Low commodity prices are still keeping pressure on demand for irrigation equipment in the US and internationally, equipment maker Lindsay said, as its latest set of financial results missed analysts revenue and earning expectations.
Lindsay chief executive Rick Parod said that the market for irrigation equipment in North America, which should now be in the midst of its seasonal peak, is under pressure to tight farm budgets.
“While we have seen signs of stabilization, the market continues to reflect reductions from peak periods in farmers’ investments in equipment due to the lowest projected net farm income since 2002,” Mr Parod said.
Lower farm income
“The irrigation markets continue to be constrained by lower commodity prices and foreign exchange rates,” said Mr Parod.
Lindsay noted that net US farm income is expected to be down 3% in 2016, at $54.8bn, with an “increase in grain stocks compressing commodity prices”.
Still, he expressed hopes that long-term prospects “remain positive” thanks to “population growth, expanded food production, efficient water use and infrastructure upgrades and expansion”.
In overseas markets, Lindsay said that low commodity prices could delay the implementation of large irrigation projects.
Falling profits
In the three months to February 29, Lindsay reported revenues down 15% year-on-year, at $120.6m, short of analyst expectations of $123.8m.
The company made a net loss of $4.1m, or $0.37 per share, compared to a profit of $9.0m in the same period last year.
Analysts were looking for profits of $0.56 a share.
Overseas pressure
Revenues from the company’s irrigation equipment business were down 5%, at $103.1m.
True, in the US irrigation revenues rose by 6%, “primarily due to revenues from acquired companies, including Elecsys Corporation,” Lindsay said.
But overseas Irrigation sales fell by 24%, in part due to weakening overseas currencies.
“Excluding the effect of currency translation, international irrigation sales declined 15%, most significantly in Brazil and several export markets,” Lindsay said.
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