Valmont Acquires DS SM A/S

Zacks

Valmont Industries, Inc. (VMI) has acquired privately-held, leading Northern European engineered steel products maker – DS SM A/S. The acquisition will allow Valmont to cater a wide range of industries.

The acquired company will be rechristened Valmont SM A/S and will be added under the Engineered Infrastructures Products Segment of Valmont. The acquisition is expected to be accretive to Valmont’s earnings for 2014. DS SM will maintain its 10% ownership stake in the company.

DS SM, which is a part of DS Gruppen, had annual sales of roughly $190 million last year and is valued at roughly $148 million. The company operates two manufacturing units in Denmark. There are three primary product segments under DS SM for the wind energy industry, the oil and gas industry and the utility industry.

DS SM manufactures support structures for both the onshore and the rapidly growing offshore wind market segments, as well as rotor housings for direct drive turbines. It also produces specialty equipment for offshore drilling rig stability and lifting and handling equipment, such as, cranes and winches for the oil and gas industry. Engineered transmission support structures are produced by DS SM for the utility industry.

The DS SM buyout complements Valmont’s aim of expanding its portfolio of engineered infrastructure product line offerings to a broader geographic platform and also  participating in growing markets for wind energy, oil and gas exploration, power transmission and other related infrastructure projects.

Valmont, which is among the prominent steel-pipe and tube companies along with MRC Global Inc. (MRC), Mueller Water Products, Inc. (MWA) and Tenaris SA (TS), registered earnings of $2.04 per share in the fourth quarter of 2013, down 16% from $2.43 in the year-ago quarter.

Barring charges related to asset impairment and deconsolidation of Delta EMD, earnings came in at $2.66 per share in the reported quarter, exceeding the Zacks Consensus Estimate by a penny.

The company’s revenues of $827.9 million in the quarter were up roughly 1.6% year over year. The increase was mainly driven by gains in the Engineered Infrastructure Products Segment. However, sales lagged the Zacks Consensus Estimate of $851 million.

Looking ahead, Valmont expects its first quarter of 2014 to be challenging compared with the year-ago quarter. The company forecasts its irrigation results to decline in the first quarter.

The company expects its first-quarter earnings to be down roughly 25%. It forecasts full-year 2014 earnings to be modestly below adjusted earnings of $10.97 per share in the prior year.

Valmont currently carries a Zacks Rank #4 (Sell).

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