Posted: Thursday, May 10, 2012 11:00 AM
Manufacturers report sharp rise in revenues, profits
By MATEUSZ PERKOWSKI
Strong economic prospects for agriculture have spurred farmers to invest in new irrigation equipment, according to two major manufacturers.
Makers of the Valley and Zimmatic brands of irrigation equipment have reported surging sales in early 2012, which they attribute to optimism among growers.
Sales of Valley irrigation equipment increased nearly 30 percent, to $196 million, during the first quarter of 2012, according to manufacturer Valmont Industries.
"Farm commodity prices continue to be favorable, with a positive outlook for net farm income in most markets around the world," Valmont said in a filing with the U.S. Securities and Exchange Commission.
Valmont also produces lighting, traffic and utility structures, as well as industrial coatings and other products, but irrigation equipment comprised the largest segment of its $717 million in total sales.
The company has doubled its profits compared to the first quarter of 2011, from $25.6 million to $52.3 million.
It is possible that some of the strength in irrigation equipment sales came from mild winter weather, which allowed products to be shipped earlier than normal in the year, said Mogens Bay, the firm's CEO, in a conference call with analysts.
The long-term perspective for irrigation equipment looks prosperous due to global population growth, though shorter-term cyclical downturns in agriculture will likely affect the market, Bay said.
The producer of Zimmatic irrigation equipment, Lindsay Corp., saw its irrigation segment revenues rise nearly 28 percent, to $117 million, during its most recent fiscal quarter.
The spike "is primarily due to an increase in the number of irrigation systems, parts and related services sold" in the U.S. and globally, the company said in an SEC filing.
"Operating revenues increased in nearly all international markets, most significantly in the Middle East, Canada, Europe and Latin America," the filing said.
Irrigation equipment makes up the bulk of Lindsay Corp.'s sales, but its overall revenues of $132 million were dampened by a 47 percent drop in sales in its infrastructure segment, which produces movable barriers, steel tubing and railroad signals and structures. The company's net income rose nearly 13 percent, to $12.8 million.