Valmont Reports Fourth Quarter and Full Year 2021 Results; Achieved Record Annual Sales of $3.5 Billion – QNT Press Release

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Valmont Industries, Inc. (NYSE:VMI), a leading global provider of engineered products and services for infrastructure development and irrigation equipment and services for agriculture, today reported financial results for the fourth quarter and fiscal year ended December 25, 2021.

Fourth Quarter 2021 Highlights (all metrics compared to Fourth Quarter 2020 unless otherwise noted)

  • Record Net Sales of $963.3 million increased 20.7%, with growth in all segments led by significantly higher Irrigation sales
  • Operating Income of $50.8 million, or 5.3% of sales ($85.6 million or 8.9% adjusted1) compared to $54.1 million or 6.8% of sales ($68.8 million or 8.6% adjusted1)
  • Diluted Earnings per Share (EPS) of $1.25 ($2.73 adjusted1) compared to $1.68 ($2.20 adjusted1)
  • Repurchased 8,800 shares of company stock for $2.0 million at an average price of $227.22 per share
  • Incurred a higher GAAP tax rate of 35.3% due to recognizing a $5.0 million valuation allowance against deferred tax assets for the wind structures subsidiary; tax rate on an adjusted basis was lower, driven by a more favorable geographic mix of earnings
  • Record year-end backlog of more than $1.6 billion, an increase of more than 40.0% since the end of fiscal 2020, and an increase of more than 5.0% since the end of third quarter 2021, reflecting improved pricing and continued strong market demand across the portfolio

Full Year 2021 Highlights (all metrics compared to Full Year 2020 unless otherwise noted)

  • Record Net Sales of $3.5 billion, an increase of 20.9%

    • Sales growth in all segments, led by Irrigation which grew 59.3% to a record $1.03 billion
  • Operating income improved to $286.8 million or 8.2% of sales ($334.0 million or 9.5% adjusted1), compared to $226.0 million or 7.8% of sales ($268.5 million or 9.3% adjusted1)

    • Higher operating income was led by favorable pricing and higher volumes, including significant volume growth in Irrigation, and operating margins of nearly 11.0% in Engineered Support Structures
  • Diluted EPS of $9.10 ($10.92 adjusted1) compared to $6.57 ($8.18 adjusted1)
  • Capital expenditures were $108.0 million, including approximately $45.0 million for strategic investments, which included a new spun concrete utility distribution pole facility in Bristol, Indiana, capacity expansion of infrastructure facilities in Mexico, and technology investments across the organization, all to support global market growth
  • Deployed $313.0 million of cash for two acquisitions, both in the Irrigation segment: Prospera Technologies Ltd. and PivoTrac, accelerating the Company's global Ag Tech growth strategy
  • Returned $67.5 million of capital to shareholders through share repurchases of $26.1 million and dividends of $41.4 million
  • Enhanced ESG, a top strategic imperative and part of the Company's long-standing tagline of 'Conserving Resources. Improving Life.® '

    • Enhanced the 2021 Valmont Sustainability Report and launched a dedicated Sustainability website, while updating key disclosures and highlighting Valmont products and solutions that support ESG principles
    • Established new environmental and diversity goals for 2025 and 2030
    • Initiated Global Reporting Initiative (GRI) reporting to align with current GRI Standards and alignment with Sustainability Accounting Standards Board (SASB), Task Force on Climate-Related Financial Disclosures (TCFD) frameworks, and four of the seventeen United Nations Sustainable Development Goals (SDGs):

      • SDG 2: Zero Hunger
      • SDG 7: Affordable and Clean Energy
      • SDG 9: Industry, Innovation and Infrastructure
      • SDG 11: Sustainable Cities and Communities

Key Financial Metrics

Fourth Quarter 2021

GAAP

 

Adjusted1

 

(000's except per share amounts)

12/25/2021

4Q 2021

 

12/26/2020

4Q 2020

 

vs. 4Q 2020

 

12/25/2021

4Q 2021

 

12/26/2020

4Q 2020

vs. 4Q 2020

Net Sales

$

963,278

 

 

$

798,377

 

20.7%

 

$

963,278

 

 

$

798,377

 

20.7%

Operating Income

 

50,754

 

 

 

54,139

 

(6.3)%

 

 

85,555

 

 

 

68,799

 

24.4%

Operating Income as a % of Net Sales

 

5.3

%

 

 

6.8

%

 

 

 

8.9

%

 

 

8.6

%

 

Net Earnings

 

26,856

 

 

 

35,815

 

(25.0)%

 

 

58,751

 

 

 

46,856

 

25.4%

Diluted Earnings Per Share

$

1.25

 

 

$

1.68

 

(25.6)%

 

$

2.73

 

 

$

2.20

 

24.1%

Average Shares Outstanding

 

21,523

 

 

 

21,342

 

 

 

 

21,523

 

 

 

21,342

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2021

GAAP

 

Adjusted1

 

(000's except per share amounts)

12/25/2021

FY 2021

 

12/26/2020

FY 2020

vs. FY 2020

 

12/25/2021

FY 2021

 

