Ascent Industries Co (ACNT, Financial) has released its earnings report for the third quarter ended September 30, 2023, revealing a challenging period with significant declines in net sales, gross profit, and net income. The industrials company, which specializes in tubular products and specialty chemicals, reported net sales of $56.1 million, a 28.3% decrease from the $78.2 million recorded in the same quarter of the previous year. This decline was primarily due to lower sales volumes and average selling prices in both business segments.
Financial Performance Overview
The gross profit for Q3 2023 stood at $6.0 million, or 10.7% of net sales, a sharp decrease from the $14.1 million, or 18.0%, seen in Q3 2022. The company's net loss from continuing operations was $12.8 million, or $(1.26) per diluted share, compared to a net income of $3.1 million, or $0.30 per diluted share, in the prior year. This loss was primarily due to a $11.4 million goodwill impairment within the specialty chemicals segment, in addition to the decline in gross profit.
Adjusted EBITDA, a key metric for evaluating operational efficiency, was $0.9 million, down 88.5% from the $8.2 million reported in Q3 2022. The Adjusted EBITDA margin also saw a significant contraction, from 10.5% to 1.7%.
Segment Performance and Liquidity Position
Segment-wise, Ascent Tubular's net sales from continuing operations were $36.1 million, a decrease from $50.6 million in the previous year, with operating income also falling to $1.7 million from $7.6 million. Ascent Chemicals fared worse, with net sales dropping to $20.1 million from $27.3 million and an operating loss of $(11.5) million, a reversal from an operating income of $1.1 million in Q3 2022.
Ascent Industries Co's liquidity position showed some resilience, with total debt decreasing to $53.0 million from $71.5 million at the end of 2022. The company also had $41.8 million of remaining available borrowing capacity under its revolving credit facility, an improvement from $37.6 million at the end of the previous year.
Management Commentary and Future Outlook
“After a challenging first half of the year, we were pleased to begin seeing signs of improvement within our operations during the third quarter,” said Chris Hutter, president and CEO of Ascent. “Challenging macro-economic volatility continues to play a factor in overall end market demand, which impacted sales volumes in both our segments during the quarter. Despite this, our sales teams remained diligent in their efforts to uncover demand, and we believe we are building a healthier backlog across the board. We were also proud to appoint Bryan Kitchen as the new president of Ascent Chemicals. In the few weeks that Bryan has been onboard, he has already made significant contributions to our chemicals segment, and we look forward to the success we believe he will bring.
“While there is still much work to be done to return to acceptable levels of profitability, we do believe that we have turned the corner operationally and are continuing to make progress stabilizing the business. We remain determined to hit our long-term strategic goals and believe the operational moves we made in 2023 were necessary to achieve those goals. Although broader economic uncertainty continues to hamper sales volumes in both our segments, we believe that we have the right leadership in place to capitalize on our market position heading into 2024.”
Ascent Industries Co's management remains optimistic about the future despite the current headwinds, citing operational improvements and leadership changes as reasons for a potential turnaround. The company's strategic decisions in 2023 are seen as necessary steps towards achieving long-term goals, even as economic uncertainty persists.
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Explore the complete 8-K earnings release (here) from Ascent Industries Co for further details.
