Your question, and we'll get to as many questions as we can, time permitting. I'm Steve Ferazani, an Analyst at Sidoti. So pleased to be joined by Astec Industries, ticker is A S T E. We're joined by CEO Jaco van der Merwe and the rest of the team who will introduce. Coming off a month ago, reporting a massive 4Q, people want to know what's next to come from Astec, and here to explain it and talk about where things stand with the business and give you an overview. Let me turn it over to CEO Jaco. Jaco.
Good afternoon. Thank you, Steve. Good afternoon, everybody. Thanks for joining us today. You know, we have our safe harbor statement up there. I assume that everybody has familiarized themselves with that. On the call with me today, we have Steve Anderson, who's responsible for investor relations here at Astec, and we have Brian Harris, who's our CFO, and Brian will cover the financials part of this presentation. You know, I think I want to start by just introducing the company on a high level. You know, Astec Industries are based here in Chattanooga, Tennessee. The company was founded in 1972. You know, last year, we reported sales around $1.3 billion, EPS of $2.45, and we had an adjusted EBITDA margin of 8.6%. We have just over 4,000 employees around the world, and we operate with two segments.
Our Infrastructure Solutions segment is focused on asphalt plants, concrete plants, and road construction equipment for the infrastructure industry. That is supported by our Materials Solutions group that is primarily focusing on crushing and screening. The infrastructure group is about two-thirds of our business and Materials Solutions around a third of the business. We do about 80% of our business in North America and about 20% outside of the U.S. From an industry point of view, one of the questions we get a lot about is, you know, what makes us excited about Astec and the future of Astec? You know, I think all of us that's based here in the U.S. have a very clear understanding of the state of infrastructure. We feel that this is a really good industry segment to be present in.
We believe that the U.S. will have to invest in infrastructure for many years to come. Currently, as everybody knows, we have a federal funding IIJA program in place that will expire in September of 2026. Within that package was dedicated the amount of money focused on improving infrastructure. We've seen quite a bit of that money flow through to the market, although, you know, there's still quite an amount of money that needs to flow through. From a long-term perspective, even with this bill, you know, we believe that the state of infrastructure in the U.S. has just stabilized or even further deteriorated. We are, you know, we're very bullish that in the future, infrastructure spending will continue to be a focus. It's actually one of the areas where we have bipartisan support.
You know, we're looking forward to see what President Trump announces here in the next, hopefully, a couple of months around infrastructure spending. Brian, why don't you take the financials, and then I'll conclude at the end?
Okay. We can go to actually the next slide, Jaco, and I'll summarize things there. Yeah. You can see here, fourth quarter is highlighted with very strong results for the fourth quarter, mainly due to increased demand for both capital equipment and our aftermarket parts. We saw adjusted EBITDA and adjusted EBITDA margins benefited from favorable volume pricing and mix. Adjusted earnings per share were $1.19, and that was a record as well. Record financial results for the year, full year, EBITDA dollars and EBITDA margins grew slightly. We had favorable pricing, but some of that was offset by volume mix and manufacturing inefficiencies, and of course, the impact of inflation, which lingered during the year. A full year earnings per share decline that you see there was primarily driven by the impact of increased income tax, interest, and some other expenses.
If we go to the next slide, this is where we show the results for our Infrastructure Solutions segment. Again, higher net sales for the quarter due to strong domestic capital equipment and moderate increases in our aftermarket part sales. For the year, the net sales increased by $37 million or about 4.6%. The operating adjusted EBITDA dollars and margins were affected positively by the volume that we saw in the fourth quarter. Pricing and operational excellence initiatives and tight expense management also contributed. The fourth quarter EBITDA delivered a record margin of 21.3%, reflecting very strong execution of our plans. If we go to the next slide, we can see the Materials Solutions segment. Again, adjusted EBITDA dollars and the margins negatively impacted in the quarter. That was really just due to lower capital equipment sales.
I think we've seen continued to see the impact of some destocking and higher interest rates. We'll talk a little bit more about that later. Aftermarket part sales in this segment were relatively flat, but it's still at good levels. Again, reflecting the fact that there's a lot of equipment in use in the field. Some of the negative impact of the volume was offset by tighter cost control. If we go to the next slide, it's just a summary of our balance sheet and liquidity. You can see that we do have a very strong, healthy balance sheet just now, available cash of $88.3 million, available credit of $139 million, almost $140 million, and total availability of $228 million. Free cash flow in the quarter was also strong at a little over $32 million.
