Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Investor Day (March 2018)
140 slides from Valmont Industries's investor day presentation, Mar 6, 2018
Slide 1: Forward-looking Statement Disclosure
Forward-looking Statement Disclosure 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 factors that
Slide 2: Agenda
Agenda Introductions Company Overview & Strategy Operational Transformation Engineered Support Structures (ESS) Overview Renee Campbell & Jeff Laudin – IR Steve Kaniewski – President & CEO Doug Bryson – SVP, Steel Operations Barry Ruffalo – Group President 8:30 AM Coatings Overview Utility Support S
Slide 3: Company Overview & Strategy
COMPANY OVERVIEW STRATEGY & Steve Kaniewski | President & CEO 4 | March 6, 2018 | Valmont Industries, Inc.
Slide 4: Key Messages
Key Messages wth 5 | March 6, 2018 | Valmont Industries, Inc. Transforming Our Company while Maintaining Philosophy on Total Value Impact Talent Development to Strengthen Our Culture of Accountability, Excellence and Collaboration Expanded View of Addressable Market; Strategies in Place to Capture G
Slide 5: Valmont at a Glance
Valmont at a Glance Company Profile 2017 Mix ($M) Headquarters By Revenue3 By Operating Income 2017 Sales Market Cap Countries of Operation Manufacturing Sites Total Employees ESS Utility Irrigation Coatings 1 Includes Other of $76M. 2 As of 3’2’2018. 3 Net of intersegment sales 6 | March 6, 2018 |
Slide 6: Broad Global Footprint is a Competitive Differentiator
Broad Global Footprint is a Competitive Differentiator 2017 Revenue by Geography 67% AMERICAS 10% EMEA 23% APAC 7 | March 6, 2018 | Valmont Industries, Inc. #1 or #2 in All Markets We Serve within Our Industries Manufacturing Facility
Slide 7: Products Serving Agriculture and Infrastructure Development
Products Serving Agriculture and Infrastructure Development sprinklers, drive trains, services management through Efficient Delivery of 8 | March 6, 2018 | Valmont Industries, Inc. ENGINEERED SUPPORT STRUCTURES (ESS) UTILITY SUPPORT STRUCTURES (USS) COATINGS IRRIGATION Lighting and traffic structure
Slide 8: When You Look Closely…
When You Look Closely… 9 | March 6, 2018 | Valmont Industries, Inc.
Slide 9: Valmont Products Are Everywhere…
Valmont Products Are Everywhere… 10 | March 6, 2018 | Valmont Industries, Inc.
Slide 10: …Even from the Air
…Even from the Air 11 | March 6, 2018 | Valmont Industries, Inc.
Slide 11: Valmont Business Model
Valmont Business Model Strong, Global, and Enduring Drivers Operational Focus Total Value Impact Focus Culture & Talent VALUE CREATION Niche Markets Engineering Leverage Products, Markets and Capabilities Global Mindset/ Footprint 1 As of 12’31’2017. Source: FactSet. 12 | March 6, 2018 | Valmont Ind
Slide 12: Energized Management Team Driving Results
Energized Management Team Driving Results 13 | March 6, 2018 | Valmont Industries, Inc. President & CEO Steve Kaniewski Joined: 2010 EVP & CFO Mark Jakisch 1983 SVP, Human Resources Vanessa Brown 1973 SVP, IT & CIO John Kehoe 2014 SVP, Steel Operations Doug Bryson 2013 VP, Global Taxation Ellen Dash
Slide 13: Significant Accomplishments Since 2016 Investor Day
Significant Accomplishments Since 2016 Investor Day Steps Taken to Transform Organization Strategic Focus Going Forward Completed Restructuring Program; Delivered $30M+ Annualized Cost Savings Simplified Reporting Structure to 4 Segments Enhanced Commitment to Corporate Sustainability Accelerated Le
Slide 14: Elevating Our Commitment to Corporate Sustainability
Elevating Our Commitment to Corporate Sustainability Aggregating global data for improved measurement Green Teams in every facility Reductions in electricity consumption and landfill waste Elevating sustainability throughout our organization Enhanced global data analytics and metrics track sustainab
Slide 15: Building and Aligning the Organization
Building and Aligning the Organization 16 | March 6, 2018 | Valmont Industries, Inc. Shift to a Market-Focused Organization Training and Safety Talent Management Requires product line management Rethinking how we manage countries and regions Managing manufacturing workforce challenges Compensation r
Slide 16: Operational Transformation
Operational Transformation Staged Rollout of a Central-Led Operations Model PHASE 1 PHASE 2 PHASE 3 17 | March 6, 2018 | Valmont Industries, Inc. Build on Distinct Competitive Advantage of Our Global Footprint
Slide 17: Recap of 2018 Restructuring Plan
Recap of 2018 Restructuring Plan Consolidation of operations and other cost-reduction activities Expected Charges: $10M - Cash: $8.5M - Non-Cash: $1.5M Expected Payback: Approx. $10M, 12-18 months from January 2018 18 | March 6, 2018 | Valmont Industries, Inc. Continue to Pursue Opportunities to Imp
Slide 18: Formalizing Process for New Product Development
Formalizing Process for New Product Development Our Broader View of the Total Addressable Market Has Led Us to Identify Additional Product and Service Offerings and Adjacencies Voice of Customer-Driven Process Adopting Agile Methodology to Drive Faster Deployment of New Products and Services Setting
Slide 19: Expanding View of Our Addressable Market
Expanding View of Our Addressable Market ~$37B1 | Addressable Market Increased 3X GEOGRAPHIC EXPANSION ENCIES ODUCTS VICES 1 Based on independent and Company estimates. 20 | March 6, 2018 | Valmont Industries, Inc.
