On Tuesday, Valmont Industries (NYSE:VMI) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Valmont Industries reported a 6.2% year-over-year increase in net sales to $1.03 billion, driven by strong performance in the North America utility sector, which saw a 27.4% sales growth.

Strategic initiatives include capacity expansion in the utility segment, with significant investments in infrastructure to meet growing demand, especially in North America, and ongoing efforts to enhance operational efficiency.

The company raised its 2026 outlook, projecting net sales of $4.2 to $4.4 billion and diluted EPS between $21.50 to $23.50, supported by strong pricing and volume in North America Utility.

Operational highlights include a focus on advancing high-value offerings and maintaining discipline in pricing, with strategic investments in technology and the aftermarket to support long-term growth.

Management highlighted the company's resilience in navigating challenging environments, such as the Middle East, and emphasized continued efforts to maximize US melt and pour steel to mitigate tariff impacts.

Full Transcript

OPERATOR

Against our strategic priorities. This reflects our discipline and focused execution across the business. We remain committed to serving customers, managing what we can control and advancing our value drivers. Our performance reflects the execution of our strategy. We're prioritizing high value offerings, strengthening our core businesses and improving operational performance. Our strategy is anchored in markets with durable demand drivers, most notably utility, while continuing to improve the quality and resiliency of our earnings. Second, infrastructure is performing well, supported by a growing demand for energy. This includes the need to expand the electrical grid to support data centers and the need to replace aging assets. Our capacity expansion plans are on track and these actions are driving improvements in throughput and overall operational performance as reflected in the 27% sales growth in North America utility. Third, in agriculture, we were able to grow in North America year over year due to favorable pricing. I also want to recognize our teams in Middle East who continue to navigate a very challenging environment. The safety and well being of our employees remain our top priority. We are focused on supporting them as they manage through the ongoing situation. We appreciate their commitment to one another and to our customers during this time. Turning to slide 5 for a review of our current market dynamics. Starting with North America Utility, our customers are implementing multi year increases in capital spending, driving strong demand in utility infrastructure. U.S. utilities are planning roughly $1.4 trillion of investment through 2030, up meaningfully from prior expectations driven by load growth, grid modernization and increasingly data center demand. This environment supports our growth outlook and the capacity expansions we have underway. Industry supply remains constrained with extended lead times and favorable pricing and margins. North America Coatings is also capturing growth from infrastructure activity and increasing exposure to data center construction. Our galvanizing services play a critical role in protecting and extending the life of steel structures in North America. Lighting and Transportation market conditions remain mixed. In lighting, demand continues to be impacted by softer housing activity and commercial development. In transportation, the market is supported by stable infrastructure spending. From an operational standpoint, we have made progress, but we are not yet where we want to be in terms of consistency. Our priority is improving performance to deliver reliably for our customers. Turning to international infrastructure, market conditions across Europe and Asia Pacific remain soft but stable. We are advancing commercial discipline and improving operational performance. Turning to slide 6, agriculture markets are navigating a dynamic environment as we begin the year. In North America, grower sentiment remains cautious, reflecting tighter farm economics supported by USDA data. Seasonal order patterns have been more muted with no meaningful acceleration in the spring selling season. Taken together, current indicators including input costs and overall farmer profitability suggest the market will remain under pressure. In the near term, international markets are seeing variability in demand. Ongoing challenges in the Middle East, including logistic constraints and reduced operating capacity, are impacting activity and the pace of execution. At the onset of the conflict, our Dubai facility operated at a minimal level, prioritizing employee safety in alignment with local government guidance. The plant has currently paused operations until conditions stabilize. We have mitigated some of this impact through our global manufacturing footprint, leveraging other facilities to support demand in the region. Long term demand is supported by investment in food security and water infrastructure in Brazil, tight credit availability and delays in government backed financing continue to weigh on near term demand. Over the longer term, Brazil remains an attractive growth market supported by favorable agronomics, multiple crop cycles and compelling returns on irrigation equipment. We continue to advance our priorities in technology and aftermarket positioning agriculture to perform through the cycle turning to slide 7 I'd now like to welcome and introduce John Schweitz as Valmont's Chief Financial Officer.

