MSA Safety is facing three very stiff headwinds from the strong dollar, along with weaknesses in emerging and energy markets pushing against business growth. While each put downward pressure on revenue and earnings in the third quarter, the company was able to overcome much of this pressure thanks to a revolutionary new product. That product, the G1 SCBA, pushed sales in its breathing apparatus segment up more than 80% over last year's third quarter, helping it to eke out single digit year-over-year growth in adjusted earnings.
MSA Safety's results: The raw numbers
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Data source: MSA Safety.
What happened with MSA Safety this quarter?Even with a trio of challenges, MSA Safety delivered fairly solid results.
- While revenue was down 1% on a reported basis, on a constant currency basis revenue increased 8% year over year. This shows just how strongly foreign currency fluctuations are blowing against MSA Safety.
- The big driver, of course, were sales of itsnew G1 SCBA, which pushed sales of withinthe breathing apparatus segment up 83% year over year on a constant currency basis, driven by a 163% sales increase in North America.
- The backlog of future sales within the breathing apparatus segment also remained strong at $68 million. However, on a net basis the backlog is down $9 million sequentially.
- Also strong were sales within the company's fire and rescue helmet segment, which were up 32% worldwide, again on a constant currency basis.
- The rest of the company's segments were under pressure due to weaknesses in emerging markets, particularly China and Brazil, as well as continued weakness in sales to energy-related customers.
What management had to sayCEO William Lambert noted this pressure in his commentary on the quarter in the company's earnings press release. According to him:
Sales to the fire service market really rescued MSA Safety this quarter with those customers driving both breathing apparatus and fire and rescue helmet segment sales.
MSA Safety isn't the company seeing its sales rescued by the fire service market. Honeywell , noted on its third-quarter conference call that it saw a good performance in its security and fire segment, which helped push energy, safety, and security sales up 4% on a core organic basis. Furthermore, Honeywell CFO Tom Szlosekcommented on the call that its "security and fire business is well positioned for continued growth" due in part to positive fire service market conditions.
Looking forwardMSA Safety expects the impact from currencies, emerging markets, and energy to last into 2016. Because of this, it is now undergoing a restructuring to reduce its costs by $10 million next year. These steps to pare down its cost structure will position the company to better weather the weakness ahead while still positioning it to capture growth over the long term. In the near term, that growth will likely continue to be driven by the fire service market, where, like Honeywell, it is banking on strong sales growth to persist.
The article MSA Safety Inc. Earnings Edge Higher on Strong Product Sales originally appeared on Fool.com.
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