Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q2 2020 Earnings Presentation
38 slides from Valmont Industries's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter Earnings Presentation
Valmont Industries, Inc. Second Quarter Earnings Presentation July 23, 2020
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 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 4: 2Q 2020 Segment Revenue and Segment Summaries
2Q 2020 Segment Revenue and Segment Summaries TOTAL 2Q 2020 REVENUE: $688.8M $253.4M $231.3M $80.0M $150.6M Engineered Support Utility Support Coatings Irrigation Structures Structures N.A.: $99.0M | International: $51.6M 36.8% of Sales 33.6% of Sales 11.6% of Sales 21.9% of Sales SEGMENT SUMMARIES
Slide 5: Further Advancing Adjacent Market Growth and Technology Leadership
Further Advancing Adjacent Market Growth and Technology Leadership Completed Two Strategic Acquisitions Strengthening Valley Insights • AI crop monitoring and detection service, in partnership with Prospera Technologies, which utilizes imagery to detect crop health issues to alert a grower to proble
Slide 6: Strong Execution of COVID-19 Pandemic Plan and Safety Protocols
Strong Execution of COVID-19 Pandemic Plan and Safety Protocols Valmont implemented enhanced protocols in response to COVID-19, including recommendations and requirements issued by the Centers for Disease Control and Prevention (“CDC”), World Health Organization (“WHO”) and local, state and national
Slide 7: Key Observations Related to COVID-19
Key Observations Related to COVID-19 • Valmont products and solutions support critical infrastructure sectors as defined by the Department of Homeland 01 Security (CISA.gov) and similar global government agencies − Communication: Wireless communication structures and components (ESS) − Energy: Utili
Slide 8: Future Impact of COVID-19 Varies Across Diversified Portfolio
Future Impact of COVID-19 Varies Across Diversified Portfolio Valmont FY2019 Segment Operating Income ($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 geographies un
Slide 9: Avner Applbaum, EVP & Chief Financial Officer
AVNER APPLBAUM EVP & CHIEF FINANCIAL OFFICER 9 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 10: 2Q 2020 Financial Summary
2Q 2020 Financial Summary $M, except for per share amounts Revenue Operating Income Diluted EPS (1.7%) (29.3%) | 6.8%1 (41.8%) | 9.9%1 $65.7 1 $700.9 $61.5 $2.00 1 $688.8 $1.82 $43.4 $1.06 2020 2019 2020 2020 Adj. 2019 2020 2020 Adj. 2019 • Strong growth in Utility Support Structures offset by • Sol
Slide 11: 2Q Results | Engineered Support Structures
2Q Results | Engineered Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 257.5 Volume (5.8) $248.8 $257.5 $22.9 2 $20.9 Pricing/Mix 2.0 Acquisitions/Divestiture 1.2 $4.8 Currency Translation (6.1) 2020 Revenue1 $ 248.8 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Continu
Slide 12: 2Q Results | Utility Support Structures
2Q Results | Utility Support Structures ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 209.1 Volume 14.3 $228.5 $209.1 $25.3 2 $21.7 Pricing/Mix 3.6 $16.0 Acquisitions/Divestiture 1.8 Currency Translation (0.3) 2020 Revenue1 $ 228.5 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Sales grew
Slide 13: 2Q Results | Coatings
2Q Results | Coatings ($M) Key Statistics Revenue Operating Income 2019 Revenue1 $ 81.1 Volume (13.9) $15.0 $81.1 Pricing/Mix (2.8) $62.7 $10.1 $10.4 2 Acquisitions/Divestiture - Currency Translation (1.7) 2020 Revenue1 $ 62.7 2020 2019 2020 2020 Adj. 2019 COMMENTARY • Sales decreased 18.7% YoY • Hi
Slide 14: 2Q Results | Irrigation
2Q Results | Irrigation ($M) Key Statistics Revenue Total Operating Income 2019 Revenue1 $ 153.2 Volume 3.3 $97.2 $100.8 $22.4 $21.5 Pricing/Mix (2.0) $51.6 $52.4 Acquisitions/Divestiture (0.1) Currency Translation (5.6) North America International 2020 Revenue1 $ 148.8 2020 2019 2020 2019 COMMENTAR
Slide 15: 2Q 2020 Cash Flow Highlights
2Q 2020 Cash Flow Highlights 2Q YTD Cash Flow | FCF Reconciliation Cash and Debt Highlights YTD ($M) Net Cash Flows from Operating Activities $ 06/27/2020 150.7 $353.3M Net Cash Flows from Investing Activities (53.0) ($169.7M ex-U.S.) Cash at 06/27/2020 Net Cash Flows from Financing Activities (92.0
Slide 16: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation ($M) 2020 YTD Capital Deployment: $102M • Working capital investment to support investments in Capital people, technology and systems Expenditures Growing Our • 2020 CapEx expected to be $80 - $90M Business $48 • Strategic fit + market expansion • Returns exce