That was really a result of sound working capital management as we got towards the end of the year and driving up the cash flow. I do not think we are going to talk too much about our guidance. That number is already out there, so I will not go into that at this stage. I will maybe just hand back to Jaco for some summary comments before we go to Q&A.
Yeah, no, thanks, Brian. You know, maybe just as the intro to this slide, when I took over the role here about two years ago, there was a very clear message from the markets, you know, that Astec has been an inconsistent performer in the past. You know, as a team, we've focused a lot on that over the last two years. We've had two pretty decent years behind us, and the team is continuously focusing on further driving that consistency. We're doing it through, you know, focusing on our parts and service business to grow that and sales and operations planning so that we have the ability to give better outlooks to the market. We also spend a significant amount of time over the last two years to clean up some of the legacy issues that we've had.
You know, now I think we are in a really good business to take a step into the growth phase of our company. You know, there are quite a few things that we are very excited about for this business. You know, we talked earlier about the favorable customer segment that we're in, but we also have some good sentiment from our customers. I've been on the road quite a bit this year, and we attended our annual dealer meeting, World of Concrete, National Asphalt Paving Association, and, you know, all of those were quite positive, with our customers being cautiously optimistic. Of course, quite a few of those things happened in the very early part of this year, and the tariff discussion has definitely come up since then. Overall, you know, we have a good segment that we operate in. We have good customer sentiment right now.
You know, as a team, we are now focusing on driving that operational excellence in our manufacturing areas. It's another area that will help us to become more consistent in the future. From a growth point of view, we are very excited about new products that we have announced and that, you know, are still in the pipeline. Next week, our industry is getting together in St. Louis, Missouri for the World of Asphalt show, and we are very excited about some of the new products that we will showcase there. I already talked about parts, parts and service revenue. It's something that I'm very focused on, and there's a great opportunity for us to grow. International expansion, another opportunity for us as we are a small player outside of the U.S.
Brian touched on our strong balance sheet, and we definitely have an opportunity to use our balance sheet and to grow this business through acquisitions that will make sense and acquisitions that will be accretive, you know, from day one. Yeah, good position overall. Really proud of the work the team have done so far over the last couple of years, and we're looking forward to continuously executing our strategy. Steve, with that, I think we're ready for questions.
That's great. Thanks so much, Jaco, Brian, for that overview. As a reminder to everyone, if you have any questions, press that Q&A button at the bottom of your screen, type into the question, and we'll read as many as we can, time permitting. I don't want to kick things off, Jaco. I don't want to overstate this, but there has been a little bit of a tale of two segments for Astec. Obviously, why don't we touch the strong one first, I nfrastructure Solutions. I think when I talk to investors, a lot of people think of you as asphalt and concrete plants. And one thing, good quarters, bad quarters, the one consistent has been the demand for your asphalt and concrete plants. Can you talk a little bit about how that's running now and what you're thinking about for demand and why that specifically has been so consistent?
Yeah. No, Steve, good question. I will say I'm very proud of the work our teams have done there. You know, we've seen a consistent improvement in performance on those product lines. You know, we have a very strong market position there. You know, we're leading with technology. We're leading with customer service. We have a great parts and service business there. You know, it's just a well-rounded product portfolio. It's mature, and our operational excellence teams have done a lot of good work driving the margins in that business in the right direction. You know, one thing that is maybe not that known is that we actually have a pretty sizable piece of that business is our mobile road construction equipment side, which has actually been a little bit softer as part of the interest rate environment and the dealer environment.
You know, despite that, the Infrastructure Solutions business has done really well. We've had a very strong, you know, couple of years out of COVID. We came in the year with decent backlog for that business. Our concrete plant backlog, you know, there's a couple of our facilities that sold out for the year. You know, we think that will continue to be strong. On the asphalt plant side, you know, we're more back to normal lead times. We still have opportunity to take orders for the third and fourth quarter of this year. It doesn't take a lot to fill the facilities, you know, three or four big plants, and you get there very quickly. We still encourage about that.
As I mentioned on our last earnings call, we were encouraged by the bookings in the first six weeks of the year, and we see no reason why that will not continue.
Should we be paying attention and how close, and I'm sure you are closely paying attention to highway funding? Because we've still got some time, but where do you think we are and how can that affect things?
Yeah, no, always, Steve. I mean, it's always a positive boost for Astec when a new highway fund is announced. You know, going back to my earlier slide around the general state of infrastructure in the U.S., you know, I say a bit with tongue in cheek, but if we don't get another bill and a big bill and our government stops spending on infrastructure, I think we have bigger problems than just what is the state of business for Astec, you know. I think we will always have some form of funding. You know, it might vary a little bit, but we cannot afford not to invest in our infrastructure.
