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Dec 31, 2022
Otter Tail Q4 2022 Earnings Report
Otter Tail Corporation reported a decrease in operating revenues and net income compared to the same quarter last year, but achieved record annual financial results in 2022.
Key Takeaways
Otter Tail Corporation announced its fourth-quarter earnings, revealing a decrease in both operating revenues and net income compared to the previous year. However, the company reported record annual earnings for 2022, driven by strong performance across all operating segments. The company also increased its quarterly dividend and provided earnings guidance for 2023.
Consolidated operating revenues decreased by 9.6% to $301.4 million for the quarter.
Net income decreased by 18.6% to $42.0 million for the quarter.
Diluted earnings per share decreased to $1.00, compared to $1.23 in the fourth quarter of 2021.
The company is initiating 2023 earnings per share guidance range of $3.76 to $4.06.
Otter Tail
Otter Tail
Otter Tail Revenue by Segment
Revenue by Segment
Electric Revenue
CapyFin.comManufacturing Revenue
CapyFin.comPlastics Revenue
CapyFin.com Forward Guidance
The company anticipates 2023 diluted earnings per share to be in the range of $3.76 to $4.06.
Positive Outlook
- Normal weather conditions for 2023
- Returns generated from an increase in rate base, as our average rate base in 2022 increased 3.1%, to $1.6 billion, compared to the prior year, and increased sales volumes from commercial and industrial customers.
- Lower operating and maintenance expenses, primarily from an absence of planned plant outages in 2023 and lower pension costs due to updated actuarial assumptions, including an increase in the discount rate from 3.03% in 2022 to 5.51% in 2023 and an increase in the assumed long-term rate of return on plan assets from 6.30% in 2022 to 7.00% in 2023.
- Lower expected contribution to the Otter Tail Power Company Foundation in 2023.
- Increase in earnings generated on our cash and cash equivalents.
Challenges Ahead
- We expect segment earnings to decline 10% from 2022 given overall concerns about a slowing manufacturing sector given the continued decline in overall industrial production as our customers continue to experience slower demand for products.
- Anticipated margin compression as industry supply and demand dynamics begin to normalize leading to reduced product sales prices.
- Lower sales volumes, especially in the first half of 2023, as distributors and contractors continue to manage purchase volumes and consume current inventories given the ongoing dynamics within the industry.
- Inflationary cost pressures and unfavorable manufacturing cost absorption putting downward pressure on operating margins.
- These items are partially offset by inflationary increases in salary and benefit costs, other corporate operating expense items as well as no expectations of receiving any death benefit proceeds on corporate owned life insurance.
Revenue & Expenses
Visualization of income flow from segment revenue to net income