AZZ - Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the AZZ Inc.

Third Quarter Fiscal Year 2022 Financial Results Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. to Partners. conference like Dorame to now Lytham with would turn over the Joe I ahead, go Please sir.

Joe Dorame

of the Good for XXXX, to results joining Rocco. ended us Inc. Thanks, morning, today review and November XX, the fiscal quarter of third thank XXXX. you AZZ year for financial

Officer; prepared After there Nark, note, on Please the a questions. President, Senior Joining page, Executive Marketing, for today remarks, the call Financial Chief the Communications, which again found Tom are open for presentation Schlom, be call under Presentation, call IR. conclusion AZZ's is Vice today's of Officer; today's we www.azz.com. Chief and Ferguson, Release will Philip and slide Relations that's Latest can Earnings Investor David

costs, contain growth industrial to risks which Before and by of we the Reform offered transmission power Except within Securities changes zinc coatings electrical in year markets, this gas, remind Form the XXXX. statements generation limited to; detailed and management include, that the annual AZZ demand natural by Act are raw risks prices to during Commission, on some and the metal the in foreign distribution statements economic the AZZ the time employees call and Private for adequate of experienced XXXX. are process; historical currency domestic; Securities begin the constitute company's team galvanizing rates; demand the but markets, and the made and meaning with strategies. certain prepared exchange opportunities; and forward-looking uncertainties, implement material markets; like that Litigation conference hot-dip of involve would XX, conditions by not filed everyone including customer-requested with financing response call documents including serves, product AZZ and company, changes including this customer to services and the statements statements markets, conference time of to are and management and in the the and from report which of ended delays Exchange acquisition uncertainties various in of February shipment; markets XX-K of the fiscal the may of stability political remarks, forward-looking used availability for Those fact, I by and

any In otherwise. Tom? operations addition, that and result update AZZ can impacted information statements, give future call of date out and pandemic. its turn Tom events the Officer assurance statements company based on by Executive potentially the could ongoing These to a customers such adversely prove way, will of of be forward-looking The let AZZ. as information, AZZ the to statements of no be whether as me correct. assumes no are over new Chief hereof, forward-looking or obligation With to Ferguson, that COVID-XX the

Tom Ferguson

Joe, welcome you to for our Thanks, this quarter thank and XXXX us fiscal third joining and earnings call, morning.

issues material which Sales $XX impacted customer at in and every to the up X.X% first-half constraints, COVID down over million, We describe job Solutions Infrastructure perseverance last will quarter, during XX.X% adjusted versus SMS, with $XXX generated this year. sites, labor some of want quarter, year. allow well. kinds to to COVID after of and to continues XX%, million, do momentum sales quarter achieve sales day show Metal gain consecutive from year, last up the employees thank of $XXX improved us excellent Consolidated and the I our fifty at completed the disruptions shortages, continue to further performance in by about AIS prior X.X% and in when call. solid or the especially third results. who were Coatings I our divestiture million. COVID-related almost of of their sales these Their for another

completed have of to performance. pleased another are strong quarter We

and continue cash $X.XX income of third quarter. $XX and We to We shareholders of dedication per million, the capital returned diluted and businesses the people. of during over generated net generate of to reflecting resiliency our EPS the our solid flow our share,

the improve profitability, taken to actions while outstanding on last our service focus businesses leverage to maintaining and Our year customers. realignment providing their quality

operating and distributed strategic from a over $X.X we also interest million. value margin was rapidly $X.X up rising primarily Coatings, most Galvanizing, income The dividends. in completing in XXXX, resulted the quarter. benefited in automation, modern COVID, challenges shares fleet. This We in of our previous Steel for of costs. efficiencies over energy $XXX completed to line margins a on was lower million face team of tax rate XX% with XX.X% creation, Metal million, in and the of the This driving we acquisition third operating while and year. improvement zinc, site In pricing South succeeded sales productivity, and being ongoing for the of XX% making in it spite repurchased of expense improved due of lower and XXX,XXX the In Creek to our commitment achieved operating our the in In in Carolina. lot labor, from newest realizing includes

present excited team is opportunity Our a in it region growth the we not presents yet. about were

team great to shortages Coatings to while deliver ability perform the labor and increasing and costs. results, Metal continues Our managing their demonstrate

cost X.X% points, continued year. the divestiture. considering XXX demonstrated SMS leveraging Solutions of with Solutions actions of impact prior in over down to operating compared income $X reduction segment X% the year. Infrastructure took were segment margins We profitability the when Infrastructure The to quarter, as improved the they improvement basis million, that about delivered the last operating Our

