Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q4 2020 Earnings Presentation
40 slides from Valmont Industries's earnings presentation, Feb 18, 2021
Slide 1: Fourth Quarter and Full Year 2020 Earnings Presentation
Valmont Industries, Inc. Fourth Quarter and Full Year 2020 Earnings Presentation February 18, 2021 © 2021 Valmont® Industries, Inc.
Slide 2: Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other f
Slide 3: Steve Kaniewski, President & Chief Executive Officer
STEVE KANIEWSKI PRESIDENT & CHIEF EXECUTIVE OFFICER 3 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 4: 4Q 2020 Segment Sales and Segment Summaries
4Q 2020 Segment Sales and Segment Summaries TOTAL 4Q 2020 SALES: $798.4M $271.0M $256.1M $89.3M $199.3M Utility Support Engineered Support Coatings Irrigation Structures Structures N.A.: $97.1M | International: $102.2M 33.9% of Sales 32.1% of Sales 11.2% of Sales 25.0% of Sales SEGMENT SUMMARIES • S
Slide 5: Full Year 2020 Segment Sales and Segment Summaries
Full Year 2020 Segment Sales and Segment Summaries TOTAL FY 2020 SALES: $2,895.4M $1,002.2M $995.8M $345.3M $645.8M Utility Support Engineered Support Coatings Irrigation Structures Structures N.A.: $378.4M | International: $267.4M 34.6% of Sales 34.4% of Sales 11.9% of Sales 22.3% of Sales SEGMENT
Slide 6: Significant Progress Made in Key Areas During 2020
Significant Progress Made in Key Areas During 2020 • Elevated commitment to ESG throughout organization – more to come in 2021 • Accelerated innovation through new products and services ‒ Spun concrete distribution poles ‒ Small cell solutions ‒ Valley 365 platform technology advancements • All s
Slide 7: Collaboration with the Republic of Kazakhstan to Develop Center-Pivot Manufacturing Facility
Recently Announced Collaboration with the Republic of Kazakhstan to Develop First In-Country Center-Pivot Manufacturing Facility • Kazakhstan is rapidly embracing agriculture as a key contributor to its economy with a national plan to more than double the number of irrigated acres over the next deca
Slide 8: Avner Applbaum, EVP & Chief Financial Officer
AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER 8 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 9: 4Q 2020 Financial Summary
4Q 2020 Financial Summary $M, except for per share amounts Sales Operating Income Diluted EPS 16.8% 6.6% | 35.5%1 11.3% | 45.7%1 $68.8 1 $2.20 1 $798.4 $54.1 $50.8 $1.68 $1.51 $683.6 2020 2019 2020 2020 Adj. 2019 2020 2020 Adj. 2019 • Net Sales growth led primarily by significantly higher • Operatin
Slide 10: 4Q 2020 Results | Utility Support Structures
4Q 2020 Results | Utility Support Structures ($M) Key Statistics Sales Operating Income 2019 Sales1 $ 229.1 16.9% (2.8%) | 6.2%2 Volume 69.0 $278.2 $28.0 2 $26.3 $229.1 $25.6 Pricing/Mix (24.5) Acquisitions/Divestiture 2.7 Currency Translation 1.9 2020 Sales1 $ 278.2 2020 2019 2020 2020 Adj. 2019 CO
Slide 11: 4Q 2020 Results | Engineered Support Structures
4Q 2020 Results | Engineered Support Structures ($M) Key Statistics Sales Operating Income 2019 Sales1 $ 250.0 0.9% 82.9% | 132.7%2 Volume (8.7) 2 $252.3 $250.0 $24.4 Pricing/Mix 4.4 $19.2 Acquisitions/Divestiture - $10.5 Currency Translation 6.6 2020 Sales1 $ 252.3 2020 2019 2020 2020 Adj. 2019 COM
Slide 12: 4Q 2020 Results | Coatings
4Q 2020 Results | Coatings ($M) Key Statistics Sales Operating Income 2019 Sales1 $ 72.4 (3.8%) (21.8%) | (1.4%)2 Volume (4.5) $72.4 $11.8 2 $12.0 $69.6 Pricing/Mix 0.4 $9.4 Acquisitions/Divestiture - Currency Translation 1.3 2020 Sales1 $ 69.6 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Sales were s
Slide 13: 4Q 2020 Results | Irrigation
4Q 2020 Results | Irrigation ($M) Key Statistics Sales Operating Income 2019 Sales1 $ 132.0 15.0% 110.7% 89.1% | 114.2%2 Volume 70.7 $102.2 $96.0 $25.3 2 $83.5 $22.3 Pricing/Mix (1.6) $48.5 Acquisitions/Divestiture 3.4 $11.8 Currency Translation (6.3) North America International 2020 Sales1 $ 198.2