Okay. Now, flip over to Materials Solutions, which has been a little bit softer. Can you talk about, do you have any signs that we could be nearing an inflection point? For folks who are a little bit newer to the story, can you explain why there is that difference between those two segments and what's going on?
Yeah, absolutely. You know, traditionally, the Materials Solutions business is a business that goes through dealers. You know, typically, dealers will put our equipment to work through rent-to-own programs. After COVID, we saw a huge order intake that drove our backlog through the roof. Obviously, you know, we started to pump out a lot of equipment, and the dealer inventory started to build up, and not just us, but from all OEM suppliers. The dealers quickly started to run into, you know, the upper ends of their credit limits. Although the equipment is running, and it's very visible if you look at our parts business, that was pretty stable last year. If you look at some of our big public companies like CRH, Vulcan, you know, they've had pretty good business on the crushing and screening side.
The dealer network was flush with inventory, and that created then a backlash to us where we did not get the replacement order. As interest rates are stabilizing, and I think our customer base are getting used to higher interest rates, you know, we have seen, you know, quite a nice reduction in dealer inventory in December, again in January. In the, you know, the earnings call, we made a comment that we were encouraged by the level of order intake for the first six weeks of the year. Steve, I feel a lot better about that business than just, you know, three, four months ago.
Okay, fair enough. Talk to me about the balance sheet, which has been, through it all, very, very strong, and you had a really nice cash flow quarter in 4Q. I mean, all around strong 4Q. How are you thinking about that balance sheet? You haven't necessarily taken advantage of it lately. Is there something out there that you're considering, or how are you thinking about the balance sheet today?
Great question. You know, Astec has been very fortunate that we've had a strong balance sheet for many years. You know, coming out of COVID, inventory increased quite a bit, and there was a while that we had to use our revolver to finance that inventory, but we've had a really nice reduction, and there's more room to grow. We further see some reductions in inventory. You know, when I took over, Steve, like I mentioned earlier, we really focused on creating that consistency in our business. Although we still have work to do, I think we are well positioned now to use the balance sheet, and we're going to do it in a couple of areas. You know, investing back in our business, we have great opportunity to further use capital to create some automation in our factories.
You know, we see some big opportunities for us to use that capital in acquisitions. I will say we have a very structured process with very clear filters. You know, we are looking for businesses that will fit into our Rock-to-Road, you know, view of the market and maybe some adjacencies. We are looking for businesses that have a very strong parts and service component. You know, we're also looking for businesses that can give us, you know, an international manufacturing footprint. We are very selective. We have quite a few opportunities that are out there. You know, our team that we have today is very experienced with deal-making. We have a good acquisition playbook. Yeah, I think the stage is set for us to go and do something.
How much of it is exploring specifically, and you mentioned, for instance, parts and services, but how much of it is strategic versus do you consider roll-ups? In fact, we have a question about whether you see opportunities for roll-ups within paving, which has been smaller for you. You do not need to answer specifically, but generally the question.
Yeah, yeah. No, there's definitely opportunities in both. You know, there's a few areas where there's product gaps that we can fill with acquisitions. You know, in certain cases, we are a small niche player that adding, you know, a company or two can help us to strengthen our market position. I think we've demonstrated that on the concrete plant side over the last few years, you know, adding three businesses together, and there's some more opportunities there. Steve, both of those scenarios can play out for sure.
Okay. You touched on it during the presentation, but I know it's been important to you in the two years you took over, Jaco, and I know there's been progress, and we saw some of it in Q4. In terms of you shot a couple of plants around even before you took over, in terms of about getting production efficiency back to a level that you felt was.
Yeah, absolutely. Yeah, we closed two factories. One was in the Materials Solutions side, and I will say I think we are over that. We've done a really good job getting our parts business on track that was highly affected by that. I feel much better around that. The plant that we closed in the Infrastructure Solutions side was, you know, on the mobile paving side, and we moved that into one of our other facilities. You know, it created a real big challenge for the organization. Our team have done a really good job here in the last 6 months-12 months, but we still have quite a bit of work to do. You know, I will say that's an area where if we can increase our output, you know, +20%, +30%, +50% , we feel confident that we can sell it.
