Business Wire | Apr 21, 2021 04:16PM EDT

Valmont Reports First Quarter 2021 Results

Apr. 21, 2021

OMAHA, Neb.--(BUSINESS WIRE)--Apr. 21, 2021--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 first quarter ended March 27, 2021.

First Quarter 2021 Highlights(all metrics compared to First Quarter 2020 unless otherwise noted)

* Net Sales of $774.9 million increased 14.9% led primarily by significantly higher sales in Irrigation and Utility Support Structures

* Operating Income increased 15.4% to $77.2 million, or 10.0% of sales compared to $66.9 million or 9.9% of sales last year, despite significant inflationary pressures

* Diluted Earnings per Share (EPS) improved to $2.57 compared to $1.99, an increase of 29.1%

* Record global backlog of more than $1.3 billion, reflecting strong market demand Utility Support Structures global backlog increased 27.0% during the quarter to a record $717.0 million, including receipt of two additional purchase orders totaling approximately $220 million for the large 500kV project in the Southeast U.S. Irrigation global backlog increased to approximately $350.0 million during the quarter * Generated operating cash flow of $33.2 million; cash and cash equivalents at end of first quarter were $391.5 million * Repurchased 50,147 shares of company stock for $11.1 million, at an average price of $221.98 per share * Announced an 11.0% quarterly dividend increase, from $0.45 to $0.50 ($1.80 to $2.00 annualized) * Recognized a favorable tax rate of 21.9% primarily due to a non-recurring incremental tax benefit attributed to employee stock option exercises * Released the Valmont 2021 Sustainability Report, highlighting commitments to environmental, social and governance (ESG) principles along with key metrics and 2025 environmental goals: 19% reduction in Scope I carbon intensity of Company vehicles 12% additional reduction in normalized global electricity usage 10% reduction in Scope I/II carbon intensity

* Commissioned a 1MW solar installation at the Company's largest manufacturing facility in Valley, Nebraska, utilizing the Company's proprietary solar tracker technology to supply approximately 6.0% of the site's electricity demand

Key Financial Metrics

First Quarter 2021

(000's except per share amounts) 03/27/2021 03/28/2020

1Q 2021 1Q 2020 vs. 1Q 2020

Net Sales $ 774,886 $ 674,200 14.9 %

Operating Income 77,211 66,895 15.4 %

Operating Income as a % of Net Sales 10.0 % 9.9 %

Net Earnings 55,014 42,929 28.2 %

Diluted Earnings Per Share $ 2.57 $ 1.99 29.1 %

Average Shares Outstanding 21,429 21,549

"We achieved solid sales and earnings growth across the majority of our businesses this quarter through proactively implementing pricing actions starting in fourth quarter 2020, which helped largely offset steep inflationary pressures," said Stephen G. Kaniewski, President and Chief Executive Officer. "Sales growth was led by significantly higher sales in the Irrigation segment including a 34.0% increase in technology products year-over-year, as higher agricultural commodity prices are driving positive farmer sentiment, and deliveries of the large, multi-year project for Egypt continued during the quarter. Higher volumes in the Utility Support Structures segment were driven by strong underlying demand, including in renewable energy markets, and we were pleased to be awarded two additional purchase orders for the large 500kV project in the Southeast U.S. In Engineered Support Structures, higher sales of wireless communication products helped partially offset anticipated lower transportation market volumes, and the Coatings segment continues to improve with general economic trends. We generated positive free cash flow despite unprecedented raw material inflation, driven by our continued focus on working capital management and solid earnings growth."

First Quarter 2021 Segment Review

Infrastructure

Utility Support Structures Segment (32.7% of Sales)

Steel, concrete and composite structures for utility markets, including transmission, distribution, substations, and renewable energy generation equipment and drone inspection services

Sales of $253.1 million grew 12.3% year-over-year, led by higher volumes from increasing demand for renewable energy generation and utilities' continued investments in grid resiliency.

Operating Income was $21.7 million or 8.6% of sales compared to $27.7 million, or 12.3% of sales in 2020. Higher volumes and improved operational performance were more than offset by the impact of rapid raw material cost inflation that could not be fully recovered through pricing actions and a higher mix of global generation products.

Engineered Support Structures Segment(28.7% of Sales)

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

Sales of $222.3 million decreased 3.6% year-over-year, as lower volumes in transportation markets were partially offset by favorable pricing, higher sales of wireless communication products and components, and $8.6 million of favorable currency impacts.

