Nordson Corporation (NDSN Quick QuoteNDSN - Free Report) reported flat bottom-line results for third-quarter fiscal 2018 (ended Jul 31, 2018).

Adjusted earnings in the reported quarter were $1.60 per share, in line with the Zacks Consensus Estimate. On a year-over-year basis, the company’s earnings declined 10.1% from the year-ago tally of $1.78.

Decline in Organic Volumes Affects Revenues

In the reported quarter, Nordson’s net sales were $581.2 million, decreasing 1.4% year over year. The poor performance was due to 3% decline in organic volumes, partially offset by 1% forex gains and 1% benefit from acquired assets. Moreover, the top line lagged the Zacks Consensus Estimate of $590 million by 1.5%.

At the quarter end, backlog was $428 million, up 16% year over year.

On a regional basis, revenues, sourced from the United States, increased 4.7% year over year to $191.5 million. Revenues generated from operations in Japan declined 31.6% to $28.4 million while that from the American operations decreased 6.5% to $38.96 million. Sales in Europe improved by 12.6% to $150.7 million and that in the Asia Pacific declined 9.4% to $171.7 million.

The company reports its top-line results under three segments, namely, Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. A brief discussion on the segmental performance in the fiscal first-quarter is provided below:

The Adhesive Dispensing Systems segment’s revenues totaled $244.7 million, increasing 4.9% year over year. Results were driven by 3.4% volume growth and 1.5% forex gains.

Advanced Technology Systems’ revenues were $266.6 million, down 8.2% year over year. The fall was due to 8.9% decline in volumes, partially offset by 0.7% forex gains.

Revenues generated from Industrial coating systems grew 6.5% to $69.9 million. Volumes grew 5.7% and foreign currency movements had a positive impact of 0.8%.

Margin Weak on Higher Expenses

In the quarter under review, Nordson’s cost of sales declined 0.9% year over year to $260.8 million. It represented 44.9% of net sales versus 44.6% in the year-ago quarter. Selling and administrative expenses increased 7% year over year while as a percentage of net sales expenses were 31.8% versus 29.3% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review were $163.4 million, decreasing 10.1% year over year. Operating profits declined 11.7% year over year to $135.6 million while the margin came in at 23.3% versus 26% in the year-ago quarter.

Balance Sheet & Cash Flow
 
Exiting the fiscal third quarter, Nordson had cash and marketable securities of $266.8 million, up 71.15 from $155.9 million in the previous quarter end. The company’s long-term debt increased 15.9%, sequentially, to $1,521.4 million.

In the fiscal third quarter, the company generated net cash of $130.6 million from its operating activities, reflecting year-over-year growth of 68.5%. Capital spent on the addition of property, plant and equipment decreased 42% to $12.9 million. Adjusted free cash flow was $117.8 million, increasing 106.1% year over year.

During the reported quarter, the company paid dividends of approximately $17.4 million to its shareholders.

Outlook

For fourth-quarter fiscal 2018 (ending October 2018), Nordson anticipates sales to be flat year over year to decline 4%. Organic volume growth is predicted to range from    3% fall to 1% growth. Acquisition gains will likely add 1% sales growth while foreign currency movements will have an adverse 2% impact.

Operating margin will likely be 22% while EBITDA is expected to be $143-$155 million. EBITDA margin is predicted to be roughly 26%. The tax rate is estimated to be 25%. GAAP earnings are expected to be $1.38-$1.54 per share.

For fiscal 2018, Nordson anticipates organic revenues to grow roughly 2%.

Nordson Corporation Price and Consensus