- Net Income doubled on a 26% sales increase.
- First quarter Utility Support Structures Segment sales rose 52%, operating income increased 86%.
– First quarter Irrigation Segment sales improved 30%, operating income increased 61%.
- Coatings Segment sales rose 13%, operating income increased 60%.
- Operating income improved in the Engineered Infrastructure Products Segment on a 17% increase in sales.
Valmont Industries, Inc. VMI -1.63% , a leading global manufacturer of engineered products for infrastructure, mechanized irrigation equipment for agriculture, and a provider of coating services, reported sales for the first quarter of $717.4 million compared with $567.9 million for the same period of 2011. First quarter 2012 operating income was $82.8 million versus $45.3 million in 2011. First quarter 2012 net earnings were $52.3 million, or $1.96 per diluted share, versus first quarter 2011 net earnings of $25.6 million, or $0.97 per diluted share.
First Quarter Review:
"Record first quarter sales of both irrigation equipment and utility structures were the primary drivers of first quarter results," said Mr. Bay. "This, combined with favorable weather conditions, stable input costs and double-digit sales growth in all of our segments resulted in a record first quarter performance.
"Profitability in the Irrigation Segment benefited from volume leverage and improved manufacturing productivity. While volumes and profitability in the Utility Support Structures Segment rose significantly, margins continue to reflect competitive pricing on large project shipments. The operating performance of the Engineered Infrastructure Products Segment improved as a result of better performance in the North American and Asia-Pacific regions. However, in general, the demand for lighting and traffic products still suffers from the lack of a long-term U.S. highway bill and the restraint in government spending in many parts of the world. In the Coatings Segment, the quality of operating results improved due to volume leverage and increased productivity. Financial results in the businesses classified in "Other" improved as well.
"The positive impact of volume leverage on our businesses resulted in a substantial improvement in operating income as a percent of sales."
First Quarter Segment Review:
Irrigation Segment (27% of 1st Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
Sales rose 30% to $196.3 million, reflecting favorable drivers in the agricultural economy: The outlook for farm income continues to be strong. Crop commodity prices remained at high levels during the first quarter. Dry weather in the Midwest agricultural regions of North America heightened concerns about soil moisture levels for the upcoming planting season. This, along with the drivers of improved productivity and water conservation, led to increased purchases of irrigation equipment.
International markets experienced modest growth in sales with most regions showing increases.
Operating income grew 61% to $38.4 million and was 19.6% of segment sales. The improvement in operating income was the result of lower input costs, increased productivity and volume leverage.
Utility Support Structures Segment (26% of 1st Quarter Sales)
Steel and concrete structures for the global electric utility industry.
Sales of $191.2 million were 52% higher than 2011. The sales increase reflects large project demand to upgrade the North American transmission grid. In addition, unseasonably mild weather in North America contributed to a favorable environment for production and shipping during the quarter.
The need to add capacity and improve the reliability of the North American electrical transmission grid continues to drive demand for utility transmission structures. A period of underinvestment in transmission capacity in North America followed by a period of rapid economic growth in the 1990s resulted in the need for transmission infrastructure improvements to better support increased electricity demand. In addition, occasional outages within the grid highlighted vulnerabilities to its reliability. Provisions of the 2005 Energy bill were designed to address these shortcomings, which have led to utilities increasing their investment in transmission infrastructure. We believe the current demand for large project orders is part of a longer cycle of investment that will lead to thousands of new miles being added to the transmission grid over the next 10 years. This trend supports a positive long-term outlook for our utility business.
Sales in international utility markets were lower, as increased sales in the Asia-Pacific region were more than offset by lower project sales to emerging markets.
Operating income increased 86% to $25.1 million and was 13.1% of sales. The increase in operating income was due to the positive impact of volumes and the associated operating leverage.
Engineered Infrastructure Products Segment (26% of 1st Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
First quarter sales were $197.9 million, a 17% increase over 2011. In North America, commercial lighting product sales rose. Transportation lighting and traffic product sales were higher, in part reflecting the positive impact of mild winter weather conditions. Sales of wireless communication structures and components also rose.
In international markets, European lighting and traffic structures market conditions remained challenging.
In the Asia-Pacific region, sales of Webforge branded industrial gratings and access systems rose, supported by continued investment in the mining and industrial economies in the region. Highway safety product sales were higher in Australia. Sales of wireless communication and lighting products were flat in China.
Operating income increased more than threefold to $8.0 million, or 4.1% of segment sales. Increased sales and the associated operating leverage led to the improvement in profitability.
Coatings Segment (11% of 1st Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
Sales of $82.8 million were 13% greater than last year. The increase in demand was broad-based and evident in both North American and Australian markets. The effects of a modest economic recovery in North American markets, with an accompanying increase in industrial production, were favorable drivers for galvanizing demand. Industrial activity in the Asia-Pacific region was higher than last year, when severe weather conditions disrupted demand in Australia.
Operating income increased 60% to $16.5 million or 19.9% of segment sales as a result of higher volumes, improved productivity and somewhat lower input costs.
"Presently the drivers for our Utility Support Structures Segment are particularly strong, said Mr. Bay. "We expect utility demand to increase and margins to improve modestly as the year progresses. In the Engineered Infrastructure Products Segment, the environment for lighting and traffic products is not as favorable. Prospects for passage of a new U.S. highway bill appear to have been deferred until after the U.S. election in November, and the markets in Europe continue to be challenging. However, we are pleased with the improved quality of profitability in this segment, and expect continued improvement in the quality of segment profitability as the year progresses. The macroeconomic environment for the Irrigation Segment continues to be strong. The results for the second half of the year will largely depend on the outlook for the farm economy at that time. We expect the quality of the operating performance in the Coatings Segment to remain strong for the remainder of the year.
"In light of the strong first quarter results, and the factors outlined above, we are increasing our earnings outlook for the year and now expect earnings to exceed $8.00 per diluted share."
Valmont is the global leader in designing and manufacturing poles, towers and structures for lighting and traffic, wireless communication and utility markets, industrial access systems, highway safety barriers and a provider of protective coating services. Valmont also leads the world in mechanized irrigation equipment for agriculture, enhancing food production while conserving and protecting natural water resources. In addition, Valmont produces a wide variety of tubing for commercial and industrial applications.
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