Acuity Brands Q2 Profit Up 32%, But Results Miss View

(RTTNews) - Lighting fixtures maker Acuity Brands, Inc. (AYI) on Wednesday reported a 32 percent increase in profit for the second quarter from last year, reflecting double-digit sales growth on higher volume. However, both revenue and adjusted earnings per share for the latest quarter missed analysts' expectations. The company noted that the quarter's results were impacted by inclement winter weather.

Vernon Nagel, chairman, president, and chief executive officer of Acuity Brands, said, "While we believe inclement winter weather in certain parts of the U.S. dampened customer orders during the quarter and somewhat impacted our operations, the year-over-year increase in net sales reflects continued favorable trends in order rates as well as the continued adoption of LED lighting solutions, which again more than doubled over the prior year."

Atlanta, Georgia-based Acuity Brands' net income for the second quarter was $32.7 million or $0.75 per share, up from $24.7 million or $0.57 per share in the prior-year quarter.

The prior-year quarter's results included pre-tax special charge and temporary expenses totaling $3.1 million or $.05 per share, related to temporary manufacturing inefficiencies associated with the closing of the Cochran production facility.

Excluding special items, adjusted net income for the latest quarter was $32.6 million or $0.75 per share, compared to $26.7 million or $0.62 per share in the year-ago quarter. On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $0.83 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 12 percent to $546.2 million from $486.7 million in the same period last year, but missed analysts' consensus revenue estimate of $553.95 million.

Acuity Brands noted that net sales growth for the quarter was driven primarily by a more than 13 percent increase in sales volume. This was partly offset by a net unfavorable change in foreign currency rates, primarily because of a weaker Canadian dollar.

According to Acuity Brands, the increase in sales volume was broad-based across most product categories and key sales channels in North America. Sales of LED-based luminaires now represent 30 percent of the company's net sales.

However, the company added that inclement winter weather reduced net sales for the quarter by as much as 3 percent and impacted margins as well as profitability.

Gross margin for the quarter declined 20 basis points to 39.4 percent from adjusted gross profit margin of 39.6 percent in the year-ago period.

Gross profit margin was negatively impacted by about 100 basis points due to a combination of higher warranty-related costs associated with a specific non-LED product, the impact of a net unfavorable change in foreign currency rates, and higher freight costs for expediting various components.

Adjusted operating profit margin increased 80 basis points from the prior-year quarter to 10.7 percent, due primarily to increased sales and productivity gains.

The company said that during the latest quarter, it expects to have realized about $3.5 million of pre-tax savings associated with the streamlining activities initiated in 2013 and it is now at the total annualized savings run rate of $15 million.

Looking ahead, Acuity Brands noted that third-party forecasts and leading indicators suggested that the growth rate for the North American lighting market, including renovation and retrofit activity, will be in the mid-to-upper single digit range during 2014.

The company still expects to see some volatility in demand among certain sales channels and geographies, and also projects overall demand in end markets to continue.

In Wednesday's regular trading session, AYI is currently trading at $135.01, up $1.55 or 1.17 percent on a volume of 156,125 shares.