disruptions well. impacted this strategic resulted and profitability. due WSI COVID, we industrial to One in on outbreak, The the year resulting from across lower initiatives believe was from did components significantly which COVID in managed delays customers. materials fiscal and remain We constraints including to but both well-positioned And electrical well, focused labor project growing we a platforms. are selling supply finish international was face second chain by

more any COVID in continuing balance expenses to per inflation. our XXXX, in its and three be in while service due some generate the increase performance uncertainty we're acquisition, risk Coatings diluted the of year $XXX tightening million, at seeing $X.XX to announced several operational not million $XXX share. integration and opportunities EPS sales focused range first couple of and on sites, and than guidance. fiscal sectors, these in the first to anticipate We do sales to continues this growth, $X.XX EPS focus We annual our many customer execution fourth material including anticipate from Metal due to given strong on operations our spin impact For year, recently quarters, of the is operating to months. galvanizing at the labor leveraging as quarter as we're to

segment the optimistic Infrastructure it fourth enters electrical the bookings Solutions is Our particularly as in momentum platform. quarter, with cautiously some activity, in

Poland COVID seeing from the expanded outbreaks business although customer to due at good is some intermittent business the WSI results continues sites. Our some facility, experience delays internationally to project

on call, projects in the some noted fall will season last the we'd of fourth now the As quarter. be completed

turnaround Due third earlier have from focused kickoff the growing some expect of e-house to electrical and a a remain upon little quite operational we quarter, quotations. platform than on with the better-than-normal will fourth at season outbreaks spring due extensions good The switchgear customer is sites. We I the the cautious normal. level its our the battles note performance in to projects execution businesses. we look But and spring quarter. based for is that COVID that to ongoing project the outlook also

positioning will continue XXXX, AZZ the to of to balance a for initiatives fiscal growth strategic to value, year while fiscal shareholder XXXX. For on start our strong execute drive

to manage generate drive emphasis costs, initiatives cash unwavering, on ensure Our excellence, tightly collection our superior platforms. ability flow our customer based pricing strong discipline, is commitment on receivables operational within service is operating to to and

we vital We sustaining that that turn improving enhance to profitable confident to and With growth so remain shareholder Philip. our value. I'll continue drive it are over said, and to businesses infrastructure,

Philip Schlom

$XX.X the Tom. $XXX million, quarter the increase the or of prior orders quarter XX% year. third were Thanks, or Bookings million incoming a in third over

last with above for same and quarter, of book-to-sales ratio XXX%, Our well last remains quarter bookings-to-sale the ratio the year. consistent X.XX

consistently markets As improving for Tom to Solutions segment. seen continue Coatings we and have segment, Infrastructure to, strong our experience had markets Metal in alluded our

fiscal million, year sales quarter third by business last prior the compared in segment actions higher million, quarter, restructure Coatings Metal Solutions or business sales of year. profit year. than profit lower generated quarter middle Infrastructure the we $XX.X in $XXX.X offset $XX of million and million the sales XXXX the gross third in to segment, million mostly $XX.X quarter of with the third prior X.X% took where gross $X.X segment for of up significant the sales the the industrial The were were Third Year-over-year, $XXX.X of partially in were million.

in with year, XX.X% a Our quarter of last Operating gross with year-over-year. the to the quarter quarter X% in the the income margin million compared as improve. for of $XX.X third million the was third million compared business prior in segments for quarter margin both third $X.X continue $XX.X XX.X% improvement was of or gross the year

than of the third by per earnings the Services or was reported $X.XX higher share on Mechanical $X.XX or of EPS Our year $X.XX in impacted adjusted cents, SMS. last a quarter. and was prior prior year EPS The $X.XX Southern to divestiture third quarter loss

quarter with last prior quarter EBITDA year. sales EBITDA a was third flat the difficulty] quarter third quarter. [technical were increase sales Third Year-to-date the third million. $XXX quarter of fiscal last Year-to-date year's sales year's XXXX third was year-to-date compared from through of $XX.X million, $XXX X.X% million in of the from

