SIOUX FALLS, S.D. — As the precision ag marget continues to slump, Sioux Falls, S.D.-based Raven Industries Inc., saw revenue in its Applied Technologies Division dip during the second quarter of the 2016 fiscal year.
According to a report from Marketwatch, net sales for Applied Technology in the second quarter of 2016 were $20.4 million, down 43.7% vs. the second quarter of 2015. Notably lower end-market demand conditions continue to impact the sales development of the division. Sales to OEM's and the aftermarket declined by approximately 50% and 35%, respectively, in the second quarter.
Operating income was $4.0 million, down $4.8 million or 54.2% vs. the second quarter of 2015. The decline was mostly due to significantly lower sales volume year-over-year. Although restructuring efforts and cost containment actions are reducing expenses as planned, reduced leverage of fixed manufacturing costs due to seasonally lower sales in the second quarter drove division profit margins lower sequentially. Conversely, operating margin is expected to benefit from increased fixed cost leverage as sales volumes increase in the future.
"As we expected, the market dynamics in the second quarter were little changed versus what we experienced in the first quarter," said Raven President and CEO Dan Rykhus. "While corn prices climbed to a one-year high during the quarter, it was short-lived and not sustained. Unfortunately, it will take time for the market to return to a more balanced and stable demand profile where growth in precision agriculture markets can resume."
To read the full report on Raven's second quarter fiscal results, visit www.marketwatch.com.