MSA Safety Incorporated's Quarterly Report (Form 10-Q)

Press release · 10/26 02:22
MSA Safety Incorporated's Quarterly Report (Form 10-Q)

MSA Safety Incorporated's Quarterly Report (Form 10-Q)

MSA Safety Incorporated reported its quarterly financial results for the period ended September 30, 2024. The company’s net sales increased by 4.5% to $444.1 million, driven by growth in its core businesses and acquisitions. Gross profit margin expanded by 130 basis points to 43.1%, while operating income rose by 12.5% to $64.1 million. Net income attributable to common shareholders increased by 15.1% to $43.9 million, or $1.11 per diluted share. The company’s cash and cash equivalents totaled $243.1 million, and its debt-to-equity ratio was 0.44. MSA Safety Incorporated also provided guidance for the full year 2024, expecting net sales to grow by 4-6% and operating income to increase by 10-12%.

Overview of the Company’s Financial Performance

MSA Safety Incorporated (the “Company” or “MSA”) reported a decrease in net sales for the three months ended September 30, 2024, compared to the same period in 2023. Net sales for the third quarter of 2024 were $432.7 million, a decrease of $14.0 million or 3.1% compared to $446.7 million in the same period last year. This decrease was driven by a 4.7% decline in the Americas segment, partially offset by a 0.6% increase in the International segment.

Gross profit for the third quarter of 2024 was $207.5 million, a decrease of $11.3 million or 5.2% compared to $218.8 million in the same quarter last year. The ratio of gross profit to net sales was 47.9% in the third quarter of 2024 compared to 49.0% in the same quarter last year. The decrease in gross profit margin was primarily related to lower sales volume, though effective price/cost management and productivity improvements offset inflationary pressures.

Selling, general and administrative (SG&A) expenses decreased by $7.1 million or 6.9% to $95.1 million in the third quarter of 2024 compared to $102.2 million in the same period a year ago. SG&A expenses were 22.0% of net sales during the third quarter of 2024, compared to 22.9% of net sales during the same period in 2023. The decrease in SG&A was driven by lower variable compensation and discretionary expense management, partially offset by inflation and professional service expense related to strategic initiatives.

Research and development expense decreased by $1.0 million to $16.7 million in the third quarter of 2024 compared to $17.7 million in the same period last year. The Company remains committed to dedicating significant resources to research and development activities, including the development of technology-based safety solutions.

Consolidated operating income for the third quarter of 2024 was $91.5 million compared to $94.1 million in the same period last year. The decrease in operating income was primarily driven by lower sales and gross profit, partially offset by productivity improvements and lower SG&A expenses.

Net income was $66.6 million for the third quarter of 2024, or $1.69 per diluted share, compared to $65.3 million, or $1.65 per diluted share, for the same period last year.

Revenue and Profit Trends

For the nine months ended September 30, 2024, net sales increased by $16.1 million or 1.2% to $1.31 billion compared to $1.29 billion in the same period last year. This growth was driven by a 0.8% increase in the Americas segment and a 2.4% increase in the International segment.

Gross profit for the nine months ended September 30, 2024, was $626.0 million, an increase of $12.0 million or 2.0% compared to $614.0 million during the same period last year. The ratio of gross profit to net sales was 47.8% during the nine months ended September 30, 2024, compared to 47.5% during the same period last year. Volume leverage, price/cost management, and productivity efforts offset inflationary pressures and contributed to the gross profit margin improvement.

SG&A expenses increased by $4.7 million or 1.6% to $294.3 million during the nine months ended September 30, 2024, compared to $289.6 million during the same period last year. SG&A expenses were 22.5% of net sales during the nine months ended September 30, 2024, compared to 22.4% of net sales during the same period in 2023. The increase in SG&A was driven by higher commercial costs associated with volume growth, inflation, net cost for a product-related legal matter, and higher professional service expense, partially offset by lower variable compensation and discretionary cost management.

Consolidated operating income for the nine months ended September 30, 2024, was $271.5 million compared to $129.1 million in the same period last year. The increase in operating results was driven by the higher sales and gross profit margin, as well as the absence of the $129.2 million loss on divestiture of MSA LLC that was recognized in 2023, partially offset by increased SG&A expense.

Net income was $197.0 million for the nine months ended September 30, 2024, or $4.98 per diluted share, compared to a net loss of $17.8 million, or $(0.46) per diluted share, for the same period last year.

Strengths and Weaknesses

Strengths:

  • Diversified product portfolio across fire service, detection, and industrial PPE markets
  • Consistent investment in research and development to drive innovation
  • Effective price/cost management and productivity improvements to offset inflationary pressures
  • Strong balance sheet and liquidity position to navigate challenging business conditions

Weaknesses:

  • Decline in fire service sales, particularly in SCBA, due to delayed timing of large order deliveries
  • Weakness in industrial PPE sales in the International segment
  • Increased SG&A expenses related to inflation, legal matters, and strategic initiatives

Outlook

The Company expects to finish 2024 with mid-single-digit sales growth in the fourth quarter, resulting in low-single-digit top-line growth for the full year. The operating environment remains dynamic, and the Company is focused on executing programs to optimize its cost structure and continue investing in technology-based safety solutions to drive long-term growth.