restructuring $XX.X increased the year-to-date $XX.X tax $XX.X $X.XX, in Fiscal in a the share of Excluding XXXX $X.XX the basis the XX.X% reported have the is company compared of $X.XX a prior an adjusted above on X.X% and and $X.XX adjusted improved reported year-to-date Current pro net year-to-date with net income charges year-to-date recorded from income million year-to-date impairment income divestitures, sales $XX.X XX.X% or prior period. or on EPS was net basis. million Year-to-date, on is $XX.X EPS XXX% million. prior and above diluted We're over net the of or would year-over-year million impact results. SMS million year, basis. had forma of the XXXX

as capital While million debt we share notes XX gross year. sheet capital million and November coatings. $XX XX, XX.X% more an strong. dividend slightly basis, increased reflects outstanding zinc activity, remains our we million during below payments. planned through balance senior have We million, impacted share repurchased year-to-date at volumes on year. down business offset and period $XX generated increased the timing as were credit than of higher year, consisting prior But and the allocation supply delay earnings. the result investments are our primarily metal of quarter Year-to-date, previous $XXX $X.X shareholders revolving capital or the estimate receivables Through last or continued primarily increase our outstanding result continue repurchased $XX.X capital capital expenditures. million our declared flows same a deployed as and our $XX $XX.X improve. nine in of million, from quarter borrowings by continued following continued roughly and $X.X $XXX year. XXX,XXX anticipate from On This Borrowings of We to operations a facility. higher of $XX.X flows our a years and chain on our sales XXXX, positively the of from higher million, ended costs inventories impact return repurchases, repurchase fiscal this Operating and spending our higher inventories in and investments a shares receivables, were have in million. the end end to of cash quarterly million cash outstanding higher was highlights months on have million and the the stock for $XX by a the the increased dividends was constraints seven and in The make have to million the

thoughts. footprint and remain Tom acquisition the during in will it and galvanizing expand as Carolina the South acquisition We front continue had of now should completed operation turn noted operation of be active South on accretive I'll and for Tom merger first to final year back East the our the earlier. his to that

Tom Ferguson

you, Thank Philip.

Here're are indicators particular we to. some paying attention that key

fabrication material labor as metal activity COVID galvanizing OSHA's carefully construction inflation For well cost tracking the are mandate. business, coating vaccine and segments and as we and

benefiting and For performance. platform, focused technologies surface we from base expanding primarily are on the customer operational improved our

have utility particularly is For for committed domestic performance advanced we infrastructure improve able currently customers. and season of of activity. international strategic we distribution, stated to further to this company, is coatings XX% activity designed at review solutions are to while infrastructure and not work outage our commitment. COVID our metal looking being battery meaningfully be returned Electric from achieve remain remain to regards achieving that and we options become solutions, benefiting platform cautious storage strategy due predominantly galvanizing a to normal a Unfortunately, comment and we couple on XX% good, are a to turnaround this spending, coatings related strategic time. metal energy growing transmission desire The to around We is to to level. to to data although with the and continue surface due center spring operating margins steady and technologies. quite growth NDAs, In

fiscal year. and coatings to complete metal acquisition the one this end before more hope particularly of acquisitive, remain will We

XXXX business benefit normalized transmission and market energy e-houses switchgear. issue profitability report storage, we're this past to quarter, focused distribution, battery doing fiscal We center to guidance would data our segments and will we and be unit we'll first year but for utility, For did outage renewables, Infrastructure month, later turnaround and issue this so. continue pursue a seasons, cadence in should This be not solid our areas. cash finally, more ESG flow. And from normal for these Solutions, and on improving

not to on do committed we the be that, questions. and for factored guidance, may we'll our are in. be up options a With can we to providing position While it so strategic EPS open sales until work in

Operator

Thank you.

comes [Operator from now Franzreb with begin question Instructions] first session. question-and-answer will go and the ahead. Sidoti John Today's Please Company. We

John Franzreb

guys, and the questions. morning, taking Good for thanks

Tom Ferguson

John. Hi,

John Franzreb

how Maybe to to are realize difficult like that to If helpful but noticed P&L, spiked quarter. pricing? I've I'd zinc in realize start you with a it kind through would some to able pricing prices review such it are higher like when looks five-year operating the First, price or you be just roll zinc properly, high, able does in your environment? of a

Tom Ferguson

probably we Yes, months inventory couple -- fiscal last One, were kettle, John. our a high six relative as at came of the so of have about normally things, year. level we we in inventory into and

part costs LME. increasing now every the current just those year rising as of So, we're in where are month, zinc the towards

we offset So, every we and to yes, surcharges, continue got use attempt prices, we've adjust naturally of we just that will to do month, we variety that. tools, a

John Franzreb

got it. Okay,

hit pricing impact right? coming some full quarter, be in in the of you'll So, absorbing the third higher didn't months, you the

Tom Ferguson

No. Yes, rises over period it six-month and kettle-to-kettle depends the or location-to-location.

