Southern Indiana Business Report
JASPER – Amid a net loss of $6.1 million for the third quarter, Kimball Electronics Inc. (Nasdaq: KE) announced Tuesday that it expects to divest the Automation, Test & Measurement business.
The Jasper-based company reported net sales totaling $425 million.
“As we anticipated, the operating environment has remained challenged for the EMS industry, and our sales in the third quarter declined as expected,” said CEO Richard D. Phillips in a press release. “During this period of end market softness, we have focused on ‘controlling what we can control,’ proactively aligning our cost structure with short-term demand trends, maintaining competitiveness with stable operating margins, and focusing on working capital improvements.”
Phillips added, “We’re taking meaningful steps to sharpen our strategic focus and further position the Company for profitable growth, and stronger performance moving forward. With the expected divestiture of the Automation, Test & Measurement business, our team can increase focus and support on our core EMS operations. While we suspect the macro headwinds will persist in fiscal 2025, we’re continuing to make investments in long-term growth opportunities supported by a robust funnel for new business in the next 18-24 months, while deploying a capital allocation strategy that balances growth, lasting customer relationships, and returning cash to Share Owners with opportunistic share repurchases.”
Report highlights
- Excluding these items, adjusted net income in the third quarter of fiscal 2024 totaled $8.4 million, or $0.34 per diluted share, and adjusted operating income equaled $17.0 million, or 4.0% of net sales.
- Cash flow from operating activities in the quarter was $42.6 million driven by inventory reductions.
- Company sharpens strategic focus on EMS operations and aligns cost structure to short-term demand trends.
- Guidance for adjusted operating income in fiscal 2024 reiterated, while the estimate for net sales was updated, in response to the challenging operating environment, and capital expenditures strategically reduced.
- Resumption of share repurchases approved by the Board of Directors.
Kimball Electronics ended the third quarter of fiscal 2024 with cash and cash equivalents of $65.2 million and borrowings outstanding on credit facilities of $319.6 million, including $235.0 million classified as long term, and $117.4 million of borrowing capacity available. Capital expenditures were $13.4 million in Q3.
Guidance for Fiscal Year 2024
Kimball Electronics reiterated its guidance for adjusted operating income in fiscal year 2024 of 4.2% to 4.6% of net sales. In response to the current economic environment, net sales are now expected to decline 4% to 6%, compared to the previous estimate of a 2% to 4% decrease. Capital expenditures are estimated to be in the range of $55 to $60 million, compared to the previous guidance of $70 to $80 million.