The road to prosperity may not be paved yet by Congress, but officials for the asphalt equipment maker Astec Industries are hoping Washington is moving closer to passing a fuel tax increase or some other means to better pay for highway repairs and construction.
"While we expect another short-term extension of the current federal highway bill [set to expire at the end of May], we still believe there is a desire in Washington to pass a long-term highway bill this year," Astec CEO Ben Brock told industry analysts on Tuesday.
The federal gas tax that funds the Highway Trust Fund hasn't been increased since 1993 and improved vehicle mileage means most drivers are paying less in per-gallon fuel taxes. Congress has balked at raising the federal gas tax, including a proposal by U.S. Sen. Bob Corker, R-Tenn., despite appeals by everyone from President Obama to the U.S. Chamber of Commerce to help fund more needed infrastructure improvements.
"I do think if we got a highway bill we would see a quick increase in larger capital orders and then a little bit of a break while people figured out what was going to be let," Brock said. "Traveling around and talking with customers, I know there is still a lot of pent up demand. With the right bill, we would probably have two or three years of a good run on both the infrastructure and aggregate sides of our business."
Even without a highway bill, however, Astec Industries reported a strong 59 percent jump in first-quarter profits that was better than industry analysts had expected. Brock said state governments are spending more on roads in the U.S., private businesses are investing more in equipment and international sales are staying strong, even though the increased value of the U.S. dollar has lessened some of the dollar-denominated sales volumes overseas for Astec.
The Chattanooga-based asphalt and crushing equipment maker said Tuesday it earned $15.1 million, or 65 cents per share, on net sales of $288.7 million in the first quarter of 2015. In the same period a year earlier, Astec earned $9.5 million, or 41 cents per share, on sales of $238.7 million.
Earnings were 8 cents per share better than the average of what analysts have forecast for the three-month period, and revenues for the company were nearly $30.8 million ahead of projections.
Domestic sales for Astec increased by 20 percent to $211 million for the first quarter of 2015 while international sales increased an even stronger 23 percent to $77.7 million despite the increased value of the U.S. dollar this year.
Astec's backlog decreased 6 percent from $309.6 million at March 31, 2014, to $291.2 million at March 31, 2015, due to a drop in international sales due to the dollar strength and mining slowdown around the globe.
"Our customers in the United States continue to experience a good private construction market and states continue to implement mechanisms to raise funds for highway funding as Congress continues to struggle to develop and pass a long-term highway bill," Brock said in the quarterly earnings announcement.
The Obama administration sent Congress a six year, $478 billion highway bill to Congress in late March as lawmakers try to craft some type of highway spending compromise ahead of a May 31 deadline to renew federal infrastructure spending. The Obama plan is an update of the Grow America Act, a transportation bill the Obama administration previously sent to Congress and which has not got much support in the GOP-controlled legislative body.
Astec is one of the world's biggest makers of asphalt and rock-crushing equipment used in road building, but the company also is diversifying with the development of such business lines as wood pellet production.
Brock, who succeeded his late father who founded Astec, Dr. Don Brock, said one of his short-term goals is to get the company's margins back to historic levels.
"We have a lean effort within the company and we're looking at how we purchase items," he said. "Our target over the years of 15 percent growth a year -- 10 percent organic and 5 percent through acquisition -- is still a good target, in my mind. If we could do that, we would double our size every five years."
Investors welcomed Astec's first-quarter results on Tuesday, bidding up shares in the company by $1.15 per share, or nearly 2.8 percent, to close at $42.64 per share in trading on the Nasdaq exchange.
Contact Dave Flessner at dfless ner@timesfreepress.com or at 423-757-6340.