Diversified specialty chemicals maker American Vanguard Corp. (AVD) reported a healthy increase in its second-quarter 2012 profit on the back of strong market demand for its products.
The California-based company posted earnings of 30 cents a share in the quarter, which topped the Zacks Consensus Estimate by a nickel and exceeded the year-ago quarter’s earnings of 22 cents. Profit surged 46% year over year to $8.7 million, buoyed by higher demand for its soil fumigants and insecticides.
Revenues rose 6% year over year to $84.8 million, but missed the Zacks Consensus Estimate of $86 million. Gross margin rose to 45.2% from 39.6% a year ago, aided by the company’s sales and marketing efforts and operational efficiency.
Operating expenses climbed 14.8% year over year to $24.1 million. Operating margin rose to 16.8% from 13.3% a year ago as higher sales more than offset an increase in operating costs.
The company’s balance sheet remains healthy with cash increasing nearly five-fold year over year to $48 million. Long-term debt declined 21% year over year to $56 million.
American Vanguard said that it was relatively unaffected by the Midwest and Southwest drought in the second quarter. Moving ahead, the company sees that it is well placed to leverage the favorable market conditions in the remainder of 2012. It envisions continued demand for its post-harvest soil fumigants and cotton insecticides in the third quarter.
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 is leveraging the growing demand for soil insecticides as the U.S. corn growers contend with pest problems. Earnings momentum for the company looks to continue thanks to the favorable industry trends.
American Vanguard currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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