VMI - Earnings call transcript Q3 2017 | Valmont Industries, Inc.

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Operator

Good morning. My name is Kathy. I will be your conference operator today. At this time, I would like to welcome everyone to the Valmont Industries, Inc.

Third Quarter Earnings Call. Instructions]. [Operator like conference now to turn to would over today's Mr. I Manager, Investor Laudin, Relations. Jeff sir. Please go ahead,

Jeff Laudin

Thank to Jaksich, Relations of has Controller and and Campbell are and President Conference and Vice who Chief you, welcome Executive team. and Call. President XXXX Financial Third Chief incoming CEO and Executive With Earnings Vice Chief Quarter Operating me Steve today Officer; Mogens Corporate as Officer Officer; Chairman the Bay, joined and Investor Kaniewski, Valmont our just XX/XX/XXXX; Mark President Tim Francis, Industries' Renee

we call which statements, our on of the Before Media for you begin, discussion in subject release, website. please be to of can the Room applies link call the conference note and forward-looking instructions in is the on at a be our The press read this will full accessing disclosure replay today's our found in will to find which end call.

Now Executive over I would like Chairman Mogens Officer, and call our to Bay. to turn the Chief

Mogens Bay

two and is The coatings. markets year, utility higher sales and last and utility most update you everyone. level call quarter, trust financial aspects improved good drivers were demand. website. results in review challenges material will now the website today's for our I the improved the of who wireless of has review we the us XX our the caused irrigation has performance a Mark growth segment read over the shipping in raw the share. Irrigation zinc give production Steve call in earnings of you major third spike morning segment the release America The customers The of the where markets the and of are press on China Thank and hurricanes main price stabilized all have have robust, and North profitability will facilities our the I slide through you On in in us. will summary increases which coatings deck working the prior in and communication joining turn demand has international delays and quarter. of I'll review and by high over performance demand a greater quarter primarily Thank detail. of volume steel. strong. The health cost performance $X.XX will Jeff Steve to stabilized numerous impacted seen and our product provide about particular and

Steve Kaniewski

operational this traffic and and contrast Thank In second results you everyone. quarter, was structure to morning Mogens when with steel similar Starting saw with we of markets quarter and the show a increased year was good wireless last certain sharp signs our level with sales in communication firm high At leverage. global the were in segment engineered lighting in Europe cost support cases demand needed in truth. continued lower. the costs structure

results. and markets Highway Pacific Asia America traffic been segment moderately Safety offset demands. North all low year strength supported This more and lighting robust than have

growing is green was continue and lead and sized over of investments in quality reliability grid by The an structures and year of up raw has impacted the markets XX% In pricing improved expanding. for a material X.X% into a renewable to generation business year, under negatively income times inflation unfavorable economy Operating projects. need supported recovery by are India's ago be plants sales mix. as few India utility a highlights start years and develops. and Our was support sales sales field good ongoing firmed in infrastructure

construction. efforts customers focused and Texas more on by results versus new impacted were Florida Our the our restoration in hurricanes as

disruption As be quarter moved result the as around could from of fourth in the a can some expected be the project timelines hurricanes.

near our term on help hurricanes to the drive the results term weigh medium overall over While they demand. long may

the kind hurricane Pacific segment rose the out XX.X% largely income North could that to just coatings in quarter reliability. anywhere to hurricane. one to one levels. for areas failed structure the Valmont hardening from mix. due begun demand, that America and this It Operating efforts is prone during the was notably has internal favorable impact due As recovery not segment not of the sales but will for Florida In sales depressed recover in price continue nature in performance higher of customer pointed to Asia drive region

business and weakness diverse This cost. end-market helps base customer exposure. is market. despite sales the the $X.XX as quarter provide the on one and recover We profitability benefits beginning at quarter context, to price a some higher during of was were at XX.X% coatings $X.XX from Segment a able Our of oil gas the such any specific zinc offset and not improved increases. dependent cost a to To end. zinc through

our quarter systems, and Sales of our in energy restructuring anticipated with Asia the products tough seeing year, scope market activities. segment XXXX we the last We than was also to to to architectural for strategy benefit were mining are spoke when other we call. access which In it Pacific in full we our continue benefits and broaden second applications. lower you a the from quarter