Lighting and traffic sales of $153.9 million decreased 10.5% year-over-year. Lower volumes, primarily due to COVID-19 impacts on project timing and delays in approving the FAST Act extension, were partially offset by favorable pricing in all regions.

Wireless communication structures and components sales of $46.1 million increased 20.6% year-over-year. Increasing capital investments from wireless carriers and favorable pricing led to the sales growth.

Access Systems sales of $22.3 million increased 8.8% year-over-year, primarily due to favorable currency impacts.

Operating Income was $19.9 million or 9.0% of sales compared to $15.9 million or 6.9% of sales in 2020. Profitability improvement was driven by favorable pricing, a more favorable mix of products and lower SG&A expense.

Coatings Segment(12.0% of Sales)

Galvanizing, painting and anodizing services to preserve and protect metal products

Sales of $93.3 million increased 5.9% year-over-year, as favorable pricing and higher internal volumes were partially offset by lower external volumes in North America due to disruptions from COVID-19 and winter weather on end customers.

Operating Income was $12.9 million or 13.8% of sales compared to $11.1 million or 12.5% of sales in 2020. Profitability improvement was led by favorable pricing and operational efficiencies, partially offset by a $0.8 million non-recurring, natural gas expense due to impacts of the Texas winter weather event during the quarter.

Agriculture

Irrigation Segment(29.6% of Sales)

Irrigation equipment, center pivots and linears for agricultural markets, including parts, services, and tubular products, and advanced technology solutions for water management and precision agriculture

Global sales of $229.7 million increased 46.5% year-over-year, due to higher volumes across most markets, particularly in the Middle East, and higher technology sales, partially offset by $6.1 million of unfavorable currency impacts.

North American sales of $122.8 million increased 15.2% compared to 2020, due to higher volumes across all irrigation product lines, and higher industrial tubing sales.

International sales of $106.9 million more than doubled year-over-year and increased more than 125.0% in local currencies. Sales growth was led by higher volumes including continued deliveries of the large multi-year Egypt project, strong demand in Brazil, improved product mix and sales from recent acquisitions.

Operating Income was $38.7 million, or 16.9% of sales compared to $23.7 million, or 15.1% of sales in 2020. Profitability growth was driven by higher volumes and improved operational efficiency, partially offset by higher R&D expense of approximately $2.0 million for technology growth investments.

Strength of Global Supply Chain and Continuation of COVID-19 Safety Protocols

Since the start of the pandemic, the Company has been taking measured and deliberate steps to strengthen its global supply chain. Through its strong relationships with many strategic suppliers, Valmont has been able to continue procuring raw materials and components critical to its operations, particularly steel. Other supply constraints have been largely mitigated by effectively utilizing the Company's global footprint. Further, current constraints at global seaports have not significantly disrupted its operations. Additionally, Valmont continues to follow CDC, WHO and local guidelines during the pandemic to protect the safety, health and well-being of employees, customers, suppliers and communities.

Balance Sheet, Liquidity and Capital Allocation

The Company continues to generate good cash flows through strong earnings and a focus on working capital management, including inventory optimization. At end of the first quarter, cash and cash equivalents were $391.5 million. Valmont purchased $11.1 million of company stock in the first quarter, and $136.8 million remains on the current authorization, with no expiration. Recognizing its strong balance sheet and confidence in generating good cash flows in the future, the Company in February announced an 11.0% increase to its quarterly dividend. During the quarter, Moody's reaffirmed the Company's Baa3/Stable credit rating and Valmont remains committed to maintaining its Investment Grade rating.

Second-Quarter 2021 Financial Outlook and Reaffirming Full-Year Key Assumptions

While certain aspects of the pandemic's impact on global economic factors and pace of economic recovery remain somewhat uncertain, the Company will continue to provide a greater level of transparency, including key assumptions and indications for second quarter 2021, to help the financial community understand short-term impacts and expectations. The Company is also reaffirming key assumptions and indications for full-year 2021.

