A promising future for Matthews International?

January 9, 2023/Finance/

Last week a press release came out of Matthews International that seemed to show them on their way to executing their plans in the energy storage solutions business. CEO Joseph Bartolacci commented in the release as such, “We are very pleased to see continued strength in orders for our energy storage solutions. This order rate reflects industry interest in the proprietary nature of our unique solutions. Over the past two fiscal years, our energy storage solutions business has more than tripled. With these orders, we are potentially on track this fiscal year for another year of very significant growth.”

You can see that press release here.

Matthews International is also one of the world’s largest conglomerates that operates in the death care business. A question one might have is how will this new growth in the energy storage business affect what they call their Memorialization segment? First of all, the energy storage business comes under Matthews Industrial Technology segment which last year produced sales of $335.5 million, up 17.9% from their 2021 fiscal year sales. In addition, the Industrial Technology segment of the company produces about 19.0% of company revenue. . up from about 17% for FY 2021. There is no doubt that this segment is poised for growth going forward with extensive investment in the green energy movement.

Tom Anderson
Funeral Director Daily

So, what about their Memorialization segment? The Memorialization segment continues to grow for Matthews also. As a matter of fact, it accounted for 47.7% of company-wide revenue in FY 2022, up from a figure of 46% of revenue in FY 2021. It produced over double of the Industrial Technology revenue from fiscal year 2022 with sales of $840.1 million as compared to the aforementioned $335.5 million of the Industrial Technology segment. It appears that both of those segments for Matthews are poised to grow.

While there is no doubt that the green energy movement is on the front burner of investment in America, I think that Matthews also likes their future outlook in the memorialization or death care space as well. According to this company investment presentation, Matthews holds market share positions of #1 in Bronze Memorials, #1 in Granite Memorials, #1 in global cremation equipment sales, and #2 in casket sales in the United States with their Aurora brand.

Below is a slide from their investor presentation that shows the potential market for future casket sales and historical cremation product growth. While the growing number of deaths in North America somewhat blunts the loss of casket sales to other disposition methods, the historical growth of cremation products somewhat parallels the anticipated growth of the energy storage business. . . . .To me, being in those growth businesses –renewable energy and cremation — would portend a bright future going forward.

However, it is not all positive movement at Matthews. Their third business leg, called SGK Brand solutions, had a decrease in sales revenue of about 5% from Fiscal Year 2021 to Fiscal Year 2022. Their share of company sales revenue also dropped between those two years from 36.9% of sales in FY 2021 to about 33.2% of sales in FY 2022. So, in essence, a portion of their overall business which accounts for about 1/3 of all revenue is seeing a sales drop. Management will have to figure out what options that they have for this segment to improve or what they need to do with it.

As a matter of fact, this recent article from Funeral Director Daily points out that an activist investor group within the company ownership is advocating for Matthews International to potentially shore up the segment and then liquidate it to concentrate on the other two growing segments.

And here is a press release from Matthews International on how they have chosen to handle those activist investors.

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