Matthews reports 1st Qtr 2019. . . . Memorialization segment increases sales
On January 31 Matthews International, parent company of Matthews Cremation and Aurora Casket, reported its first quarter of fiscal year 2019 which covers the period of October 1, 2018 to December 31, 2018. You can read the press release from Matthews here.
As a company the consolidated sales totaled $374.2 million as compared to $369.5 million for the same period one year ago. Cash flow from operations was reported as higher than one year ago. The Memorialization segment of the company reported 1st quarter sales of $153.9 million as compared to $144.9 million one year ago. That is a $9 million increase or an increase of about 6.2%. CEO Joseph C. Bartolacci also mentioned that sales could have been higher but a large $4.5 million cremator order for a party in the EU was pushed back to the 2nd quarter for reasons beyond the company’s responsibility.
CEO Bartolacci also provided many comments in an earnings call with interested parties. You can read a transcript of that call here. We have provided some of his direct quotes concerning the Memorialization segment as follows.
- “The growth reflected increase in sales of Memorial products, caskets, and cremation equipment in the U.S. and the benefit of the acquisition of Star Granite & Bronze in February 2018.”
- “Memorialization segment adjusted EBITDA for the fiscal 2019 first quarter was $30.3 million compared to $28.4 million a year ago, reflecting an increase of $1.9 million or about 7%”.
- “As we look at our businesses, we recognize that some of the markets that we serve are changing and accordingly we have changed as well. Some of those changes include creatively and effectively managing our SGK Brand Solutions and our Memorialization businesses, where we expect modest growth and active cost management, while continuing to generate very strong cash flow”.
- “We had a strong quarter with organic growth in our significant product lines. Our Star Granite business that we acquired a year ago also contributed to that growth. It’s performing well and our integration of their bronze production into our facilities is now complete”.
- Regarding our casket business, we’re in the process of completing our facilities consolidation later this year, which will mark completion of the integration of the Aurora acquisition.”
- “I remind you that we believe Aurora to have been a tremendous success, ultimately adding more than $40 million of EBITDA to the segment. . . together with the addition of Aurora and the final plant closure, we expect that our adjusted EBITDA margins in the casket business will be above 20%.”
- “Within our current equipment – within our cremation equipment business, revenue was solid and we would have had an even stronger quarter, except that it was impacted by a large U.K. cremation installation that was delayed until later this year”.
- “after a strategic review of our pet cremation services business, this quarter we divested a majority position in our business to a private equity partner”.
- “Finally, on the cost side, the entire Memorialization business, we have been successful realizing acquisition synergies and managing contrallable costs. . .”
Funeral Director Daily take: It is interesting to note that after this report the stock of Matthews International took a hit because the company did not attain their expected sales as a whole company. When you look at the Memorialization segment, at first glance the company looks very strong and you would wonder where is the expected mirrored casket sale decline which was evident in the last report by Hillenbrand Industries and its Batesville segment.
One of the things that I noticed – and you cannot know the exact situation because we do not know the seasonal nature of this – is that sales in the Memorialization segment increased about $9 million as compared to last year. However, last year for the first quarter Matthews did not own Star Granite and Bronze and when it was acquired last February its annual sales were reported to be over $31 million — so that acquisition should have added $8 million or so to the 1Q year over year sales on its own.
Finally, from my point of view, the Aurora segment looks to be very similar to the Batesville segment at Hillenbrand. It appears, with a final Aurora plant closing, costs are being cut to provide a high level return on the unit — even, as I suspect, that unit volumes will drop. It will be interesting to see moving forward how both companies can return the EBITDA that they hope for in the face of rising commodity (steel) and freight costs as well as a well known and anticipated drop in the percentage of casketed deaths nationwide.