Lindsay Corporation (NYSE:LNN) Q3 2023 Earnings Conference Call June 29, 2023 11:00 AM ET

Company Participants

Randy Wood - President and Chief Executive Officer

Brian Ketcham - Chief Financial Officer

Conference Call Participants

Nathan Jones - Stifel

Brian Drab - William Blair

Ryan Connors - Northcoast Research Partners

Brian Wright - ROTH MKM

Brett Kearney - Gabelli Fund

Bill Baldwin - Baldwin Anthony Securities

Operator

Good day, and welcome to the Lindsay Corporation Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Randy Wood, President and Chief Executive Officer. Please go ahead.

Randy Wood

Thank you, and good morning, everyone. Welcome to our fiscal 2023 third quarter earnings call. With me today is Brian Ketcham, our Chief Financial Officer.

I'd like to start by looking at market conditions in North American irrigation where we're really seeing two themes playing off one another. Firstly, market fundamentals remain strong. And although net farm income is projected to decline versus last year, it's still well above historical averages and will represent the third highest income level over the past 10 years. Commodity prices have also seen support recently due to crop quality concerns caused by the drought.

While some parts of the country have received much needed precipitation, we have seen drought spread across the Midwest driving the USDA to announce earlier this month that 64% of the U.S. corn crop was currently impacted by drought. This market tailwind has been partially offset by tepid customer sentiment that has been driven by inflation, interest rates, general economic uncertainty and commodity prices still below last year's highs.

In our view, the short-term uncertainties have influenced customer behavior and caused an unexpected shift in seasonal order patterns. While market feedback indicated quotation volume remained generally consistent with the prior year, our order volume was impacted by customers who've taken a more cautious wait-and-see approach for the near term. For us, this means some of the spring volume we anticipated will shift into the fall installation season.

Our operational focus, pricing discipline and spending efficiencies in the quarter did allow us to expand operating margins and maintain business quality in spite of the deleveraging driven by lighter volumes.

Moving on to International irrigation. We continue to see strong project demand connected to global food security and shifting climate patterns. We recently confirmed 250 project units in the Middle East and there are also several additional large projects in the Europe, Middle East and Africa region that are actively being designed and quoted. Our global footprint, differentiated technology and strong project experience position us to be confident in our ability to identify and win these competitive projects.