ASTE Q4 2024: Asphalt/Concrete Backlog Offsets Rate Headwinds
- Improved Operational Efficiencies: Management noted a steady improvement in manufacturing inefficiencies, with teams reducing days lost for inventory counting and overall operational inefficiencies declining quarter-over-quarter.
- Strong and Healthy Backlog: Despite some pressure in the mobile equipment segment, the backlog for asphalt and concrete plant equipment remains robust with strong order intake already evident in early 2025, reinforcing demand stability.
- Resilient Demand and Policy Upside: Customers have adapted to a high interest rate environment and indicated positive reactions to potential benefits from bonus depreciation incentives, suggesting further order and backlog improvements, especially among smaller customers.
- High interest rate sensitivity: Management acknowledged that elevated interest rates have made customers more conservative in their buying, particularly affecting the mobile equipment and Material Solutions segments. This cautious buying behavior may delay replacement orders and growth momentum.
- Inventory destocking and demand uncertainty: Dealers have indicated significant destocking in Material Solutions, and with some parts of the mobile equipment segment under pressure, there is a risk that lower future orders and a declining backlog could weigh on revenue.
- Reliance on policy incentives: Comments regarding the need for bonus depreciation to spur orders among smaller customers highlight the company's vulnerability to changes in government policy. A failure to reinstate such incentives could further suppress demand.
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Infrastructure Backlog
Q: Normal backlog level concerns?
A: Management emphasized that, excluding mobile equipment, the asphalt and concrete plant backlog remains very strong and is supported by healthy order intake, so they aren’t worried about shortfalls in deliverables for 2025. -
Bonus Depreciation
Q: Is bonus depreciation critical for orders?
A: They noted that reinstating 100% bonus depreciation would be a significant win for smaller customers, potentially boosting orders and backlog turnaround. -
Interest Rates
Q: What interest rate delta benefits orders?
A: Management acknowledged that elevated rates keep customers cautious, but did not specify an exact basis point change, suggesting improvements occur gradually as buyers adapt. -
Manufacturing Efficiency
Q: What progress on manufacturing inefficiencies?
A: Management highlighted steady quarter-over-quarter improvements in reducing inefficiencies, with Q4 recording some of the lowest counting losses, indicating ongoing process enhancements.
Research analysts covering ASTEC INDUSTRIES.