US-based OEM, Wabash National, has reported results for the quarter ended 30 September 2020.
Net sales for Q3 2020 were steady compared with prior quarters at $351.6 million USD as the company continued to produce equipment to satisfy customer demand volumes.
Consolidated gross margin of 12.3 per cent was the strongest rate since Q4 of 2019 as the company continued to achieve greater efficiency operating within the constraints of Covid-19 protocols.
Operating income of $8.4 million USD, or 2.4 per cent of sales includes the positive impact of cost savings stemming from strategic organisational realignment actions completed during the quarter.
Wabash’s previously announced target of $20 million USD in run rate savings from these realignment actions has been completed ahead of schedule and helped to limit decremental margins to 13 per cent during the third quarter.
Total company backlog as of 30 September 2020 was approximately $1.0 billion USD as new order activity markedly accelerated during the September timeframe. Backlog rose 37 per cent compared to June 2020 and was 29 per cent above September 2019.
“We are pleased to deliver a profitable quarter that builds upon our purposeful financial management during the first half of 2020,” said Wabash National President and CEO, Brent Yeagy.
“We successfully executed strategic cost reductions that have not only preserved our organisation’s strength, but have enhanced our company’s culture by eliminating silos and allowed us to provide a more seamless experience for customers who purchase across our unmatched portfolio of first to final mile solutions,” he said.
Operating cash flow was $107.1 million USD and free cash flow was $93.4 million USD year-to-date at the close of Q3 2020, which compares to significant cash burn during each of the two prior economic recessions. Liquidity as of the end of the third quarter was $383 million USD with $216 million USD of cash and a fully untapped revolving credit line of $167 million USD. Following the successful refinancing of the company’s term loan, Wabash’s nearest material debt maturity is now October 2025.
“Our increased backlog reflects strong underpinnings within the freight markets as rebounding freight activity has contributed to significant gains in spot and contract rates,” said Yeagy.
“While we’re looking forward to a demand environment that looks poised to improve into 2021, we also remain focused on executing in the final quarter of 2020 completing a year that we expect will demonstrate the benefits of our company’s diversification efforts over the last decade as well as actions over the past two years to significantly strengthen the management system of the company.
“Our broadened and synergistic portfolio has resulted in considerable improvement in trough performance across an array of key financial metrics like operating income, EBITDA, and free cash flow.”
Commercial Trailer Products’ net sales for the third quarter were $226.5 million USD, a decrease of 40.4 per cent as compared to the prior year quarter as a result of a reduction in market demand. Operating income was $19.7 million USD or 8.7 per cent of sales during the quarter.
Diversified Products’ net sales for the third quarter were $72.0 million USD, a decrease of 22.7 per cent as compared to the prior year as a result of lower market demand. Operating income was $4.2 million USD or 5.8 per cent of sales during the quarter.
Final Mile Products’ net sales for the third quarter totalled $55.3 million USD, a decrease of 51.2 per cent, as compared to the prior year, due to softer market demand. Operating loss was $4.4 million USD during the quarter as a result of weaker volume leverage over fixed costs.
In other news, Wabash and Carrier join forces on all-electric tech.