CEO Overview and Strategic Direction
Otter Tail Corporation began 2026 with a strong first quarter, reflecting solid execution across its diversified business segments. CEO Chuck MacFarlane highlighted that the company remains firmly on track to meet its financial objectives for the year, supported by disciplined operations and a clear focus on long-term growth.
MacFarlane emphasized that teams across all divisions delivered on near-term priorities, benefiting both customers and shareholders. The company’s diversified portfolio—spanning electric utilities, manufacturing, and plastics—continues to provide resilience and balanced earnings contributions. This approach allows Otter Tail to navigate varying market conditions while maintaining steady financial performance.
Progress in the Electric Segment
The Electric segment, anchored by Otter Tail Power Company, delivered notable achievements during the quarter. Regulatory progress remained a key focus, with the company securing approval for its fully settled South Dakota rate case. New base rates were successfully implemented in April, while interim rates for the Minnesota case went into effect earlier in the year.
These regulatory milestones are critical in supporting the company’s customer-focused rate base growth strategy. By aligning rates with infrastructure investments, Otter Tail ensures it can continue delivering reliable energy while funding modernization efforts.
The company also made substantial progress on renewable energy initiatives. A wind repowering project was completed on budget despite weather-related delays, demonstrating strong project management capabilities. Additionally, advancements in solar energy, battery storage, and regional transmission projects signal a continued commitment to clean energy and grid reliability.
A key operational achievement during the quarter was the early procurement of solar panels for two development projects. This proactive move eliminated tariff-related risks and avoided potential cost increases, ultimately benefiting customers.
Manufacturing Segment Performance
Otter Tail’s Manufacturing segment showed meaningful improvement, driven by effective cost management and rising demand in key markets. Revenue increased by 9.6% year-over-year, reaching $89.6 million, while net income surged by nearly 180% to $4.3 million.
This strong performance reflects a combination of higher sales volumes and improved margins. Demand strengthened in sectors such as construction and recreational vehicles, which had experienced softer conditions in the prior year. Additionally, a modest increase in steel costs—passed on to customers—contributed to revenue growth.
The company’s focus on aligning its cost structure with current demand levels proved particularly effective. Enhanced production efficiencies and a favorable product mix further supported profitability. While general and administrative expenses increased, they were more than offset by gains in operational performance.
Plastics Segment Developments
The Plastics segment experienced mixed results during the quarter. While sales volumes increased by 7%, overall revenue declined by 13.5% to $91.6 million due to lower average selling prices. This decline reflects an ongoing normalization of pricing following peak levels reached in late 2022.
Despite the drop in revenue, the segment benefited from strong demand in certain areas. Opportunistic sales of specialty pipe and increased purchasing activity from distributors and contractors—anticipating potential cost increases—helped boost volumes.
Net income for the segment decreased by $10.5 million, primarily due to reduced pricing. However, this impact was partially offset by lower input costs, including a 12% decline in PVC resin prices. The company also completed the second phase of its Vinyltech expansion project, adding 15% more production capacity along with enhanced manufacturing and storage capabilities.
This multi-year investment positions the Plastics segment for future growth, enabling it to better serve customers and capitalize on new market opportunities.
Financial Strength and Cash Flow Performance
Otter Tail demonstrated strong cash flow generation in the first quarter of 2026. Cash provided by operating activities totaled $70.6 million, a significant increase from $39.5 million in the same period of 2025. This improvement was largely driven by reduced working capital requirements, influenced by the timing of vendor payments and recovery of fuel-related costs.
The company continued to invest heavily in its infrastructure and growth initiatives, with capital expenditures reaching $185.3 million during the quarter. Most of these investments were directed toward the Electric segment, particularly renewable energy and grid modernization projects.
Financing activities included the issuance of $100 million in long-term debt by Otter Tail Power Company. These funds were used to repay short-term borrowings, support capital investments, and maintain operational flexibility. Additional financing activities included $7.7 million in net short-term borrowings and $24.3 million in dividend payments.
As of March 31, 2026, the company maintained a strong liquidity position, with total available liquidity of $658.9 million. This includes cash reserves and access to credit facilities, providing ample financial flexibility for future investments and operations.
Dividend and Shareholder Returns
In line with its commitment to delivering shareholder value, Otter Tail’s Board of Directors declared a quarterly dividend of $0.5775 per share on May 4, 2026. The dividend is scheduled for payment on June 10, 2026, to shareholders of record as of May 15.
This consistent dividend policy reflects the company’s stable financial position and confidence in its long-term earnings potential. Otter Tail continues to balance reinvestment in growth initiatives with returns to shareholders, supporting its broader financial strategy.
Segment-Level Financial Highlights
The Electric segment reported operating revenues of $165.9 million, up 10.8% year-over-year, with net income increasing by 42.7% to $35.3 million. Growth was driven by higher retail rates, increased commercial sales volumes, and recovery of fuel and infrastructure investments. However, unfavorable weather conditions slightly tempered demand.
The Manufacturing segment delivered strong gains, with revenue rising to $89.6 million and net income nearly tripling. Improved efficiencies and stronger market demand were key contributors.
In contrast, the Plastics segment faced pricing pressures, leading to lower revenues and earnings despite higher volumes. Meanwhile, corporate-level results improved due to tax benefits and reduced healthcare costs, offsetting some investment-related losses.
2026 Outlook and Earnings Guidance
Looking ahead, Otter Tail Corporation reaffirmed its 2026 earnings guidance, projecting diluted earnings per share in the range of $5.22 to $5.62. The company expects a balanced contribution from its segments, with approximately 49% of earnings coming from the Electric segment and 51% from Manufacturing and Plastics combined.
This distribution differs from the company’s long-term target mix of 70% Electric and 30% non-electric, largely due to temporarily elevated earnings in the Plastics segment. Over time, the company anticipates returning to its traditional earnings balance.
Otter Tail also maintains a long-term earnings per share growth target of 7% to 9%, along with a total shareholder return objective of 10% to 12%. These targets reflect confidence in the company’s strategic direction and operational capabilities.
Commitment to Long-Term Growth
Otter Tail’s diversified business model remains a cornerstone of its success. By investing in renewable energy, expanding manufacturing capabilities, and enhancing plastics production, the company is positioning itself for sustainable growth.
The combination of regulatory progress, infrastructure investment, and operational efficiency supports a strong foundation for future performance. As the company continues to execute its strategy, it aims to deliver consistent value to customers, employees, and shareholders alike
Upcoming Conference Call and Investor Engagement
To provide further insights into its financial and operational performance, Otter Tail Corporation will host a live webcast on May 5, 2026. During this session, management will discuss first-quarter results, strategic initiatives, and the outlook for the remainder of the year.
Investors and stakeholders will have the opportunity to engage with company leadership and gain a deeper understanding of the factors driving performance. An archived version of the webcast will also be made available for those unable to attend live.Otter Tail Corporation’s first-quarter 2026 results underscore the strength of its diversified operations and strategic execution. With solid financial performance, ongoing investments in growth, and a clear outlook for the future, the company is well-positioned to achieve its annual goals.
From renewable energy advancements to manufacturing efficiency and plastics expansion, Otter Tail continues to build momentum across all segments. Supported by strong leadership and a disciplined approach, the company remains focused on delivering long-term value in an evolving economic landscape.
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