MSA Safety Incorporated ((MSA)) has held its Q1 earnings call. Read on for the main highlights of the call.
MSA Safety Incorporated’s recent earnings call painted a picture of balanced growth and challenges. The company reported strong growth in its Detection segment and resilient demand across its product categories. However, it also faced challenges such as a decline in Fire Service sales and operating margin contraction due to tariff and foreign exchange headwinds. The sentiment during the call was one of cautious optimism, acknowledging both positive long-term trends and immediate hurdles.
Strong Performance in Detection Segment
The Detection segment emerged as a standout performer, reporting mid-teens growth. This was driven by expansion in both fixed and portable gas detection categories. Notably, the io 4 gas monitor and MSA+ offerings showed substantial growth, with over half of the MSA+ customers being new, underscoring the segment’s robust performance.
Resilient Overall Demand and Sales Growth
Despite facing tariffs and macroeconomic uncertainties, MSA Safety reported a 2% sales growth, or 4% organically. The company also achieved a 4% growth in adjusted earnings per share, highlighting the resilience of demand across its product categories.
New Contract Wins and Increased Backlog
MSA Safety secured a significant $10 million contract with the Orange County Fire Authority, contributing to a sequential increase in backlog. This aligns with historical trends and reflects the company’s ability to win strategic contracts.
International Segment Growth
The International segment saw a 9% year-over-year sales increase, or 11% organically. This growth was driven by double-digit organic growth in the Detection and Fire Service categories, showcasing the company’s expanding global footprint.
Decline in Fire Service Sales
Sales in the Fire Service segment were down high single digits year-over-year, primarily due to challenging year-over-year comparables in the Americas segment. This decline highlights some of the challenges MSA Safety faces in maintaining growth across all segments.
Operating Margin Contraction
Operating margins declined year-over-year, impacted by gross margin pressure from transactional foreign currency headwinds. This contraction underscores the financial challenges posed by external economic factors.
Challenges with Tariffs
About 15% of MSA Safety’s cost of sales is subject to tariffs, with one-third coming from China. These tariffs are expected to impact the company’s financials in the second half of the year, presenting a significant challenge.
FX Headwinds Impacting Margins
Foreign exchange headwinds, particularly from Latin American currencies, impacted gross margins. This challenge is expected to persist into the second quarter, affecting the company’s profitability.
Forward-Looking Guidance
Looking ahead, MSA Safety maintains a low single-digit full-year organic growth outlook. The company plans to leverage its strong commercial pipeline and strategic actions under its ACCELERATE strategy. This includes extending its innovation-led leadership and optimizing its supply chain to mitigate tariff impacts. Additionally, MSA Safety expanded its revolving credit facility to $1.3 billion to support future growth initiatives.
In summary, MSA Safety’s earnings call reflected a balanced view of growth and challenges. While the Detection segment and international sales showed strong performance, the company faces hurdles such as declining Fire Service sales and margin pressures from tariffs and foreign exchange headwinds. However, with strategic initiatives and a robust commercial pipeline, MSA Safety remains optimistic about its future growth prospects.