OMAHA, Neb. — Valmont Industries, Inc. (NYSE: VMI), a global provider of engineered products and services for infrastructure development and mechanized irrigation equipment and services for agriculture, today reported first quarter results.
- Revenues of $596.6 million were down 11% year-over-year, reflecting negative foreign currency translation and the revenue impact of significantly lower steel costs
- Operating income rose 8% to $62.4 million, which included $1.1 million negative foreign exchange impact; operating income was 10.5% of net sales, compared with 8.6% in 2015
- Diluted EPS increased 13% to $1.45 compared with $1.28 in 2015 due to restructuring, improved productivity and continued cost-cutting initiatives
- Free cash flow for the quarter totaled $66.5 million and the cash balance was $388 million
- The Company repurchased 154,000 shares for $17 million during the quarter; $169 million remains on the current authorization
- The Company is reaffirming 2016 annual guidance of diluted EPS up 12-15% from 2015 adjusted EPS of $5.63
"The positive impacts of cost savings associated with last year's restructuring, productivity improvements beyond restructuring, and lower input costs contributed to improved profitability despite challenging end markets," said Mogens C. Bay, Valmont's chairman and chief executive officer. "We remain committed to delivering solid earnings growth this year."
First Quarter Segment Review
Engineered Support Structures (30% of Sales)
Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.
First quarter sales of $177.0 million were comparable to last year, despite negative currency translation of $5.6 million. Improved sales in Asia Pacific were more than offset by lower project sales in Europe.
In North America, sales of lighting and traffic products were comparable with last year, with stronger U.S. sales in the commercial lighting market offsetting lower sales in Canada. Wireless communication product sales remain subdued in the US.
In Europe, Middle East and Africa, lighting and traffic structure sales declined year-over-year on difficult comps as the prior period reflected an export project in the Middle East. Sales inEurope were similar to last year.
In the Asia-Pacific region, wireless communication structure sales rose significantly amid the continued rollout of 4G wireless technology over broader regions of China. Other highway and pole businesses in the region remained comparable to last year.
Operating income rose 50% to $14.2 million or 8.0% of sales compared with operating income of $9.5 million or 5.3% of sales in 2015. The increase was driven by restructuring and cost reduction efforts, lower raw material prices, improved operating performance in North America, and volume leverage in the Asia Pacific region.
Utility Support Structures (24% of Sales)
Steel and concrete structures for the global electric utility industry.
Sales of $144.5 million decreased 18% year-over-year due to lower volume and lower selling prices per ton, reflecting the impact of lower steel costs and mix shift toward smaller structures. International sales were lower than last year.
Operating income was $14.8 million compared to $15.4 million in 2015. Operating income as a percent of sales increased to 10.2% from 8.7%, reflecting the positive impact of restructuring and ongoing operational improvements.
Coatings Segment (12% of Sales)
Global galvanizing, painting and anodizing services.
Sales of $68.6 million were 8% lower than last year due to reduced sales in the Asia Pacific region; half of the decline was unfavorable currency translation. In North America, sales were comparable with 2015, including the revenue contribution from American Galvanizing, acquired in the fourth quarter of 2015.
Operating income of $11.4 million grew 4% over last year's $11.0 million. Operating income as a percent of sales rose to 16.6% from 14.8% as a result of the favorable impact of 2015 restructuring initiatives and lower natural gas and zinc costs.
Energy and Mining Segment (12% of Sales)
Offshore structures, engineered access systems and grinding media.
Sales of $72.5 million reflect declines in all product lines leading to an 18% decrease from last year. Sales of wind tower products were firm, while other offshore structure sales were lower, negatively impacted by continued depressed oil prices. Weak energy and mining markets weighed on Access Systems results in Asia Pacific, although sales in civil and architectural markets improved. Grinding media revenues softened amid continued sluggish mining activity in Australia and also reflect the impact of lower-cost steel.
Operating income was $1.9 million compared with $4.4 million last year, a 56% decline. Operating income as a percent of sales was 2.6% reflecting the influence of lower oil and energy prices and reduced mining activity in Australia on segment performance. Last year's restructuring dampened the impact of the weaker markets on operating performance.
Irrigation Segment (27% of Sales)
Agricultural irrigation equipment, parts, services and tubular products.
Irrigation Segment sales declined 9% to $158.5 million mostly due to reduced North America irrigation equipment and tubing sales. Irrigation equipment sales in North America were pressured by a reduction in net farm income. International irrigation equipment sales decreased due to the impact of currency translation. The international irrigation markets are highly diverse and benefitted from increased project activity in Eastern Europe and the Middle East that more than offset declines in other markets. Tubing sales were significantly lower due to reduced demand from agricultural equipment manufacturers and continued low steel prices.
Operating income of $28.8 million was modestly below last year's $30.2 million due to the weakness in tubing markets. Operating income as a percent of sales improved to 18.2% from 17.3% last year mainly due to cost management, improved productivity and lower raw material cost.
"The result of the restructuring activities of last year are manifested in our improved profitability despite lower first quarter revenues," Mr. Bay said. "For the balance of the year, we expect revenues more in line with last year and are reaffirming annual guidance."
"We continue to operate in a challenging external environment but continue to control what we can do to drive improved profitability. The positive long-term, global drivers for our businesses remain in place. Efficient use of water for food production will only increase in urgency and economic growth cannot be sustained without investments in the world's infrastructure. We believe we are well positioned to participate in these opportunities."