On July 26, 2024, Barnes Group Inc (B, Financial) released its 8-K filing detailing the financial results for the second quarter of 2024. Barnes Group Inc is a U.S.-based industrial and aerospace manufacturer and service provider. It leverages world-class manufacturing capabilities and engineering to develop various processes, automation solutions, and applied technologies for industries ranging from aerospace and medical & personal care to mobility and packaging. The company operates through two segments: Industrial and Aerospace.
Performance Overview
For the second quarter of 2024, Barnes Group Inc reported sales of $382 million, marking a 13% increase year-over-year. Organic sales grew by 5%, while the net beneficial impact of acquisition and divestiture-related sales was approximately 8%. Despite these gains, the company faced challenges, including a non-cash impairment charge of $53.7 million in its Automation business unit, contributing to an operating loss of $2.1 million and an operating margin of -0.6%. Adjusted operating income was $47.6 million, up 9%, with an adjusted operating margin of 12.4%, down 40 basis points.
Financial Achievements
Barnes Group Inc's adjusted EBITDA for the quarter was $76.5 million, up 14% from the previous year, with an adjusted EBITDA margin of 20.0%, up 20 basis points. The company also reported a GAAP EPS of -$0.91 and an adjusted EPS of $0.37, down 36% year-over-year but exceeding the analyst estimate of $0.32.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Sales | $382 million | $339 million | 12.8% |
| Operating (Loss) Income | $(2.1) million | $26 million | (108.1%) |
| Net (Loss) Income | $(46.8) million | $17.4 million | (369.8%) |
| Adjusted EPS | $0.37 | $0.58 | (36%) |
Segment Performance
The Aerospace segment reported sales of $218 million, up 79% year-over-year, with organic sales increasing by 8%. The acquisition of MB Aerospace contributed significantly, adding 71% to the sales growth. Aerospace OEM sales increased by 75%, while aftermarket sales surged by 84%. The segment's adjusted operating profit was $32.3 million, up 56%, although the adjusted operating margin declined by 220 basis points to 14.8%.
In contrast, the Industrial segment saw a decline in sales to $164 million, down 24% due to the divestiture of the Associated Spring and Hänggi businesses. On an organic basis, sales were up 3%. The segment reported an operating loss of $31.5 million, compared to an operating income of $9.4 million in the prior year. Adjusted operating profit was $15.3 million, down 33%, with an adjusted operating margin of 9.3%, down 120 basis points.
Balance Sheet and Cash Flow
As of June 30, 2024, Barnes Group Inc had $66 million in cash and $419 million in available borrowing capacity under its revolving credit facility. The company's "Net Debt to EBITDA" ratio was 3.48 times, down from 3.62 times at the end of March 2024. Year-to-date cash provided by operating activities was $3.1 million, compared to $42.5 million in the first half of 2023, primarily due to an increase in working capital and divestiture-related income tax payments.
Updated 2024 Outlook
Barnes Group Inc has updated its full-year 2024 guidance:
| Metric | 2024 Guidance |
|---|---|
| Organic Sales Growth | 4% to 6% |
| Adjusted Operating Margin | 12% to 14% |
| Adjusted EBITDA Margin | 20% to 22% |
| Adjusted EPS | $1.55 to $1.75 |
| Capital Expenditures | $55 million to $65 million |
| Free Cash Flow | $45 million to $55 million |
| Adjusted Effective Tax Rate | 33% to 34% |
“For the second quarter, strong Aerospace aftermarket and Molding Solutions revenue growth partially offset lower than expected Aerospace OEM sales, as industry supply chain and productivity constraints continue to temper our Aerospace OEM results," said Thomas J. Hook, President and Chief Executive Officer of Barnes.
Despite the challenges, Barnes Group Inc is making significant progress in transforming into a higher growth, higher value company, led by a strong Aerospace business and a streamlined Industrial business. The company's focus on achieving a leverage ratio of 3.0x or lower by the end of 2024 and reaffirming its long-term leverage goal of 2.5x by 2025 demonstrates its commitment to financial stability and growth.
Explore the complete 8-K earnings release (here) from Barnes Group Inc for further details.
