Yahoo Finance Valmont Industries Inc (VMI) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...
Net Sales: $977.8 million, down 8% year-over-year.
Operating Income: Increased 11% to $131.6 million.
Operating Margins: Improved to 13.5%.
Diluted EPS: $4.32, up nearly 25% year-over-year.
Infrastructure Sales: $723.6 million, decreased 1.7% year-over-year.
Agriculture Sales: $258.7 million, decreased 22.1% year-over-year.
Operating Cash Flows: $23.3 million for the quarter.
Total Debt to Adjusted EBITDA: 1.82x, within the target range of 1.5 to 2.5x.
Capital Spending: $15 million focused on enhancing operational capacity and resilience.
2024 Outlook: Net sales expected to be down 2% to up 0.5%; diluted EPS projected between $15.40 and $16.40.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Valmont Industries Inc (NYSE:VMI) reported a strong start to 2024 with results exceeding expectations, demonstrating significant commercial and operational achievements.
Operating margins expanded by 240 basis points and diluted earnings per share grew nearly 25% despite an 8% decrease in sales.
The company successfully navigated severe weather in the Central U.S. without damage to facilities or disruption to operations, ready to support dealers and customers with repairs and replacements.
Valmont Industries Inc (NYSE:VMI) secured over $50 million in new projects for the Middle East market, indicating strong international project pipeline and strategic market positioning.
The company's focus on operational excellence and strategic investments in manufacturing facilities has improved profitability and product mix, driving higher returns.
Negative Points
Sales decreased by 8% year-over-year, indicating lower demand from some end markets.
Agriculture segment sales decreased by 22.1% year-over-year, primarily due to lower sales in Brazil and softer soybean prices impacting grower sentiment.
Demand in Telecommunications markets remains muted as carrier investments normalize, which could impact future growth in this segment.
The company anticipates a lower quarterly EPS during the second half of the year, following a strong first quarter.
While the company has made strategic pricing adjustments in North America to maintain market share, these adjustments may impact profitability in targeted markets.
Q & A Highlights
Q: What's the reason for the estimate for Brazil in '24? Are you looking at '24 as an anomaly? Or is it fair to think that Brazil might be smaller in '25 as well? A: Timothy P. Francis, CAO & Interim CFO of Valmont Industries, noted that while they don't specify Brazil's percentage of the total segment, it is expected to be down as a percentage of the total due to more project work in international markets for 2024. However, they remain bullish on Brazil long-term, closely watching soybean prices as they correlate strongly with sales expectations in that market.
Q: Can you unpack the moving pieces on the infrastructure margin this quarter? A: Timothy P. Francis explained that the first quarter Infrastructure gross profit margin of 31.3% was positively impacted by an opportunistic purchase of steel and a shift in product mix within TD&S to more distribution and substation structures, which have strong demand and favorable pricing.
Q: How do you look at parts in the agriculture segment equation? Is the parts revenue much different internationally versus North America? A: Avner M. Applbaum, CEO, President & Director, indicated that in North America, parts would be at the lower end of the range (closer to 10%) and internationally at the higher end (around 15%). He highlighted that order rates in North America are stronger than last year, reflecting underlying strong market fundamentals.
Q: On the margin dynamics for the year, can you provide more details? A: Timothy P. Francis mentioned that the Infrastructure segment is expected to see an improvement in its full-year gross profit margin compared to 2023. The first quarter benefited from steel purchase effects, which will be less in Q2, leading to a slightly reduced gross profit margin in the second quarter and second half of the year.
Q: What should we expect for the core large Transmission structures business in 2024 in terms of volume and pricing? A: Timothy P. Francis clarified that due to the mix shift to smaller structures and the impact of steel deflation tied to pricing contracts, pricing was favorable despite these challenges. They anticipate an increase in volumes in TD&S throughout the year, supported by strategic investments in manufacturing flexibility.
Q: Are buyers purchasing the full complement of technology solutions when they purchase a pivot in current market conditions? A: Avner M. Applbaum confirmed that buyers are indeed purchasing the full suite of technology solutions, recognizing the strong value proposition and return on investment provided by these technologies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