which divestiture regulator that notice time at of end, we mining could be which to will by consumables its for not are anti-trust do year waiting approve to we Australia's impact material. financial anticipate the come we transaction Regarding the quantify

twice which applications. application downturn X-Tec of crops received to enables a speed option X-Tech, allows have aggressive pivots operate greater driven allows irrigation new Shows a AC the optimizing Summer market. to America our grower another released well with drive that water we during have growers quarter segment constant to was Farm we at better the a assist in products been motor larger by the precision of solid demand standard international had and has [indiscernible] the variety At Turning developing the productivity. to in slightly higher, North strong growth. that this we by continued be

operational at and good operating to quarter. income demand international of led performance for XX.X% sales the Solid

have factories well continued teams improve Our manage to and the productivity.

on update to operational like would initiatives. our excellence an I provide Finally

continue we the the During better production from operations poll assets the our while and human to leverage plants in the physical capital have we performance, commercial to streamline organizations particularly driving factories. year decoupled actively

example assisting Capital the better in a team inventories. mitigating can by North and our an costs to all As to now management return while serve the achieving be to ESS and America capital be and report lines plants utilized utility allowing leveraging us freight broader products invested of inventory single plants better assets footprint. set pole now across optimized product a on

the over to forward this area and at early in more Mark. look our now details I about Day excited of year. early turn some are call to next progress will the sharing We Investor

Mark Jaksich

Thank you, everyone. morning Steve. Good

the begin as and on your attention on I'd my to comments Reg slide I of the quarter financials. like to are G press the release the based deck Before adjusted tables draw at the third end

steel basis that Third support structure segment less energy with quarter decrease also selling earnings points improvements helped SG&A in the basis favorable compressions to In increase compared productivity mining offset volumes. for mix XXXX our a up The sales spending segments, SG&A in structure engineered XX% rising as XXX were cost pricing On margin environment a to input top over mining sales mining other and year. contributed increases of effect volume profitability. the per consumables and company pricing from volume points in and segments segments small percentage Most mix the improved EPS gross and most and XXXX line a a last last sales. with of share support segment in and $X.XX improvement sales comparable and X.X% and decreased most energy to growth comparative translation. higher margins adjusted The despite lower the to year. irrigation and $X.XX a environments margins. much was engineered currency positive prices gross structures and the to profit was in and realized mining of were of basis At equally profit we support unfavorable the the with contributed segments the the energy and were engineer of a cost. notable decrease XXX for realized by due

was million and X% XX our over income the about same operating last was in XXXX period percentage XX.X income down operating quarter basis year. Third points from

the XX.X% tax was with year's third for adjusted rate quarter rate quarter of income comparable Our last XX.X%. of

balance Turning in to operating XXX year. increased cash XXXX. with cash to operating digit flows capital XX end year. our cash about working despite year million We this flows by date totaled flows over support sales compared were to increase double cash million realized increases The the million in XXX growth last a year

year-to-date million receivable spending improved somewhat However XX.X inventory as in to Capital $XX have XXXX. million over was compared XXXX. terms in

range to $XX of be expect million $XX year total the the We CapEx to million. in

be a have comment our the fourth during capital on and due quarter $X.XX logistics $X.XX, deployment about mining effects me on in to other our excludes quarter the business With $X.XX under guidance schedules outlook third remaining concerns impact immaterial share the between slightly did now EPS Regarding the about the which total activities will the the sale not and quarter of the repurchase from shares the $XXX year per hurricanes XXXX let for and our events and or current of of those we on XXXX, should that delivery share how customer consumables are this to the aftermath any authorization. affect from balance timing million pending we of results repurchases. lowering

digits. the any material purchases. results cost timing recovery free net return not of of do year, cash and is effect projected expect we pricing for the be zinc dependent material to short about double we be which We efforts nor any invested XX% on After projecting for opportunistic purchases the material sales potential for of time the growth strategic cost to of decreased while prices prices expect project to the our this have one in in balance be warranted. cross through the on flow We'll when tax higher much the market mitigating efforts steel raw We raw earnings year on recently in continue low reduction to year is through decrease to impact capital term. around on activities,

of XX%. approximate We or expect the to XXXX rate rate XXXX adjusted about tax

solid flow. of end and leverage manageable with quarter of most free-cash strong the remain United Cash sheet million is the outside the at was which balance XXX Our States.