Slide 14: Full Year 2020 Cash Flow Highlights
Full Year 2020 Cash Flow Highlights Full Year Cash Flow | FCF Reconciliation Cash and Debt Highlights FY ($M) Net Cash Flows from Operating Activities $ 12/26/2020 316.3 $400.7M Net Cash Flows from Investing Activities (104.0) ($208.6M ex-U.S.) Cash at 12/26/2020 Net Cash Flows from Financing Activi
Slide 15: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation • Working capital investment to support investments in FY20 Capital Deployment: $275M ($M) Capital people, technology and systems Expenditures • 2020 CapEx of $107M, including ~$42M for strategic growth initiatives $107 Growing Our Business • Strategic fit + m
Slide 16: Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty
Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty AS OF DECEMBER 26, 2020 Cash $400.7M Available Credit under Revolving Credit Facility2 $585.4M Total Debt (Long-Term) $728.4M Cash $400.7M Shareholders’ Equity $1,207.8M Total Available Liquidity ~$986.1M Total Debt to Adj. EBITDA1 2.
Slide 17: 1Q 2021 / Full Year 2021 Outlook and Key Assumptions
1Q 2021 / Full Year 2021 Outlook and Key Assumptions 1Q21 OUTLOOK1 FY21 OUTLOOK1 KEY ASSUMPTIONS • Favorable foreign currency translation impact of ~2% of $740M – $765M 9% – 14% Net Sales Net Sales, an increase of Increase in Net Sales 10% - 13% YoY YoY • In Utility Support Structures, significant r
Slide 18: 2021 Segment Market Trends and Potential Risks
2021 Segment Market Trends and Potential Risks • Strong backlog provides good visibility • Aggressively raising prices due to rapidly escalating raw material costs; pricing actions in response to rapid inflation take 1 to 2 quarters to USS recover • Expect unfavorable gross profit margin comparisons
Slide 19: Fundamental Market Drivers Remain Resilient
Fundamental Market Drivers Remain Resilient USS ESS COATINGS IRRIGATION • Elevated and robust backlog • Short-term market softness in • Business closely follows industrial • Net farm income improvements have demonstrates ongoing demand; transportation as delays in last year’s production trends and g
Slide 20: Continuing to Elevate our ESG Commitment
Continuing to Elevate our ESG Commitment Advanced ESG to be a top strategic imperative, including formation of a CEO-led ESG Taskforce, elevating our tagline of 'Conserving Resources. Improving Life®.' • ESG Taskforce analyzed demand drivers across business portfolio and discovered products and solu
Slide 21: Summary
Summary Expect solid operating performance and strong EPS accretion in 2021 as well as sales 01 growth exceeding our stated long-term financial goal Focused on profitable growth and ROIC improvement, while keeping employees and 02 communities safe and investing in the business for growth; strategic
Slide 22: Q&A
Q&A 22 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 23: Appendix
APPENDIX 23 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 24: Full Year 2020 Financial Summary
Full Year 2020 Financial Summary $M, except for per share amounts Sales Operating Income Diluted EPS 4.6% (0.9)% | 17.8%1 (2.4)% | 21.5%1 $268.51 $2,895.4 $226.0 227.9 $8.18 1 $2,767.0 $6.57 $6.73 2020 2019 2020 2020 Adj. 2019 2020 2020 Adj. 2019 • Significantly higher sales in the Utility Support •
Slide 25: Fourth Quarter and Full Year 2020 Financial Summary
Fourth Quarter and Full Year 2020 Financial Summary $M, except for per share amounts Net Sales 2020 2019 Change FY 2020 FY 2019 Change Engineered Support Structures $ 256.1 $ 255.2 0.3% $ 995.8 $ 1,012.3 (1.6%) Utility Support Structures 271.0 231.9 16.9% 1,002.2 890.6 12.5% Coatings 89.3 89.7 (0.4%
Slide 26: Steel Material Index Trends 2020-2021 YTD
