Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q3 2020 Earnings Presentation
35 slides from Valmont Industries's earnings presentation, Oct 22, 2020
Slide 1: Third Quarter Earnings Presentation
Valmont Industries, Inc. Third Quarter Earnings Presentation October 22, 2020 © 2020 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 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 4: 3Q 2020 Segment Revenue and Segment Summaries
3Q 2020 Segment Revenue and Segment Summaries TOTAL 3Q 2020 REVENUE: $734.0M $274.4M $255.7M $87.9M $139.2M Utility Support Engineered Support Coatings Irrigation Structures Structures N.A.: $75.8M | International: $63.4M 37.4% of Sales 34.8% of Sales 12.0% of Sales 19.0% of Sales SEGMENT SUMMARIES
Slide 5: Future Impact of COVID-19 Varies Across Diversified Portfolio
Future Impact of COVID-19 Varies Across Diversified Portfolio Valmont FY2019 Segment Operating Income ($M) Estimated Risk Profile Due to COVID-19 UTILITY ESS • Supports critical infrastructure sector (Energy) to help ensure • Variety of demand drivers across multiple product lines and uninterrupted
Slide 6: Elevating our Commitment to ESG
Elevating our Commitment to ESG Conserving Resources, Improving Life® is at the Core of the Products and Service that we Provide to Support Sustainable Infrastructure Development and Efficient Use of Water for Agriculture 2019 & 2020 Notable Accomplishments • Established 1st global electricity goal
Slide 7: Avner Applbaum, EVP & Chief Financial Officer
AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER 7 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 8: 3Q 2020 Financial Summary
3Q 2020 Financial Summary $M, except for per share amounts Revenue Operating Income Diluted EPS 6.3% 0.7% | 9.9%1 5.1% | 13.7%1 $734.0 $67.1 1 $61.5 $61.1 $1.99 1 $690.3 $1.84 $1.75 2020 2019 2020 2020 Adj. 2019 2020 2020 Adj. 2019 • Significantly higher Utility Support Structures sales • Operating
Slide 9: 3Q 2020 Results | Utility Support Structures
3Q 2020 Results | Utility Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 204.2 Volume 83.2 $272.5 2 $204.2 $29.2 Pricing/Mix (17.2) $25.9 $20.4 Acquisitions/Divestiture 1.7 Currency Translation 0.6 2020 Revenue1 $ 272.5 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Sale
Slide 10: 3Q 2020 Results | Engineered Support Structures
3Q 2020 Results | Engineered Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 266.5 Volume (17.2) $255.0 $266.5 $25.4 $26.3 2 $21.8 Pricing/Mix 2.5 Acquisitions/Divestiture - Currency Translation 3.2 2020 Revenue1 $ 255.0 2020 2019 2020 2020 Adj. 2019 COMMENTARY • High
Slide 11: 3Q 2020 Results | Coatings
3Q 2020 Results | Coatings ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 76.9 $13.7 2 $13.9 Volume (8.9) $12.4 $76.9 Pricing/Mix - $68.7 Acquisitions/Divestiture - Currency Translation 0.7 2020 Revenue1 $ 68.7 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Sales decreased 5.5% YoY • Highe
Slide 12: 3Q 2020 Results | Irrigation
3Q 2020 Results | Irrigation ($M) Key Statistics Revenue Total Operating Income 2019 Revenue1 $ 142.7 Volume 2.9 $74.4 $81.4 $63.4 $61.3 Pricing/Mix (2.1) $18.2 14.7 Acquisitions/Divestiture 0.6 Currency Translation (6.3) North America International 2020 Revenue1 $ 137.8 2020 2019 2020 2019 COMMENTA
Slide 13: 3Q 2020 Cash Flow Highlights
3Q 2020 Cash Flow Highlights 3Q YTD Cash Flow | FCF Reconciliation Cash and Debt Highlights YTD ($M) Net Cash Flows from Operating Activities $ 09/26/2020 273.0 $443.1M Net Cash Flows from Investing Activities (71.4) ($221.7M ex-U.S.) Cash at 09/26/2020 Net Cash Flows from Financing Activities (110.
