Astec points to pellet division as bright spot

By Anna Simet | April 29, 2016

Despite an off year overall for the global pellet market, Astec Industries reported that its pellet division continues to be a bright spot for the company.

In its Q1 2016 financial earnings call, Astec reported net sales for Q1 as $278.7 million, compared to $288.7 million in Q1 2015, a decrease of 3.5 percent or $10 million. For the quarter, gross profit was $72 million compared to $66 million in Q1 2015, a 9.1 percent, or $46 million increase. Earnings per share for the quarter was $0.77 versus $0.65 in Q1 2015.

President and CEO Benjamin Brock updated callers on its pellet plant business, reminding callers that Astec has extended the timeline for the customer of its Hazelhurst, Georgia, plant to take Astec out of financing. Brock also mentioned its recently announced, $122.5 million pellet plant order, an add-on to the $30 million Highland Pellets order that Astec recognized during the first quarter, bringing the total order amount to $132.5 million.

The $30 million Highland Pellets project in Pine Bluff Arkansas, is progressing after some delay. In an April 20 updated provided to Biomass Magazine by Jim Olson, Astec Industries project manager, said the project is finally moving forward and will start line one erection by May 2. “We are currently pouring concrete on line one, and electrical underground is complete on line one and 50 percent complete on line two,” he said. There will be four lines total, Olson added, and the goal is to begin producing pellets in November, and achieve full operation of the facility toward the last quarter of 2017.

During the earnings call, Brock said Astec has ongoing quoting activity for new projects, and that, “we do believe that will add a new large order late this year…as a reminder, these deals are long and complicated to get across the line. While we’re optimistic that a new [order] will happen by the end of this year, it can always can take longer than we anticipate.”

On potential in overseas markets, Brock said Astec has several customers who are serious about building pellet plants, describing current pellet demand as being “off” because of a couple of warm winters in Europe. But utilities have planned to switch over to using pellets, he said, contracts have been made, and people are looking at plans to be able to supply those future needs, which is largely the reason Astec is confident it will secure another order by the year’s end.

He added that South Korea, Japan and China are also being looked at as potential markets.