Is the BTD manufacturing capacity currently operating close to full utilization, or is there room for growth?

There is still room to grow, particularly in the recently expanded Georgia facility, which was a targeted investment for existing customer growth. “We would still have room to grow. We recently expanded our facility in Georgia. So there is definitely room in that facility for additional growth, and that's -- that was a targeted investment and that's where we see growth from our existing customers in that part of the U.S.”

Does the PVC pipe legal settlement change the pricing dynamic with distributors or the relationship with customers going forward?

The company does not believe the settlement will change any pricing dynamics or customer relationships. “It does not change any pricing or relationship with the customers. We don't view that, that will change in any way based on the settlement.”

What is the timing for the cash payment related to the PVC settlement, specifically if all payments will be made by year-end?

The full $103.5 million payment was made into an escrow account by the end of July, and it will remain there until final court approval. “So we -- by the end of July, we had actually made the full payment of $103.5 million into an escrow account that will reside in that escrow account until final court approval is provided.”

OTTR

Otter Tail (OTTR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 4, 2026

Source: earnings call transcript

Executive summary

Otter Tail Corporation Q2 FY26 — Raises FY26 EPS Guidance, Large Load Pipeline Expands

Otter Tail Corporation delivered a mixed second quarter, marked by a significant raise in its full-year adjusted EPS guidance driven by improved outlooks for its Manufacturing and Plastics segments. The utility business continues to execute on its regulatory agenda and expand its large load pipeline, reinforcing its long-term growth trajectory. However, the quarter also saw a year-over-year decline in adjusted EPS, primarily due to receding PVC pipe prices, alongside a substantial legal settlement payment that underscores ongoing challenges in the Plastics segment.

Highlights

Adjusted diluted EPS guidance for FY26 raised to $5.68-$6.08 from $5.22-$5.62.
Large load pipeline increased by 350 megawatts, now totaling 1,400 megawatts.
Manufacturing segment earnings increased 38% due to favorable product mix and higher sales volumes.
Plastics segment sales volumes increased 15% year-over-year, surpassing expectations.

Concerns

Adjusted diluted EPS decreased to $1.66 from $1.85 year-over-year, primarily due to Plastics segment performance.
Average sales price of PVC pipe decreased 14% year-over-year.
The company paid $103.5 million into escrow for a PVC pipe legal settlement.
Projected customer bills are expected to increase between 3% and 4% on a compounded annual growth rate over the next 5 years.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted diluted earnings per share	$5.68 to $6.08 high materiality	FY26	High
Electric segment earnings increase	14% medium materiality	FY26	High
Manufacturing segment guidance	increased medium materiality	FY26	High
Plastics segment guidance	increased medium materiality	FY26	High
2026 average PVC sales price decrease	approximately 15% medium materiality	FY26	High
Plastics segment earnings	decline through end of 2027, $45 million to $50 million high materiality	FY27-FY28	Medium
5-year rate base compounded annual growth rate	10% high materiality	5-year planning period	High
Otter Tail Power earnings growth rate	similar rate to rate base high materiality	5-year planning period	High
Long-term EPS growth rate target	7% to 9% high materiality	long-term	High
Total shareholder return target	10% to 12% high materiality	long-term	High
Customer bill increase compounded annual growth rate	3% to 4% medium materiality	5-year planning period	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Electric Earnings decreased slightly year-over-year, benefiting from higher electric rates and timely rate base investment recovery, along with increased C&I sales. This was offset by higher O&M costs due to a planned coal facility outage, vegetation management, and increased labor costs. Higher electric rates: positive impactTimely recovery of rate base investments: positive impactIncreased commercial and industrial sales volumes: positive impactHigher operating and maintenance costs: negative impact	—	—	—	decreased slightly
Manufacturing Earnings increased by $0.03 per share, or 38%, primarily driven by higher margins from a favorable product mix and increased sales volumes across several end markets. This was partially offset by higher operating costs, including performance-based compensation. Higher margins: due to favorable product mixIncreased sales volumes: in construction, recreational vehicle, and horticulture end marketsHigher operating costs: partially offsetting, including performance-based compensation	—	38%	—	increased $0.03 per share
Plastics Adjusted earnings decreased by $0.14 per share, or 11%, mainly due to a 14% decrease in average pipe sales prices. This was partially offset by a 15% increase in sales volumes, which outpaced expectations and moderated the rate of price decline. Lower pipe sales prices: primary driver of decreaseHigher sales volumes: partially offsettingAverage sales price decrease: 14% year-over-yearSales volumes increase: 15% year-over-year	—	-11%	—	decreased $0.14 per share

Orderbook & backlog

Large load pipeline 1,400 MW Q2 FY26

increased by 350 MW

35% data center, remaining clean fuel and thermal storage; includes interruptible opportunities

Capital programs

5-year capital investment plan underway $1.9B

Funding: internal cash flow, debt

Benefit:customer-focused growth

Primary driver of growth for Otter Tail Power, funded without external equity needs.

Solway Solar Project under construction

One of two solar projects currently under construction and progressing well.

