Otter Tail Corp Q3 FY2024 earnings call

• Electric segment: Regulated utility has a five-year capital spending plan for renewable generation, transmission, and technology. Advanced Metering Infrastructure project progressing, wind repowering project on budget, and ongoing transmission investment discussions.
• Plastics segment: Vinyltech expansion in Arizona progressing, PVC pipe prices declining but at a slower rate, and segment performing better than expected with sales volume growth.
• Manufacturing segment: Facing end-market demand headwinds, but BTD expansion in Georgia progressing.

Electric segment earnings increased 16% or $4 million primarily due to North Dakota interim rates and a FERC ruling on transmission return on equity. Plastics segment earnings decreased 8% or approximately $5 million as PVC pipe sales prices declined, but its financial results exceeded expectations. Manufacturing segment earnings decreased 71% or approximately $5 million due to lower sales volumes across several end markets. In terms of revenue contribution, while specific percentages aren't explicitly stated, the Electric segment's earnings growth and Plastics segment's performance despite decline are highlighted.

• Increased and narrowed 2024 earnings guidance for Plastics segment to $6.97 to $7.17 from $6.77 to $7.07.
• Maintained Electric segment and corporate cost center guidance for 2024.
• Decreased 2024 earnings guidance for Manufacturing segment due to lower anticipated sales volumes.
• Anticipate reaching long-term earnings mix of 65% electric and 35% non-electric as Plastics segment earnings decline to $45 million to $50 million annually.

• Class action lawsuits against pipe manufacturers, with Otter Tail believing in factual and legal defenses.
• Market conditions affecting segments, such as end-market demand headwinds for Manufacturing and import competition for Plastics.
• Regulatory approvals needed for transmission investments like MISO's long-range plans.

Q: Chuck, any update on potential new large loads and timeline?

A: Working with entities interested in new loads, in discussions with several, no service agreements signed yet, expect something within next two quarters.

Q: Ida Wozniak on plastics segment glide path to normal?

A: Anticipate Plastics segment net income of $45 million to $50 million in 2026 timeframe, prices to continue recede towards that level.

Q: Tate Sullivan on manufacturing revenue mix and PVC net income reference?

A: BTD is much larger entity, $45 million to $50 million refers to forecast net income from Plastics segment in 2026 or beyond