Slide 20: Company Targets
Company Targets Long-Term Goal 1 5% organic. Acquisitions over time are necessary to achieve top end of range. 21 | March 6, 2018 | Valmont Industries, Inc. Revenue Growth1 5% - 10% > 10% > 10% > 1.0x Net Earnings > 12% EPS Growth ROIC FCF Conversion Operating Margin
Slide 21: Operational Transformation
OPERATIONAL TRANSFORMATION Doug Bryson | SVP, Steel Operations 22 | March 6, 2018 | Valmont Industries, Inc.
Slide 22: Key Messages
Key Messages 23 | March 6, 2018 | Valmont Industries, Inc. Newly-Created, Central-Led Global Operations Role We Are Changing the Way We Manage Our Factories Focused on Cost Reductions and Working Capital Optimization Strategic Deployment, Lean, and Agile Are How We Operate; SQDC Are Our KPIs
Slide 23: Evolution of Our Operational Foundation
Evolution of Our Operational Foundation; 2017 was Pivotal Identified the Opportunity Established new corporate executive role in February 2017 ̶ Underutilized capacity in strategic regional locations Cultural silos masked capacity utilization opportunities headcount-neutral ̶ ASSEMBLED THE TEAM, EST
Slide 24: Critical Focus Areas
Critical Focus Areas organization 25 | March 6, 2018 | Valmont Industries, Inc. Thoughtful and Strategic Rollout Centralized Organizational Responsibilities Leveraging Existing Talent Environmental Health & Safety (EHS) Operations management Sales & Operations Planning (S&OP) Creation of a global su
Slide 25: Leveraging Our Manufacturing Footprint
Leveraging Our Manufacturing Footprint OUR SOLUTION Factories are product agnostic and now handle multiple product lines depending on market demand Increased flexibility to react quicker and improve lead times Increased ability to expand capacity without capital investment 26 | March 6, 2018 | Valmo
Slide 26: Supply Chain Transformation of North America Steel Ops
Supply Chain Transformation of North America Steel Ops • Implemented sourcing strategy Inbound Freight Avg. Weight (lbs.)/Load - Materials council comprising senior management and segment leadership directing raw materials sourcing Centralized raw material sourcing across North America steel sites -
Slide 27: Strategic Deployment for Organizational Alignment
Strategic Deployment for Organizational Alignment • Strategic deployment aligned as of January 1, 2018 • Cascading action plans based on strategic initiatives • Structured X-Matrix monthly business unit reviews: Action Plan Plan, Do, Check, and Act (PDCA) Tracking Results toward Goals Pareto of Q4 2
Slide 28: Lean Training is Critical for Operational Excellence
Lean Training is Critical for Operational Excellence Globally centralized Lean team Valmont University Lean Training # of Associates Trained 206 The cornerstone of the process A systematic and standardized training system developed internally; deployed online and in-person Rigorous requirements for
Slide 29: Driving SQDC Throughout Our Organization
Driving SQDC Throughout Our Organization 31 | March 6, 2018 | Valmont Industries, Inc. How We Are “Playing Our Position” COST Reducing Manufacturing Costs DELIVERY Driving Speed and Flexibility QUALITY Responding to Voice of Customer SAFETY Focusing on Leading Indicators
Slide 30: Case Study: Operational Excellence in Utility
Case Study: Operational Excellence in Utility COST Eliminate Waste Fully Load Low-Cost Sites Maximize Asset Capacity Utility: Steel Conversion Cost All NA Sites 2014 2015 2016 2017 1 Total Recordable Incident Rate. 2 Lost Time Injury Rate. 3 Defective parts per million. 32 | March 6, 2018 | Valmont
Slide 31: 2020 Strategic Goals
2020 Strategic Goals 1 Defective parts per million. 33 | March 6, 2018 | Valmont Industries, Inc. COST Offset Inflation and Improve by 2% DELIVERY Reduce Lead Times QUALITY Reduce Internal and External DPPM1 SAFETY Reduce Reportable Incidents
Slide 32: Key Takeaways
Key Takeaways 34 | March 6, 2018 | Valmont Industries, Inc. We Are Building a Model that Can be Replicated Globally Maximizing Capacity while Minimizing Additional Capital Investment We Are Aligned with SQDC A Meaningful Transformation in the Way We Operate
Slide 33: Engineered Support Structures (ESS)
ENGINEERED SUPPORT STRUCTURES (ESS) Barry Ruffalo | Group President 35 | March 6, 2018 | Valmont Industries, Inc.
Slide 34: Key Messages
Key Messages ete s 36 | March 6, 2018 | Valmont Industries, Inc. We Can Participate in Infrastructure Growth around the World Only Player with Multiple Differentiators; Engineering, Footprint, and Compl Product Lines Leveraging Global Supply Chain to Lower Manufacturing and Delivery Cost
Slide 35: ESS at a Glance
ESS at a Glance Business Profile Product Portfolio 2017 Revenue Mfg. Facilities Countries Employees Revenue by Region 37 | March 6, 2018 | Valmont Industries, Inc. Communication Structures and Components Highway Safety Architectural Components North America APAC EMEA Access Systems and Mining Lighti
Slide 36: How Do We Differ?
