Valmont Industries (VMI) posted a profit of $56 million or $2.08 per share in the first quarter of 2014, down roughly 28% from $77.6 million or $2.89 in the year-ago quarter.
Barring charges related to the fair value adjustment of Delta EMD shares on the Johannesburg Stock Exchange, earnings came in at $2.20 per share in the reported quarter, surpassing the Zacks Consensus Estimate of $2.15 per share.
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 revenues of $751.7 million in the quarter, down 8.3% from $819.6 million in the year-ago quarter. The decrease was mainly driven by lower sales in the Utility Support Structures, Coatings and Irrigation segments. Sales lagged the Zacks Consensus Estimate of $790 million.
Revenues from the Utility Support Structures segment declined 10% year over year to $214.7 million in the reported quarter as a result of pricing pressure, a harsh winter weather in North America translating into lower sales volumes and a significant decline in international projects leading to a decline in overseas sales.
The Irrigation segment revenues declined 13% year over year to $212.7 million in the quarter from the record $244.7 million in the last-year quarter. Though more typical seasonal selling patterns in the quarter lead to solid volumes, they were below the excellent first-quarter levels of 2013. Lower crop commodity prices led to lower orders and sales. Valmont expects net farm income to decline in 2014 as North American farmers reduced purchases of mechanized irrigation equipment.
Revenues from the Engineered Infrastructure Products division went up 2% year over year to $228.5 million. Sales were driven by the DS-SM acquisition and higher sales of lighting and traffic products in North America. Contributions from DS-SM more than offset the impact of weaker foreign exchange translation and a decline in inter-company sales to Valmont's utility division.
The Coatings segment’s sales declined 8% to $82.2 million. The decline was due to the impact of lower manufacturing and mining activity in Australia.
Valmont exited the quarter with cash and cash equivalents of $488.2 million, up 16% from $420 million in the year-ago quarter. Long-term debt increased 1.5% year over year to $479.2 million.
On Mar 3, 2014, Valmont acquired privately held, leading Northern European engineered steel products maker – DS-SM A/S. The acquisition will allow Valmont to cater to a wide range of industries. The DS-SM (rechristened Valmont SM A/S) acquisition contributed $17.3 million to first quarter sales.
The acquisition is expected to be accretive to Valmont’s earnings for 2014. DS-SM will maintain its 10% ownership stake in the company.
Looking ahead, Valmont expects its 2014 sales to increase slightly. The company expects to benefit from the Valmont-SM acquisition. Sales gains are expected in its product lines within the Engineered Infrastructure Products Segment which will result in segment profitability. The Coatings Segment’s sales and profitability are expected to be flat with 2013 results.
For the Utility Support Structures Segment, the company anticipates increased volumes, flat revenues and reduced profitability in 2014. The company expects second-quarter sales and profitability for the Irrigation Segment to be significantly lower and irrigation sales profitability in the second half of 2014 to be in line with 2013.
The company forecasts its earnings for 2014 to be within the range of $10.00 to $10.50 per share.
Valmont currently carries a Zacks Rank #3 (Hold).