Slide 17: Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty
Strong Balance Sheet and Liquidity to Endure COVID-19 Uncertainty AS OF JUNE 27, 2020 Cash ~$353.0M Available Credit under Revolving Credit Facility2 $545.0M Total Debt (Long-Term) $795.4M Cash ~$353.0M Shareholders’ Equity $1,126.8M Total Available Liquidity ~$878.0M Total Debt to Adj. EBITDA1 2.3x
Slide 18: 3Q 2020 Outlook and Assumptions
3Q 2020 Outlook and Assumptions 3Q20 OUTLOOK1 KEY ASSUMPTIONS • Utility Support Structures: revenue estimated to increase ~20.0% YoY due to higher expected sales in international businesses $680M – $700M • Expect tax rate of ~25.0% Net Sales • Expect unfavorable currency translation on net sales of
Slide 19: 3Q 2020 Segment Market Trends and Potential Risks
3Q 2020 Segment Market Trends and Potential Risks • Backlog provides good visibility to 3Q lighting and traffic sales • Solid long-term market trends for both transportation and wireless communication structures and components in North America ESS • Less clear visibility beyond 3Q given combination
Slide 20: Fundamental Market Drivers Remain Resilient
Fundamental Market Drivers Remain Resilient ESS USS COATINGS IRRIGATION • Continued government investments • Robust backlog demonstrates • Business closely follows industrial • Our mission-critical products and in infrastructure development across ongoing demand and necessity for production trends a
Slide 21: Summary
Summary Strong performance in 1H20 is a testament to our team’s ability to remain positive, flexible and 01 committed to delivering strong results despite current market environment Diverse, global workforce rooted by our core value of integrity – continue to build on commitment 02 to environmental
Slide 22: Q&A
Q&A 22 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 23: Appendix
APPENDIX 23 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 24: Second Quarter and YTD 2020 Financial Summary
Second 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 $ 253.4 $ 258.7 (2.1%) $ 484.1 $ 489.0 (1.0%) Utility Support Structures 231.3 209.8 10.2% 456.8 453.8 0.7% Coatings 80.0 98.4 (18.7%) 168.
Slide 25: Department of Transportation Indicators | Recent Fuel Tax Changes
Department of Transportation Indicators | Recent Fuel Tax Changes Source: IHS Markit 25 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 26: Valley Insights 2020: 5M Total Acres Monitored
Valley Insights 2020 5M Total Acres Monitored 4,500 4,000 3,500 3,000 2,500 2,000 Idaho, 1676 Washington, Nebraska, 1,390 1,500 1,161 1,000 Texas, 617 500 0 Washington Idaho Nebraska Texas Subscribed Fields Total Fields (DB) Regions Covered 26 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Ear
Slide 27: On Pivot Sensors
On Pivot Sensors 27 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 28: Valley Insights On-Pivot Sensor Detections
Valley Insights On-Pivot Sensor Detections Northwestern US Insect Feeding Damage 28 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 29: First Sensor Images (Corn)
First Sensor Images (Corn) 29 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 30: U.S. Corn for Fuel Ethanol, Feed, and Other Uses
U.S. Corn for Fuel Ethanol, Feed, and Other Uses 30 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 31: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year 31 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 32: 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 33: 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 34: 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 35: 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 36: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) 36 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 37: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results ($000s) 37 | July 23, 2020 | Valmont Industries, Inc. | 2Q 2020 Earnings Presentation
Slide 38: Summary of Effect of Significant Non-Recurring Items on Reported Results
Summary of Effect of Significant Non-Recurring Items on Reported Results Engineered Support Structures • $16.6M pre-tax non-cash goodwill and ($000s) tradename impairment • Severance and cash restructuring expenses to exit product lines within access system Utility Support Structures • Severance and