Abercrombie Solar Project under construction

One of two solar projects currently under construction and progressing well.

Battery Storage Project under development

Battery storage facility targeting to be online in 2028.

MISO Tranche 1 345 kV Transmission Projects under development

Benefit:nearly 200 miles of transmission lines

Secured route permits for two large regional transmission projects, marking an important milestone for reliability-driven investments.

50 MW natural gas facility (IRP) proposed

Benefit:50 MW generation capacity

Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

50 MW wind facility (IRP, 2035) proposed

Benefit:50 MW generation capacity

Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

50 MW wind facility (IRP, 2040) proposed

Benefit:50 MW generation capacity

Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

Risks & headwinds

PVC pipe legal settlement Q2 FY26

$103.5 million

Mitigation:Settlement reduces uncertainty, distraction, and significant costs/exposure associated with complex antitrust litigation.

Plastics segment earnings decline through FY27

expected to continue through end of 2027

Mitigation:Management expects normalization in 2028, with the segment still producing accretive returns and incremental cash for reinvestment.

Challenging agriculture industry conditions current

weak farm economy, elevated costs, lower relative commodity prices, ongoing trade disruption

Higher operating and maintenance costs Q2 FY26

planned outage at coal facility, timing of vegetation management expenses, higher labor costs

Softer H2 sales volumes for Plastics H2 FY26

expected after Q2 pull-forward

Mitigation:Annual sales volume assumption remains largely unchanged, indicating overall demand stability.

What to watch in Q3 FY26

Minnesota Rate Case Outcome

Next quarter

Current Amended net revenue increase request to $42.3M

Target Constructive outcome / Commission decision

Why it matters

The outcome of the Minnesota rate case will directly impact regulated earnings and rate base growth for the utility segment.

We submitted our rebuttal testimony late last month. In the filing, we amended our requested net revenue increase to $42.3 million from $44.8 million due to an updated test year information. Our team continues to work towards reaching a constructive outcome.

Find out whether OTTR delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you comment on the historical 5-7% net profit margin range for the Manufacturing business, given current strength?

The company is currently tracking at about a 5% net income return for the Manufacturing segment, with opportunities for improvement through increased volumes and operating efficiencies.

“If you look, say, at our first 6 months of the year, it would be at about a 5% net income return. We do think there's opportunity to improve on that with increased volumes, providing increased leveraging of our fixed costs along with operating efficiencies, production and productivity gains in the business.”

asked by Tate Sullivan · answered by Tyler Nelson

2 min read 5 chapters

Detailed narrative

Regulatory and Resource Planning Updates

Otter Tail Power advanced its regulatory agenda by securing route permits for two MISO Tranche 1 345 kV transmission projects, spanning nearly 200 miles. The company also filed its 15-year Integrated Resource Plan (IRP) with the Minnesota Public Utilities Commission, proposing a 50-megawatt natural gas facility by 2031/2032 and two 50-megawatt wind facilities by 2035 and 2040, respectively.

In the Minnesota rate case, the requested net revenue increase was amended to $42.3 million from $44.8 million due to updated test year information, with a constructive outcome still sought.

Expanding Large Load Pipeline and Strategy

The company's large load pipeline increased by approximately 350 megawatts, reaching a total of 1,400 megawatts. This pipeline is diverse, with approximately 35% related to data centers and the remainder from clean fuel and thermal storage opportunities, many of which are interruptible.

Otter Tail Power filed large load tariffs with Minnesota, North Dakota, and South Dakota commissions, designed to protect existing customers by directly assigning costs to new large loads and allocating fixed costs to produce a rate credit for existing customers.

Manufacturing Segment Performance and Market Conditions

The Manufacturing segment saw a 38% increase in earnings, driven by a favorable product mix and higher sales volumes in construction, recreational vehicle, and horticulture end markets. The industrial end market remains strong, supporting growing energy demand. The company noted improved industry conditions and its ability to leverage added capacity in Georgia.

However, the agriculture industry continues to face challenges due to a weak farm economy, elevated costs, lower commodity prices, and trade disruptions.

Plastics Segment Dynamics and Legal Settlement

The Plastics segment experienced a 14% year-over-year decline in average sales prices for PVC pipe, though the rate of decline moderated. Sales volumes increased 15% year-over-year, exceeding expectations, partly due to customers pulling forward orders ahead of announced resin price increases.

The company entered into settlement agreements for the U.S. PVC pipe antitrust litigation, agreeing to pay $103.5 million to resolve claims, with preliminary court approval received. The full amount was paid into an escrow account by the end of July.

Financial Strength and Capital Investment Plan

Otter Tail Corporation maintains a strong financial position with an equity layer of 60% of total capital and over $600 million in available liquidity, including $278 million in cash. This financial strength enables the company to fund its $1.9 billion 5-year capital investment plan for Otter Tail Power without external equity needs.

The plan includes solar projects (Solway operational H1 2027, Abercrombie 2028) and a battery storage facility (online 2028), with periodic debt issuance at Otter Tail Power to maintain its authorized capital structure. The parent company plans to retire $80 million of maturing debt in Q4 without replacement.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.