Slide 14: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation ($M) 2020 YTD Capital Deployment: $142M • Working capital investment to support investments in Capital people, technology and systems Expenditures Growing Our • 2020 CapEx expected to be $85M - $95M Business $71 • Strategic fit + market expansion • Returns exc
Slide 15: Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty
Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty AS OF SEPTEMBER 26, 2020 Cash ~$443.0M Available Credit under Revolving Credit Facility2 $543.0M Total Debt (Long-Term) $779.8M Cash ~$443.0M Shareholders’ Equity $1,189.7M Total Available Liquidity ~$986.0M Total Debt to Adj. EBITDA1
Slide 16: Focus Areas of Our Finance Function Transformation
Focus Areas of Our Finance Function Transformation 01 02 03 04 Using advanced Deploying data Improving working Developing Centers technology and science capabilities capital by executing of Excellence automation to and leveraging AI on strategic priorities focused on talent streamline processes, and
Slide 17: 4Q 2020 Outlook and Assumptions
4Q 2020 Outlook and Assumptions 4Q20 OUTLOOK1 KEY ASSUMPTIONS • Irrigation: revenue estimated to increase ~ 12% - 15% YoY due $715M – $735M to expected timing of international project deliveries Net Sales • Expect tax rate of ~25.0% • Expect positive operating cash flows 6.5% – 7.5% GAAP Operating P
Slide 18: 4Q 2020 Segment Market Trends and Potential Risks
4Q 2020 Segment Market Trends and Potential Risks • Strong backlog and benefit of capacity additions provides good visibility to 4Q in North America USS • Mild risk associated with some international projects, which has been accounted for in guidance range • Backlog is providing good visibility to 4
Slide 19: Fundamental Market Drivers Remain Resilient
Fundamental Market Drivers Remain Resilient USS ESS COATINGS IRRIGATION • Robust backlog demonstrates • Continued government investments • Business closely follows industrial • Our mission-critical products and ongoing demand and necessity for in infrastructure development across production trends a
Slide 20: Summary
Summary Strong performance through the first nine months of 2020 is a testament to our team’s 01 ability to remain positive, flexible and committed to delivering strong results despite current market environment Advancing adjacent market growth and technology leadership through strategic 02 investme
Slide 21: Q&A
Q&A 21 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 22: Appendix
APPENDIX 22 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 23: Third Quarter and YTD 2020 Financial Summary
Third Quarter and YTD 2020 Financial Summary $M, except for per share amounts Net Sales 2020 2019 Change YTD 2020 YTD 2019 Change Engineered Support Structures $ 255.7 $ 268.1 (4.6%) $ 739.8 $ 757.1 (2.3%) Utility Support Structures 274.4 205.0 33.9% 731.2 658.7 11.0% Coatings 87.9 93.0 (5.5%) 256.0
Slide 24: State Transportation Investment Funding Measures
State Transportation Investment Funding Measures • Six states have approved 13 transportation investment measures to-date 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
Slide 25: 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 26: Australia Infrastructure/Federal Budget 2020-21
Australia Infrastructure/Federal Budget 2020-21 Key Announcements “Long road back” Federal Budget 2020-21 sees additional and accelerated funding for all infrastructure sectors, targeting shovel ready projects Additional $4.5B in NBN for ultra-fast broadband services $250M to accelerate electr
Slide 27: U.S. Corn for Fuel Ethanol, Feed, and Other Use
U.S. Corn for Fuel Ethanol, Feed, and Other Use 14 5.43 5.38 5.61 4.85 Used for Ethanol 12 Feed and Residual Use Domestic Use (Billion Bushels) 10 Produced for Other Uses 8 6 4 2 0 Source: afdc.energy.gov/data – data from Tables 4 & 31, OCT2020 Years run from September through August Year Exports no
Slide 28: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year 28 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 29: 2010-2019 Historical Free Cash Flow
2010-2019 Historical Free Cash Flow1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ($M) Net cash flows from operating activities $ 152.2 $ 149.7 $ 197.1 $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 Net cash flows from investing activities (262.7) (84.1) (136.7) (131.7) (256.9) (48.2)
Slide 30: Strong Free Cash Flow Throughout the Cycle
Strong Free Cash Flow Throughout the Cycle 2010 – 2019 Free Cash Flow1 ($M) Years of rapid raw material cost inflation 290 227 210 175 10-yr Avg. $144M 116 GAAP 1.31X 100 101 Adj. 0.91X 78 81 67 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Historical FCF Conversion by Year1 GAAP 1.23X 0.29X 0.4
Slide 31: 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 32: 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 33: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) 33 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 34: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) 34 October 22, 2020 | Valmont Industries, Inc. | 3Q 2020 Earnings Presentation
Slide 35: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) Engineered Support Structures • Cash restructuring expenses to exit product lines within Access Systems Utility Support Structures • An asset impairment charge for a steel utility facility that is held-for-sale • Valuat