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Valmont Reports Second Quarter 2022 Results and Raises Full-Year Guidance

·14 min read

Achieved Record Sales and Earnings per Share

OMAHA, Neb., July 20, 2022--(BUSINESS WIRE)--Valmont Industries, Inc. (NYSE: VMI), a global leader that provides vital infrastructure and advances agricultural productivity while driving innovation through technology, today reported financial results for the second quarter ended June 25, 2022.

Second Quarter 2022 Highlights (all metrics compared to Second Quarter 2021 unless otherwise noted)

  • Record Net Sales of $1.1 billion increased 26.9%

  • Operating Income increased to $118.7 million, or 10.5% of net sales ($122.9 million or 10.8% adjusted1) compared to $82.6 million or 9.2% of net sales ($90.9 million or 10.2% adjusted1)

  • Record Diluted Earnings per Share (EPS) of $3.53 ($3.70 adjusted1) compared to $2.89 ($3.06 adjusted1)

  • Benefited from strong market demand across the portfolio, leading to a record backlog of $2.0 billion, an increase of 24.7% since the end of fiscal 2021, and an increase of 13.4% since the end of first quarter 2022

  • Returned $21.5 million to shareholders through dividends and share repurchases

  • Incurred an effective tax rate of 27.6% compared to 19.0% in 2021, primarily due to the geographic mix of earnings and an incremental U.K. tax benefit in 2021 that did not repeat in 2022

  • Commenced production at the newly-built spun concrete pole manufacturing facility in Bristol, Indiana, that will be accompanied by a 500-kilowatt solar array expected to fully offset the site’s energy consumption

  • Acquired a majority interest in ConcealFab, a leader in 5G infrastructure and passive intermodulation (PIM) mitigation solutions for the telecommunications market

Key Financial Metrics

Second Quarter 2022

GAAP

Adjusted1

(000's except per share amounts)

06/25/2022
2Q 2022

06/26/2021
2Q 2021

vs. 2Q 2021

06/25/2022
2Q 2022

06/26/2021
2Q 2021

vs. 2Q 2021

Net Sales

$

1,135,532

$

894,629

26.9%

$

1,135,532

$

894,629

26.9%

Operating Income

118,719

82,625

43.7%

122,859

90,850

35.2%

Operating Income as a % of Net Sales

10.5

%

9.2

%

10.8

%

10.2

%

Net Earnings

76,108

62,110

22.5%

79,682

65,752

21.2%

Diluted Earnings Per Share

$

3.53

$

2.89

22.1%

$

3.70

$

3.06

20.9%

Average Shares Outstanding

21,541

21,469

21,541

21,469

YTD 2022

GAAP

Adjusted1

(000's except per share amounts)

06/25/2022
FY 2022

06/26/2021
FY 2021

vs. FY 2021

06/25/2022
FY 2022

06/26/2021
FY 2021

vs. FY 2021

Net Sales

$

2,116,352

$

1,669,515

26.8%

$

2,116,352

$

1,669,515

26.8%

Operating Income

213,561

159,836

33.6%

221,844

168,061

32.0%

Operating Income as a % of Net Sales

10.1

%

9.6

%

10.5

%

10.1

%

Net Earnings

138,419

117,124

18.2%

145,570

120,776

20.5%

Diluted Earnings Per Share

$

6.43

$

5.46

17.8%

$

6.77

$

5.63

20.2%

Average Shares Outstanding

21,516

21,449

21,516

21,449

"We delivered record quarterly revenue, an increase of 27% year-over-year, and record adjusted earnings per share that increased 21%," said Stephen G. Kaniewski, President and Chief Executive Officer. "Operating margin improvement was driven by our ability to successfully execute on pricing strategies, higher volumes, and better fixed-cost leverage. We continue to prioritize actions to better serve our customers by leveraging our global manufacturing footprint, strategically expanding capacity in key growth markets, and implementing sourcing strategies to help mitigate continuing supply chain volatility. We are seeing strong demand for our products and solutions across global infrastructure and agriculture markets and our Valmont teams around the world are doing an excellent job of delivering value to our customers every day. We are executing consistently on our strategy of creating sustainable growth across our businesses and long-term value for our shareholders."

Second Quarter 2022 Segment Review

Infrastructure (67.0% of Net Sales)

Products and solutions to serve the infrastructure markets of utility, renewable energy, lighting, transportation and telecommunications, and coatings services to preserve and protect metal products

Sales of $765.0 million grew 23.9% year-over-year with double-digit sales growth across all product lines, net of a 2.5% unfavorable foreign currency translation impact. Higher sales were driven by favorable pricing globally, primarily in the Transmission, Distribution and Substation (TD&S), Lighting and Transportation (L&T), and Telecommunications product lines, and higher volumes, notably in the Renewable Energy, Telecommunications and TD&S product lines.

Operating Income improved to $84.6 million or 11.1% of net sales compared to $61.6 million or 10.0% ($67.7 million or 11.0% adjusted1) in 2021, driven by favorable pricing and improved fixed-cost leverage, including SG&A.