Steel Material Index Trends 2020-2021 YTD Credit: FastMarketsAMM 26 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 27: State Transportation Investment Funding Measures
State Transportation Investment Funding Measures • Six states approved 13 transportation investment measures in 2020 • Highlights: − 38 bills have advanced beyond one chamber, while 133 bills are still in the introductory stage. − 13 states introduced legislation to increase their motor fuel tax, ei
Slide 28: State Transportation Investment Funding Measures
State Transportation Investment Funding Measures Change in 2020 Gas Tax State Name Effective Date (cents/gallon) Kentucky $ 10.0 Proposal Pending New Jersey $ 9.3 10/1/2020 Alaska $ 8.0 Proposal Pending Arizona $ 6.0 Proposal Pending Massachusetts $ 5.0 Proposal Pending Virginia $ 5.0 7/1/2020 Georg
Slide 29: 5G Adoption Forecast and Capex Spend Post-COVID
5G Adoption Forecast and Capex Spend Post-COVID Source: GSM Association 29 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 30: U.S. Level of Farm Subsidies
U.S. Level of Farm Subsidies U.S. GOV'T CONTRIBUTION TO NFI 140 120 11 100 46 11 10 80 $ BILLIONS 11 14 22 12 60 113 13 40 82 84 71 73 64 68 61 49 20 0 2013 2014 2015 2016 2017 2018 2019 2020 2021e Net Farm Income (NFI) Government Assistance Source: American Farm Bureau Federation 30 October 22, 202
Slide 31: US Commodity Price Trends, July 2020 – Feb 2021
US Commodity Price Trends, July 2020 – Feb 2021 Source: Investing.com 31 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 32: U.S. Corn for Fuel Ethanol, Feed, and Other Use
U.S. Corn for Fuel Ethanol, Feed, and Other Use 14 5.43 5.38 5.61 4.85 Used for Ethanol 12 Feed and Residual Use Domestic Use (Billion Bushels) 10 Produced for Other Uses 8 6 4 2 0 Year Source: afdc.energy.gov/data – data from Tables 4 & 31, OCT2020. Years run from September through August. Exports
Slide 33: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year Source: USDA, American Farm Bureau Federation 33 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 34: 2011-2020 Historical Free Cash Flow
2011-2020 Historical Free Cash Flow1 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ($M) Net cash flows from operating activities $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 Net cash flows from investing activities (84.1) (136.7) (131.7) (256.9) (48.2) (53.0) (
Slide 35: Strong Free Cash Flow throughout the Cycle
Strong Free Cash Flow throughout the Cycle 2011 – 2020 Free Cash Flow1 ($M) Years of rapid raw material cost inflation 290 227 210 210 175 10-yr Avg. $154M GAAP 1.34X 100 101 Adj. 0.91X 78 81 67 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Historical FCF Conversion by Year1 GAAP 0.29X 0.43X 1.0
Slide 36: Calculation of Adjusted EBITDA and Leverage Ratio
Calculation of Adjusted EBITDA and Leverage Ratio Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarte
Slide 37: 2018-2019 Financials Retrospectively Adjusted from LIFO to FIFO Change
2018-2019 Financials Retrospectively Adjusted from LIFO to FIFO Change Valmont Industries, Inc. Retrospectively Adjusted from LIFO to FIFO Change First Quarter 2019 Second Quarter 2019 Third Quarter 2019 Fourth Quarter 2019 Fiscal Year 2019 As Previously Retrospectively As Previously Retrospectively
Slide 38: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results 38 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 39: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) 39 February 18, 2021 | Valmont Industries, Inc. | 4Q and FY 2020 Earnings Presentation
Slide 40: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) Whole Corporation (Q4) • Severance of $10.9 million for early retirement program (across all segments) Engineered Support Structures (Q4) • Cash restructuring expenses to reduce administrative headcounts in India. Utili