John Schweitz (Chief Financial Officer)

Thank you Abner Good morning everyone and thank you for joining us today. I'd like to start by thanking Abner and the board for their confidence in me as I step into the CFO role. I appreciate the opportunity to build upon the strong foundation already in place. I look forward to working closely with our teams across Valmont to reinforce financial discipline, support our strategy and deliver long term value for our customers, employees and shareholders. Turning to Slide 9 net sales of $1.03 billion increased 6.2% year over year, driven by sales growth and infrastructure, particularly North America. Utility operating income increased to 1:55.6 million and operating margins improved 190 basis points to 15.1%, reflecting stronger performance in both segments. Our tax rate remained steady at approximately 26%. Diluted earnings per share was $5.51, a 27.5% increase from prior year. Moving to our Segment results on Slide 10, I want to start by highlighting a change to our infrastructure product Line revenue, reporting that beginning this quarter we have realigned to better reflect the markets that we serve and how we manage them. We are now reporting our North America Infrastructure businesses separately and have consolidated International Infrastructure and Global Solar into one product line. A quarterly recast for 2025 reflecting these updates is included in the appendix of today's presentation. Now moving to Infrastructure results sales of 806 million grew 14.1% year over year. North America utility sales increased 27.4% driven by pricing and higher volumes. Sales in North America lighting and transportation declined 4.4% due to the production challenges. As noted by Abner. North America coating sales increased 13.3% supported by healthy infrastructure and data center demand. North America Telecommunications sales decreased 3.9% as volume softened due to a shift in carrier spending allocation. International infrastructure sales increased 6.9% due to favorable foreign exchange impacts. Operating income was $143 million or 17.8% of net sales, an increase of 110 basis points as a result of our pricing actions and fixed cost leverage. Turning to Slide 11 first quarter agriculture sales decreased 15.1% year over year to 227 million, driven by lower international sales. North America agriculture increased 1.5% year over year. Importantly, operating margin improved to 14.8% in the quarter, returning to double digit levels. This reflects the benefits of our continued focus on pricing, cost management and risk mitigation. Following up on last quarter, we reached a settlement on the Material Brazil legal matter we previously discussed and it was resolved within our existing accrual. Moving to Slide 12 for cash liquidity and capital allocation, we had another quarter of healthy operating cash flows generating 103.5 million. We ended the quarter with 1 60.2 million of cash and our net debt leverage is approximately 1 times during the quarter. We invested 35 million in CapEx primarily for utility capacity expansion. As previously discussed, we finalized the acquisition of Rational Mines and the purchase of the remaining minority shares of Conceal Fab for a combined $20 million. We returned $71 million to shareholders, including $13 million through dividends and $58 million through share repurchases In February. We also increased our quarterly dividend by 13% to $0.77 per share or $3.08 on an annualized basis. Turning to our 2026 outlook on Slide 13, we are increasing our full year EPS guidance. Net sales are projected to be between 4.2 to 4.4 billion. We are increasing infrastructure sales to be between 3.3 to 3.45 billion. This is offset by a decline in agriculture with sales to be between 0.9 to 0.95 billion in infrastructure. The increase is driven by North America Utility. We expect pricing and volumes to remain elevated throughout the year in agriculture. Given recent changes in market conditions and project economics primarily related to the Middle East conflict, we have become more selective in our pipeline aligning with our disciplined approach and focus on long term value. Diluted earnings per share are projected to be in the range of $21.50 to $23.50 at midpoint. This represents a 4.8% growth in revenue and a 17.9% growth in adjusted EPS. Higher pricing and volumes in North America Utility are driving the increase in our EPS target. Also included in our EPS guidance is the impact of the tariff changes that went into effect on April 6th. These primarily affect a portion of our North America Utility production source from Mexico. Importantly, we are mitigating much of this exposure by using primary US melt and poured steel which limits the incremental section 232 tariff to 10%. Looking ahead, we remain focused on what we can control and prioritizing opportunities that support sustainable higher quality earnings. With that, I'll turn the call back to Avner to review our value drivers.

Abner

Thank you, John. Moving to Slide 14, we continue to advance our 3 core value drivers. Catching the infrastructure wave, positioning agriculture for growth and executing disciplined resource allocation. These priorities are guiding how we invest in capacity, strengthen our product and technology offerings and align our cost structure supporting improved performance and more consistent profitable growth over time. We continue to drive above market growth in infrastructure through targeted investments in capacity and operational efficiency. And we're seeing the benefits reflected in our sales volume. In agriculture, we are growing our presence in emerging markets and investing in aftermarket and technology to improve the mix of higher margin business. Finally, our disciplined resource allocation initiatives are on track. Overall, we are confident in our 2026 performance and and achieving our long term value driver targets. We look forward to sharing more details at our upcoming Investor Day on June 16. Before we close, I want to thank the entire Valmont team for their efforts navigating a dynamic first quarter. With that, I will now turn the call over to Renee.

