Applied Sees Flat 4Q Sales as Organic Slides, Reports 2 Acquisitions (2024)

Author

• MDM Staff

Date

• August 15, 2024

• TypeNews

Fluid power, power transmission and automation products distributor Applied Industrial Technologies reported its 2024 fourth quarter (April-July) and full-year financial results on Aug. 15, along with announcing a pair of acquisitions.

Fiscal 4Q Results

For the three months ended June 30, Applied posted total sales of $1.2 billion that were up approximately 0.2% year-over-year. Acquisitions drove most of the increase (1.5%) and a positive 0.8% selling day impact, offset by a negative 0.1% impact from foreign currency translation.

The company’s 4Q organic sales declined 2.0% year-over-year, a decrease from 3Q’s 0.7% improvement. Applied said the organic decline reflected a 0.7% decrease in its Service Center segment and a 4.6% decrease in its Engineered Solutions segment.

Applied’s 4Q gross margin was 30.7%, up year-over-year, which was attributed to strong execution and positive margin momentum within an “ongoing muted demand backdrop.”

The company’s 4Q EBITDA was $153.5 million, up 9.6% year-over-year. Sequentially, it topped 3Q’s $135.7 million.

“Gross margins exceeded 30% and EBITDA margins exceeded 13% for the first time, both significant milestones,” Applied President & CEO Neil Schrimsher said in the company’s financial release. “These results provide further evidence of the benefits our strategy, ongoing evolution and operational discipline can deliver in any environment, as well as the margin improvement potential ahead as we continue to leverage our differentiated industry position and internal initiatives.”

Applied’s 4Q operating profit of $139 million increased from the $121 million of a year earlier, while net profit of $103 million increased from the $92 million a year prior.

Full-Year 2024 Results

For the 12 months ended June 30, Applied’s full-year total sales of $4.5 billion increased 1.5% year-over-year, 0r 0.4% on an organic daily basis.

“We are increasingly confident in the opportunity developing beyond our intermediate-term annual objectives of $5.5 billion in sales and 13% EBITDA margins considering fiscal 2024 margin performance, nearly $2 billion of current balance sheet capacity, and the increasing critical role we are playing across the North American industrial sector,” Schrimsher said about its fiscal 2025 outlook.

The company’s net income of $382.7 million was up 11.4% year-over-year. Gross margin of 29.8% increased .7% year-over-year.

The company’s full-year EBITDA of $553.3 million was up by 5.5% year-over-year.

“Our track record over the past five years highlights the power of our strategy and value creation potential,” Schrimsher added in the financial release. “This includes respective EBITDA and EPS compounded annual growth of 11% and 17%, EBITDA margin expansion of nearly 300 basis points, more than $1.3 billion in free cash generation and a meaningful increase in our returns on capital. We look forward to expanding on this progress in fiscal 2025 and years to come.”

Acquisitions

Alongside the financials, Applied announced that it acquired Fairfield, NJ-based Total Machine Solution (TMS) and Twinsburg, OH-based Stanley Proctor. Terms weren’t disclosed for either deal, but Applied said they are expected to generate combined annual sales of about $17 million in their first year post-transaction.

TMS — a provider of electrical and mechanical power transmission products and solutions — will be integrated into Applied’s U.S. Service Center operations.

Stanley Proctor — a hydraulic and instrumental components distributor — will join Applied’s Fluid Power Operations.

“Of note, TMS will supplement our growth potential in the U.S. Upper Northeast with local customer focus and capabilities across the Food & Beverage vertical,” Schrimscher explained. “Stanley Proctor brings specialization and capabilities in the design and assembly of hydraulic power units, as well as fluid power rebuild and repair services. We look forward to their contribution to Applied’s performance.”

2025 Outlook

In releasing its 2025 fiscal guidance, Applied said it expects full-year sales growth of between +2.5% and -2.5%, including +1.0% to -4.0% in organic daily sales growth and EBITDA margin of 12.1% to 12.3%.

• Filed In: Power Transmission/Motion Control/Fluid Power, News, Motion and Flow Control Products, Facilities Maintenance (MRO), Earnings

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