VMI Valmont Industries

OMAHA, Neb., July 23, 2019 /PRNewswire/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and irrigation equipment and services for agriculture, today reported financial results for the second quarter ended June 29, 2019.

Second Quarter 2019 Highlights (metrics compared to second quarter 2018 unless otherwise noted)

• Revenues grew 2.7% to $700.9 million; excluding a 2.0% unfavorable currency impact and revenue from the divested grinding media business of $4.7 million, sales would have increased 5.5%¹
• Operating income remained flat at $63.7 million or 9.1% of sales, compared to $63.7 million or 9.3% of sales ($70.7 million adjusted¹ or 10.4% of sales)
• Diluted Earnings per Share of $1.90 compared to $1.46 ($1.98 adjusted¹) last year; 2019 results included pre-tax expenses of approximately $6.0 million ($4.3 million after-tax and $0.20 per share) related to certain non-recurring items impacting the Utility Support Structures and Coatings segments
• Operating cash flows grew to $105 million, a significant increase compared to 2018, and the highest second quarter level since 2013
• Repurchased 236,300 shares of company stock for $28.9 million, at an average price of $122.41 per share
• Completed the acquisition of Connect-It Wireless in the Engineered Support Structures segment, advancing strategies of geographic expansion and market growth
• Revising EPS guidance range to $8.10 to $8.70 from $8.30 to $8.90, due to the non-recurring expenses that occurred during the second quarter

Key Financial Metrics

"We had a good quarter across the majority of our businesses, despite substantial, unfavorable comparisons in the Irrigation segment, and we exceeded last year's performance after excluding non-recurring expenses," said Stephen G. Kaniewski, President and Chief Executive Officer.  "Sales growth was led by robust transportation and wireless communication demand, particularly in North America markets, revenue from acquisitions, and favorable pricing across the portfolio. We experienced favorable demand in three of our four segments. Strong order flow in Engineered Support Structures accelerated during the quarter, increasing backlogs and significantly extending lead times, demonstrating market strength. Utilities Support Structures saw continued investments in grid hardening and modernization, while Coatings benefited from general economic growth and revenue from recent acquisitions. Lower sales in Irrigation, coupled with lower profitability in the international portion of our Utility business, led to overall results that were below our expectations. We were pleased to have generated strong, second quarter operating cash flows of $105 million, due to our lean efforts and receipt of a project downpayment."

Second Quarter 2019 Segment Review

Infrastructure

Engineered Support Structures Segment (36.9% of Sales)

Poles, towers and components for the global lighting, traffic and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products

Sales of $258.7 million increased 3.2% compared to last year.  Higher volumes in North America markets, favorable pricing across the segment, and revenue from acquisitions, drove sales growth. In international markets, sales were lower. Excluding a 3.5% unfavorable currency impact, segment sales would have increased by 6.7%¹.

In North America, lighting and traffic sales were higher, driven by pricing and continued strong market demand. In Europe, sales decreased due to lower volumes across the region. Sales of highway safety products were also lower, from a pause in government spending ahead of elections in Australia and India.

Wireless communication and components sales increased 20% globally compared to last year. Strong demand in North America markets was led by carriers' ongoing buildout of 4G networks, and 5G site preparation. Sales growth was driven by higher volumes, and revenues from recent acquisitions.

During the quarter, the Company completed the acquisition of Connect-It Wireless, a U.S. distributor of wireless site components.

Sales of Access Systems products of $29.7 million were slightly below last year, in part due to unfavorable currency translation.

Operating income was $20.8 million or 8.1% of sales compared to $13.0 million, or 5.2% of sales ($18.4 million or 7.3% adjusted¹). The improvement was due to benefits from the 2018 operational transformation efforts, primarily in the Asia Pacific region, and pricing discipline across the segment. As expected, segment profitability was pressured from effects of the March flooding event, the impact of which has extended into the second and third quarters. Insurance recovery for property and business interruption is in process, and the Company expects to receive reimbursement in the second half of 2019.

Utility Support Structures Segment (29.9% of Sales)

Steel and concrete structures for global utility transmission, distribution and generation applications, renewable energy generation equipment, and inspection services

Revenues of $209.8 million increased 6.1% compared to last year, led by sales from acquisitions completed last year, and favorable pricing in bid markets.