to remain investment ample We us capability pursue gives rating. organically growth via or whether our liquidity initiatives committed maintaining credit to acquisitions. Our grade

With cash are and time dividends that paying I businesses, the or at to spending, opportunistically. capital the growth call to performance of closely back over earnings that's Steve. and turn priorities our of companies are now XX% acquire support our existing to over capital will the and strengthened businesses, Our working to unchanged those repurchase adjacent and shares net

Steve Kaniewski

Thank Mark. you,

Our with support has challenge over business. dramatically the moved this year that commensurate structure been to last firm, is stubbornly Steel sales growth critical remain margin side. engineered to zinc performance up are materials and costs aluminum even our year, higher in getting primarily

are inflationary enable leverage pressures pricing taken actions of Given costs growth to these muting better forward. our performance all segments as that and sales have across recoup we proactive go we

for utility, and interrupted guidance Our quarter trucks we diluted strong is earnings our the loaded before expectations in supporting full this $X.XX, revised and shipment. the share of to per XXX for the hurricanes range in a go outlook had $X.XX ready year fourth

time. now but will that some for product of is Some project shipping volatility remain

support supports sluggish results similar trends fourth a to backlog segment results improving into the North outlook positive may is yet continue we for Lighting the quarter engineered persist. American last coatings Our to The international in expect outlook in structure year. the

and but continued harvest expect for as energy on will costs the steel the solid demand. beginning quarter We of expect in pricing in North will mining unfavorable most preoccupy based international customer of take America recovering The time comparisons arrangements. farmers we

been said will believe M&A process have appropriate of active turn robust. to always time the do I and our difficult acquisitions our Our it of candidates business rationale solid acquisitions. invested your discipline predict deployed. like We That the is to and pipeline is At capital it to questions. returns operator would take in over this good to the result and on with timing

Operator

Instructions]. [Operator

Credit first comes Suisse. Your with question the Julian from line Mitchell of

Lee Sandquist

a the This in hurricanes? of give could the Lee what Regarding margins the incremental addition impact us top Queen is impact for and the of adjusting in hurricanes was Sandquist, also you quarter actually sense the the line

Mogens Bay

segment customers saw and being impacted of and saw of was that the $XX we supports terms Well utility the the amount plants revenue of also that those share margins around million areas. the to having then that coatings approximately the in overall us about in said we majority effects $X.XX that in due ESS by a range to with it and

Lee Sandquist

increased adjusting the hurricane expected a from guidance being top was up of input to unchanged weaker high mining, low line single And costs to for than it's just digits just Understood. the energy essentially but and mid so but bit the a also function headwinds? double digits little [indiscernible]

Mogens Bay

correct. That's

Lee Sandquist

And of times lead in are terms utility extending.

just for segment next as into So this touch head the can the volume you year? outlook on we

Mogens Bay

we lead kind to at have are we Year their now visibility beyond it so and that looks weeks expenditures. like that a Yes with it's is and around reload look looking into their quarter it's Sure. to New the into pretty their the the times and pretty due utilities of to unknown year right spend first have look good to this capital as that we're still and XX for number and obviously pretty projects firm activity as a roughly the of as we customers comparable good

remains anticipate where we we and just quoting don't that significant going there's a drop activity it's our about know So don't a upturn. been. yet We off significant to be know if

Operator

of Your Seaport the [indiscernible] Global. from comes next question line with

Unidentified Analyst

is impact the I are a headwind of you you the able prices in the did more you of the quarter of for account? your the other taken good they a margins Valmont, when about kind but can metals on make two the segments guess in five or of work of of three all into for a offset get holistic kind Kind on assessment segments the quarter kind overall all I were prices and on to were net-net segments. company total metal it for margins think when

