American Vanguard NYSE: AVD reported lower second-quarter sales amid challenging agricultural market conditions, while management said U.S. specialty growth, cost actions and product-development investments supported its full-year outlook.
Second-quarter sales totaled $117 million, down from $129 million in the prior-year period. First-half sales declined about 2% to $240 million. Chief Executive Officer Dak Kaye said the quarter reflected continued pressure on farm economics, including high capital costs, higher fuel and fertilizer expenses tied to the Middle East conflict, and conservative purchasing practices among distributors, retailers and growers.
Customers have increasingly ordered closer to the time of use and, in some cases, deferred purchases month to month, Kaye said. International markets also faced adverse weather, inflation and higher raw-material costs.
U.S. Specialty Growth Partly Offset International Weakness
U.S. crop sales fell 9% in the second quarter, primarily because sales in the company’s cotton portfolio shifted into the third quarter as customers delayed purchases. Insecticide sales also declined amid low bug pressure and cautious grower spending, Chief Financial Officer David Johnson said.
Those declines were partly offset by continued herbicide momentum, led by the company’s Impact and Envoke brands, while soil fumigant sales remained stable. On a first-half basis, U.S. crop sales increased 5%.
American Vanguard’s specialty business grew 11% during the quarter and 10% during the first half. Johnson said OHP led demand for biological solutions, while turf results exceeded the company’s forecast.
International sales declined 18% in the second quarter and 13% in the first half. Management cited dry conditions associated with El Niño in Central America, paused customer shipments related to local labor activity, reduced agave acreage in Mexico, and softer Brazilian demand for a copper fungicide following higher raw-material costs.
During the question-and-answer session, Kaye said the company was seeing higher—not lower—pricing in Brazil for its copper fungicide as copper costs rose. He also said American Vanguard had implemented freight-related price increases in July and that the increases appeared to be taking hold.
Margins and EBITDA Affected by Freight, Volume and Factory Utilization
Gross margin was 30% in the second quarter, compared with 31% a year earlier. Johnson attributed the decline to roughly $2 million of higher freight costs during the quarter and weaker factory absorption. For the first half, however, gross margin improved by 100 basis points to 30%, from 29% in the year-earlier period.
Kaye said higher freight costs reduced first-half margins by an estimated $2.2 million, or 90 basis points. The company expects pricing actions intended to recover those costs to begin contributing during the second half.
Adjusted EBITDA was $6.6 million in the second quarter, down from $11 million in the second quarter of 2025. The decline reflected lower sales, freight costs and weaker manufacturing efficiencies, partially offset by higher variable-cost margins and lower operating expenses.
First-half adjusted EBITDA increased by more than 20% to $17 million, compared with $14 million a year earlier.
Adjusted operating expenses, excluding items such as transformation and asset impairment costs, declined 3% year over year to $33.5 million in the quarter. On a GAAP basis, expenses fell $1.2 million, with selling, general and administrative expense down approximately $2.1 million, or 7%. Research, product development and regulatory spending increased 12% as the company continued to invest in new products.
Cost Initiatives and Product Pipeline Remain Strategic Priorities
Kaye said actions including the rationalization of the company’s Los Angeles production facility and headquarters relocation are expected to lower costs in the second half. The Los Angeles facility rationalization is expected to produce at least $4 million in annualized savings, according to management.
The company also named Hermann Castro senior vice president of marketing and business development in early July. Kaye said Castro will help advance American Vanguard’s goal of launching 50 new products over five years, targeting $100 million in annualized revenue by 2030.
At quarter-end, American Vanguard held $43.9 million in cash, down from $70.9 million at the end of the first quarter. Total debt was approximately $267.6 million, while net debt was about $224.7 million, compared with $194.7 million at the end of the first quarter. Johnson said the higher net debt reflected seasonal working-capital needs, normalization of accounts payable and increased receivables resulting from changes in certain customers’ early-pay strategies.
Inventory declined to $181 million from $191 million a year earlier, which Johnson said reflected tighter production planning and working-capital discipline.
Company Maintains 2026 Outlook
Management reiterated its expectation for 2026 adjusted EBITDA of $44 million to $48 million on sales of $530 million to $550 million. Kaye said delayed second-quarter shipments helped create a stronger order book entering the third quarter and that management remained comfortable with its forecast.
Looking further ahead, American Vanguard expects to reach an annualized revenue run rate above $600 million by the second half of 2028, alongside double-digit EBITDA margins. Kaye said the timing of that progress will depend partly on recovery in U.S. and global agricultural markets, though the company plans to continue pursuing efficiency, productivity and cost-reduction measures regardless of market conditions.
About American Vanguard (NYSE:AVD)
American Vanguard Corporation NYSE: AVD is a developer, manufacturer and marketer of specialty chemical products for crop protection, turf and ornamental care, and public health pest control. Headquartered in Newport Beach, California, the company offers a portfolio of insecticides, herbicides, fungicides and rodenticides designed for use across agricultural, turf and urban pest management applications. Its research and development efforts focus on novel chemistries and formulation technologies that address emerging pest resistance and regulatory requirements.
The company's product lines include emulsifiable concentrates, wettable powders, granular formulations, baits and liquid concentrates sold under proprietary brand names.
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