L.B. Foster Company (NASDAQ:FSTR) concluded 2025 with a robust fourth-quarter performance, demonstrating significant sales growth across its operating segments, enhanced efficiency in selling, general and administrative (SG&A) expenses, and strong cash generation. This financial momentum allowed the company to reduce its net debt while continuing its share repurchase program.
In the fourth quarter, L.B. Foster reported a gross profit increase of 10.6%, although gross margin experienced a decline of 260 basis points, settling at 19.7%. According to President and CEO John Kasel, the company anticipated a strong finish to the year due to a higher backlog. He described the quarter as an “exceptional” close to 2025. The margin decline was primarily attributed to weaker Rail margins linked to the company’s Technology Solutions & Services (TS&S) business in the U.K. and a less favorable product mix due to increased Rail product volumes.
Bill Thalman, Chief Financial Officer, noted that SG&A expenses fell by $1.3 million, improving as a percentage of sales by 470 basis points to 14.4%. Adjusted EBITDA for the quarter reached $13.7 million, marking an 89% increase from the previous year, driven by higher sales volumes and improved gross profit.
Performance Across Segments: Rail and Infrastructure
The Rail segment showed notable revenue growth, with fourth-quarter sales reaching $98.0 million, up 23.7% year-over-year. This increase was fueled by significant volume growth in Friction Management, which surged 41.6%, and Rail Products, which rose 31.1%. Thalman emphasized that Rail Products achieved its highest fourth-quarter sales on record, while Friction Management experienced 19% sales growth for the entire year.
Despite the revenue increase, Rail margins decreased to 17.8%, down 440 basis points. Contributing factors included lower sales volume, rising costs, an unfavorable sales mix, and $1.0 million in restructuring expenses due to downsizing in the U.K. While Rail orders softened during the quarter, the Rail backlog increased by 55.3% year-over-year across all three Rail business units.
In the Infrastructure Solutions segment, revenue rose by $13.4 million, or 27.3%, with both business units contributing to growth. Steel Products sales jumped 58.2%, notably driven by a 206.5% increase in Protective Coatings. Precast Concrete sales grew by 18.7% for the quarter and 19.9% for the year. Infrastructure gross margin improved slightly to 22.8%, up 20 basis points.
Financial Strategy and Future Outlook
The company undertook additional restructuring of its U.K. Rail business during the fourth quarter, incurring a $2.2 million charge, which included $1.0 million in gross margin and $1.2 million in SG&A. L.B. Foster anticipates that these changes will yield annual savings of between $1.5 million and $2.0 million by 2026.
Operating cash flow for the fourth quarter stood at $22.2 million, consistent with seasonal trends, while capital expenditures totaled $2.4 million. The company repurchased $3.3 million of its stock, reducing net debt by $16.9 million to end the quarter with net debt of $38.4 million. This led to a gross leverage ratio of 1.0x, down from 1.6x at the beginning of the quarter and 1.2x a year prior.
For the full year, L.B. Foster reported sales of $540 million, a 1.7% increase, largely attributed to strong fourth-quarter performance. Infrastructure sales rose by 14.9%, while Rail sales experienced a decline of 6.5%. Thalman highlighted that adjusted EBITDA for 2025 was $39.1 million, a $5.5 million increase from the previous year.
Looking forward, Kasel expressed optimism regarding the bidding activity in Rail, particularly with anticipated federal funding for repair and maintenance projects. Management also expects increased demand for Total Track Monitoring in 2026, supported by new safety technologies.
Despite challenging conditions in the U.K. market, the company believes its strategic actions over the past three years will improve results moving into 2026. In Infrastructure, strong civil construction activity, particularly in the southern U.S., is expected to bolster demand for Precast Concrete and other solutions.
For 2026, L.B. Foster has guided for a sales growth of 3.7% and an adjusted EBITDA growth of 11.3% at the midpoint of expectations. The company also projects free cash flow of $20 million. As the new year begins, the backlog for Rail increased by $34.5 million year-over-year, with growth in both Rail Products and Friction Management.
Headquartered in Pittsburgh, Pennsylvania, L.B. Foster Company is a diversified infrastructure solutions provider that serves the transportation, energy, and construction sectors. Founded in 1902, the company focuses on delivering specialty materials and engineering solutions critical to infrastructure projects across various industries.
