Sales of Advanced Drainage Systems Inc. products to manage stormwater and septic wastewater increased 18.5 percent to $1.98 billion for fiscal 2021 compared with the prior year.
The publicly traded company also posted a profit of $226.1 million for the year ending March 31.
The Hilliard, Ohio-based business benefited from new home construction, repair and remodel work and on-site septic demand coupled with material conversion strategies, ADS officials said during a May 20 quarterly conference call.
ADS products made of virgin and recycled polyethylene and polypropylene have been gaining market share from concrete and other legacy materials.
The company also experienced strong demand in the agriculture end market and for horizontal construction, such as warehouses and data and distribution centers, in the nonresidential market.
Because of the strong results, ADS officials plan to hand out $4 million in one-time bonuses and invest $130 million to $150 million to support growth, recycling, innovation, productivity and safety initiatives. The bonuses will reward employees who are not part of the company's annual incentive compensation plan for their service and dedication, according to ADS Chief Financial Officer Scott Cottrill.
"Our ability to deliver in the face of a uniquely challenging year and a strong demand environment would not have been possible without their hard work and dedication," Cottrill said during the call.
ADS also continues to leverage its pipe manufacturing facilities in Mexico to meet strong U.S. demand, company officials said.
They pointed to the 2019 acquisition of Infiltrator Water Technologies for $1.08 billion as a contributor to the strong performance with growth across the product portfolio and brisk demand in both the residential and repair and remodel end markets.
Residential sales are up to 39 percent of ADS' domestic sales as compared with 23 percent prior to the Infiltrator acquisition.
"The market indicators show that homebuilders continue to acquire land for future development and that there is an overall shortage in available homes, which drives the front-end new community development sales at ADS, and the on-site septic system sales in Infiltrator are driven during the home completion stage," CEO Scott Barbour said.
The Infiltrator business also is benefiting from a "strong distribution presence in the Southeast and Midwest as well as rapidly growing micropolitan areas, which typically lacked the sewer infrastructure needed to support rapid housing development," Barbour said.
In the agricultural market, ADS sales increased 50 percent during the fourth quarter as the spring selling season got off to a good start. The company saw strong demand in the Midwest region, particularly Minnesota, Ohio, Iowa and Michigan.
For fiscal 2022, ADS officials offered sales guidance of $2.2 billion to $2.3 billion, which is a year-over-year increase of 12-16 percent. They expect some of the increase to come from converting traditional stormwater products to plastic pipe products.
"Our sales team is going after the significant growth opportunity for large-diameter HP [brand] pipe, which has grown at a double-digit CAGR [compounded annual growth rate] over the three-year period," Barbour said. "We are focused on growth in key states, namely Florida, Texas and California, as well as additional priority states, where we find attractive market opportunities."
ADS officials also said they will pursue merger and acquisitions as a key component of the capital deployment strategy in both the near term and longer term.