Applied Industrial Technologies sees drop in Service Center, Engineered Solutions segments
Applied Industrial Technologies reported its net sales of $1.1 billion for its fiscal 2025 first quarter are an increase of 0.3% over the prior year, but sales decreased 3.0% on an organic daily basis.
The 0.3% change includes a 2.0% increase from acquisitions and a 1.6% benefit from one extra selling day, partially offset by a negative 0.3% impact from foreign currency translation. Excluding these factors, the organic decline reflects a 1.4% decrease in the Service Center segment and a 6.1% decrease in the Engineered Solutions segment.
The company reported net income of $92.1 million, or $2.36 per share, and EBITDA of $129.0 million. On a pre-tax basis, results include $2.0 million ($0.04 after tax per share) of LIFO expense compared to $4.6 million ($0.09 after tax per share) of LIFO expense in the prior-year period.
“I’m encouraged by the start to fiscal 2025," said President and CEO Neil A. Schrimsher. While the demand backdrop remains mixed, first-quarter sales exceeded our expectations and strengthened during September. Positive trends are developing across our Engineered Solutions segment including stronger orders within our Automation operations and the technology sector, while Service Center segment sales held steady as the quarter progressed. As expected, margin trends were more modest against difficult comparisons, mix dynamics, and softer volumes early in the quarter. We remain prudent with cost measures but balanced considering firming demand the past couple of months, while protecting investments in key strategic growth initiatives during the quarter. Additionally, free cash flow nearly doubled over the prior year to record first quarter levels. Our cash flow growth potential remains significant as we continue to scale our differentiated industry position, benefit from working capital initiatives, and enhance our margin profile.”
“Looking ahead, we expect near-term sales to remain choppy as customers slowly reengage production and capital investments ahead of the upcoming U.S. election and seasonally slower fall and winter months," Schrimsher added. "Organic sales month to date in October are trending down by a mid single-digit percent year over year, though partially impacted by recent hurricane disruption in the Southeast. That said, we remain constructive on our setup with various self-help and secular tailwinds supporting above market growth and ongoing margin expansion. Combined with easing interest rates and easier comparisons, we see ongoing potential for stronger sales and earnings trends as the year progresses. Lastly, we expect greater capital deployment focused on growth investments including strategic bolt-on and mid-size acquisitions, as well as opportunistic share repurchases and dividend growth.”
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