Despite reporting increased profits, Tennant Co. was the latest local manufacturer to report slower first-quarter sales.
The Golden Valley-based maker of cleaning equipment and supplies on Tuesday reported sales of $262.5 million, down 3.8% from the same period a year ago and missing Wall Street expectations. The company said sales were negatively affected by currency fluctuations, but excluding those impacts, they were still down nearly 1%.
“During the quarter, our sales reflected a combination of factors: difficult comparisons to the robust amount of strategic account activity in last year’s first quarter, industry softness in the United Kingdom and the negative impact of currency,” said Chris Killingstad, the company’s president and chief executive, in a news release. “These factors were partly offset by strength in Latin America and across Asia Pacific.”
The steepest slowdown in sales were in Europe, the Middle East and Africa at 12%. Sales were down slightly in the Americas and up 10% in the Asia-Pacific region, which is the company’s smallest geographic market.
Other local companies such as 3M, Graco and Protolabs also have reported mixed quarters as industrial companies continue to be affected by tariffs, tight labor markets, high shipping costs, rising raw material costs and economic slowdowns in some world markets.
Killingstad said the company had mixed first-quarter results in an earnings call with analysts but that a focus on expanding margins and earnings is beginning to show progress.
Tennant’s first-quarter earnings increased and the profit margin improved through a focus on expense management and a more favorable mix of higher-margin items. A favorable sales mix and some price increases helped the company’s gross margins improve 120 basis points over the first quarter last year to 41.2%.
Net income was $5.4 million, or 29 cents per diluted share, compared with $3.3 million, or 18 cents per share, in the first quarter last year.
Adjusted for one-time items, net earnings were 49 cents per share, beating analysts’ estimates by 9 cents.
Despite the quarter’s mixed results, Tennant reiterated its guidance for the rest of the year, and Killingstad told analysts on the company’s earnings call he expected each sales region to record growth by the end of the year. He pointed to the company’s contract to supply Walmart with 1,500 of its T7AMR autonomous floor-cleaning machines as one factor of confidence.
The company expects net sales for 2019 to be between $1.15 billion and $1.17 billion, a 2% to 3% organic sales growth rate, and adjusted earnings in the $2.30 to $2.50 per share range.
Shares of Tennant closed Tuesday at $66.38, down 3%. Shares are up 29% year-to-date, and shares have traded between $48.97 and $86.03 during the last 52 weeks.