Argan Inc (AGX) Reports Mixed Q3 Fiscal 2024 Results Amidst Operational Challenges
Argan Inc (NYSE:AGX) sees a 39% revenue increase in Q3 but faces a decline in gross profit margin.
Net income falls to $5.5 million from $7.8 million in the same quarter last year.
Company's backlog decreases to $730 million, with a significant loss attributed to the Kilroot project.
Argan Inc (NYSE:AGX) announces a 20% increase in quarterly dividend amidst operational challenges.
On December 6, 2023, Argan Inc (NYSE:AGX) released its 8-K filing, detailing the financial outcomes for the third quarter of fiscal year 2024, which ended on October 31, 2023. Despite substantial revenue growth, the company faced a decline in gross profit and net income, primarily due to operational and contractual challenges at its international subsidiary, Atlantic Projects Company (APC).
Financial Performance Overview
Argan Inc (NYSE:AGX) reported a significant revenue increase for the third quarter, with revenues rising by 39% to $163.8 million compared to $117.9 million in the same period last year. However, gross profit decreased to $19.2 million, representing a gross margin of 11.7%, a notable drop from the 18.8% margin reported in the prior year's quarter. Net income also fell to $5.5 million, or $0.40 per diluted share, from $7.8 million, or $0.56 per diluted share, in the comparable quarter of the previous fiscal year.
For the nine months ended October 31, 2023, Argan Inc (NYSE:AGX) saw revenues climb to $408.8 million, up from $336.3 million in the prior year. However, gross profit for the period declined to $57.2 million, with a gross margin of 14.0%, compared to a gross margin of 19.7% for the same period last year. Net income for the nine-month period was slightly higher at $20.3 million, or $1.50 per diluted share, compared to $19.5 million, or $1.36 per diluted share, in the previous year.
Operational Challenges and Strategic Focus
David Watson, President and CEO of Argan Inc (NYSE:AGX), acknowledged the challenges faced by the company, particularly the pre-tax loss of approximately $10.7 million associated with the Kilroot Power Station project due to various factors including supply chain delays and the impact of the COVID-19 omicron outbreak.
Naturally, we are disappointed by these developments and are focused on navigating the completion of this project by early next year and making every effort to mitigate these losses to improve the final results of the project,
Watson stated.
Despite these setbacks, Watson highlighted the company's diverse capabilities in energy facility design and construction, which positions Argan Inc (NYSE:AGX) to capitalize on the growing demand for reliable power grids and emergency power resources. The company's backlog, although reduced to $730 million from $822 million, is expected to increase in the fourth quarter and the following year.
Balance Sheet and Shareholder Returns
Argan Inc (NYSE:AGX) maintains a strong balance sheet with cash, cash equivalents, and investments totaling $397.5 million, and no debt. The company's net liquidity stands at $240.2 million. In a move to enhance shareholder value, Argan Inc (NYSE:AGX) has increased its quarterly dividend by 20% and continues its active $125 million share repurchase program.
Looking Ahead
While the company faces challenges, particularly with the Kilroot project, Argan Inc (NYSE:AGX) remains focused on completing existing projects and pursuing new opportunities. The company's strong financial position and commitment to returning value to shareholders through dividends and share repurchases reflect confidence in its long-term prospects.
Investors and interested parties were invited to participate in a conference call and webcast hosted by Argan Inc (NYSE:AGX) on December 6, 2023, to discuss the quarterly results and future outlook.
For a detailed view of Argan Inc (NYSE:AGX)'s financial statements and further insights into the company's performance, readers are encouraged to review the full earnings report and listen to the webcast replay available on the company's website.
Explore the complete 8-K earnings release (here) from Argan Inc for further details.
This article first appeared on GuruFocus.