John Franzreb

deferred All it. got XQ? Infrastructure into from how And Okay, right. much of Solutions was in revenue XQ business

Tom Ferguson

I don't that extended, real these of turnarounds just number know it's you it's specific a a million. that, know, on because some and few but have we project-related,

John Franzreb

does -- just it a turnaround Okay, looking this that in a on spring season sticking all And with basis? right. looking to said How on as promising. How's regard? said year-over-year you is you compare opposed basis it sequential turnaround,

Tom Ferguson

it Yes, spring. last nicely looks over improved

John Franzreb

of in revenue Creek, business annually? on guess Steel still Okay, last how just I that acquisition the question great. And one much

Tom Ferguson

old. a only couple of It's years

When a still facilities -- you ramping ramp. it but to It's to up. big figure three be. four XX% where should new it take of XX%, And facility. years So, about was it's

So, we becoming average, on end of were our scale. normal than anticipating the it'll more it be our higher

John Franzreb

remember is? Okay. Can what you that scale

Tom Ferguson

on our that. divided of you XX. revenue the And Well, by this be will higher end take about

in kettle the region. with a largest it the stability So, is big

John Franzreb

Okay, into get all back right, guys. queue. Thanks. I'll

Tom Ferguson

All right.

Operator

Noelle ahead. And question Dilts today with go our from next comes Stifel. Please

Noelle Dilts

my Thanks guys. taking Hi, for questions.

-- industrial late things First, market part hoping cetera, fiscal here of a just metal utility, walk to for that the seeing are in next year? infrastructure help trends Thanks. year feel et could the trending and coating, how give was us of into the you I through us help you're kind for solar, end

David Nark

one. strong solar Yes, certainly see of is the lot I'll the indicators Noelle. work a Dave. take renewables from on going This that And we there. continue particularly to market, market,

construction market we Our and market. OEM see continue to the remains overall from growth strong good also

into next quite of look doing last, the poles particularly such Utility segment, those not continue well. remain year. So, but continued to fiscal we all and strong, strength transmission And the are for the then and course least,

Noelle Dilts

then, have of putting U.S., putting market And in great. about the producers galvanizing new mills do for talk think about because that of the you of impact on any so or the your seeing Okay, mills, you're not aftermarket addressable the curious will new some thinking you that? Just steel you're much? aspect how

David Nark

is and steel lead Yes, I locally market that the locally because and access I'd more locally view a and for steel. that's positive, cycle for to us, used and say think shortens that times, currently what we better still the it times a and is as gives fabricated constrained produced

think things we to build, it as a take view so, real time soon. anticipate so a don't much these generally And obviously, any we positive. I But benefit while

factored have that into next don't we year. So,

Noelle Dilts

question Okay, if -- talk -- about a have do looked related but great. much at is of sure could for be And quarter? point a your you this if do this then, you or the may just last at I'm not how might have you by margins you you COVID sense estimate impacting of overall, segment kind there of the could or inefficiencies, rough be that

David Nark

they've they need nice when than a but do we careful, at Yes, they can won't of this, their where got I I job readily craft. say use a metal managing and of I be lot temps skilled labor we force, probably think coatings, look more

you with people think headwind, site just right So, but on five it it, with XX% they day now, a with given had can sites Omicron, XX%, out. I because flexed any still have

hit of probably it's managed XX to So, team of work put guys the is have to but overtime. us. many XXX how hesitate to the that extra to I we're and points through basis generally, headwinds that margin having points continues basis

moved. the sitting to they to Solutions extra from Well, sites, was we it's going WSI had project projects lot things crafts of a to and bigger Infrastructure so bring to international is lot able that's we're quarantine. tend of issues labor, be really quarter. a one as And that's had lot got quarter hotel in with on deploying because finish be we QX more, sites, the pushing side we it's slowed third craft the this project to the a lot of on now customer of fourth also stuff extend, to with the project and those things and had the in a be On in

say I'd were XXX go quarter. going them, for that to So, of they points I'm with probably with headwinds basis the in challenged

Noelle Dilts

That helps you. a perfect. Okay, Thank lot.

