Vancouver-based Northwest Pipe Company posted its second quarter results on Monday, detailing a strong bidding environment that propelled the company to a profitable quarter in spite of costs incurred from an April fire that heavily damaged one of the company’s buildings.
“This is probably the strongest and best bidding environment that we’ve seen in many years,” said CEO Scott Montross.
Net sales rose to $69.2 million, a gain of more than 140 percent compared with the second quarter of 2018. The company attributed those gains primarily to a 186 percent increase in tons of product produced, spurred by increased demand and the company’s acquisition last year of Ameron Water Transmission Group.
Gross profit was reported at $8.2 million, compared with a gross loss of $1.2 million in the second quarter of the previous year. The profits were partially offset by a $3.2 million increase in production costs due to the fire.
The accidental fire broke out during the weekend of April 20-21 at a coatings building in a Northwest Pipe facility in Saginaw, Texas. There were no injuries, but the building was heavily damaged – video and photos published by the Fort Worth Fire Department showed smoke billowing out of the warehouse with the entire roofline visibly on fire.
In a conference call with investors and analysts on Tuesday, Montross and Chief Financial Officer Robin Gantt said the building is being repaired, but would likely remain out of commission until approximately December.
Gantt told analysts that the company has already filed insurance claims for property and equipment lost in the fire, although those claims have only been partially paid, so they’re not yet reflected in the company’s income statement.
There will be additional claims related to the costs Northwest Pipe incurred during the second quarter in order to keep up with its production commitments despite the loss of the warehouse, Gantt said, but those claims will take longer to process.
“We plan that we’ll be done by the end of the year, so in the fourth quarter we’ll be up and running,” she said, “so hopefully the insurance money will be in by then.”
Aside from the fire, the report was almost entirely good news for Northwest Pipe; the company continues to amass a large backlog of multi-year project contracts, Montross said, and the project bidding environment has remained at the robust levels seen throughout 2018 and the first quarter of 2019.
As of June 30, the company’s backlog stood at $276 million, Motross said, compared with $122 million at the end of the second quarter of 2018.
Some of the biggest business areas continue to be California and Texas, both of which have multi-year, multi-billion dollar public water infrastructure projects underway, which will collectively require hundreds of thousands of tons of new piping.
Montross said he also hopes to see the start of bidding next year on a major upcoming water supply project in North Dakota, although he noted that the project has been stalled due to heavy flooding elsewhere in the state, which has created more competition for funding.
Looking toward the second half of 2019, Montross said the company expects to continue to see an excellent bidding environment and an even larger backlog, leading to third quarter revenues that are about the same as those of the second quarter, if not slightly higher – although he cautioned that there could be a few anomalies depending on the timing of the Saginaw facility insurance payouts.
“We’re very excited about the business,” Montross said. “It’s in a situation and a condition now that we’ve long hoped for – with the demand, the stable market situation and the values in projects going up to where they should be – so we’re looking forward to better and better results.”
