Trailer builder Wabash National Corp. (NYSE: WNC) is refocusing its business on cold chain, home delivery and parts and service as it pushes resources to refrigerated vans needed to move vaccines and food to a homebound nation.
Wabash sees the growth in home delivery having staying power even as more Americans receive inoculations against COVID-19. New technology and products to keep goods refrigerated presents significant organic growth prospects, CEO Brent Yeagy said on the company’s fourth-quarter earnings call Wednesday.
“We’ve never been faced with a market that has this much potential,” he said. “All the ways that we could potentially grow are on the table right now.”
Those include expanding upfitting, acquiring technology or another manufacturing platform.
“We took action to streamline our portfolio by selling assets that do not offer strong strategic fit,” Yeagy said. “As we finish pruning our portfolio, we are also setting the stage to backfill by continuing the diversification with expanded and new revenue streams [in the] transportation, logistics and distribution markets.”
Wabash sold its Beall brand of tank trailer to MAC Trailer Enterprises in December. But it is holding onto its other tank trailer brands.
“We are absolutely repositioning resources to accelerate the organic efforts to create additional revenue in a way that has never been seen at Wabash National,” Yeagy said.
Wabash sees expanded use of molded structural composite (MSC) technology beyond the 53-foot refrigerated van market. MSC weighs less and offers better thermal protection than other trailer construction material.
Wabash worked on an MSC pilot project with C&S Wholesale Grocers in 2020. Using MSC technology, Wabash said it is able to make a 48-foot trailer 30% more thermally efficient than a traditional refrigerated trailer. Refrigeration units can run fewer hours and for those with all-electric units, fewer batteries are needed.
“We believe this is likely to be a rapidly expanding market segment where MSC continues to offer unique value to customers with its durability, reduced weight and improved thermal efficiency,” Yeagy said. “Consistent feedback from interested parties is that our technology offers benefits they have been unable to find elsewhere.”
Wabash also is manufacturing Gruau refrigerated inserts for the Ford Transit van to serve the rapidly expanding food/grocery home delivery market. Traditionally constructed refrigerated cargo vans use spray foam insulation, which can release gas and allow mold to intrude. Gruau inserts fit specific van models with 30% to 50% greater thermal efficiency.
“This is an important space for Wabash to participate in with our technology as it sets us up to better serve the smaller light-duty upfit market compared to our larger, more traditional truck body product models,” Yeagy said.
President Joe Biden’s green agenda, the lingering pandemic, climate change and technology advances combine to create opportunity, he said.
“At least for the next four years, it opens up a really interesting way that Wabash National can take the ideas we generate from an innovation standpoint, technology that we have and really bring sustainable solutions within those spaces.”
Looking to hire
But traditional truck bodies are the main catalyst to pay for expansion. The value of Wabash’s backlog of trailers awaiting construction rose to $1.5 billion at the end of Q4 compared to $1 billion at the end of the third quarter. Most of the work is dry vans that dominate the Commercial Trailer Products division.The average selling price was $27,000, flat with the prior year.
“Generally, shipments are in line with how we thought that would materialize in the fourth quarter,” Yeagy said. “As we look at 2021, we don’t see anything that is a structural impediment moving forward.”
Wabash shipped 10,610 trailers in Q4 compared to 14,950 in the same period last year.
Though Yeagy expressed concern during the third-quarter earnings call about being able to find workers to hire during the pandemic, Wabash added 600 hourly employees during the October-December period. It is seeking 900 more new hires this quarter, Chief Financial Officer Mike Pettit said.
By the numbers
Net sales for the fourth quarter 2020 were $404.1 million. Operating income was $10 million or 2.5% of net sales. For the full year 2020, total revenue totaled $1.5 billion. Operating income was $22.5 million.
Q4 net income was $5.5 million, or 10 cents per diluted share. For the full year of 2020, net income was $7.8 million, or 15 cents a share. Operating earnings before interest, taxes, depreciation and amortization (EBITDA) was $25.2 million, or 6.2% of net sales in Q4. Full-year operating EBITDA was $73.6 million, or 5% of net sales.