How Do We Differ? Core Strengths Local Presence Competitive Differentiators Large Project Capability 38 | March 6, 2018 | Valmont Industries, Inc. Demonstrated Management Innovative Engineering Solutions Broadest Global Footprint Most Complete Product Line Global Reach Leading Designs in Decorative
Slide 37: Geographic Footprint
Geographic Footprint Scale and footprint provide unmatched advantages ̶ Flexible capacity ̶ Competitive lead times 39 | March 6, 2018 | Valmont Industries, Inc. Manufacturing Facility
Slide 38: Market Drivers
Market Drivers Need for increased spend on transportation - - Globally, new road construction by 2030 is projected to be $101B1 Infrastructure renewal in developed economies; new road construction in developing economies Demand for safer roads Urbanization - - Explosion of demand on wireless network
Slide 39: Expanding Our Total Addressable Market
Expanding Our Total Addressable Market AREAS OF OPPORTUNITY $11B GEOGRAPHIC EXPANSION ENCIES ODUCTS VICES 41 | March 6, 2018 | Valmont Industries, Inc. Highway Safety Smart Pole Solutions Architectural Components Telecommunications Products & Components Sign Structures
Slide 40: Geographic Expansion
Geographic Expansion Telecommunication products and components - - - - Leverage engineering expertise and customer collaboration Develop innovative solutions for 5G expansion Expand components go-to-market model Bring existing products to new markets Architectural components: decorative sunscreens o
Slide 41: Adjacencies
Adjacencies Sign structures: regional to national expansion - Specified market plays to our engineering, manufacturing, and galvanizing strengths Opportunity to cross-sell and bundle with our transportation product line Leverage our engineering and drafting talent - - Smart (multi-function) pole sol
Slide 42: New Product & Service Development
New Product & Service Development Smart pole (multi-function) solutions - Being the integrator will disrupt the market Highway safety - - Rigorous standards and long incubation times are barriers to entry We have next-generation products already in pipeline Mitigator™ Vibration Mitigation Devices -
Slide 43: ESS Strategic Initiatives
ESS Strategic Initiatives Building and aligning the organization Valmont Strategic Focus Going Forward - Realigning market focus to 3 core markets; transportation, communication and architectural Reorganizing European and Asia Pacific management structures and repurposing capacity Dedicating segment
Slide 44: Case Study: Parking Garage – Sunscreen and Safety Barrier
Case Study: Parking Garage – Sunscreen and Safety Barrier Our Solution CUSTOMER NEED Only provider who offered a combined package façade and safety barrier Project Name: Royal North Shore Hospital Atmosphere™ façade system provided design flexibility and fast and efficient installation Location: Syd
Slide 45: 2016-2017 Lean/Operational Excellence Metrics
2016-2017 Lean/Operational Excellence Metrics transition, COGS quote to cash through shared 47 | March 6, 2018 | Valmont Industries, Inc. Safety Talent Development Accounts Receivable Inventory Cost Reductions Productivity Total Recordable Incident Rate (TRIR): 12% reduction Lost Time Injury Rate (L
Slide 46: Margin Improvement Initiatives
Margin Improvement Initiatives Price Cost Productivity Exercise price leadership in a fragmented market Engineering as a value proposition Leveraging back office and manufacturing capacity Rationalize global footprint Institutionalize Agile and Lean in the organization Reduce complexity of order-to-
Slide 47: Key Takeaways
Key Takeaways 49 | March 6, 2018 | Valmont Industries, Inc. Driving Value Proposition through Solutions-Based Selling Smart Infrastructure Provides Growth and Value Expansion Opportunities Geographic Expansion Taking Existing Products into New Markets Infrastructure Development is Critical to Econom
Slide 48: Q&A
Q&A 50 | March 6, 2018 | Valmont Industries, Inc.
Slide 49: Break
BREAK 51 | March 6, 2018 | Valmont Industries, Inc.
Slide 50: Coatings
COATINGS Rick Cornish | Group President 52 | March 6, 2018 | Valmont Industries, Inc.
Slide 51: Key Messages
Key Messages 53 | March 6, 2018 | Valmont Industries, Inc. Galvanizing Protects Steel for Generations Robust Global Pipeline of Acquisitions and New Construction Opportunities Expanding Our Addressable Market through Innovative Use of Technology and Applied Coatings We Find Value-Add Opportunities b
Slide 52: Coatings at a Glance
Coatings at a Glance Business Profile Services Portfolio 2017 Revenue Service Sites Countries Employees Revenue by Region 54 | March 6, 2018 | Valmont Industries, Inc. Value-Added Services Applied Coatings North America APAC Galvanizing 2,000 6 33 $319M
Slide 53: How Do We Differ?
How Do We Differ? Core Strengths Operating System Competitive Differentiators Technologies Services 55 | March 6, 2018 | Valmont Industries, Inc. Innovative Use of Unmatched Product Breadth, Capabilities, and Lean Deployment Unrivaled in the Industry Customer-Centric Partnerships Valmont Coatings In
Slide 54: Demonstrating Our Unique Capabilities
Demonstrating Our Unique Capabilities American Galvanizing Association (AGA) Award | City of San Jose City of San Jose public art collection in collaboration with the city’s trails program Showcases our ability to galvanize anything 56 | March 6, 2018 | Valmont Industries, Inc.
