Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q2 2024 Earnings Presentation
32 slides from Valmont Industries's earnings presentation, Jul 25, 2024
Slide 1: Q2 2024 Earnings Presentation
Q2 2024 Earnings Presentation July 25, 2024 © 2024 Valmont® Industries, Inc.
Slide 2: Today’s Agenda
Today’s Agenda • Q2 2024 Results • Current Market Dynamics and Long-term Megatrends • Strategic Priorities • Updated 2024 Outlook and Guidance • Q&A 2 July 25, 2024 | Valmont Industries, Inc.
Slide 3: 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 4: CEO Opening Comments
CEO Opening Comments Avner Applbaum, President & CEO 4 July 25, 2024 | Valmont Industries, Inc.
Slide 5: Q2 2024 Financials and Key Messages
Q2 2024 Financials and Key Messages $1.04B (0.6%) 14.2% $4.91 $131M $27M Net Sales Y/Y Net Sales Operating Margin Diluted EPS Operating Cash Flow Cash Returned to Shareholders The global Valmont team achieved strong results, expanding operating margins 140 bps and increasing diluted EPS to $4.91, on
Slide 6: Infrastructure Market Drivers
Infrastructure Market Drivers Steady-to-improving near-term demand across our markets, with positive long-term drivers Near Term Demand Global Megatrends • Elevated utility capex spending due to the energy transition, replacement of aging infrastructure, and power load growth • Strong Department of
Slide 7: Agriculture Market Drivers
Agriculture Market Drivers Outlook for sustained long-term growth remains strong, despite short-term demand headwinds Near Term Demand Global Megatrends • North America order rates were higher due to storm events; grower sentiment remains muted due to expected NFI1 decline this year and the downward
Slide 8: Maximizing Value Creation
Maximizing Value Creation • Leveraging focus areas and core values of Valmont Business Model to produce desired outcomes • We’ve refined our strategy and are concentrating growth on high- return areas that align our core competencies with customer needs • Initial focus on realigning the organization
Slide 9: Conserving Resources. Improving Life.
Conserving Resources. Improving Life. ® ESG is a core focus area: It creates efficiencies and cost savings, improves safety, manages risks, and fosters innovation, enhancing our resilience and competitive edge Recommitted to our 2025 environmental goals1: 2024 Sustainability Report Highlights: • Not
Slide 10: Financial Results and Outlook
Financial Results and Outlook Tim Francis, Interim CFO 10 July 25, 2024 | Valmont Industries, Inc.
Slide 11: Q2 2024 Financial Summary
Q2 2024 Financial Summary • Sales were similar to prior year • Operating margin expanded 140 bps $M, except EPS 2024 2023 % on commercial and operational execution, pricing strategies and an Net Sales 1,039.7 1,046.3 -0.6% improved cost structure Operating Income 147.3 133.7 +10.2% • Diluted EPS imp
Slide 12: Q2 2024 Results | Infrastructure
Q2 2024 Results | Infrastructure • Utility volumes were slightly higher; a greater mix of distribution and substation structures, and the Sales ($M) Operating Income ($M) unfavorable contractual price impact -1.0% +15.2% of steel index deflation, limited sales $133.6 growth this quarter $762.7 $770.
Slide 13: Q2 2024 Results | Agriculture
Q2 2024 Results | Agriculture • North America volumes were significantly higher driven by replacement sales due to severe Sales ($M) Operating Income ($M) weather; average irrigation selling +0.6% -18.8% prices were lower compared to last year due to targeted regional pricing $49.3 $281.7 $279.9 act
Slide 14: Building Solid Financial Foundation
• Q2 2024 Operating Cash Flows were Building Solid Financial Foundation nearly 50% higher than Q2 2023 • Expect to generate strong cash flow in 2024 through earnings growth and diligent working capital management • During the quarter we reduced borrowings on our revolving line of credit by $90M, and
Slide 15: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation 2024 Year-to-Date Capital Deployment: $72M Growing Our Business Returning Cash to Shareholders $33M N/A $15M $24M Capital Expenditures Acquisitions Share Repurchases Dividends • We continue to invest in • Targeting adjacent opportunities • ~$121M remains on th
Slide 16: Updating 2024 Outlook and Key Assumptions
Updating 2024 Outlook and Key Assumptions (3.5%) – (1.5%) $16.50 – $17.30 Change In Net Sales Y/Y GAAP Diluted EPS Previous outlook: (2.0%) – 0.5% Previous outlook: $15.40 – $16.40 Segment Assumptions Key Assumptions Other Modeling Considerations • Infrastructure sales are now expected • Steel cost
Slide 17: Valmont Team Is Executing Our Strategy and Performing Well in Dynamic Market
Valmont Team Is Executing Our Strategy and Performing Well in Dynamic Market Actively managing our business to maximize returns Driving commercial execution and operational excellence Leveraging competitive advantages and core competencies Streamlining administrative functions and enhancing producti
Slide 18: Q&A
Q&A 18 July 25, 2024 | Valmont Industries, Inc.