Renee Campbell

Thank you, Abner. At this time the operator will open up the call for questions. Thank you. At this time we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your Question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys to allow as many questions as possible, please limit yourself to one question and one follow up. One moment while we poll for questions. Our first question is from Nathan Jones with Stifel. Please proceed.

Nathan Jones (Equity Analyst at Stifel)

Good morning, everyone.

Abner

Hey, good morning, Nathan.

Nathan Jones (Equity Analyst at Stifel)

I guess I'll start with a question on the 232 tariffs. We've been getting a lot of questions from investors, as I'm sure you guys have as well. I think the anticipation was probably that these new tariffs were going to be more impactful to Valmont than you guys are talking about them being. Can you maybe just provide a little bit more color on. I know John said using poured and melted U.S. steel helps protect from that, but can you just. Any more color you can give us around that and then how you plan to mitigate that with customers. Thanks.

Abner

Thanks. John, you want to take that one?

John Schweitz (Chief Financial Officer)

Yep. Thank you. So, Nathan, first, of course we. We welcome the clarity that we got on April 6 with the updated regulations. So our understanding of these rules are incorporated in our guidance, as you mentioned. Really the upshot of this guidance is that we need to maximize US Poured and melted steel. So that's what we've been doing for the last few quarters is maximizing that and that's what we'll continue to do. Of course, tariffs are changing. They adjust. And as they adjust, we adjust our pricing and also our supply chains. This takes a little bit of time to take hold, but overall we feel comfortable with it. And as we've mentioned on prior calls, the objective for us is to be tariff cost, profit neutral. And so. And that's what's incorporated in our guidance. That's helpful. Thanks.

Nathan Jones (Equity Analyst at Stifel)

I guess my second question is around the U.S. utility business for the last 12 to 18 months. I think the company's been talking about know effectively being out of capacity and having to increase capital expenditure to add capacity, which it's been doing. But I think the story was kind of that a dollar of capital expenditure was going to increase capacity by a dollar and the business is clearly outperforming the level of capital expenditure that's going into it. Can you talk a little bit about where the additional productivity is coming from or know how we should think about a dollar of capital expenditure now translating into maybe more than a dollar of capacity. And thanks for taking my questions.

Abner

Sure. So we are. Let me start off. We're very pleased with our quarterly results. I mean, we've grown utility by more than 27%. And to your point, a lot of the growth is driven by the strength in the environment with, coupled with our investment in capacity. Capital is clearly one of the areas that we're investing to increase our capacity. And we're going to invest between 170 to 200 million dollars this year, with the majority of that going into utility. So capital is one lever, but let me just address it a little broader. Right? It's a whole system of capacity increases. So we have our capital, we have our operational capacity, and we have our commercial capacity. So just to give a little bit more flavor to that, while we're adding capital every day, our employees go into the shop and look for opportunities to increase our throughput. And we are getting a lot of innovation, continuous improvement to drive the increased output. So as an example, in one of our plants, we were looking at bottlenecks and we noticed that in some cases, if we add some labor, we will increase our output. And we did a quick, very successful hiring event and we were able to increase the capacity at that site. We had another site where we saw that the flow was not perfect. We did a couple of Kaizen events. We got the flow significantly improved, just to name another example. So we have over, you know, we have 24 facilities in the U.S. each one of them. We are taking many actions to drive the increased output and we should see this Trend continuity into Q2. We're expecting to see a very strong, a similar type growth or even better in the second quarter. And in fact, we should expect to see a very strong year in utility as well. So just to sum it up, we're taking many initiatives, capital being one of them. We are seeing that with capital, we're driving more than one for one. So that is another area of an improvement. And we look forward to keep on capitalizing on the strength of this market.

Nathan Jones (Equity Analyst at Stifel)

Thanks very much for taking the questions.

OPERATOR

Our next question is from Chris Moore with CJS Securities. Please proceed.

Chris Moore (Equity Analyst at CJS Securities)

Hey, good morning, guys. Thanks for taking a couple. Yeah. Recognizing you don't necessarily provide backlog on a quarterly basis, can you give any big picture thoughts in terms of, you know, kind of what it looks like today versus, you know, kind of year over year, sequentially?

