Advanced Drainage Systems acquires surface drain maker Duraslot

Advanced Drainage Systems Inc. has acquired Duraslot Inc., a manufacturer of surface drains to collect storm water. ADS plans to broaden its own product offering while leveraging its national network to spur Duraslot growth.

Terms were not disclosed for the deal between ADS, a publicly traded company based in Hillard, Ohio, and Duraslot, which manufactures products in South Glens Falls, N.Y., and previously was called Hall Construction Products and Services.

Duraslot surface drains are made from double-wall corrugated polyethylene pipe and have an aluminum slot mounted on top to intercept storm water from paved or clear areas. The company’s acquisition was announced Aug. 3 along with ADS’s first quarter results for its 2018 fiscal year.

ADS saw flat sales of $358.4 million and a slight dip of $900,000 in profit to $18.5 million mostly due to higher material costs and headwinds in agricultural and international markets with weakness in Canada driven by weather.

Sales from domestic agricultural markets was down 13 percent for the first quarter and some restructuring actions will be taken.

“To this point, we are currently in the process of shutting down underutilized facilities, reducing our headcount, and cutting out non-essential costs. We expect these initiatives to have a favorable benefit to our adjusted EBITDA of $5 [million] to $10 million over the remainder of fiscal 2018,” ADS Chief Financial Officer Scott Cottrell said in a quarterly conference call.

One part of the restructuring plan is to move infrastructure dedicated to markets that aren’t growing.

“We’re putting our production equipment in the markets that are strong. That’s been one of the key initiatives we talked about as we went into the performance improvement systems upgrade,” ADS CEO Joseph Chlapaty said, adding that production capacity is being reduced “mainly in the agricultural Midwest.”

ADS continues to do well in its core domestic construction market. Company officials say materials costs for high density PE and polypropylene are moving down and the end market is off to a good start. Sales were up 4 percent against a strong comparison to the prior year, which saw growth of 8 percent.

“Our end markets outside of agriculture are robust and our orders and shipping activity is quite strong. We believe as we go through quarters two, three and four, we will accelerate our performance and improve to the point where we meet our guidance,” Chlapaty said, pointing to solid demand in both non-residential and new residential construction.

ADS maintained its financial targets for its fiscal 2018 outlook, which projects net sales of $1.275 billion to $1.325 billion.

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