Franklin Electric Reports Third Quarter 2023 Results
Image source: Franklin Electric Co. Inc.
“The third quarter, which is seasonally one of our stronger periods, was a solid quarter but more challenging than anticipated and our results were below our expectations as additional commodity price pressure in our Distribution business and further destocking impacted sales. Nevertheless, Water Systems set a third-quarter record for revenue and operating income on strong global execution. While underlying demand in our core markets remains solid, we continued to see customers extend project timelines and right-size inventory levels in response to improved supplier lead times. In addition, unfavorable weather lasted longer than expected during our busiest months, negatively impacting what is historically a strong quarter,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.
“Our team executed well and remained nimble as we delivered strong margins and robust cash flow generation with a focus on disciplined cost management. Year-to-date cash flows from operating activities increased about $190 million over the prior year as we progressed on our inventory reduction goals. Looking ahead, we remain focused on delivering for our customers while continuing to manage our costs and driving value for our shareholders.” concluded Mr. Sengstack.
Segment Summaries
Water Systems net sales were $295.8 million, a new third quarter record, an increase of $2.7 million compared to the third quarter 2022. Sales increases were led by continued strong end market demand for large pumps. Water Systems operating income in the third quarter 2023 was $52.7 million, a new quarterly record, driven by higher sales and disciplined cost management. Third quarter 2022 Water Systems operating income was $45.5 million.
Distribution net sales were $189.2 million in the third quarter 2023, a decrease of $4.0 million compared to the third quarter 2022. The Distribution segment operating income was $10.7 million in the third quarter 2023 compared to third quarter 2022 operating income of $19.0 million. Distribution segment sales and operating income were negatively impacted by wet weather across much of the US, margin compression from declining pricing of commodity-based products sold through the business, and some channel inventory destocking as supply chains normalize.
Fueling Systems net sales were $77.7 million in the third quarter 2023, a decrease of $12.5 million compared to the third quarter 2022 when the Company realized an all-time quarterly sales record and reduced its backlog significantly. Sales decreased in the U.S. and Canada by 14 percent and outside the U.S. and Canada by 20 percent. Fueling Systems operating income in the third quarter 2023 was $25.8 million. Third quarter 2022 Fueling Systems operating income was $28.6 million.
2023 Guidance
The Company is updating its guidance for full year 2023 sales to be in the range of $2.05 billion to $2.15 billion and full year 2023 EPS to be in the range of $4.07 to $4.17.
Source: Franklin Electric Co., Inc.
