Otter Tail Swings to Loss, Raises Adjusted Outlook
Revenue edged up to $334.4 million as manufacturing growth offset declines in the electric and plastics businesses.
Otter Tail Corporation (OTTR), the diversified utility and manufacturing company, swung to a second-quarter loss after a $103.5 million pretax settlement charge in PVC-pipe antitrust litigation pushed operating income below zero.
The charge obscured an improving outlook for Otter Tail’s manufacturing and plastics operations. The company raised adjusted earnings guidance for both segments as stronger volumes and better PVC-pipe pricing expectations outweighed a weaker corporate forecast.
Otter Tail reported a GAAP loss of $0.18 a share, compared with earnings of $1.85 a share a year earlier and $1.73 a share in the first quarter. Excluding the settlement, adjusted earnings were $1.66 a share, down 10% from a year earlier and 4% sequentially. Revenue was nearly flat at $334.4 million, versus $333.0 million a year earlier.
The electric business reversed its first-quarter gains. Revenue fell 5.8% to $121.3 million despite a 4.7% increase in retail electricity sales, while net income declined 2.6% to $18.7 million. Higher production-tax-credit pass-throughs, lower fuel-recovery and wholesale revenue, and increased outage, labor and depreciation costs offset rate increases and favorable weather.
Manufacturing supplied the quarter’s clearest growth. Revenue rose 12.4% to $88.5 million, helped by higher steel-cost pass-throughs and a 3% increase in volumes, while net income increased 31.3% to $4.6 million as product mix and fixed-cost leverage improved. Demand strengthened in recreational-vehicle, construction and horticulture markets after customer orders had begun recovering late last year.
Plastics revenue slipped 0.8% to $124.6 million as a 15% increase in volume nearly offset a 14% decline in average selling prices. Advance purchases ahead of announced resin-price increases and added capacity at the Phoenix facility supported shipments, while the PVC-pipe pricing decline moderated from the first quarter. Adjusted net income fell 11.2% from a year earlier to $47.1 million but increased about 43% sequentially.
Otter Tail now expects 2026 GAAP earnings of $3.84 to $4.24 a share, down $1.38 at both ends because of the settlement. Its new adjusted forecast is $5.68 to $6.08 a share, excluding a $1.84-a-share settlement impact. Manufacturing guidance rises to $0.32 to $0.38 a share, adjusted plastics guidance rises to $2.97 to $3.19, and the electric outlook remains $2.61 to $2.69.
First-half operating cash flow rose 15% to $182.7 million, while capital spending climbed 161% to $324.8 million as Otter Tail funded solar, wind-repowering and other electric projects. Available liquidity declined to $601.4 million at June 30 from $658.9 million three months earlier, leaving the accelerated investment program as the principal draw on the balance sheet.