L.B. Foster Reaffirms Outlook as Quarterly Sales Slip
Gross margin widened 80 basis points to 22.3% despite weaker second-quarter sales.
L.B. Foster Co. (FSTR), a rail and infrastructure products and services provider, reported a 3.5% decline in second-quarter sales as weaker Rail Products demand outweighed growth in its technology-services business.
The quarter marked a reversal from the first quarter, when sales grew 23.9%. Revenue increased 14.4% sequentially to $138.6 million from $121.1 million, while first-half adjusted EBITDA remained 19.6% above the prior-year period.
Operating income fell 19.9% from a year earlier to $6.2 million, while net income rose 7.9% to $3.1 million and more than doubled sequentially. Adjusted EBITDA declined 4.7% to $11.7 million after rising 183.0% in the first quarter.
Rail segment sales fell 5.2% to $72.0 million as Rail Products revenue dropped 27.3% because of large-order timing. Technology Services and Solutions growth accelerated to 66.9%, driven by short-term U.K. project work and a shift toward projects with higher profitability and lower working-capital needs. Rail gross margin expanded 70 basis points to 20.6%.
Infrastructure sales declined 1.5%, following 5.9% growth in the first quarter, while its gross margin widened 80 basis points to 24.1% on favorable mix and manufacturing efficiency. Precast sales rose 2.1%, and the decline in Steel Products moderated to 9.3% from 14.4% in the prior quarter.
New orders edged up 0.2% to $176.1 million after declining in the first quarter. Backlog rose 17.4% sequentially to $246.1 million, though it remained 8.8% below the prior year. Technology Services and Solutions orders more than doubled, while Rail Products orders fell 20.0%.
Operating cash flow increased 71.7% to $17.9 million, and free cash flow swung to positive $14.3 million from negative $13.4 million in the first quarter. L.B. Foster reduced total debt by $11.7 million sequentially to $48.0 million, lowering gross leverage to 1.0 times.
The company reaffirmed its full-year outlook, which calls for sales of $540 million to $580 million, adjusted EBITDA of $41 million to $46 million and free cash flow of $15 million to $25 million. The unchanged guidance incorporated L.B. Foster's exit from certain Tew Engineering product lines, which resulted in about $2.6 million of second-quarter costs.