On June 1, 2022, Valmont acquired a majority interest in ConcealFab, advancing the Company's growth strategy to deliver industry-leading 5G infrastructure solutions for the telecommunications market.

Agriculture (33.0% of Net Sales)

Center pivot and linear irrigation equipment for agricultural markets, including parts and tubular products; advanced technology solutions for precision agriculture

Sales of $377.8 million increased 34.0% year-over-year, led by higher average selling prices of irrigation equipment globally and higher volumes, notably in North America and Brazil. In Brazil, revenues grew more than $40.0 million year-over-year, demonstrating robust market demand for irrigation equipment and ag solar products.

Operating Income was $58.0 million, or 15.5% of net sales ($62.2 million or 16.6% adjusted1) compared to $42.0 million or 15.0% of net sales ($42.9 million or 15.3% adjusted1) in 2021. The benefit of higher average selling prices and additional volume leverage was partially offset by higher SG&A, including incremental R&D expense for technology investments.

Realignment of Reporting Segments

On April 6, 2022, the Company announced that it had realigned its reporting segment structure beginning with its first quarter 2022 financial results. The new reporting segments are Infrastructure (includes the previous segments of Utility Support Structures, Engineered Support Structures and Coatings) and Agriculture (a renaming of the previous Irrigation segment). A recast of comparable prior-year segment financial information for 2020 and 2021 affected by the change is available in a summary presentation on the Investors page at Valmont.com. The Company's historical GAAP balance sheet, income statement and cash flows are not affected.

Balance Sheet, Liquidity and Capital Allocation

The Company generated year-to-date operating cash flows of $68.0 million through strong earnings and managing working capital to mitigate supply chain volatility while supporting strong revenue growth. At the end of the second quarter, cash and cash equivalents were $154.6 million. Valmont purchased approximately $10.0 million of company stock in the second quarter and approximately $112.0 million remains on the current authorization with no expiration.

Increasing Full Year 2022 Financial Outlook and Updating Key Assumptions

The Company is increasing its 2022 full-year net sales and diluted earnings per share outlook from the previous indications that were communicated last quarter, and is providing updated key assumptions for the year.

2022 Full Year Financial Outlook

Previous Outlook

Revised Outlook

Net Sales Growth (vs. PY)

11% to 17%

20% to 21%

GAAP Diluted EPS1

$12.30 to $12.80

$12.90 to $13.30

Adjusted Diluted EPS1

$13.00 to $13.50

$13.60 to $14.00

Tax Rate

~ 26.5%

~ 27.5%

FX Translation Impact on Net Sales

0.0%

~ (2.0%)

  • Revised net sales growth is primarily due to favorable pricing to offset continued broad-based inflation

  • Now expecting a full-year tax rate of ~27.5% due to the geographic mix of earnings

  • Now expecting a ~2.0% unfavorable foreign currency translation impact on net sales vs. prior year

  • Capital expenditures continue to be in the range of $110.0 - $120.0 million to support strategic growth and Industry 4.0 advanced manufacturing initiatives

Kaniewski continued, "We've had a very strong first half of the year and are increasing our full-year outlook based on this performance and several other positive factors, including our record backlog of $2.0 billion, which reflects continued strong, global market drivers across our businesses and provides significant momentum as we look ahead to the balance of 2022 and into 2023. Additionally, broad-based market strength for infrastructure products and solutions that help deliver safety, security and reliability while also participating in the change to renewable generation sources across our markets, are driving robust demand globally. Favorable agricultural market fundamentals and continued heightened concerns over food security have led to increasing activity levels across global markets. While inflation and supply chain volatility continue, we remain focused on what we can control: leveraging the strength of our organization to deliver innovative products and solutions to our customers, maintaining cost discipline, advancing operational excellence, and executing on our pricing strategies. Additionally, our balance sheet is strong and gives us flexibility to execute our long-term strategic plan. Through our diversified business portfolio, organizational emphasis on ESG principles and return on invested capital focus, we are well-positioned to drive sustainable, profitable growth and deliver long-term value to our shareholders."

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, July 21, 2022 at 8:00 a.m. CDT by dialing 1-844-200-6205 or 1-646-904-5544 using access code 849925, or via webcast by pointing browsers to this link: Valmont Industries 2Q 2022 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page of valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-866-813-9403 or 1-929-458-6194. Please use access code 917263. The replay will be available through 5:00 p.m. CDT on July 28, 2022.

About Valmont Industries, Inc.

