Twin Disc's Q2 2025: Unpacking Contradictions in Oil and Gas Revenue, R&D Strategy, and CapEx Outlook

These are the key contradictions discussed in Twin Disc, Incorporated's latest 2025Q2 earnings call, specifically including: Oil and Gas Business Revenue Contribution, R&D Investments and Electric Frac Fleet Update, Oil and Gas Business Revenue and Growth, and CapEx Outlook:



Sales Growth Across Segments:
- Twin Disc reported sales of $89.3 million for the second quarter of fiscal 2025, reflecting a 23.2% year-over-year increase, with double-digit growth in Marine and Propulsion, land-based transmissions, and the Industrial segment.
- Growth was driven by strong demand across end markets, integration of Katsa Oy, and increased orders for Veth products.

Marine and Propulsion Sales Surge:
- The Marine and Propulsion segment saw a 23.9% year-over-year increase in sales, with record orders for Veth products.
- The increase was primarily due to robust demand for electric, hybrid, and conventional propulsion systems, along with defense spending for patrol boat projects.

Land-Based Transmissions Momentum:
- Land-based transmissions reported a 19.8% year-over-year sales increase, driven by strong demand for airport rescue and firefighting transmissions.
- This growth is attributed to advanced configurations, unique torque capabilities, and a global shift towards emissions-compliant transmission.

Inventory Rationalization and Operational Efficiencies:
- Twin Disc saw a 420 basis points decrease in gross margin, primarily due to inventory rationalization in the Industrial segment and unfavorable product mix.
- Efforts to integrate Katsa and eliminate redundant inventory, improve supply sourcing, and enhance facility management are aimed at optimizing profitability and margin expansion.