Operating income was $16.0 million or 7.6% of sales compared to $20.8 million, or 10.6% of sales ($22.3 million or 11.3% adjusted¹) in 2018. Pricing actions and improved factory performance in North America, were more than offset by approximately $5.0 million of lower profitability from the international portion of the utility business compared to last year, and approximately $3.0 million in one-time expenses related to the completion of a multi-year customer accommodation from 2015 that will not repeat.

Coatings Segment (14.0% of Sales)

Global galvanizing, painting and anodizing services to preserve and protect metal products

Global sales of $98.4 million grew 7.5% versus prior year from higher revenues across all regions, led by sales from recent acquisitions and pricing discipline. Excluding a 1.9% unfavorable currency impact, sales would have increased 9.4%¹.

Operating income was $15.1 million or 15.3% of sales, compared to $14.9 million or 16.2% of sales in 2018, led by pricing improvements and acquisitions. Excluding approximately $3.0 million of one-time expenses associated with a legal settlement, operating income would have been $18.1 million, or 18.4% of sales.

Agriculture

Irrigation Segment (22.1% of Sales)

Agricultural irrigation equipment, parts, services and tubular products, water management solutions, and technology for precision agriculture

Global sales of $155.2 million were 4.8% lower than last year. Excluding a 1.5% unfavorable currency impact, sales would have decreased 3.3%¹.

North America sales of $102.8 million were 9.7% below 2018 sales of $113.9 million. Adverse weather conditions and continued low net farm income levels are weighing on farmer sentiment and demand. Pricing discipline, a more favorable product mix, and higher technology sales, were offset by lower volumes.

International irrigation sales of $52.4 million were 6.7% higher compared to last year, driven by stronger demand in Brazil and the EMEA region, partially offset by unfavorable currency impacts.

Segment operating income was $21.5 million, or 13.9% of sales, compared to $27.7 million, or 17.0% of sales in 2018. Pricing discipline was more than offset by lower volumes and factory deleverage.

2019 Outlook

"The non-recurring expenses recognized during the second quarter have led to a revised outlook for full-year operating margin improvement and earnings per share," said Kaniewski. "While North American irrigation markets have remained challenged by low net farm income levels and weather conditions, we are seeing signs that the market is stabilizing. However, international irrigation project demand is below our expectations for the year. This, combined with a stronger U.S. dollar, is resulting in a downward revision to revenue growth for 2019. Despite the lower international irrigation demand, we are encouraged by record order flow in Brazil as the government financing program there was finalized earlier this month. We are also seeing steady activity in the Central Europe and Middle East regions."

Kaniewski continued, "We expect margin improvement in the Engineered Support Structures and Utility Support Structures segments in the second half of 2019 when compared to 2018, and compared to the first half of 2019. North American transportation market demand is expected to remain strong, as evidenced by robust order flow that has extended industry lead times, signaling market strength. Globally, wireless communication markets continue to build on the momentum of 5G and small cell opportunities, and we are seeing a more positive market environment in the Asia Pacific region from post-election government investments in road safety. We continue to have record backlog in Utility Support Structures, supported by the large, multi-year order we announced last quarter, and incremental demand this year from grid hardening efforts, particularly in the western and southeast regions of the U.S. Firm demand across all regions supports a favorable outlook in our Coatings business. Additionally, we expect our cash flows to strengthen in the second half of the year, and remain committed to our free cash flow goal of at least 1x net earnings for the year."

A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Mark C. Jaksich, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Wednesday, July 24, 2019 at 8:00 a.m. CDT by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries Q2 2019 Earnings Conference Call A slide presentation will simultaneously be available for download on the Investors page at www.valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use conference identification number 13684639. The replay will be available through 10:59 p.m. CDT on July 31, 2019.

About Valmont Industries, Inc.

Valmont is a global leader, designing and manufacturing engineered products that support global infrastructure development and agricultural productivity. Its products for infrastructure serve highway, transportation, wireless communication, electric transmission, and industrial construction and energy markets. Its irrigation equipment and services for large-scale agriculture improves farm productivity while conserving fresh water resources. In addition, Valmont provides coatings services that protect against corrosion and improve the service lives of steel and other metal products.

Concerning Forward-Looking Statements

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management's perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont's control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time to time in Valmont's reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.

¹ Please see Reg G reconciliation of GAAP sales, operating income, net earnings and EPS to Adjusted figures at end of document
² Excludes additional acquisitions in 2019

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SOURCE Valmont Industries, Inc.