growth initiatives – i) Core Business (through innovation of conventional products), ii) Green Solutions (with over 130 biorational products – including fertilizers, microbials, nutritionals and non-conventional products) and iii) Precision Agriculture innovation (including SIMPAS prescriptive application and Ultimus measure/record/verify technologies). American Vanguard is included in the Russell 2000® and Russell 3000® Indexes. To learn more about American Vanguard, please reference the Company’s web site at www.american-vanguard.com.
The Company, from time to time, may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the Company’s management and are subject to various risks and uncertainties that may cause results to differ from management’s current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time-to-time in the Company’s SEC reports and filings. All forward-looking statements, if any, in this release represent the Company’s judgment as of the date of this release.
American Vanguard Corporation
William A. Kuser, Director of Investor Relations