Chattanooga

Astec Industries Inc. says it is paving the way for improved sales and profits this year despite supply chain and inflation challenges.

The Chattanooga-based asphalt and mining equipment maker said Wednesday its second-quarter sales rose 10% to a record high of $350 million, helping to boost net income to $13.1 million after reporting a loss in the same period a year earlier.

Earnings, adjusted for nonrecurring costs, were 87 cents per share. The results topped Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 59 cents per share.

In response to the positive earnings report, Astec shares rose Wednesday by more than 4.1% to reach their highest level in the past 18 months. Astec's stock, which dropped by more than 50% in 2022 after supply interruptions and the pandemic resulted in company losses, has increased so far this year by 31.2%, easily outpacing the overall 20.3% gain in stock prices for the S&P 500 list of the biggest U.S. stocks.

Jaco van der Merwe, who became CEO of Astec Industries in January after former CEO Barry Ruffalo suddenly resigned, said the company has improved its products and margins this year.

"Positive customer outlook continues to be driven by demand for asphalt, concrete, aggregates and machines to support the 'Rock to Road' value chain," van der Merwe told industry analysts during an earnings call Wednesday. "Our exciting new products have been well received by our customers for their expanding projects."

The Astec CEO said the company raised prices to offset inflation and its backlog of orders, which swelled in 2022 due to supply challenges, "trended downward in the quarter supported by fulfilling parts orders more efficiently, experiencing fewer supply chain disruptions and driving manufacturing lead times."

Astec posted revenues in the second quarter of $350 million, also surpassing forecasts.

Despite the slowdown in other sectors of the economy, road building activity remains robust, Astec said in its earnings report.

"Demand from the infrastructure market we serve remains strong," van der Merwe told analysts. "In conservation with our customers, they continue to share that a positive business environment is driving demand for the equipment, parts and solutions we provide."

The American Road & Transportation Builders Association reports federal contracts were up 30% in June compared to the same period a year ago, and van der Merwe said he expects the federal infrastructure spending bill will provide long-term stability for Astec.

Founded in 1972 by the late J. Don Brock, Astec Industries designs, engineers, manufactures and markets equipment and components primarily for the road building, aggregate processing, geothermal, water, oil and gas, and wood processing industries around the world and employs more than 3,000 workers.

— Compiled by Dave Flessner