Nordson Corporation
CEO : Mr. Sundaram Nagarajan
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q3 | -2.0% YoY | -7.5% | -9.3% | 2023-08-22 |
Joseph Kelley says,
Q3 2023 Sales and Profitability
- Sales for Q3 2023 were $649 million, a decrease of 2% compared to the prior year’s Q3 sales of $662 million.
- Organic sales decreased by 5%.
- Gross profit totaled $360 million, or 56% of sales, comparable to the prior year.
- Operating profit, excluding non-recurring items, was $181 million, or 28% of sales, 4% below the prior year.
- EBITDA for Q3 was $208 million, or 32% of sales, $5 million below the prior year.
- Net income for Q3 was $128 million, or $2.22 per share.
- Adjusted earnings per share, excluding non-recurring costs, were $2.35 per share, a 6% decrease from the prior year.
Segment Performance
- Industrial Precision Solutions (IPS) sales of $338 million decreased 1% compared to the prior year, driven by softness in product assembly and nonwovens product lines in Asia.
- EBITDA for IPS was $122 million, or 36% of sales, a decrease of 3% compared to the prior year.
- Medical and Fluid Solutions sales of $171 million decreased 4% compared to the prior year, driven by softness in medical fluid components and fluid solutions product lines in Asia Pacific.
- EBITDA for Medical and Fluid Solutions was $68 million, or 40% of sales, a decrease of $8 million compared to the prior year.
- Advanced Technology Solutions sales were $140 million, a 3% decrease compared to the prior year, with organic sales volume down 13%.
- EBITDA for Advanced Technology Solutions was $33 million, or 24% of sales, an improvement compared to the prior year.
Balance Sheet and Cash Flow
- Generated $181 million in free cash flow in Q3.
- Cash ended the quarter at $143 million and net debt was $695 million, resulting in a 0.9 times leverage ratio based on the trailing 12 months EBITDA.
- Repaid $111 million of debt, paid $37 million in dividends, and spent $23 million on stock repurchasing.
Upcoming Acquisition of ARAG
- Expect to close the ARAG acquisition by the end of August.
- Projected net debt to EBITDA leverage ratio of approximately 2 times by the end of the year.
- Assume approximately $20 million to $30 million in revenue from ARAG in fiscal ’23, with EBITDA margins expected in the high-30% range.
- ARAG acquisition initially financed with a short-term loan and revolver borrowings, with a bond issuance in the public markets planned later this year.
Sundaram Nagarajan says,
Financial Results
- Sales were at the low-end of expected guidance range for the quarter.
- Adjusted earnings per share (EPS) for the quarter were $2.35, which was at the high-end of third quarter EPS guidance.
- Cost control measures were implemented in divisions where necessary, resulting in strong growth in divisions with strong market demand.
Electronics and Biopharma Product Lines
- Weakness in the electronics and biopharma product lines affected sales.
- Asia Pacific results were significantly impacted, with a 20% decline, particularly in the semiconductor and electronics assembly segments.
- These markets are cyclical, and a turnaround is expected in the middle of 2024.
Diversification of Business
- The company experienced double-digit organic growth in medical interventional solutions and polymer processing product lines.
- The test and inspection business also saw high-single-digit growth.
- Customers in the Americas and Europe are rebalancing their supply chains, leading to mid-single-digit organic growth in these regions.
Upcoming Enterprise Updates
- An acquisition of ARAG has been made, which will be discussed in more detail later.
Q & A sessions,
Medical Fluid Components Division:
- Expecting to anniversaries the supply chain destocking pressure in Q1 2024
- Cautiously expecting the division to return to its historical mid to high single-digit growth rate over time
Electronics End Markets:
- Expecting the CapEx spend cycle to turn in the second half of calendar 2024
- Expecting to benefit from customer investments in automation, memory, AI, and electronics new product innovation
- Successfully managing costs and staying invested in profitable growth opportunities
Asia Pacific Region:
- Monitoring sales weakness in China, largely related to the electronics exposure
- Not seeing significant moves out of China, but some rebalancing of supply chain to other regions of Asia, Americas, and Europe
- Well-positioned to support customers in diversifying their supply chains
Acquisitions and Revenue Guidance:
- Acquired revenue target of $500 million set for 2025 is nearly 80% achieved
- Acquired ARAG, a market leader in precision spraying technology for precision agriculture
- Expecting revenue growth of 0% to 2% over fiscal 2022 and adjusted earnings of $8.90 to $9.05 per share for 2023
End Market Expectations:
- Expecting electronics cycle to rebound in mid-calendar 2024, benefiting both T&I and EPS divisions
- Medical division seeing strong double-digit growth due to backlog and elective surgery returning to normal, expecting to settle into historical mid to high single-digit growth rate
- Biopharma division believed to have bottomed out and settling at current levels, cautious about the speed of returning to high-single-digit growth rate
No bad stock 