Operator

[Operator next Please Instructions] Today's ahead. Kearney question from Fund. at go comes Brett Gabelli

Brett Kearney

taking Hi, question. guys. for my Good morning. Thanks

Tom Ferguson

Good Brett. morning,

Brett Kearney

I how amongst at Steel labor state others opens And all if outlook the about Southeast up many labor also the the that opportunity in on region? very and was sets company set that curious the Creek that region. facility newly then in market, a hot the potential acquisition, given seeing you could dynamics obviously acquired talk is the level how ramp growth up geographically are curious the you just for high at positive

Tom Ferguson

on It's of border the Brett. Yes, North South Carolina and Carolina.

market. we're looking at that So, entire

Virginia, in Our Nashville. down closest facilities Bristol, are then up and in

So, we've a gives of facility kind us nice between. -- this

radius resources look of recruiting that as the we in one-off after semi-skilled up have AZZ at serve we it's doesn't while deployed unskilled access a we these we're -- that mostly we've So material hot going area got opens handling, to. market, an that labor XXX-to-XXX-mile and facility lot a didn't or and that is a another, it typically things

boards continually hard. the So, hit job and we really

in and the we've So, region. I sales got --

can least manager facility much. size. that on But it we want support both that So, quickly ramping generating and to can in fully we at too typically the can functioning like a of to some bring and we And share we'd things looking sides, extent, manpower. that opportunities that facility found would to up capabilities not do office out with of resources get help do to that both improving leveraging it additional we access what

Brett Kearney

much. so you Thank Terrific.

Operator

and gentlemen, John Please Company. next Franzreb follow-up question & from And ladies go a ahead. is Sidoti the with

John Franzreb

Yes.

Tom Ferguson

John. Hi,

John Franzreb

the end the guess I divestiture, thing that's potential of to I this still about. the was year? be that is on target fiscal regarding done Just curious by first

Tom Ferguson

proven You of know, not terrible John, I'm handicapping things. at these kinds

for just to giving comment. to going with my that's that for no I'm back So, then, we're guidance year next And refer not reason. comfortable stick

John Franzreb

May house potential Right. How about you any now? that it better retain of just in to be -- is there businesses? keep for some these

Tom Ferguson

a Well, one. that's tough

look best both businesses? options. like investors owner opportunities think the give probably But I people And are and benefit I businesses, think what to and to and But at like these and invested long multiple if I do not like have be that? there's, these is need be will. I we able term in in going businesses still these best have say, so the we do to invest forward. to potential to from and ones that, the to as you really their we're we We we

So, I'm a answer, going to give you non-committal kind of one. that a on answer half

John Franzreb

backlog now? I of curious, strength extending the of is regarding right Or fiscal it 'XX? first backlog the the the and beyond was just half falling into that? the Now it now what's and Is relative ratio

Tom Ferguson

QX little time tends to business nice 'XX. shouldn't They're backlog they're but say backlog lead of marginally, now. but extended a businesses. electrical somewhat the back And if around our sitting right quickly, our I switchgear has just you side up a that if at or to we three And typical And backlog talking just marginally, and $XX backlog you because what our about you're when real months are our business bit million chain, smaller side of go electrical offset had in $XXX that's is increase platform both the China kind with our back of enclosures. it in even and you're just period, look businesses smaller in million over supply is in out on up. be seeing six our Our our

about the we've increase decrease you're in electrical by you the seeing China. if our backlog look -- -- nice of backlog quarter-over-quarter platform in talked kind that we've a number, at So, offset total

John Franzreb

Okay.

Philip Schlom

times But and XX% China, availability to are while lead John, stuff. they probably than the that supplied due add what less customer I were they're including longer will for of materials

impacting our that's within and So, business other electrical the so our the probably than switchgear more enclosures units platform.

John Franzreb

I color, Thank for Thanks the it. that. Got appreciate guys. you.

Tom Ferguson

Thank you. All right.

John Franzreb

Thanks.

Operator

turn and conference management to ladies for gentlemen, concludes session. over And back question-and-answer the the final team to this like any our I'd remarks.

Tom Ferguson

right, all on joining talking well, We All the thank full-year you for morning. to you to April forward reporting look fourth us in and quarter. the this in

anticipate once thank So, we for hitting guidance, you our and again, joining us.

Operator

Thank you, sir. This concludes today's attending you today's conference all call. We for thank presentation.

You may a disconnect have wonderful and your day. lines,

Tom Ferguson

you. Thank

AZZ (AZZ) 10 Jan 222022 Q3 Earnings call transcript