Slide 55: Global Coatings Footprint
Global Coatings Footprint Global Markets Served: 20171 Power Distribution Misc. Fabrication Agriculture Buildings Support Stuctures Bridge & Highway Communication Lighting Transportation Access Systems 1 Revenue by market. 57 | March 6, 2018 | Valmont Industries, Inc. Broad Footprint to Effectively
Slide 56: Market Drivers
Market Drivers Coatings demand is typically correlated to industrial production - Valmont sales can lag the Industrial Production Index (IPI) Infrastructure investments promote coatings demand Cost of corrosion is a major financial burden on economies - Total annual estimated cost in the U.S. is $27
Slide 57: Expanding Our Total Addressable Market
Expanding Our Total Addressable Market AREAS OF OPPORTUNITY $3B GEOGRAPHIC EXPANSION ENCIES ODUCTS VICES 59 | March 6, 2018 | Valmont Industries, Inc. Value-Added Services Applied Coatings Acquisitions and New Construction
Slide 58: Geographic Expansion
Geographic Expansion Targeted acquisitions in galvanizing and applied coatings - - - Expand market share where we operate currently Enter developing markets Build upon Valmont’s in-country presence when expanding to international markets New construction in targeted markets - Target existing Valmont
Slide 59: Adjacencies
Adjacencies Applied Coatings - Rebar – “100 Year Bridge” - Thermal Applications - Plating Managed Operations 61 | March 6, 2018 | Valmont Industries, Inc.
Slide 60: New Product and Service Development
New Product and Service Development OUR TECHNOLOGY WILL BE A DISRUPTOR EXTERNAL INTERNAL 62 | March 6, 2018 | Valmont Industries, Inc.
Slide 61: Valmont Coatings Connector (VCC)
Valmont Coatings Connector (VCC) Customer-driven app - Customer sought visibility at every stage of the process VCC provides real-time product visibility - Order status & updates, action item resolution, request, and schedule product pickup and/or delivery System generates notifications through text
Slide 62: Valmont Coatings Connector (VCC)
Valmont Coatings Connector (VCC) Providing Customers Real-Time Visibility of Their Product in Every Valmont Facility 64 | March 6, 2018 | Valmont Industries, Inc.
Slide 63: GalvTrac Proprietary Visual Management Tool
GalvTrac™ Proprietary Visual Management Tool Precise, proven, and repeatable recipes per customer product Lean-optimized: standard work, visual management, and cost reduction Minimizes material usage Maximizes available process time Continuously improving/shared globally Immersion Timer 65 | March 6
Slide 64: Valmont Coatings Operating System
Valmont Coatings Operating System Business Intelligence and Analytics Numerous acquisitions required implementation of a single operating system Finely-tuned combination of operations, finance, communications, and performance management/development Produces data and analysis on market trends, custom
Slide 65: Coatings Strategic Initiatives
Coatings Strategic Initiatives Building and aligning organization Valmont Strategic Focus Going Forward - - Identify managers for Leadership track Dedicated business development resource Operations transformation - Drive Agile and Lean throughout the organization Expand process to identify new servi
Slide 66: 2016-2017 Lean/Operational Excellence Metrics
2016-2017 Lean/Operational Excellence Metrics 1 Rate per 200,000 hours. 68 | March 6, 2018 | Valmont Industries, Inc. Safety Talent Development Operational Metrics Total Recordable Incident Rate (TRIR) declined 9% from 5.33 to 4.831 Lost Time Injury Rate (LTIR) declined 18% from 0.67 to 0.551 Hand I
Slide 67: Margin Improvement Initiatives
Margin Improvement Initiatives Price Cost Productivity Micro-market analytics understand customer/ market needs Pricing leadership to Standard work eliminates waste Product recipes optimize material usage and flow Continuously adjusting Improving pounds per man hour Product recipes increase kettle a
Slide 68: Key Takeaways
Key Takeaways 70 | March 6, 2018 | Valmont Industries, Inc. Profitable Business that Levers Well with Volume Broadest Portfolio of Services and Capabilities Attracts Customers Using Technology in a Creative Way to Enhance Results Driving Growth through Acquisitions and New Construction
Slide 69: Utility Support Structures
UTILITY SUPPORT STRUCTURES Aaron Schapper | Group President 71 | March 6, 2018 | Valmont Industries, Inc.
Slide 70: Key Messages
Key Messages on 72 | March 6, 2018 | Valmont Industries, Inc. Customers Value Expertise in Engineering, Project Management, & Executi Customer Relationships Enhanced by Valuable Alliance Contracts International Market Expansion is a Focus Area Adding New Product Lines as Part of Our Global Growth St
Slide 71: Utility Support Structures at a Glance
Utility Support Structures at a Glance Business Profile Product Portfolio 2017 Revenue (Mainly U.S.) Manufacturing Facilities Countries Employees 1 Includes 3 ESS plants in China. 73 | March 6, 2018 | Valmont Industries, Inc. Inspection Services Wind Distribution Poles Substations 2,900 41 16 1 Tran
Slide 72: Complete Portfolio of Transmission Products
Complete Portfolio of Transmission Products Monopole applications favor expensive labor and land costs Lattice applications favor inexpensive labor and land costs 74 | March 6, 2018 | Valmont Industries, Inc. Monopoles PyraMAX™ Lattice >500KV 500KV – 230KV (Developed Country) 500KV – 230KV (Developi
Slide 73: How Do We Differ?