Slide 19: Appendix
Appendix 19 July 25, 2024 | Valmont Industries, Inc.
Slide 20: Long-Term Financial Targets
Long-Term Financial Targets Net Sales Operating Return on Invested Net Earnings Growth1 Margin Capital FCF Conversion Approaching MSD+ Mid-Teens High-Teens 100% Serving markets with Strategic pricing to align A disciplined and efficient Managing net working positive growth outlook with value we deli
Slide 21: Steel Material Index Trends
Steel Material Index Trends AMM Steel Material Index National Mills Carbon Grade Cut to Length and Coiled / Hot Rolled Plate Average • The contractual price impact 2020 through 2024 YTD from steel index deflation is leading us to adjust our expected increase in Utility sales downward • Steel cost ch
Slide 22: Actual and Projected Transmission Investment
Actual and Projected Transmission Investment Investment of investor-owned electric companies and stand-alone transmission companies. Actual Investment figures were obtained from the EEI Property & Plant Capital Investment Survey supplemented with FERC Form 1 data. Projected investment figures were o
Slide 23: Utility Industry Capital Expenditures
Utility Industry Capital Expenditures Chart represents total company spending of U.S. Investor-Owned Electric Utilities, consolidated at the parent or appropriate holding company. At the industry level, CapEx tends to be overestimated for the current, or first, year’s projection and underestimated f
Slide 24: Infrastructure Investment and Jobs Act (IIJA)
Infrastructure Investment and Jobs Act (IIJA) Infrastructure Investment and Jobs Act Spending Breakdown (In Order - Most to Least) Previously-Passed Transportation Funding | $650B Roads, Bridges and Related Programs | $111B Energy, Power and Electric Grid Reliability | $107.5B Freight and Passenger
Slide 25: Wireless Carrier Spending
Wireless Carrier Spending US Wireless CapEx & 5G Auction Spend (US$ billions, 2019-2026E) 140 Auction 107: C-Band (3.7 GHz) Auction 110: 3.45 GHz Band 120 100 Auction 108: 2.5 GHz Band 80 60 Auction 105: 3.5 GHz Band 40 20 0 2019 2020 2021 2022 2023 2024e 2025e 2026e The data does not include invest
Slide 26: Single Family Housing Starts Market Forecast
Single Family Housing Starts Market Forecast $350 $300 $250 $200 Billions $150 $100 $50 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Actual Starts Current Forecast Previous Forecast Source: CMD Forecast Data Updated February 2024 26 July 25, 2024 | Valmont
Slide 27: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year Source: USDA 27 July 25, 2024 | Valmont Industries, Inc. Updated February 7, 2024
Slide 28: U.S. Drought Condition
U.S. Drought Condition Source: Drought Monitor 28 July 25, 2024 | Valmont Industries, Inc. Updated July 18, 2024
Slide 29: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands The non-GAAP table below discloses the impacts of the realignment charges and non-recurring charges associated with major scope changes for two strategic projects initiated by departed senior leadership
Slide 30: Historical Free Cash Flow (2014 – 2023)
Historical Free Cash Flow1,2 (2014 – 2023) Dollars in millions 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net cash flows from operating activities $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 $ 326.3 $ 306.8 Net cash flows from investing activities (256.9) (48.2) (53.0) (49.
Slide 31: Free Cash Flow Throughout the Cycle
Free Cash Flow Throughout the Cycle Dollars in millions 2014 – 2023 Free Cash Flow1 Years of rapid raw material cost inflation 350 300 250 227 233 210 210 210 200 175 148 10-yr Avg. $148M 150 GAAP 1.37X 101 100 78 81 Adj. 0.87X 50 - (50) (42) (100) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1
Slide 32: Calculation of Adjusted EBITDA and Leverage Ratio
Calculation of Adjusted EBITDA and Leverage Ratio Dollars in thousands Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt to Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions)