Hilliard, Ohio-based Advanced Drainage Systems Inc. posted a sales decline of 6.4 percent to $2.87 billion in its 2024 fiscal year, but profit edged up to $513.3 million for the manufacturer of stormwater and onsite septic wastewater pipes, tanks and chambers.
ADS, which trades under the ticker symbol WMS for water management solutions, also saw adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increase to $923 million for the year ending March 31, 2024.
ADS ranks No. 4 among North American pipe, profile and tubing makers, according to Plastics News data.
Both sales and adjusted EBITDA came in above the guidance range, marking ADS's ninth consecutive year of record profitability, ADS President and CEO Scott Barbour said in a May 16 quarterly call with analysts.
"Market demand improved significantly in the second half of fiscal 2024 resulting in a 3 percent increase in second-half revenue primarily due to the notable improvement in the residential and infrastructure end markets, which grew 8 percent and 14 percent, respectively," Barbour said.
The nonresidential, agriculture and international end markets also improved in the second half of the year to partially offset the weak start to the fiscal year, which led to a full-year sales decrease of 6 percent.
The adjusted EBITDA increased 2 percent to $923 million thanks in large part to ADS's Infiltrator brand of septic wastewater treatment products, which was driven by better-than-expected single-family housing construction and new products.
The adjusted EBITDA margin increased 270 basis points to 32.1 percent, which is the highest annual profit margin in the company's 58-year history.
"Despite a year-over-year revenue decline, these strong profitability results are due to better-than-expected performance from the Infiltrator business and Allied Products portfolio, effective management of price cost, solid operational execution, and the benefit of previous capital investments in the business," Barbour said.
To reward the service and dedication of employees, ADS officials paid a discretionary bonus that resulted in about $4 million of additional compensation cost in the fourth quarter.
The strength of ADS's market position and business model gives company officials confidence about the long-term business outlook.
"We benefit from the secular tailwinds of changing climate patterns, which drive the need for resilient water management solutions," Barbour said. "As a pure-play water company, our products and solutions play a critical role in preventing floods, recharging aquifers, improving food security, and mitigating the risk of water scarcity to improve to ensure the quality of life and communities."
The frequency of large-scale storm events is increasing as climate patterns change, Barbour also noted.
"In 2023 there were a record 27 of these events in the United States resulting in a total cost of over $88 billion," he said. "These events, ranging from severe storms and hurricanes to floods and droughts, had devastating impacts on communities and highlighted how the existing stormwater infrastructure has not kept pace with increasing climate challenges."
Based on the current backlog of existing orders and business trends, ADS officials expect fiscal 2025 sales to be in the range of $2.925 billion to $3.025 billion; adjusted EBITDA to be in the range of $940 million to $980 million; and capital expenditures to be in the range of $250 million to $300 million.