Alamo Group reported record net sales and income in the first quarter. The only downside was declining Ag Division sales during the first 3 months of the year.

Highlights for the Quarter included:

• Record net income for a first quarter of $15.3 million, up 4.6%
• Record net sales for a first quarter of $261.9 million, up 10.0%
• Industrial Division up 19.9%
• Agricultural Division down (9.3%)
• European Division up 6.5%
• Backlog remains strong at $257.8 million, including Dutch Power, up 8.4% compared to the previous year's first quarter

First Quarter Results

Alamo Group's net sales for the first quarter of 2019 were $261.9 million compared to net sales of $238.1 million in the first quarter of 2018, an increase of 10%. Net income for the quarter was $15.3 million compared to net income of $14.6 million, an increase of 4.6% in net income.

Alamo Group — Condensed Consolidated Statements of Income
($000s)

Industrial Division. Net sales for Alamo's Industrial Division in the first quarter were $158.4 million, an increase of 19.9% compared to net sales of $132.2 million in the first quarter of 2018. The Division's income from operations for the quarter was $16.5 million, compared to $11.8 million in the previous year's first quarter, an increase of 39.6%. The Industrial Division's first quarter results benefited from a generally robust demand for the company's products across all product lines and were further aided by a continuing strong level of backlog.

Agricultural Division. The company's Agricultural Division net sales in the first quarter were $53.2 million, compared to net sales of $58.6 million in in the first quarter of 2018, a decrease of 9.3%. Income from operations for the quarter was $2.2 million compared to $5.3 million in the first quarter of 2018, a decrease of 58.7%. The division's first quarter results were negatively impacted by lower farm incomes and general softness in the overall agricultural market which resulted in a weak start to 2019 sales activity, particularly in the month of January. Adverse winter weather conditions also contributed to the lower activity levels in the first quarter. In addition to lower sales volume, the division’s operating margin was negatively impacted by the carryover of prior year material cost increases, which had yet to have been fully offset by the effects of pricing actions, and a shutdown of the division's largest manufacturing facility for several days in January to install a significant upgrade to their paint system.

European Division. Net sales in the first quarter were $50.3 million, compared to net sales of $47.3 million in the in the first quarter of 2018, an increase of 6.5%. Income from operations for the quarter was $4 million vs. $4.3 million in the first quarter of 2018, a decrease of 8%. The European Division's results include the effects of the acquisition of Dutch Power which contributed $3.6 million in net sales and $0.3 million in income from operations in the first quarter of 2019. Excluding the acquisition, net sales in the European Division in the first quarter were $46.7 million a decrease of 1.2%, though in local currency net sales were up 6.3%.

Comments on Results

Ron Robinson, Alamo Group's president and CEO, commented, “We are pleased to start off 2019 with record first quarter results. This is particularly gratifying given soft market conditions in some of our segments, but the strong performance by our Industrial Division allowed us to overcome the challenges and continues to propel our Company forward.

“We believe our results also benefited from some relief in the above average increases in input costs which impacted our operations in 2018. For certain commodities this is still an issue and tariffs on certain purchased components remain a concern, but in general not at the levels experienced last year.  However, longer lead times are still a factor on several key components which resulted in inventory levels well above our targets. Bringing these inventory levels back in line is one of our areas of focus for 2019.

“Alamo's Agricultural Division had a slow start to the year as the softness in the overall agricultural market continues to drag on. There were also some delays in farm activity in the first quarter as snow and flooding impacted the start of the planting season in parts of the U.S. We feel this will show some improvement in the second and third quarters, though farm incomes are still being constrained by low prices and excess inventory of key commodities. Also, we expect our margins in this division should benefit by further moderation of material costs and the full effects of pricing actions.

“While we are certainly facing some market issues as we move forward in 2019, we are pleased that there seems to be a little less inflationary pressure than last year. However, the tariff situation between the U.S. and China has yet to be resolved satisfactorily and continues to create issues affecting both costs and demand.”