Finance

Matthews reports year end. . .Memorialization sales increase

Matthews International reported their 4th Quarter and 2019 fiscal Year Sales last week.  The Pittsburgh based public company includes in its portfolio, as one of three business segments, a Memorialization unit that includes Matthews Cremation, Aurora Casket, and Star Granite which are of interest to the death care industry.

You can access the Matthews International 4Q and Fiscal 2019 report here.

For the 2019 year Matthews International reported sales of $1.54 billion as compared to 2018 total sales of $1.60 billion. . a decrease of about 4.1%.  Company officials say, however, that much of that decrease is attributed to “delayed orders in the Industrial Technologies segment and for cremation and incineration equipment” that will be placed in the early 2020 fiscal year.  As a matter of fact, here is what company CEO Joseph Bartolacci stated in the companies report, “As noted earlier, we have already started to receive several of the orders delayed from the fiscal 2019 fourth quarter, which will contribute favorably in fiscal 2020.  As a result, we are currently targeting revenue growth in our Industrial Technologies and Memorialization segments.”

Here are some highlights of the Memorialization segment:

  • For the 4th Quarter, the Memorialization segment had sales of $163 million as compared to 2018 sales of $156 million, an increase of about 4.4%.  Management stated for the quarter, “. . . reflecting higher sales of memorial products and caskets in North America.”
  • For the 2019 fiscal year, the Memorialization segment had sales of $637 million as compared to 2018 sales of $631 million, an increase of about 1.0%.  As to these sales, management stated, “For the fiscal year, the segment reported increased sales of Memorial products and cremation and incineration equipment. Caskets sales were lower on a year-to-date basis, reflecting an estimated decline in U.S. casketed deaths.
  • Memorialization segment EBITDA dropped from $145.5 million in FY2018 to $134.3 in FY2019.  That is a decline of about 7.6% and management stated, “The current year periods primarily reflected the impact of higher material and freight costs. The divestiture of a controlling interest in the pet cremation business. And on a year-to-date basis, the decline in U.S. casketed deaths on casket sales. These declines were partially offset by the segment’s cost reduction initiatives, including acquisition synergies. And on a year-to-date basis, the acquisition of Star Granite & Bronze.”

We also reviewed Matthews International’s transcript of its earnings call from last week.  You can access that transcript here.  What was of most interest to us, however, was that the company is rapidly pursuing business in what it calls its “Waste to Energy” business and that segment will be part of the Memorialization segment which could lead to rapid revenue increases in the segment in the fairly near future.  From our point of view, it appears that Matthews is using its technology advantages from the cremation industry to expand into larger projects in the “Waste to Energy” business.

Here is a quote from CEO Joseph Bartolacci on the Memorialization segment:

For example, we have long said that our memorialization business continued to improve its operating efficiency and branch out into related areas, which we believe will mitigate the demographic trends we face. This quarter reflects that strategy well. We saw positive revenue trends in our Funeral Home Products business, our Bronze business, our granite business and our environmental solutions business, despite the deferral of several projects. Our EBITDA results in this segment for the quarter continued to be challenged by commodity and freight costs as well as significant ramp-up costs associated with the waste-to-energy business. From a positive perspective, however, commodity pressures have subsided and should benefit the second half of 2020, and we recently landed another waste-to-energy project in the U.K., which we believe can be the first of many in the years to come.”

And here is a Q and A from the earnings call transcript:

Q. And I wonder if you could talk more about the waste energy market, what your expectations are as far as revenues in fiscal ’20 and then longer term, and then how do you see that whole market developing for you?

 A. by Joseph C. Bartolacci, Matthews International Corporation – CEO, President & Director

So we are very, very, very early into the marketplace. This is something that’s going on in the U.K., but is expanding greatly around the world. We got a call — just to give you an example, we had a call the other day from a cruise ship operator to look at these facilities for islands where they have landing zones for some of these cruise ships. So the market is beginning. Each one of these installations can go anywhere from $2 million to $5 million. And the potential for these would be material, let’s put it that way, material to our to our Memorialization business, and is part of why we say, our business will continue to grow top line over time.

Related — Matthews International also announced a dividend increase.  You can read about that here.

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