2Q 2021 Financial Outlook

* 2Q Net Sales estimated to be $805.0 - $830.0 million, an increase of 17.0% - 20.0% vs. prior year * 2Q Operating Profit Margin estimated to be 9.5% - 10.5% * Tax rate between 23.0% - 24.0%

Reaffirming Full Year 2021 Financial Outlook and Key Assumptions

* Net Sales estimated to increase 9.0% - 14.0% vs. prior year * Favorable foreign currency translation impact of approximately 2.0% of Net Sales * Irrigation segment sales estimated to significantly increase 27.0% - 30.0% vs. prior year * In Utility Support Structures, significant raw material cost inflation negatively impacting gross profit margins in the first half of 2021 * Diluted Earnings per Share estimated to be $9.00 - $9.70 * Second half 2021 tax rate between 24.0% - 25.0%; no tax law changes * Capital expenditures to be in the range of $110 - $120 million to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives * No closures of large manufacturing facilities, workforce disruptions, or significant supply chain interruptions

Kaniewski added, "We've had a strong start to the year, and are very encouraged by the tailwinds across many of our global markets. We entered the second quarter with a new record global backlog of more than $1.3 billion, including more than $700 million in the Utility Support Structures segment, providing a good line of sight for us into 2022. In the Engineered Support Structures segment the need for critical infrastructure investment globally gives us confidence in the long-term market growth trends, and we are benefiting from increasing demand in wireless communications markets as 5G build-outs continue to ramp. Our Coatings business is trending in-line with improving industrial production levels. In Irrigation, the large, multi-year project for Egypt and favorable market trends globally are providing strong momentum, as evidenced by our global backlog of more than $350 million. Across the portfolio, we continue to execute pricing strategies to recover the impact of unprecedented raw material cost increases and leverage the strength of our global supply chain. Additionally, our balance sheet is strong and gives us flexibility to execute our long-term strategic plan. Our strategy remains focused on long-term growth, with an organizational emphasis on ESG principles, Return on Invested Capital, Operational Excellence and strengthening our organization for the future. As always, the safety and well-being of our employees remains our number one imperative, while we continue to execute and drive growth and performance."

A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Avner M. Applbaum, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, April 22, 2021 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 1Q 2021 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page at 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 13713719. The replay will be available through 10:59 p.m. CDT on April 29, 2021.

About Valmont Industries, Inc.

Valmont is a global leader, designing and manufacturing engineered products and services 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 improve farm productivity while conserving fresh water resources. In addition, Valmont provides coatings services that protect against corrosion and improve the service life of steel and other metal products. For more information, visit valmont.com.

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, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific economic effects on the Company's business and that of its customers and suppliers, 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.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)



First Quarter

13 Weeks Ended

27-Mar-21 28-Mar-20

Net sales $ 774,886 $ 674,200

Cost of sales 570,332 487,951

Gross profit 204,554 186,249

Selling, general and administrative expenses 127,343 119,354

Operating income 77,211 66,895

Other income (expense)

Interest expense (9,999 ) (10,014 )

Interest income 311 1,043

Loss on investments (unrealized) (109 ) (2,308 )

Other 3,449 1,810

Other income (expense), net (6,348 ) (9,469 )

Earnings before income taxes 70,863 57,426

Income tax expense 15,502 14,486

Equity in (loss) of nonconsolidated subsidiaries (360 ) (219 )

Net earnings 55,001 42,721

Less: (Earnings) attributable to non-controlling 13 208 interests

Net earnings attributable to Valmont Industries, Inc. $ 55,014 $ 42,929



Average shares outstanding (000's) - Basic 21,179 21,453

Earnings per share - Basic $ 2.60 $ 2.00



Average shares outstanding (000's) - Diluted 21,429 21,549

Earnings per share - Diluted $ 2.57 $ 1.99



Cash dividends per share $ 0.500 $ 0.450

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)

First Quarter

13 Weeks Ended

27-Mar-21

28-Mar-20

Net sales

Utility Support Structures

$

253,133

$

225,461

Engineered Support Structures

222,327

230,742

Coatings

93,288

88,085

Infrastructure products

568,748

544,288

Irrigation

229,664

156,720

Less: Intersegment sales

(23,526

)

(26,808

)

Total

$

774,886

$

674,200

Operating Income

Utility Support Structures

$

21,652

$

27,724

Engineered Support Structures

19,925

15,931

Coatings

12,872

11,054

Infrastructure products

54,449

54,709

Irrigation

38,748

23,663

Corporate

(15,986

)

(11,477

)

Total

$

77,211

$

66,895

Valmont has aggregated its business segments into four global reportable segments as follows.

Utility Support Structures:This segment consists of the manufacture of engineered steel and concrete structures for utility markets, including transmission, distribution, and substation products, and renewable energy generation equipment.

