Aegion Corporation AEGN announced a business update on its balance sheet position in second-quarter 2020. Notably, the company reaffirmed its second-quarter adjusted EPS guidance of 20-30 cents per share.
As of Jun 30, it had a cash balance of more than $85 million backed by successful cost-management techniques. This enabled the company to repay approximately $40 million of debt in the second quarter. Net debt at June-end was about $175 million, the lowest level in the past four years. On Apr 9, it expanded covenant flexibility and increased borrowing capacity by more than $100 million for the next 12 months.
Backed by a strong balance sheet position and its ability to generate cash, the company announced cancellation of its temporary move to cut salary, undertaken during the second quarter in response to the COVID-19 crisis. The cancellation resulted in a pre-tax expense of $2.5 million or 6 cents per share in the second quarter. Nonetheless, it achieved cash savings of approximately $5 million as a result of the salary reduction.
As a result of increased pre-tax expense, the company anticipates profits to be at the lower end of the guided range for the second quarter. Results for the quarter are expected to release in late July. Charles R. Gordon, Aegion’s president and CEO, said, “While we continue to exercise caution in this uncertain environment with a number of savings initiatives still in place, we are confident in our ability to successfully weather this crisis and continue to differentiate ourselves as a leader in the markets we serve.”
Restructuring Initiatives to Offset Coronavirus Headwinds
Aegion is currently banking on a five-year restructuring plan. The realigned company is streamlined and more integrated with less exposure to international and lumpy project-based businesses.
In July 2017, Aegion’s board of directors had approved to realign and restructure the business. It also announced a series of strategic actions targeted to generate more predictable and sustainable long-term earnings growth. In 2018 and 2019, management had approved additional initiatives that included the decision to divest or otherwise exit multiple Infrastructure Solutions international CIPP contract installation operations and Corrosion Protection international businesses, as well as take actions to further optimize operations within North America, including measures to cut overall operating costs.
Aegion remains well positioned for 2020 — given market tailwinds and growth opportunities — and expects significant earnings growth during the year. The stock has improved impressively in the past month. Although it has underperformed the industry in the said period, the uptrend in the company’s share price is encouraging. The recent announcement is also adding to the bliss.
Aegion — which shares space with TopBuild Corp. BLD, Armstrong World Industries, Inc. AWI and Gibraltar Industries, Inc. ROCK in the same industry — currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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