Shares of Lydall (NYSE:LDL), a global manufacturer of specialty engineered products for the thermal/acoustical (primarily in vehicles) and filtration/separation markets, jumped as high as 11.9% Tuesday morning after the company released fourth-quarter results.
Net sales increased by $31.9 million, or nearly 18%, to $209.9 million, driven by the Interface Performance Materials acquisition, which added $33.9 million to net sales. Many of the company's metrics declined during the fourth quarter, including a 0.4% decline in organic sales. Adjusted gross margins declined 200 basis points to 20.3%, and adjusted operating margin dropped 240 basis points to 7%. Adjusted earnings per share checked in at $0.52, down from the prior year's $0.67 per share.
"The Interface Performance Materials business, acquired in third quarter of 2018, led to overall sales growth of nearly 18% from fourth quarter 2017, and we are pleased with the progress on the integration. Performance Materials segment organic sales grew by 4.2%, but we reported a slight decline in consolidated organic sales primarily driven by softer than expected demand in the Technical Nonwovens segment, principally in China," said Dale G. Barnhart, president and chief executive officer, in a press release.
Management was still happy with the company's cash generation during the fourth quarter, and that will be a focus moving through 2019. The company plans to reduce working capital and accelerate debt paydown and will use its cash flow and capacity under its credit facility to drive organic growth strategies. Another important note for investors was that management is seeing a stabilization of key raw material costs, although uncertainties with governmental policies remain. Investors will want to see margin improvement from the cost control, lower raw material costs, and improved business strategies and should also track how the slowing North American vehicle market impacts its thermal/acoustic business segment.