Abner

Yes, sure. So, you know, we are seeing sequentially, our backlog is relatively flat, but it has been up year over year. And you know, I think it's important to note the backlog reflects the strength of our business, but it is only a data point reflecting the strength in that market. So just to give a little Bit more color. We do, you know, we do take a approach to managing our lead times. We're currently improved our lead times. We have best lead times in the industry right now between 42 to 44 weeks on our bid market. We have a lot of projects in the pipeline that don't show up in the backlog with a lot of our alliance customers. It actually, it's an advantage to us not to have them in the backlog. So you don't have to take, you know, too much risk as it relates to the pricing of steel, etc. But overall, I think the most important point is we are seeing unprecedented demand in this market. We are. I mentioned that the IOUs are planning to spend $1.4 trillion through 2030, which is significantly higher than we've seen just recently. So that's which was about 1.1 trillion. So call that about 27% increase in their projections. So going into the year we were thinking we're going to grow 8 to 10% on our utility. Well right now this year is going to be much stronger than that. We're probably going to see growth between mid teens to high teens in the utilities space. So overall all indications are this market is robust. We have not seen it like this for decades and we're very pleased on where we are positioned with our backlog, our lead time and our alliance with our customers.

Chris Moore (Equity Analyst at CJS Securities)

Very helpful. Maybe just one on ag. So maybe can you talk a little bit about rising fertilizer prices, potential impact on pivot demand? Not necessarily for 26. It sounds like there could be kind of lag in demand, but what might be felt in 27 and just how much visibility you have on that front.

Abner

But there's not great visibility into 2027. But the way we look at it, fertilizer is an input cost, significant input cost. It will have impact on farmers. We'll put more pressure on their profitability and they have been under pressure. So at this point we continue to expect to have a challenging environment in 2026. And we're focused on areas where we could drive farmer profitability. We're supporting our farmers with our aftermarket, our technology enabling our dealers to ensure they can improve their profitability. And as we know these markets have strong long term fundamentals and as the market will improve, we'll be ready to capitalize.

Chris Moore (Equity Analyst at CJS Securities)

Terrific. I'll leave it there. Thanks so much.

OPERATOR

Our next question is from Tomo Sano with JP Morgan. Please proceed.

Tomo Sano (Equity Analyst at JP Morgan)

Hello everyone and John, congrats on your new role.

John Schweitz (Chief Financial Officer)

Thank you.

Tomo Sano (Equity Analyst at JP Morgan)

Thank you. And for North America Utility. Could you comment on any changes in pricing or the competitive landscape on pricing, power infrastructures? What gives you confidence in your ability to sustain or enhance pricing, especially as competitive dynamics evolve?

Abner

Well, thank you for the question. The market environment continues to be extremely strong right now. We always focus on value pricing. We are the leader in the market with the highest market share and we provide the utilities with mission critical products and solutions supported by our strength in our engineering, our reliability, quality on time delivery and in this environment. There's very strong value in our offering, especially in a constrained environment. And the entire industry has been very disciplined around pricing. So while there will continue to be growth in this area and our competitors will continue to invest, we remain very disciplined taking pricing leadership and as evident by our Q1 performance, which had significant pricing in our performance, pretty much demonstrates that there's no concern regarding pricing in this environment.

Tomo Sano (Equity Analyst at JP Morgan)

Thank you Avner. And follow up on AG margins have held up well despite lower sales. If the sales headwinds persist, what structural mix factors do you see as most critical for sustaining or even expanding margins in this segment, please?

John Schweitz (Chief Financial Officer)

Thank you Tomo. So as you mentioned, AG margins did well this quarter. We're pleased with the result at 14.8%. So that was driven as you know, by favorable pricing and also an improved product mix and regional mix as we look through the rest of the year. As you mentioned, there are some headwinds. And so if we look at our margins for the rest of the year in ag, we have the seasonality impact of moving more towards international less in North America. That will put some pressure on our margins for the rest of the year. Also the impact of the fixed cost deleverage in our Dubai facility will also add pressure to our margins. So I'd say that we'll certainly this year we will be in the mid teens to low teens for margins in AG this year.

Tomo Sano (Equity Analyst at JP Morgan)

Thank you, Joan. Yep.

OPERATOR

Our next question is from Brian Drab with William Blair. Please proceed.

Brian Drab (Equity Analyst at William Blair)

Thanks for taking the questions. Like Nathan, most of the questions lately have been around the section 232. So I just wanted to ask one, maybe the same question just in a little bit different way. But you have in the 10K I think that there's about $220 million worth of product in the utility business coming in from Mexico and I haven't found that 10% figure anywhere. So I'm just curious, is that a part of the new structure? Is it stated that it's 10%? If you're using melted and poured US steel for finished product coming in from Mexico, or is that just kind of how you know your assessment after looking through everything? And if so, you know, given it's 10%, is this, you know, do you put that on the 220 or so? So it's an incremental, roughly 20 million in cost that you have to absorb.

