According to the news report by MarketWatch, the shares of Acuity Brands Inc. went up by 2.9% in pre-market trading on Wednesday after the company released its fiscal Quarter 1 earnings report.
In its report, the lighting and building management company stated that net income for the quarter closing on November 30, 2018 went up from $71.5 million (which is $1.70 per share) to $79.6 million (which is $1.98 per share) from the same time a year ago. The increase in net income was attributed primarily to lowered provisions for income tax.
After excluding non-recurring items, the adjusted EPS (earnings per share) was $2.32, which is above the market consensus target of $2.11. The increase in adjusted EPS reflected both an increase in net income as well as lower average shares outstanding because Acuity Brands bought back shares over the last twelve months.
Sales also grew by 10.7% to a total of $932.6 million, which is higher than the market consensus target of $922.6 million.
Global News Wire gave the minutes of the conference call on the company’s earnings. Operating profits for the quarter were at $116.4 million, which were a 3.2% drop from the same time a year ago.
The adjusted operating profit for fiscal Q1 went down by $1.4 million (0.1%) to $134.1 million, which is 14.4% of the company’s net shales. The same time one year ago, Acuity Brands’ adjusted operating profit was at $135.5 million, which is 16.1% of its net sales.
The Chief Executive Officer of Acuity Brands Vernon Nagel stated that the company had taken several measures to address issues related to cost. This included managing price increases and improving productivity in operations.
Nagel also stated that their first quarter performance was solid despite continued cost pressure due to inflation. He also said that the company’s top line growth continued to outpace the overall growth rate of the industry.
Nagel said that the growth in net sales was due to efforts put in to expand their customer base. The introduction of new products and solutions also contributed to the significant increase in net sales.
Net sales from the company’s independent sales network, which traditionally made up 70% of their total sales, was up by 10% vis-à-vis the previous year. This was due to an increase in demand for lighting in small and medium lighting projects and a continued strong demand for their building management solutions.
The bigger non-residential projects, however, showed a slow-down in demand. Additionally, customers demanded wanted lower-priced substitutes for some of their lighting products. Due to this, the company also implemented price increases twice to recover costs incurred due to inflation and government tariffs on some of their China sourced components.
Nagel said that the increase in sales was most probably due to customers wanting to buy products in advance of the announced price increases, however, how much of an impact this had on overall sales could not be quantified.
The CEO also stated that adjusted gross profits were negatively affected by higher costs of items such as electronics, oil-based components, freight as well as commodities like steel. He said that a lot of these items has seen significant price hikes in the second half of 2018 due to increased trade tariffs as well as inflation of wages due to a difficult labor market.
He said that the increased costs had an impact of about $16 million and also lowered the company’s gross profit margin by about 170 basis points. He said the recent price hikes in some of their products would offset the higher costs they were incurring during the rest of the year.