How Do We Differ? Core Strengths Proven, Reliable Competitive Differentiators Reliability and 75 | March 6, 2018 | Valmont Industries, Inc. Recognized for Performance Broad Manufacturing Capabilities with Global Footprint Innovative New Products and Materials Fast Turnaround from Specification to De
Slide 74: Geographic Footprint
Geographic Footprint Current business is ~ 90% in North America Leveraging global manufacturing and engineering Footprint provides global growth opportunities and cost advantages 76 | March 6, 2018 | Valmont Industries, Inc. Manufacturing Facility
Slide 75: Market Drivers
Market Drivers Reliability, grid hardening, regulatory impetus, and renewable generation - Historical underinvestment in the grid and aging infrastructure - Increase in renewable and distributed generation will continue to drive new additions to the grid - Demand for uninterrupted power - Wood trans
Slide 76: Expanding Our Total Addressable Market
Expanding Our Total Addressable Market AREAS OF OPPORTUNITY $12B GEOGRAPHIC EXPANSION ENCIES ODUCTS VICES 78 | March 6, 2018 | Valmont Industries, Inc. Technology Services as a Disruptor Concrete for Grid Hardening & Distribution Pre-Packaged Substations Lattice Global Expansion & Acquisitions
Slide 77: Geographic Expansion
Geographic Expansion Add lattice capabilities - - Opens international markets Ability to leverage our existing alliances Increase round pole opportunities in Europe Further expand Middle East and Africa markets Enter Latin and South America 79 | March 6, 2018 | Valmont Industries, Inc.
Slide 78: Adjacencies
Adjacencies Services will become an important part of our differentiation strategy - Advanced Technology: Drone inspections for engineering and coatings Add lattice capabilities in U.S. - - - Completes Valmont transmission product line Strengthens Alliance opportunities Uses existing SG&A and sales
Slide 79: Case Study: Drone Inspection
Case Study: Drone Inspection Our Solution CUSTOMER NEED Implement use of drones using high-definition optics for visual review on energized lines Accurate and timely inspections that were cost-efficient and reduced the risk of injury in high-wind conditions Use LIDAR1 capabilities for line design an
Slide 80: New Product & Service Development
New Product & Service Development Pre-packaged substation - - Pre-assembled kits easily transportable and erected in the field Results in better control of project management Concrete distribution poles - - - Spun concrete and concrete/steel combination Narrows the cost gap with wood inclusive of in
Slide 81: Utility Support Structures Strategic Initiatives
Utility Support Structures Strategic Initiatives Supply electric grid designs and structures anywhere in the world Valmont Strategic Focus Going Forward - - Enabled by successful M&A execution Enables greater participation in system upgrades Building and aligning the organization - - - Promoted 3 bu
Slide 82: Case Study: Agile Methodology Success
Case Study: Agile Methodology Success Our Solution CUSTOMER NEED Implemented Agile methodology, leading to self-managing fast and flexible teams Reduced design and cycle time with better Digital Kanban for Engineering visibility status of engineering ̶ ̶ ̶ ̶ Multiple, global teams with self-prioriti
Slide 83: Margin Improvement Initiatives
Margin Improvement Initiatives Price Cost Productivity Implement a discriminating and balanced approach to customer mix Introduce innovative products to increase margins Bundle material, product, and service solutions Leverage back office and manufacturing capacity Utilize raw material efficiently i
Slide 84: Key Takeaways
Key Takeaways 86 | March 6, 2018 | Valmont Industries, Inc. Pursuing Growth through Acquisitions Product Innovations Gaining Momentum Geographic Expansion for Revenue Growth Favorable End Market Conditions Globally
Slide 85: Irrigation
IRRIGATION Lennie Adams | Group President 87 | March 6, 2018 | Valmont Industries, Inc.
Slide 86: Key Messages
Key Messages obal 88 | March 6, 2018 | Valmont Industries, Inc. Population Growth and Dietary Improvement Drive Long-Term Demand Brand Recognition Earned through Reliability, Innovation, Durability, and Gl Dealer Network Technology Leadership is Providing Growth Opportunities International Markets G
Slide 87: The Irrigation Story
The Irrigation Story Irrigated farms are more productive – Globally, 18% of farmland is irrigated, yet produces 40% of the total crop1 Freshwater 3% All Water Reduced tillage / soil erosion, run-off, and energy costs Proven yield increases across all crops Ice Caps Greater Water Efficiencies from Me
Slide 88: Irrigation at a Glance | Valley
Irrigation at a Glance | Valley Business Profile Products & Services 2017 Revenue Facilities (Mfg., Warehouse, & Distribution) Countries Employees Global Dealerships 1 Consists of linear, corner and towable center pivots and machines. 2 ~50% split U.S. and International. 90 | March 6, 2018 | Valmont
Slide 89: How Do We Differ?
