Vancouver-based Northwest Pipe Company released its third-quarter financial results on Wednesday, detailing strong year-over-year growth in both net sales and gross profit.
Net sales were $75.2 million, compared with $52.5 million a year ago. The gross profit margin was 20.6 percent, compared with 9.9 percent in the third quarter of 2018. Net income was $10.7 million, or $1.10 per diluted share.
A small part of the profit came from a $300,000 insurance payment relating to the April fire that destroyed the company’s coating facility building at its Saginaw, Texas, plant. If that were excluded, the gross profit margin would have been 20.2 percent, which would still have been the company’s best quarterly result since 2014, according to Chief Financial Officer Robin Gantt. The company manufactures pipes used for water transmission and distribution.
In a conference call with investors and analysts on Thursday morning, CEO Scott Montross said ongoing expenses and insurance payments stemming from the fire will likely continue to cause small anomalies in the company’s earnings reports for the next couple of quarters.
However, he said, the replacement building has now been completed and coating operations resumed in October.
“We are currently processing customer orders and we are back on normal coating schedule,” he said.
Northwest Pipe has enjoyed a string of strong quarters in the past two years, buoyed by a record backlog of contracts. The backlog in the third quarter was $270 million, which was a slight dip from the previous quarter but still a near-record, Montross said.
“We’re starting to really get into the meat of the backlog now that we’ve seen that’s resulted from the bidding over the last year that we’ve been talking about on these calls,” he said.
Montross said he expected to see an additional small drop in the backlog in the fourth quarter, because the winter season tends to be slightly slower.
“We expect fourth-quarter revenues to be only slightly lower as we move into the time of year that can be affected by weather and holiday schedules,” he said. “However, we expect margin levels to remain fairly stable.”
Montross outlined several of Northwest Pipe’s current municipal water project contracts and future bidding opportunities, including the recently announced Cape Fear River project contract in North Carolina and the ongoing Bois D’Arc Lake project in Texas.
The company expects the bidding environment to remain strong in 2020, Montross said, keeping the backlog at or near record levels. Most of the upcoming opportunities Montross listed are expected to bid in the next couple of years, but the timelines for some of the projects in California stretched as far as 2024.
Most of the questions from analysts focused on the company’s expectations for the future, pressing Montross on whether he thought the company would be able to sustain the record backlog and the above-20-percent margins. Montross cautioned that there will always be seasonal variation in individual quarterly results, but said in general the current margins are the kind of margins the company expects to continue to see as long as there are stable market conditions.