John Schweitz (Chief Financial Officer)

So thank you for the question. So, yes, 10% is part of the new regulation and you're thinking about this the right way. So that's approximately the number from Mexico, from our output from Mexico and export to the United States. That varies year by year, as I mentioned earlier about the transition of our supply chain. So the goal here is to maximize the US Melt and pour steel, and that will reduce our tariff exposure and cost over time. That's what the teams are doing. And that will take some time, but we're making rapid progress in making sure that we adjust that to maximize our U.S. melt and pour steel. That will bring us closer to the incremental 10%.

Brian Drab (Equity Analyst at William Blair)

Okay, but you can't size the incremental costs for us at all. You don't want to quantify that today. I don't want to press you too much on it, but that's what we're looking for.

John Schweitz (Chief Financial Officer)

Yeah. So I'd say your general range, how you're thinking about it, is approximately. Right. And, you know, I'll just add, right, we're seeing, we're seeing strong growth. Right. So that 20, 220 is going to easily be, you know, 250. So but as we grow and capitalize on the market, we'll, we'll pay more tariffs. But of course, we make very strong margins out of our plant in Mexico. So no concerns on our end. Right.

Brian Drab (Equity Analyst at William Blair)

Well, and it all just seems like my conclusion at the moment is kind of negligible given the size of that business and given the pricing power and given the pricing dynamics across the industry and what you're doing operationally. So. But thanks for the clarification on the utility business. Also, you mentioned that the price and volume drove the growth you mentioned in the press release. You listed price first in the description of that strength. Can you just talk about the breakdown of price versus volume driving the business? And then also is the price being supported more just by steel kind of skyrocketing, or is it and secondarily by the market demand.

John Schweitz (Chief Financial Officer)

Okay, so thanks for the question. So if we look at Q1, the 27% increase was driven primarily by price, as you note. It's important to note, though, that volume was an important contributor as well. For Q1 that was in the double digits. As we look through the rest of the year, Abner noted mid teens to upper teens and growth rate expectations for for utility. We expect that, Brian, to be a balance between price and volume for 2026 as it is. To your question about the price environment, Abner gave some good comments on what we're seeing in the price environment. To Abner's comments, We are pricing to market. We're constantly testing the top of that market. Yes, some of that is passed through contract pricing with regards to material escalations and then also logistics escalations. So yes, that's a component of it. But as Abner mentioned, we have confidence in the overall pricing environment for utility.

Brian Drab (Equity Analyst at William Blair)

Perfect. Okay, thank you very much.

OPERATOR

We have reached the end of our question and answer session. I will now turn the call over to Renee Campbell for closing remarks.

Renee Campbell

Thanks everyone for joining us today. A replay of this call will be available for playback on our website and by phone for the next seven days. We look forward to speaking with you again next quarter. These slides and the accompanying oral discussion contain forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. These statements are based on assumptions made by management considering its experience in the industries where Valmont operates, perceptions of historical trends, current conditions, expected future developments and other relevant factors. It is important to note that these statements are not guarantees of future performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control and assumptions. While Management believes these forward looking statements are based on reasonable assumptions, numerous factors could cause actual results to differ materially from those anticipated. These factors include, among other things, risks described in Valmont's reports to the Security and Exchange Commission, the Company's actual cash flows and net income, future economic and market circumstances, industry conditions, company performance and financial results, operational efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, geopolitical risks and actions and policy changes by domestic and foreign governments, including tariffs. The Company cautions that any forward looking statements in this release are made as of its publication date and does not undertake to update these statements except as required by law. The Company's guidance includes certain non GAAP financial measures, adjusted diluted earnings per share and adjusted effective tax rate presented on a forward looking basis. These measures are typically calculated by excluding the impact of items such as foreign exchange, acquisitions, divestitures, realignment or restructuring expenses, goodwill or intangible asset impairment, changes in tax laws or rates, change in redemption value of redeemable non controlling interests and other non recurring items. Reconciliations to the most directly comparable GAAP financial measures are not provided, as the Company cannot do so without unreasonable effort due to the inherent uncertainty and difficulty in predicting the timing and financial impact of such items. For the same reasons, the Company cannot assess the likely significance of unavailable information which could be material to future results.

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