Engineered Support Structures:This segment consists of the manufacture and distribution of engineered poles, towers, and components for lighting, transportation, and wireless communication markets, including integrated structure solutions for smart cities, and engineered access systems.

Coatings:This segment consists of global galvanizing, painting and anodizing services to preserve and protect metal products.

Irrigation:This segment consists of the global manufacture of agricultural irrigation equipment, parts, services, tubular products, and advanced technology solutions for water management and precision agriculture.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(unaudited)

First Quarter

13 Weeks Ended

27-Mar-21 28-Mar-20

Net sales

Utility Support Structures $ 253,133 $ 225,461

Engineered Support Structures 222,327 230,742

Coatings 93,288 88,085

Infrastructure products 568,748 544,288

Irrigation 229,664 156,720

Less: Intersegment sales (23,526 ) (26,808 )

Total $ 774,886 $ 674,200



Operating Income

Utility Support Structures $ 21,652 $ 27,724

Engineered Support Structures 19,925 15,931

Coatings 12,872 11,054

Infrastructure products 54,449 54,709

Irrigation 38,748 23,663

Corporate (15,986 ) (11,477 )

Total $ 77,211 $ 66,895

Valmont has aggregated its business segments into four global reportable segments as follows.

Utility Support Structures:This segment consists of the manufacture of engineered steel and concrete structures for utility markets, including transmission, distribution, and substation products, and renewable energy generation equipment.

Engineered Support Structures:This segment consists of the manufacture and distribution of engineered poles, towers, and components for lighting, transportation, and wireless communication markets, including integrated structure solutions for smart cities, and engineered access systems.

Coatings:This segment consists of global galvanizing, painting and anodizing services to preserve and protect metal products.

Irrigation:This segment consists of the global manufacture of agricultural irrigation equipment, parts, services, tubular products, and advanced technology solutions for water management and precision agriculture.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

27-Mar-21 26-Dec-20

ASSETS

Current assets:

Cash and cash equivalents $ 391,458 $ 400,726

Accounts receivable, net 491,383 511,714

Inventories 512,924 448,941

Contract asset - costs and profits in excess of 117,539 123,495 billings

Prepaid expenses and other assets 89,522 59,804

Refundable income taxes 4,810 9,945

Total current assets 1,607,636 1,554,625

Property, plant and equipment, net 605,354 597,727

Goodwill and other assets 795,086 800,808

$ 3,008,076 $ 2,953,160



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current installments of long-term debt $ 5,147 $ 2,748

Notes payable to banks 38,182 35,147

Accounts payable 289,110 268,099

Accrued expenses 186,177 227,735

Contract liability - billings in excess of costs 150,068 130,018 and earnings

Dividend payable 10,625 9,556

Total current liabilities 679,309 673,303

Long-term debt, excluding current installments 729,589 728,431

Other long-term liabilities 349,076 343,590

Shareholders' equity 1,250,102 1,207,836

$ 3,008,076 $ 2,953,160

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

First Quarter

13 Weeks Ended

27-Mar-21

28-Mar-20

Cash flows from operating activities

Net Earnings

$

55,001

$

42,721

Depreciation and amortization

21,031

20,343

Contribution to defined benefit pension plan

(964

)

(17,039

)

Change in working capital

(54,500

)

9,255

Other

12,585

7,072

Net cash flows from operating activities

33,153

62,352

Cash flows from investing activities

Purchase of property, plant, and equipment

(27,565

)

(23,580

)

Acquisitions

-

(8,804

)

Other

(1,743

)

(752

)

Net cash flows from investing activities

(29,308

)

(33,136

)

Cash flows from financing activities

Proceeds from long-term borrowings

4,181

10,000

Proceeds (payments) from short-term borrowings

3,975

(1,442

)

Principal payments on long-term borrowings

(712

)

(188

)

Purchase of treasury shares

(11,131

)

(20,481

)

Purchase of noncontrolling interest

-

(53,534

)

Dividends paid

(9,556

)

(8,079

)

Other

2,593

(5,285

)

Net cash flows from financing activities

(10,650

)

(79,009

)

Effect of exchange rates on cash and cash equivalents

(2,463

)

(9,104

)

Net change in cash and cash equivalents

(9,268

)

(58,897

)

Cash and cash equivalents - beginning of year

400,726

353,542

Cash and cash equivalents - end of period

$

391,458

$

294,645

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CONTACT: Renee Campbell +1 402.963.1057