Third quarter sales increased 7% and operating income rose 22% for a record third quarter.
Third quarter operating income as a percent of sales rose to 14.1% compared with 12.4% for the same period in 2012.
The Engineered Infrastructure Products and Utilities Segments made the greatest contributions to the quarterly operating income improvement.
A decrease in the U.K. tax rate required a reduction in deferred tax assets and an increase in third quarter tax expense. This lowered net earnings by $8.3 million, or $0.31 in fully diluted earnings per share. As a result, reported diluted earnings per share were $2.10 and adjusted for the non-cash deferred tax asset reduction, diluted earnings per share were $2.41. (See table page 7)
Omaha, NE - Valmont Industries, Inc. (NYSE: VMI), a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, reported third quarter sales of $778.0 million compared with $729.8 million for the same period of 2012. Third quarter 2013 operating income was $109.9 million versus $90.4 million in 2012. Including the impact of a non-cash income tax expense, third quarter net income was $56.5 million versus $56.7 million in 2012, which resulted in quarterly diluted earnings per share of $2.10 compared to $2.12 in 2012.
Third Quarter Review:
“Sales and earnings comparisons were positive in each reportable segment,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “Gross profit margins increased due to improved sales mix and pricing in certain markets combined with somewhat lower input costs. This increase, plus improved operating leverage, drove operating profit improvement.
“Achieving 14.1% operating income as a percent of sales in a third quarter is a record,” said Mogens C. Bay, Valmont’s Chairman and Chief Executive Officer. “This is the result of good performances in our all of our segments, including significant improvement in the Engineered Infrastructure Products Segment, which continues to face challenges in several markets.”
Third Quarter Segment Review:
Utility Support Structures Segment (30% of 3rd Quarter Sales)
Steel and concrete structures for the global electric utility industry.
Utility sales of $229.4 million were 5% higher than 2012. Substantial utility investment in the North American transmission grid continues to drive increased demand. Late in the third quarter, at the request of customers, some shipments were deferred into the fourth quarter. Utility sales in international markets, which remain project based, declined.
Increasing transmission grid reliability is a national priority. Regulatory measures effected in 2005 and 2010 created a compelling framework for substantial new investment in transmission infrastructure. Enhancing the interconnectivity of regional grids, and accommodating increased use of renewable energy sources are additional drivers of demand. Valmont believes the size of these opportunities combined with our market leadership, should result in further growth over the next few years.
Operating income rose 37% to $41.5 million, which represents 18.1% of segment sales. The increase in operating income was due to increased SG&A leverage, sales mix, and improved gross profit margins.
Irrigation Segment (23% of 3rd Quarter Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
Irrigation Segment sales increased 12% to $175.1 million, led by strong North American demand. Sales in international markets also improved. Despite lower third quarter crop prices than last year, the outlook among farm customers remained positive and drove sales increases above last year’s record levels.
Over 80% of global irrigated acres still use less efficient flood methods rather than efficient mechanized irrigation equipment. This creates tremendous long-term market opportunities for Valmont’s irrigation segment. Population growth, improved diets and competing demands for water are additional factors that will drive the need for more efficient mechanized irrigation use over time.
Operating income rose 15% to $31.1 million resulting in operating income as a percent of sales of 17.8%.
Engineered Infrastructure Products Segment (33% of 3rd Quarter Sales)
Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
Third quarter sales were $260.3 million, a 6% increase over 2012. Sales gains reflect increases in North America and Europe as well as the addition of $16.8 million in revenue from the February 2013 acquisition of the Locker Group in Australia.
In North America, lighting and traffic products sales were flat with last year. Wireless communication product sales increased over last year reflecting increased carrier investment in 4G infrastructure to support the increased network demands of data.
In Europe, lighting and traffic product sales were comparable to last year.
In the Asia-Pacific region, additional sales from acquired businesses more than offset declines in engineered access systems sales in Australia. Lighting and traffic products revenues in the region increased, while wireless communication product sales declined.
Operating income increased 37% to $25.7 million, or 9.9% of segment sales. This increase was driven by improved operating productivity, increased demand for wireless communication products in North America, improved cost structures in North America and Europe, and the contribution of the Locker Group.
Coatings Segment (11% of 3rd Quarter Sales)
Hot-dip galvanizing, and other coatings to protect against corrosion of steel and aluminum in global markets.
Sales of $89.0 million were 6% higher than last year. North American sales rose due to $9 million revenue contribution from the acquisition of a Canadian galvanizer in December, 2012 and increased internal demand. Sales declined in the Asia Pacific region due to softer market conditions in Australia and the slight revenue loss from a divestiture during the second quarter.
Operating income increased 7% to $19.8 million, or 22.3% of segment sales which was similar to last year’s levels.
“Looking to the fourth quarter, new capacity coming on-line in the Utility Support Structures Segment combined with a strong backlog should lead to record fourth quarter segment results. In the Irrigation Segment, we expect a good quarter, although not to last year’s levels as a later harvest in North America will likely reduce customer traffic in dealerships. We expect our Coatings business to continue its good performance. In the Engineered Infrastructure Products Segment, our outlook is for positive comparisons in sales and operating income. In summary, we expect full-year diluted earnings of approximately $11.00 per share, even after absorbing the $0.31 in higher tax expense this quarter.
“Looking to 2014, at this early juncture our expectations are for continued improvement in the Utility Support and Engineered Infrastructure Support segments. Market demand should result in continued strength in the Coatings Segment. For the Irrigation Segment, it remains too early to assess the outlook for 2014.
“We believe that the long term drivers present in our two core markets, engineered products for infrastructure and efficient irrigation equipment for agriculture provide compelling, global and enduring opportunities for Valmont’s continued growth going forward,” concluded Mr. Bay.
An audio discussion of Valmont’s third quarter results by Mogens C. Bay, Chairman and Chief Executive Officer and Terry J. McClain, Executive Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 98704886 or via the Internet at 8:00 a.m. CDT October 18, 2013, by pointing browsers to: http://www.valmont.com/page.aspx?id=445&pid=21. After the event you may listen by accessing the above link or by telephone. Dial 1-855-859-2056 or 404-537-3406, and enter the Conference ID#: 98704886 beginning October 18, 2013 at 10:00 a.m. CDT through 12:00 p.m. CDT on October 25, 2013.
Valmont is a global leader in designing and manufacturing poles, towers and structures for lighting and traffic, wireless communication and utility markets, industrial access systems, highway safety barriers and a provider of protective coating services. Valmont also leads the world in mechanized irrigation equipment for agriculture, enhancing food production while conserving and protecting natural water resources. In addition, Valmont produces a wide variety of tubing for commercial and industrial applications.
This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management’s perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont’s control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont’s actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time to time in Valmont’s reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.