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Valmont(VMI) - 2022 Q3 - Earnings Call Transcript
VMIValmont(VMI)2022-10-30 11:05
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Financial Data and Key Metrics Changes - Sales reached 1.1billion,a261.1 billion, a 26% year-over-year increase, marking the eighth consecutive quarter of double-digit year-over-year sales growth [11][19] - Operating income grew 42% to 114.1 million, with operating margins increasing to 10.4% [19] - Diluted earnings per share increased by 36% to 3.49,drivenbyhigheroperatingincome[19]BusinessLineDataandKeyMetricsChanges−Infrastructuresalesamountedto3.49, driven by higher operating income [19] Business Line Data and Key Metrics Changes - Infrastructure sales amounted to 778.4 million, up 23% year-over-year, supported by investments in grid resiliency and renewable energy [11][19] - Agriculture sales grew 36% year-over-year to 327.3million,drivenbystrongglobaldemandforfoodproductionandfavorablefarmersentiment[12][19]−Agtechsalesreachedapproximately327.3 million, driven by strong global demand for food production and favorable farmer sentiment [12][19] - Ag tech sales reached approximately 83 million year-to-date, a 15% increase over the previous year, with expectations to exceed 100millionforthefullyear[13][17]MarketDataandKeyMetricsChanges−Demandremainselevatedacrossallendmarketsdespitemacroeconomicvolatility,reflectingongoinginvestmentsinglobalinfrastructureandagriculture[9][11]−Thecompanyanticipateslong−termtailwindsfromgovernmentspendinginitiatives,includingtheInfrastructureInvestmentandJobsActandtheInflationReductionAct[11][12]CompanyStrategyandDevelopmentDirection−ThecompanyisfocusedonoperationalexcellencewithanESGemphasis,expandingmarketreach,andleveragingtechnologyforproductivedisruption[13][25]−Strategicacquisitions,suchasConcealFab,areaimedatenhancinggrowthopportunitiesinhigh−demandmarkets[13][70]−Thecompanyiscommittedtodisciplinedcapitalallocation,balancingorganicgrowthwithpotentialacquisitions[21][70]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgesgrowingeconomicuncertaintybutbelievesdemandforproductsislesssensitivetogeneraleconomicfactors[24]−Thecompanyexpects2023year−over−yearsalesgrowthof6100 million for the full year [13][17] Market Data and Key Metrics Changes - Demand remains elevated across all end markets despite macroeconomic volatility, reflecting ongoing investments in global infrastructure and agriculture [9][11] - The company anticipates long-term tailwinds from government spending initiatives, including the Infrastructure Investment and Jobs Act and the Inflation Reduction Act [11][12] Company Strategy and Development Direction - The company is focused on operational excellence with an ESG emphasis, expanding market reach, and leveraging technology for productive disruption [13][25] - Strategic acquisitions, such as ConcealFab, are aimed at enhancing growth opportunities in high-demand markets [13][70] - The company is committed to disciplined capital allocation, balancing organic growth with potential acquisitions [21][70] Management's Comments on Operating Environment and Future Outlook - Management acknowledges growing economic uncertainty but believes demand for products is less sensitive to general economic factors [24] - The company expects 2023 year-over-year sales growth of 6% to 9% and EPS growth of 11% to 15%, assuming steady market demand and stabilized raw material costs [23][24] - Management remains confident in the company's ability to navigate external challenges and deliver value to customers and shareholders [17][25] Other Important Information - Year-to-date free cash flow reached 117 million, reflecting improved working capital management [20] - The company reduced total borrowing by approximately $60 million, strengthening its balance sheet [21] Q&A Session Summary Question: Visibility for 2023 and sub-segment impacts from interest rates - Management indicated that all end markets are in good shape and not significantly susceptible to interest rate increases, with strong drivers across all markets [27][28] Question: Sustainability of telecom sales growth - Management noted that telecom sales have historically been lumpy but expect smoother rollouts moving forward due to consistent carrier investments [30] Question: Impact of steel prices on pricing strategy - Management confirmed that while steel prices are moderating, they maintain pricing discipline and have not needed to reduce prices due to strong demand [34][35] Question: Timing and implications of the Inflation Reduction Act - Management stated that the infrastructure bill is beginning to influence demand, while benefits from the Inflation Reduction Act will materialize in 2023 [38] Question: Inventory corrections in the channel - Management reported low inventory levels in agriculture and minimal impact from inventory corrections in other segments [40][41] Question: Pricing strategy in agriculture - Management emphasized their intent to be a price leader and maintain value-based pricing despite uncertainties in the market [60][61] Question: Impact of Hurricane Ian on backlog - Management explained that Hurricane Ian would lead to a temporary reshuffling of backlog but reinforced long-term demand for grid hardening [66][67] Question: M&A activity and capital allocation - Management expressed confidence in their capital position and a strong pipeline for acquisitions, focusing on areas that drive growth and synergies [70] Question: Interest in utility-scale projects - Management clarified that they remain interested in utility-scale projects but will be selective based on profitability [73] Question: Prospects for large-scale irrigation projects in Africa and the Middle East - Management indicated a strong pipeline for large irrigation projects driven by food security and local production needs [75]