The market is there, and we have enough of brand recognition in the market that we can go and get that volume. Big opportunity for us. You know, that is obviously in the infrastructure results today. You know, if we can further drive that in the right direction, it will have a positive effect.
You also touched on during the presentation trying to generate more consistent results that certainly I've touched on that with you personally, Jaco, in terms of something I hear from investors a lot, because you will have these big quarters, then we'll see. Now, there is some seasonality in your business. With the asphalt and concrete plants, those tend to be larger projects that can hit a quarter and not hit timing-wise. Is there a way to improve that consistency? How do you do it? I know parts helps.
Yeah, yeah. I mean, for me, a couple of things. Steve is growing the parts business as much as we can because that will give you consistency. You know, one of the things that we lacked in the past was a very clear sales and operations planning process. Today, I will say our financial team together with our sales team is getting much better at, you know, forecasting what sales we're going to get. We still have a long way to go, but it's getting much better. You know, I will say, Brian, since Brian joined, he's brought a lot of knowledge to the team. As you can see this year, we've changed the way we're giving guidance. I think Brian is going to help us to be much better communicators if we see maybe a slow quarter coming and things like that.
We're really working on all fronts. You know, I will emphasize that we can see a quarter where two or three asphalt plants move out of a quarter and it has a $20 million or a $30 million swing. You know, if we can look at our businesses in two halves of the year, I think it will be much more consistent. We're going to work on getting better at communicating. Brian has brought a lot of that to the team already, and I think that will help us a lot.
If we could touch on that, I know Brian is a couple of quarters in now, but there's also what to ask about working capital management and cash conversion efforts there.
Yeah, we're definitely going to see some improvement here, I think, in 2025. There's a couple of reasons for that. One, there's a continued focus on working capital management. We've created a shared services back office now that's focusing on AR, AP. Our procurement teams are negotiating with our vendors to get extended terms on the best terms that we possibly can. You know, for our plants, our big asphalt plants, we collect 30% upfront anyway. We're always kind of collecting cash in advance. Also, compared to the prior year, we've put some of the legacy issues that had cash settlements behind us, so they won't recur against some of the legal settlements that we have. We're curtailing or trimming the pace of spend on our ERP project as we get further into that.
Eventually, that will, you know, that will taper away as we get further into the project. Together with, you know, with improved EBITDA and some work still to do on our finished goods inventory, but I think all of those combined will just help us generate more free cash.
Excellent. I know we are running out of time, but we have to touch on this. I hate to do it. It's the last question, but Jaco, if you can talk about how you're managing tariffs and what you think the impact can be.
Yeah. No, Steve, it's definitely a topic of the day. I can tell you that. You know, I will say we are in a much better position today than what we were during the previous round of tariffs, what we were during COVID. You know, I will say one of the really good things that came out of the OneASTEC environment was the creation of our OneASTEC procurement organization. We have a very knowledgeable team. We have a specialist just on import tariffs. We have created a task force internally where we meet every day to discuss the latest. A couple of things, you know, from a parts pricing point of view, we've got a clear direction there. If we get component price increases, we're going to pass it straight on to customers. That's not something that we necessarily did during COVID.
That's 30% of the business. Our procurement team has a portal where we can see every one of those as they happen and as they play out. From a capital equipment point of view, you know, we have been proactively communicating with customers, telling them about the potential increases that can come from tariffs. We've actually spelled out to them what we see as a first step. Customers are very well aware. You know, the moment we feel these are going to be permanent, those will go into effect. I want to say we've been very proactive. You know, will it affect us one way or another? Yes, in the short term. We are going to, we are doing everything we can to minimize it. We've worked too hard over the last two years to improve margins to give it up.
I think the team is well positioned to do that.
Excellent. We are a little over time. Any closing thoughts before we wrap this up, Jaco?
Yeah, no, Steve, thank you for the opportunity. And everybody, thank you for attending. You know, I will just say I'm very proud of this business. It's a really good organization. And, you know, the management team that's here, you know, we know what good looks like in this industry. We know where we need to be to be in the top quartile of performance. And that's what we focused on is to make it one of those companies. So looking forward to dealing with you in the future.
Thank you. I know there were a lot of questions. I'm sorry if we didn't get to all of them. Certainly, you can reach out to us at Sidoti or Steve Anderson at Astec. I'm sure we'll try to get all questions answered. Thank Jaco and Brian for being here today. Hope everyone found it as informative as I did, learned something new every time. Astec Industries, thanks so much. Thanks for everyone for watching.
Thank you.
Have a great day.
Yeah, bye.
Thank you.