How Do We Differ? Core Strengths Voice of Grower Competitive Differentiators Response Time 91 | March 6, 2018 | Valmont Industries, Inc. Global Valley University™ Technology Leadership Global Dealer Network Focus on Most Connected, Reliable, Durable Pivots in Market Dealer Development Brand Recognit
Slide 90: Geographic Footprint
Geographic Footprint #1 global market share in mechanized irrigation Manufacturing facilities target key regions and offer flexibility Global demand can be sourced from any facility 92 | March 6, 2018 | Valmont Industries, Inc. Manufacturing Network is a Competitive Advantage Manufacturing FacilityW
Slide 91: Market Drivers
Market Drivers Long-term - Constraints on fresh water resources 1B people live in water-scarce regions, growing to 3.5B by 20251 o - - Governments’ desire to become more self-sufficient in food production Demand on food production 35% population growth by 2050; food production must grow 70%1 Increas
Slide 92: Expanding Our Total Addressable Market
Expanding Our Total Addressable Market AREAS OF OPPORTUNITY $11B GEOGRAPHIC EXPANSION ENCIES ODUCTS VICES 94 | March 6, 2018 | Valmont Industries, Inc. Enhanced Technology Solutions Focus on Higher Value Crops Full Service Water Management for Ag International Growth
Slide 93: Geographic Expansion: International Growth
Geographic Expansion: International Growth Targeting markets with a mix of the following qualities - - - - Population growth Arable land Available water Desire for self-sufficiency and political policies that support agricultural development Localized product development through voice of grower Supp
Slide 94: Adjacencies: Full Service Water Management for Ag
Adjacencies: Full Service Water Management for Ag Engineered turnkey irrigation solutions Valley Pumping Station - - - Water delivery from source to field Enhanced products and consulting services Integrate Valley Water Management as a solution into more platforms Scheduling, monitoring, and pumping
Slide 95: Adjacencies: Expand Markets to Higher Value Crops
Adjacencies: Expand Markets to Higher Value Crops Expand from traditional crops of corn & soybeans to other high-value specialty crops such as potatoes, carrots, sugar cane, and alfalfa Variable Rate Irrigation High-value crops require more precise irrigation management Created specialized products
Slide 96: New Product Development: Enhanced Technology Solutions
New Product Development: Enhanced Technology Solutions Drive adoption of Valley Irrigation integrated technology solutions - - Deliver labor savings and increase the quality of life for our growers AgSense Increase adoption of Valley ICON™ smart panels - - Simplified, intuitive user experience Mobil
Slide 97: Irrigation Strategic Initiatives
Irrigation Strategic Initiatives Building and aligning organization Valmont Strategic Focus Going Forward - - - - Increased focus on talent management Established Valley Water Management group Strategic regional leadership Dedicated business development resource Operations transformation - Agile and
Slide 98: 2016-2017 Lean/Operational Excellence Metrics
2016-2017 Lean/Operational Excellence Metrics Kanban activities 100 | March 6, 2018 | Valmont Industries, Inc. Safety Talent Development Inventory Cost Reductions Productivity Tubing Scrap Total Recordable Incident Rate (TRIR) declined 33% from 2.18 to 1.451 Lost Time Injury Rate (LTIR) declined 78%
Slide 99: Margin Improvement Initiatives
Margin Improvement Initiatives Price Cost Productivity Superior product, service, and support enable price leadership Dealer development and pricing education empowers dealers to command premium price Material optimization Continue to build upon Lean successes Sourcing flexibility from multiple loca
Slide 100: Key Takeaways
Key Takeaways 102 | March 6, 2018 | Valmont Industries, Inc. Good Business in Down Markets, Great Business in Good Markets International Sales Expected to Exceed North America Over Time Market-Leading Technology We Are Driving Growth, Not Waiting for Market Rebound
Slide 101: Financial Overview
FINANCIAL OVERVIEW Mark Jaksich | EVP & CFO 103 | March 6, 2018 | Valmont Industries, Inc.
Slide 102: Key Messages
Key Messages 104 | March 6, 2018 | Valmont Industries, Inc. Improved Financial Performance Since 2015 Trough Strong Balance Sheet with Liquidity to Fund Growth We Measure Our Success Using ROIC and Operating Income Growth Building an Organization to Support Growth and Acquisition Activity
Slide 103: Strong Peak to Trough Performance
Strong Peak to Trough Performance Sales and Operating Income1 ($M) $3,304 $ 600 $ 3,5 00 $3,123 $2,746 $ 3,0 00 $ 500 $2,619 $2,522 $ 2,5 00 $ 400 $ 2,0 00 $ 300 $ 1,5 00 $ 200 $ 1,0 00 $ 100 $ 500 $ - $ - 2008 2009 2010 2011 Sales 2012 2013 2014 2015 2016 2017 Operating Income GAAP Operating Income
Slide 104: Independent Segment Drivers Provide Stability Over Time
Independent Segment Drivers Provide Stability Over Time Adj. EBITDA1 $628.0 ($M) $371.6 $352.1 2008 2009 2010 2011 2012 Utility 2013 2014 Coatings 2015 Other 2016 2017 Irrigation ESS 1 Totals are exclusive of Corporate expense. Excludes restructuring charges, impairments and significant one-time 106
Slide 105: Strong and Flexible Balance Sheet
Strong and Flexible Balance Sheet Credit Rating S&P Moody’s Stable1 Stable BBB+ Baa3 Debt Maturities ($M) $250 $250 $250 2020 2044 2054 1 Upgraded in Aug 2017 from “Negative” due to improved financial performance and effective capital management. 2 Adjusted 107 | March 6, 2018 | Valmont Industries,
Slide 106: Strong Free Cash Flow Supports Capital Deployment
Strong Free Cash Flow Supports Capital Deployment Free Cash Flow ($M) Capital Deployment Track Record ($M) $290 $686 2013 2014 2015 2016 2017 FCF Conversion by Year1 2013 2014 2015 2016 2017 Capital Spending Acquisitions Dividends Share Repurchase 1 See Company’s Reg. G tables and Calculation of Fre
Slide 107: Capital Allocation Priorities
Capital Allocation Priorities Working capital investment to support sales growth Support Growth & Operations of Existing Businesses Capital expenditures $65M – $75M annually Strategic fit – leverage Acquisitions Clear path to returns exceeding cost of capital within 3 years Dividends – targeted payo
Slide 108: Growth Track Record: Organic and Acquisition
Growth Track Record: Organic and Acquisition Sales ($M) 15-Yr Acquisition Growth Rate of 14.4% 15-Yr Organic Growth Rate of 5.4% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Organic Acquisitions 110 | March 6, 2018 | Valmont Industries, Inc.