Mogens Bay

a Yes, significant of we headwind is customers. our more the side our the piece of cost, Mike utility material pricing it's you business but it was in you a know ESS with do as have business look mechanisms there significant

in next segment is more ESS due profitability big in movement impact then that's is So energy our mining pricing affect therefore to and substantially. very the and and any much a the then materials raw that those it's significant and there will more so segment so piece

Unidentified Analyst

of as for starting guess Okay. growth months, said well. also one call schedule, I a to is how course touch next want to September their your that was of XX as your growth speaking large it's modest calendar irrigation outlook kind broadly of briefly is for asked a kind Kind kind on and competitors there trend on projects response irrigation the of different big that right but of I a with next outlook that different year? excluded in now might of in-line

Mogens Bay

has seen believe yet income let's bottomed how we market a don't farm know net out. a America and know certain that the the from really will be prices market range. perspective and say You We do North kind within shake we've of out commodity

international markets to we year, to we to look expect expect our we and continue next be in serve into we pretty the move year. would the next markets that So pipeline that good that into would as continue and

Operator

Kansas Capital. next of the Your from comes Jon question with line City Braatz

Jon Braatz

the changing it and business? approaching of mix Steve, and market international, to that do be towards Is mix coming back mean that XX:XX sort been for Is much? historically movement continue international domestic of or and it I see irrigation if we business the I been North of higher international continues percentage? the incremental will number has international. the Are to way, we soft X/Xrds, you're that good years market a pretty has X/Xrd think American

Mogens Bay

business. the the much more do will domestic international outgrow believe business frankly be over and time than substantial Yes we

on. As see term switch we goes and as that in commodity we the but time that to the go are prices from push and drivers may back it but time towards the XX% time move cycles as over to good long would then and prospects markets expect the international

Jon Braatz

grows, less the business as any margin? you would see business profitable that the less And in is Okay. international change margin, international has

Mogens Bay

and Well footprint pressures adept able help offset our effectively to in the side it we're efficiencies much that different elsewhere more cost we've does East of Middle and utilizing that. have market plants so China, on at operational very been the to serving a some space our in margin international utilize becoming while

value the you more the So it leverage. more

Operator

of comes Jones question line next from with the Nathan Your Stifel.

Nathan Jones

I passing increases, just price sacrifice in it I would ESS you to of out about and little raw business dynamic to been market cost. through raw the cost material like of how to Is difficult with through you price. go Can price there? pitch the segment about that's the most at increases that maybe material higher - the ahead just share. more fragmented, have problems the more times clearly everybody price big has is a guys that else, you're know the balancing the to because to push the thinking particularly with talk ESS that willing gone

Mogens Bay

Sure. margin. incremental those it gain terrible quality see earnings diversity to and markets some different but it's of particularly said balance both It elevated have itself, just necessarily to the is us you'll same our safety, entertained for margin in in product perspective. muted. pretty and do that but much a lines not that North because customers the In of favor with Asia thing Pacific the to pricing not contributing it costs more profile as road a takes that's that of keeps global pushing right demand America pretty we for some have supply product more well but in broad-based in and some front line the the the and sales enough and are environment is longer increases is supply good we've growth particularly recover been the the there and more amount is fragmented out and by It between price

So push on long in short than diligently to story the front as on term loss. we're you and price prices out it short if we're more very means working willing market know share even

Nathan Jones

if blunt as think steel should we a point about on I the how could more little in look wondered increases? price recapture margin the be business I you to mean, I progression the that

Mogens Bay

that I to as you at you look think Well steel recover the quarter completely clear costs. time incremental introductions is be which we profile hard see small product quarter and we takes moving smart It have way. market think the will we cell, the like margin in it's as improvement also as we help by know are polls, pretty new towards will things camouflaged those a aggressive

So margin the and the sure time for those comes on delivery are the down it the that for lines customer market lose the overall of over profile will really and making don't we that and our drivers that product quality, then and value help our will change fronts. any just to ground

Operator

[Operator Instructions].

of line question Bibb next from the Your Craig CJS with comes Securities.

Craig Bibb

starting I cash any are sheet, You guys quite to the is are you you for guess Is have not thing or? year. balance on have cash what highlighted share saving a that the you the lot M&A a repurchase robust. this pipeline done

Mogens Bay

well in activity Yes. cash looking those It's we purposes that we where two our an cash fold, meeting new comments and as can for the believe as internally we're and really therefore as services the growth agenda M&A products and as are can offer so organic all pushing at best. of business our and we pretty strong that and that's the well international funnels utilize in in mentioned scope my

Craig Bibb

would be in tuck this something or And larger?

Mogens Bay

sorry? I'm

Craig Bibb

would bolt-on M&A the more you're So be looking something or larger? at

Mogens Bay

acquisitions at could we the nature size of scope look more the opportunities. grow in the but bolt-on as international It's size in and again

Craig Bibb

where you little side and more you hurricane you positive the what maybe cost it you'll could the impact then But bit like detail hurricane? you, do it of think the on when us see cost a give

Mogens Bay

touch other of drivers In Well customer that using a so needs product with we that to activities. stop stock that certain able from book interruption storm is probably lighting, hurricanes. goes in strong of our are psyche base rebuilt, get begin on so of is of the that the as What own utility place were I term affected from utilities ESS see hardening save product and effect we to will In on there have do and see term interruption the any of infrastructure work but as the area willing inventory positive we can see they long their once and to and to of much get are an that. you much of on restoration segment does customers all fixed then some taking amount you immediate we and in that should short medium cycle out those and good will you this coatings major a significant particularly take market more restoration we of storm that a major out there projects feel the install Houston that see business nothing on replenished, very to the take kind in the to see efforts activity think opportunity. there's it's in piece had the a this also simply to immediately well lines and come replanting will until again quarter stock more customers but it's lost of the

time loss the catch that of up most couldn't we deal your broad absorb an cost to activity with a kind your of dipping ramp they see thereafter. back commiserate you because opportunity up you and don't one of have so So labor and run plants spike you perspective over market in were the don't fabricators and

of we OP really we cost an as more that So just opportunity went revenue whereas potential at lost the with. that and look

Operator

D. Thielman Brent question next A. the with comes of from Davidson. Your line

Brent Thielman

guess prices drivers mining and are left of remind kind impact leftover? key to you of and to can to fluctuations divesture the the energy to what's how us in forward of I going material what's going kind business, also raw what's going of be consumables On close the dynamics

Mogens Bay

time mix our a business Access and is a we that of consumables in then well year as the is they or a anywhere is dynamic business, that it's price overall at year. mining mining is business point particularly lasting of our steel that have to for Denmark from our You revenue vary the customer in the can agreements and of and from changed to consumables has long couple inside flat Those of fairly cost we wind this especially reset significantly. of Systems, we as because time and just and the period is saw that demand months that so mills so mining increases fixed given know the be a close a a increase perspective were graded will pretty good. energy number It's used profile

Brent Thielman

larger then base sort this And irrigation more were is that results U.S.? needle moved demand outside of side of international on this the of indicative the there quarter Okay. on the broader projects the the or

Mogens Bay

projects well ones make was the It and markets as performance well much overly well up so good have based called of in as projects our market and more of broad component there international continue a previously to as piece is all we had we've projects do saw of will continuing to do there. a so we've out nothing the significant but and international

Operator

question Global. is with from [indiscernible] follow-up next Your a Seaport

Unidentified Analyst

very Texas. building and projects California here rapidly mainly bunch with in different backlog it to their of seems with the state and you of ESS, road level check I like cases wanted checked kind a of their suggested rising in on funded and on I bids are firms kind also

stepping to there that it next for a possible ESS is solid DC, kind federal turn dollars are that studies their of here of own are to people domestic are a So outlook as have business? in states way your some and kind of to year projects growth out of with

Mogens Bay

have pretty of market We California also couple their and over led funds Florida things the is Texas last the on that states strong way. seen own. doing this a have the years and

who's may idea to years see build has the kind that this very to of already that significance level a into multi-year going go see we baked and some so the and an the really it's been federal have clarity on fund they at that multiple to top particularly year So our but then reluctant projects one to last there going they infrastructure they they're should and take it's projects and funded see really larger run-rate in if help that part be giving us. it, have funding of that unless

Mark Jaksich

as our remind just types you of products about always projects building, the tend last talk of a lag because when to tail towards that and so thing you bit well To a there's pop goes of effect in end go alike other highway typically it market. structures and in errors pop project sliding than if the a road we traffic or would on a in some and we of realize a it saw players in so be later case of would the a

Operator

Jones with next Your question of Stifel. is a follow-up line Nathan the from

Nathan Jones

know correctly of in the about they appear that's to timeframe the in that utility kind business here Steve for drive increased 'XX you [indiscernible] demand steel cost opportunity pricing an weeks, continue there improve more XX have is than in the times 'XX, supply tightening to in and remember up? that that's I range covered good some and in of contractual, with I kind and were if you at utility back and you said to margins of 'XX,

Mogens Bay

Yes absolutely.

You price taking to now all opportunity into so so advantage up that. account we're particularly and into more XX has marketplace capacity we our and where see to up was bid capacity there's absorbed and take of work the in that take do know weeks added versus much then the been

Nathan Jones

and should we about The Okay, being forward? for the on tax Mark. few think your one a years, tax rates pretty how rate steady last decline over going

Mark Jaksich

course we we advantage see of can. say be earnings able we favorable money Washington something mix of back where still we of anyway over rate the that assuming change over the that no certainly of course that would XX% that's bring will whenever to certainly that's be all and take if out or in come being that to would the I made possibly Nathan, of Yes, tax rates depending time and are around on

Operator

Bibb Your the next follow-up CJS Securities. line Craig question a of from is with

Craig Bibb

would Just also down you out you ESS the competitive maybe prices back I the through increased and you margins, have pressure of can't margins to that steel down like pass mean changing. guys easily margins you curving it because is have the sounds there, are mix were have that blown your if but upside higher

recovery not mix? margins a So we a are we that get level in - because will competitive the at kind we a looking issues lower or of full in are overtime of ESS

Steve Kaniewski

we of Well, This through demand it you it part believe favor in tips the if just accelerate in go that will see recovery. firmly tends to business. over of cycle time quickly. is the that pretty this we And

pretty actions with the fresh, product new both that it our our keep we're line an have we're impact. introducing and that So to confident will products

Craig Bibb

So to stronger margins really you lighting American North demand the for lynchpin recover? need is the

Steve Kaniewski

that's Yes, a piece considerable of the segment.

true. that's So

Craig Bibb

Okay, great.

Operator

the follow-up is question Brent a next Your of Thielman of line D.A. from Davidson.

Brent Thielman

Puerto serve some pretty of that disastrous potentially? would in events Steve, in market the you down Rico, of a on the grid. terms the Is impact guys

Steve Kaniewski

clarity means. the yet see some that something I yet of But Puerto one the of people that. on a that the of we there, there's local utility don't of a reconstruction so, know in PREPA, that working And let's couple what that Rico. that position We agencies service, know any means. serve do that should when good think that are don't out We're we're say, yes. what on we

Brent Thielman

of third Coatings, zinc in I do signs trying another sustain lag these improved good quarter, mean, of in that you prices? think of I guess prices the lift on there's the fourth continued commentary the light appreciate I'm but know in thus margins far input kind into All right. far. in thus profitability understand. lift some yet kind quarter, to then And there's there. can you I this, of through

Steve Kaniewski

Yes.

I restructuring for undertook profitability and working recovery, should with we for across think that the that we the activities maintained. aggressive operational last piece that the we're excellence zinc system, the year in see Asia-Pacific, being

Brent Thielman

you. Thank Okay.

Operator

at And this time Instructions]. questions. [Operator no there are

Jeff Laudin

forward-looking forward to for speaking this the next thank call. on The internet operator we us you And read concludes This you. today. phone Thank At quarter. for the our or available will for our will to next look message be time again week. disclosure. joining We by playback you the

Valmont Industries (VMI) 19 Oct 172017 Q3 Earnings call transcript