Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure development and mechanized irrigation equipment and services for agriculture, today reported third quarter 2017 results.
“Our results were impacted by the hurricanes in Texas and Florida as our customers focused more on restoration efforts versus new construction,” said Steve Kaniewski – President and Chief Operating Officer. “As can be expected, some project timelines in the fourth quarter could be moved around as a result of the disruption from the hurricanes. While the hurricanes may weigh on our near term results over the medium to long term, they help drive overall demand,” he said. “As one customer in Florida pointed out, not one Valmont structure failed during the hurricane. It is this kind of performance that will continue to drive hardening efforts, not just in hurricane prone areas but anywhere that nature could impact reliability.”
Revenues increased 12 percent to $680.8 million, with increases in every segment except Energy & Mining:
- Operating income as a percent of sales was 8.8 percent
- North American hurricanes negatively impacted third quarter earnings by an estimated 10 cents per diluted share
- Diluted EPS increased 25 percent to $1.55, adjusted diluted EPS increased 5.4 percent to $1.56
- Annual guidance updated to reflect logistical disruptions caused by hurricanes. Earnings per diluted share for the year expected to be between $6.90-7.04, compared to prior guidance of approximately $7.06
“All segments had sales growth except Energy and Mining, with double digit sales growth in the Utility Support Structures, Irrigation and Coatings segments,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “The impact of hurricanes in North America during the third quarter were disruptive to customers, and affected 10 of our facilities, interrupting production and delivery schedules. We estimate that movements of delivery dates and manufacturing downtime negatively impacted EPS by approximately 10 cents.”
“Operating income grew largely due to the sales increase, led by improved profitability in the Utility Support Structures, Irrigation and Coatings Segments. In the Engineered Support Structures and Energy and Mining Segments, operating income was negatively impacted by raw material inflation.
Third Quarter Segment Review
Infrastructure-related
Engineered Support Structures (31 percent of Sales): Poles, towers and components for the global lighting, traffic and wireless communication markets, and highway safety products.
Sales of $221.5 million were 9 percent higher than last year, mainly due to increased highway safety sales in Australia where road development activity increased.
Lighting sales were lower in North America. “We believe customers are awaiting clarity on national infrastructure investment policies before embarking on major project planning. In Europe, lighting sales increased as general market conditions stabilized.
Wireless communication sales increased due to improved structures and components demand in North America. In China, wireless communication sales were comparable with last year, as China continues to build out its wireless network infrastructure,” Bay said.
Operating income was $16.2 million or 7.3 percent of sales compared to $20.3 million, or 10 percent of sales in 2016. The effect of sharply higher steel costs in China, a higher mix of intercompany sales and continued competitive pricing compressed margins.
Utility Support Structures (25 percent of Sales)
Steel and concrete structures for the global electric utility industry.
Sales of $179.8 million increased 19 percent over last year, mostly driven by increased pricing to reflect higher steel costs. Sales were supported by the ongoing expansion of the North American grid to improve its reliability and capacity. Expanding investments in renewable energy contributed to continued firm demand.
Operating income increased to $22.1 million or 12.3 percent of sales, compared to $16.2 million or 10.8 percent in 2016. The increase in operating income was primarily due to price recovery and favorable mix.
Coatings Segment (12% of Sales)
Global galvanizing, painting and anodizing services.
Sales of $82.6 million were 18 percent higher than last year. In North America, increased pricing and stronger internal demand drove higher sales. Asia-Pacific sales rose due to improved volume and pricing as the market recovered.
Despite zinc cost increases, operating income improved to $14.6 million, or 17.6 percent of sales, compared to $11.7 million, or 16.7 percent of sales in 2016. The operating income improvement resulted from increased volume, price recovery and operational efficiencies realized from prior restructuring activities.
October 23, 2017
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