Slide 109: Disciplined and Strategic M&A Approach
Disciplined and Strategic M&A Approach 111 | March 6, 2018 | Valmont Industries, Inc. Identify Key Learnings to Modify and Enhance the Process Going Forward 1. Identify Opportunity & Synergies 2. Financial Justification 3. Evaluation Phase 4. Integration and Post-Evaluation Market, customer, and/or
Slide 110: M&A Scorecard
M&A Scorecard 112 | March 6, 2018 | Valmont Industries, Inc. Acquired Dec. 2012 Feb. 2013 Dec. 2013 Mar. 2014 Aug. 2014 Oct. 2014 Sep. 2015 Segment CoatingsESS ESS Utility IrrigationESS Coatings Location Canada AustraliaNew ZealandDenmark U.S. (SD) U.S. (SC) U.S. (NJ) Strategic Rationale Establish M
Slide 111: Dividend is an Important Commitment
Dividend is an Important Commitment Dividend per Share $1.50 $1.50 $0.26 2000 2005 2010 2015 2017 113 | March 6, 2018 | Valmont Industries, Inc. $0.65 $0.34
Slide 112: Finance Function Transformation
Finance Function Transformation Realign Finance Resources for Better Organizational Support and to Enable Growth Finance Business Partner Regional Shared Services Strengthen FP&A function Centralizing common functions - Focus on pricing, cost drivers, and customer metrics (i.e., costs to serve) - -
Slide 113: Tax Reform
Tax Reform 2017 transitional effect: $42M1 – $1.84 per share - - Re-measurement of net deferred tax assets: $20.4M – non-cash Deemed repatriation of foreign earnings ~$21.6M Effective tax rate for 2018 going forward expected to be ~25%1,2 Cash mobility will improve - - Repatriate $75M – $100M foreig
Slide 114: 2018 EPS Guidance
2018 EPS Guidance Adjusted EPS Walk | 2017-2018 ~$8.00 $6.971 $5.11 GAAP 1 Please see Company’s Reg. G table at end of presentation. 116 | March 6, 2018 | Valmont Industries, Inc. General Assumptions: FX Rates Similar to Current Rates | Inflationary Effects Recovered through Pricing and Productivity
Slide 115: Margin Walk
Margin Walk 2017-2020 Margin Walk | 2017-2018 11.5% – 12.0% 2017 Inflation Pricing Cost Red Leverage 2020 117 | March 6, 2018 | Valmont Industries, Inc. General Assumptions: Inflation Offset by Cost Reductions and Pricing | Volume Leverage from Growth Initiatives | Excludes M&A 9.7%
Slide 116: Long-Term Company Targets
Long-Term Company Targets Projected 1 5% organic. Acquisitions over time are necessary to achieve top end of range. 2 Please see Reg G tables at the end of the 118 | March 6, 2018 | Valmont Industries, Inc. presentation. 3 Excludes effects from sale of grinding media business, potential acquisitions
Slide 117: Strong Correlation of Total Value Impact (TVI) & Share Price
Strong Correlation of Total Value Impact (TVI) & Share Price TVI1 vs. Share Price TVI ($M) $ Per Share $140 $120 $100 $80 $60 $40 $20 $0 -$20 $180 $160 $140 $120 $100 $80 $60 $40 $20 $-2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TVI Share Price 1 Total Value
Slide 118: Continuing to Create Long-Term Shareholder Value
Continuing to Create Long-Term Shareholder Value Total Shareholder Return1 (As of 12/31/17) 19.4% 18.6% 16.5% 12.5% 6.2% 5.2% 1-Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year VMI S&P 500 1 Source: FactSet. 120 | March 6, 2018 | Valmont Industries, Inc. 13.4% 11.4% 9.1% 7.4% 5.0% 10.5% 10.3% 7.7%
Slide 119: Key Takeaways
Key Takeaways 121 | March 6, 2018 | Valmont Industries, Inc. Continued Focus on ROIC and Increasing Long-Term Shareholder Value Capital Allocation Philosophy Balanced between Growth and Returning Cash to Shareholders Balance Sheet Appropriately Levered Given Cyclical Businesses Transforming Finance
Slide 120: Closing Remarks
CLOSING REMARKS Steve Kaniewski | President & CEO 122 | March 6, 2018 | Valmont Industries, Inc.
Slide 121: Why Valmont?
Why Valmont? 123 | March 6, 2018 | Valmont Industries, Inc. Sensible Capital Allocation and ROIC Focus Will Remain Agriculture and Infrastructure Provide Good Investment Opportunities Expanding Our View of Addressable Market to Leverage Existing Global Platform Management Team is Reshaping the Organ
Slide 122: Q&A
Q&A 124 | March 6, 2018 | Valmont Industries, Inc.
Slide 123: Appendix
APPENDIX 125 | March 6, 2018 | Valmont Industries, Inc.
