American Vanguard's Earnings Trump Est, Profit Zooms

Zacks

Specialty chemicals maker American Vanguard Corp. (AVD) saw its first-quarter 2013 profit nearly double on the back of strong market demand for its corn herbicide and insecticide products.

The Newport Beach, Calif.-based company logged earnings of 59 cents a share in the quarter that trounced the Zacks Consensus Estimate by 19 cents and surpassed the year-ago quarter’s earnings of 31 cents.

American Vanguard posted a profit of $16.9 million in the reported quarter, a 94% surge from a profit of $8.7 million recorded a year ago. The bottom line was boosted by healthy demand for the company’s crop protection products. American Vanguard is leveraging the growing demand for soil insecticides as the U.S. corn growers contend with pest problems.

Revenues shot up 39% year over year to $121.5 million in the reported quarter, buoyed by strong adoption of the company’s granular soil insecticides and Impact herbicide in the domestic corn market. Sales topped the Zacks Consensus Estimate of $108 million.

Crop revenues jumped 45% year over year to $116 million. Insecticide (including both granular products and foliar insecticide) sales climbed 41% to $79 million. Revenues from the herbicides, fungicides and fumigant product group soared 68% to $33 million.

Gross margin rose to 44% in the reported quarter from 43% a year ago, aided by higher pricing and better product mix. Operating expenses climbed 20% year over year to $27.6 million, partly due to higher selling and administrative expenses. Operating margin rose to 21.5% in the reported quarter from 16.5% in a year ago as a healthy rise in sales more than offset higher operating costs.

American Vanguard ended the quarter with cash of around $10 million, down roughly 32% year over year. Total long-term debt decreased 15% year over year to $49.9 million.

American Vanguard is optimistic about 2013 and feels that it is well placed to meet the increasing demand for soil insecticides by maintaining full production of its products and proprietary equipment systems. The company is also expected to benefit from its herbicide co-marketing program with Monsanto (MON).

American Vanguard, in April 2013, completed its equity investment in life sciences company, TyraTech, Inc. The company invested $3.7 million to clinch a 29.46% stake in TyraTech. The investment achieves a major goal through the expansion of American Vanguard’s participation in the development of products derived from natural sources and penetration of such technologies in non-agricultural markets.

American Vanguard also recently received registration from the Environmental Protection Agency (:EPA) for SmartBlock, a breakthrough technology for preserving potatoes during storage.

American Vanguard makes specialty chemical products for agricultural and commercial applications. The company develops and markets an array of chemicals, including insecticides, fungicides and herbicides, for crops, human and animal health protection. American Vanguard has the largest assortment of corn soil insecticides coupled with the most advanced dispensing equipment.

American Vanguard currently carries a Zacks Rank #1 (Strong Buy).

Other companies in the specialty chemicals industry with a favorable Zacks Rank are American Pacific Corporation (APFC) and Ferro Corp. (FOE). While American Pacific holds a Zacks Rank #1 (Strong Buy), Ferro retains a Zacks Rank #2 (Buy).

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