Alamo Group Seeds Future Growth in Forestry

The neatly mowed roadsides or parks and clean streets of American suburbia often owe their carefully maintained look to the rotary mowers, street sweepers, and vacuum trucks Alamo Group (NYSE: ALG) manufactures. Focused until now on selling municipalities the vehicles necessary for public space upkeep, the company completed a $325 million acquisition of Morbark on Oct. 24. Alamo Group establishes a strong foothold in the logging gear sector with this purchase, positioning itself for significant near-future growth thanks to powerfully increasing demand for forestry equipment nationally and worldwide.

Graduating from trimming grass to felling trees via its Morbark acquisition, Alamo Group enters a market with strong projected growth over the next few years. High global demand for housing and furniture, driven in part by the Asia-Pacific region's large new middle class, creates a rising need for equally large quantities of quality wood to process into finished goods and homes.

Harvesting this wood requires forestry equipment. According to some reports this sector will mushroom at a 4.9% CAGR (compound annual growth rate) through 2024. By then, the projections claim, total equipment sales will top $10.5 billion annually. Alamo Group can now compete for a piece of that windfall thanks to its acquisition. Morbark builds mulchers, stump cutters, crawler trucks, flails, compact wheel loaders good for extracting felled timber from difficult terrain, and other vehicles or devices used widely in logging and silviculture.

Source Fool.com