Slide 124: Reg G Reconciliation
Reg G Reconciliation VALMONT INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON REPORTED RESULTS (Dollars in thousands, except per share amounts) (unaudited) The non-GAAP tables below disclose the impact on (a) diluted earnings per share of (1) tax expense attr
Slide 125: Reg G Reconciliation – Continued
Reg G Reconciliation – Continued VALMONT INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF EFFECT OF SIGNIFICANT NON-RECURRING ITEMS ON OPERATING INCOME REG G RECONCILIATION (Continued) YTD 12'31'16 YTD 12'26'15 Increase 2016 from 2015 Operating Income Reconciliation Operating income (loss) - as reported
Slide 126: Reconciliation of Adjusted EBITDA to GAAP Figures
Reconciliation of Adjusted EBITDA to GAAP Figures Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) is one of our key financial ratios in that it is the basis for determining our maximum borrowing capacity at any one time. We calculate "Further Adjusted EBITDA" by addi
Slide 127: Calculation of Free Cash Flows
Calculation of Free Cash Flows We believe that Free Cash Flow is a useful performance measure for management and useful to investors as the basis for comparing our performance with other companies. Our measure of Free Cash Flow may not be directly comparable to similar measures used by other compani
Slide 128: Calculation of Return on Invested Capital
Calculation of Return on Invested Capital Return on Invested Capital is calculated as Operating Income (after-tax) divided by the average of beginning and ending Invested Capital. Invested Capital represents total assets minus total liabilities (excluding interest-bearing debt). Return on Invested C
Slide 129: Calculation of Annual Total Value Impact (TVI)
Calculation of Annual Total Value Impact (TVI) TVI is calculated as Operating Income (after-tax) less 8.5% times the average of beginning and ending Invested Capital. Invested Capital represents total assets minus total liabilities (excluding interest-bearing debt). Total Value Impact (TVI) Calculat
Slide 130: Calculation of Annual Total Value Impact (TVI) – Continued
Calculation of Annual Total Value Impact (TVI) – Continued Total Value Impact (TVI) Calculation 2010 2011 2012 2013 2014 2015 2016 2017 Operating Income Adjusted Effective Tax Rate 2, 3, 4 Tax Effected Operating Income $ 193,720 36.0% $ 263,310 30.2% $ 382,296 35.2% $ 473,069 35.1% $ 357,716 33.4% $
Slide 131: Biographies: Steve Kaniewski
Biographies 133 | March 6, 2018 | Valmont Industries, Inc. STEVE KANIEWSKI PRESIDENT & CHIEF EXECUTIVE OFFICER Stephen G. Kaniewski was appointed President and Chief Executive Officer of Valmont in 2018. Prior to that, he was President and Chief Operating Officer (COO) after serving as group preside
Slide 132: Biographies: Mark Jaksich
Biographies 134 | March 6, 2018 | Valmont Industries, Inc. MARK JAKSICH EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER As Chief Financial Officer (CFO), Mark’s responsibilities include oversight of all financial operations specifically, Treasury, Internal Audit, Information Technology, Taxation,
Slide 133: Biographies: Doug Bryson
Biographies 135 | March 6, 2018 | Valmont Industries, Inc. DOUG BRYSON SENIOR VICE PRESIDENT, STEEL OPERATIONS As Senior Vice President, Steel Operations, Doug’s responsibilities include oversight for all steel structure manufacturing and supply chain management in North America. Doug also has globa
Slide 134: Biographies: Barry Ruffalo
Biographies 136 | March 6, 2018 | Valmont Industries, Inc. BARRY RUFFALO GROUP PRESIDENT, ENGINEERED SUPPORT STRUCTURES In his current role as group president, Barry is accountable for the Engineered Support Structures global business effectiveness and growth. Before being named to his current posit
Slide 135: Biographies: Aaron Schapper
Biographies 137 | March 6, 2018 | Valmont Industries, Inc. AARON SCHAPPER GROUP PRESIDENT, UTILITY SUPPORT STRUCTURES In his role as group president of the Utility Support Structures group, Aaron is responsible for setting global strategy for the Utility division and leading the business to increase
Slide 136: Biographies: Lennie Adams
Biographies 138 | March 6, 2018 | Valmont Industries, Inc. LENNIE ADAMS GROUP PRESIDENT, IRRIGATION Lennie Adams’s responsibilities include the Global Irrigation Division, Valmont Tubular Products, and Cascade Earth Sciences (CES, a water reuse company located in Oregon). Lennie began his career at
Slide 137: Biographies: Rick Cornish
Biographies 139 | March 6, 2018 | Valmont Industries, Inc. RICK CORNISH GROUP PRESIDENT, COATINGS In 1996, Rick Cornish joined Valmont as Director of Business Development for a new company business initiative. Challenged with the opportunity to grow the Valley Galvanizing facility, then a one locati
Slide 138: Biographies: Renee Campbell
Biographies 140 | March 6, 2018 | Valmont Industries, Inc. RENEE CAMPBELL DIRECTOR, INVESTOR RELATIONS & CORPORATE COMMS Renee Campbell is the Director of Investor Relations and Corporate Communications at Valmont. In her role, Renee is one of Valmont’s primary points of contact with external stakeh
Slide 139: Biographies: Jeff Laudin
Biographies 141 | March 6, 2018 | Valmont Industries, Inc. JEFF LAUDIN MANAGER, INVESTOR RELATIONS Jeffrey Laudin has been Manager of Investor Relations at Valmont in Omaha, Nebraska for 20 years. As investor relations manager, Jeff is responsible for communicating the investment characteristics of
Slide 140: Biographies: Jeff Laudin
|Z Biographies JEFF LAUDIN MANAGER, INVESTOR RELATIONS Jeffrey Laudin has been Manager of Investor Relations at Valmont in Omaha, Nebraska for 20 years. As investor relations manager, Jeff is responsible for communicating the investment characteristics of Valmont to shareholders, investors, analysts