For over 75 years, Valmont® has been a global leader in creating vital infrastructure and advancing agricultural productivity. Today, we remain committed to doing more with less by innovating through technology. Learn more about how we’re Conserving Resources. Improving Life.® at 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, geopolitical risks, 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 to GAAP measures at end of document

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)

Second Quarter

Year-to-Date

13 Weeks Ended

26 Weeks Ended

25-Jun-22

26-Jun-21

25-Jun-22

26-Jun-21

Net sales

$

1,135,532

$

894,629

$

2,116,352

$

1,669,515

Cost of sales

842,931

664,982

1,574,565

1,235,314

Gross profit

292,601

229,647

541,787

434,201

Selling, general and administrative expenses

173,882

147,022

328,226

274,365

Operating income

118,719

82,625

213,561

159,836

Other income (expense)

Interest expense

(11,386

)

(10,436

)

(22,649

)

(20,435

)

Interest income

285

186

512

497

Gain (loss) on investments (unrealized)

(2,342

)

1,177

(3,405

)

1,068

Other

2,073

4,204

5,715

7,653

Other income (expense), net

(11,370

)

(4,869

)

(19,827

)

(11,217

)

Earnings before income taxes

107,349

77,756

193,734

148,619

Income tax expense

29,587

14,740

52,708

30,242

Equity in loss of nonconsolidated subsidiaries

(555

)

(359

)

(913

)

(719

)

Net earnings

77,207

62,657

140,113

117,658

Less: earnings attributable to non-controlling interests

(1,099

)

(547

)

(1,694

)

(534

)

Net earnings attributable to Valmont Industries, Inc.

$

76,108

$

62,110

$

138,419

$

117,124

Average shares outstanding (000's) - Basic

21,313

21,193

21,296

21,186

Earnings per share - Basic

$

3.57

$

2.93

$

6.50

$

5.53

Average shares outstanding (000's) - Diluted

21,541

21,469

21,516

21,449

Earnings per share - Diluted

$

3.53

$

2.89

$

6.43

$

5.46

Cash dividends per share

$

0.55

$

0.50

$

1.10

$

1.00

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(Unaudited)

Second Quarter

Year-to-Date

13 Weeks Ended

26 Weeks Ended

25-Jun-22

26-Jun-21

25-Jun-22

26-Jun-21

Net sales

Infrastructure

$

764,950

$

617,604

$

1,445,676

$

1,167,250

Agriculture

377,765

281,965

684,345

511,629

Total

1,142,715

899,569

2,130,021

1,678,879

Less: Intersegment sales

(7,183

)

(4,940

)

(13,669

)

(9,364

)

Total

$

1,135,532

$

894,629

$

2,116,352

$

1,669,515

Operating Income

Infrastructure

$

84,643

$

61,550

$

162,150

$

115,999

Agriculture

58,046

41,984

95,521

80,732

Corporate

(23,970

)

(20,909

)

(44,110

)

(36,895

)

Total

$

118,719

$

82,625

$

213,561

$

159,836

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

Infrastructure: This segment consists of the manufacture and distribution of products and solutions to serve infrastructure markets of utility, renewable energy, lighting, transportation and telecommunications, and coatings services to preserve and protect metal products.

Agriculture: This segment consists of the manufacture of center pivot and linear irrigation equipment for agricultural markets, including parts and tubular products, and advanced technology solutions for precision agriculture.

VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

SUMMARY OPERATING RESULTS

(Dollars in thousands)

(Unaudited)

Thirteen weeks ended June 25, 2022

Infrastructure

Agriculture

Intersegment

Sales

Consolidated

Geographical market:

North America

$

559,864

$

203,488

$

(6,716

)

$

756,636

International

205,086

174,277

(467

)

378,896

Total

$

764,950

$

377,765

$

(7,183

)

$

1,135,532

Product line:

Transmission, Distribution and Substation

$

295,835

$

$

$

295,835

Lighting and Transportation

246,652

246,652

Coatings

90,321

(4,200

)

86,121

Telecommunications

78,539

78,539

Renewable Energy

53,603

53,603

Irrigation Equipment and Parts, excluding Technology

347,585

(2,983

)

344,602

Technology Products and Services

30,180

30,180

Total

$

764,950

$

377,765

$

(7,183

)

$

1,135,532

Thirteen weeks ended June 26, 2021

Infrastructure

Agriculture

Intersegment

Sales

Consolidated

Geographical market:

North America

$

421,168

$

156,037

$

(4,940

)

$

572,265

International

196,436

125,928

322,364

Total

$

617,604

$

281,965

$

(4,940

)

$

894,629

Product line:

Transmission, Distribution and Substation

$

220,458

$

$

$

220,458

Lighting and Transportation

215,247

215,247

Coatings

80,346

(2,796

)

77,550

Telecommunications

54,102

54,102

Renewable Energy

47,451

47,451

Irrigation Equipment and Parts, excluding Technology

253,450

(2,144

)

251,306

Technology Products and Services

28,515

28,515

Total

$

617,604

$

281,965

$

(4,940

)

$

894,629

Twenty-six weeks ended June 25, 2022

Infrastructure

Agriculture

Intersegment

Sales

Consolidated

Geographical market:

North America

$

1,065,844

$

385,743

$

(13,202

)

$

1,438,385

International

379,832

298,602

(467

)

677,967

Total

$

1,445,676

$

684,345

$

(13,669

)

$

2,116,352

Product line:

Transmission, Distribution and Substation

$

577,435

$

$

$

577,435

Lighting and Transportation

459,419

459,419

Coatings

172,297

(7,301

)

164,996

Telecommunications

139,935

139,935

Renewable Energy

96,590

96,590

Irrigation Equipment and Parts, excluding Technology

625,619

(6,368

)

619,251

Technology Products and Services