12/26/2020

FY 2020

vs. FY 2020

Net Sales

$

3,501,575

 

 

$

2,895,355

 

20.9%

 

$

3,501,575

 

 

$

2,895,355

 

20.9%

Operating Income

 

286,785

 

 

 

225,953

 

26.9%

 

 

334,049

 

 

 

268,462

 

24.4%

Operating Income as a % of Net Sales

 

8.2

%

 

 

7.8

%

 

 

 

9.5

%

 

 

9.3

%

 

Net Earnings

 

195,630

 

 

 

140,693

 

39.0%

 

 

234,811

 

 

 

175,302

 

33.9%

Diluted Earnings Per Share

$

9.10

 

 

$

6.57

 

38.5%

 

$

10.92

 

 

$

8.18

 

33.5%

Average Shares Outstanding

 

21,493

 

 

 

21,425

 

 

 

 

21,493

 

 

 

21,425

 

 

"We achieved record sales for the second consecutive quarter through continued price management and strong market demand, while remaining highly focused on operational excellence and execution," said Stephen G. Kaniewski, President and Chief Executive Officer. "Our team delivered a solid fourth-quarter performance as we maintained our relentless focus on serving our customers in a challenging macro environment. I am very pleased with our ability to effectively manage our operations to meet growing demand despite continued wide-spread inflationary pressures and supply chain volatility. We also benefited from actions to improve productivity and control costs, which helped offset the margin impact of COVID-related labor inefficiencies and absenteeism in certain facilities during the quarter. Through these actions, we grew fourth quarter adjusted operating income 24.4 percent year-over-year and delivered adjusted diluted earnings per share growth of 26.0 percent. These results further demonstrate the value of our long-term strategy led by sustainable growth initiatives across our businesses, operational excellence and price leadership."

Kaniewski continued, "Reflecting on 2021 and our 75th year as a company, our full-year results exceeded the goals we set at the beginning of the year, despite an extraordinary business environment, demonstrating the resiliency of our global team of 11,000 employees. We achieved record net sales of $3.5 billion and delivered adjusted earnings per share of $10.92, an increase of 33.5 percent year-over-year. These results were driven by continued pricing actions, market expansion and investments in innovative technologies. We improved return on invested capital through productivity enhancements and lean efforts while strategically expanding capacity. I am extremely proud of our team and want to congratulate and thank them for their dedication, hard work, and execution. Together, we remain committed to providing our customers with vital infrastructure and solutions to advance agricultural productivity with an unwavering focus on employee safety and increasing shareholder value."

Fourth Quarter 2021 Segment Review

Infrastructure

Utility Support Structures Segment (33.6% of Sales)

Steel, concrete and composite structures for utility markets, including transmission, distribution, substations, renewable energy generation equipment

Sales of $324.0 million grew 19.5% year-over-year. Sales growth was driven by significantly higher pricing and higher sales of solar tracker solutions driven by utilities' continued investments in grid modernization and renewable energy markets, partially offset by lower volumes of offshore wind structures.

Global backlog of $774.0 million is indicative of the long-term market drivers of grid modernization and strengthening renewable energy markets globally.

Operating Income was $6.5 million or 2.0% of sales ($36.9 million or 11.4% adjusted1) compared to $25.6 million or 9.4% of sales ($28.0 million or 10.3% adjusted1) in 2020. GAAP operating income includes pre-tax charges of $27.9 million attributed to the offshore wind structures product line, due to an impairment of long-lived assets. Adjusted operating income increased due to favorable pricing and a more favorable mix of products.

Engineered Support Structures Segment (30.3% of Sales)

Poles, towers and components for the lighting, transportation and wireless communication markets, engineered access systems, integrated structure solutions for smart cities, and highway safety products

Sales of $291.9 million increased 14.0% year-over-year led by favorable pricing and higher volumes of wireless communication products.

Lighting and transportation sales of $188.2 million increased 3.1% year-over-year, as favorable pricing and higher international sales more than offset lower volumes in North America, primarily in transportation markets.

Wireless communication products sales of $76.1 million increased 50.9% year-over-year. Higher demand globally due to wireless carriers increasing capital investments in 5G buildouts, and favorable pricing led to the sales growth.

Access Systems sales of $27.6 million increased 20.2% year-over-year, primarily due to improved end markets in Australia.

Global backlog increased more than 50.0% year-over-year to $377.0 million, indicative of continued investments in transportation infrastructure and growing demand in wireless communications markets and 5G deployment.

Operating Income improved to $29.2 million or 10.0% of sales compared to $19.2 million or 7.5% of sales ($24.4 million or 9.5% adjusted1) in 2020. Profitability improvement was driven by favorable pricing and improved fixed cost leverage, partially offset by lower North American transportation volumes.

Coatings Segment (10.2% of Sales)

Galvanizing, painting and anodizing services to preserve and protect metal products

Sales of $98.2 million increased 9.9% year-over-year due to higher average selling prices and sales from the new greenfield facility in Pittsburgh, PA that commenced operations in 2021.

Operating Income was $10.3 million or 10.5% of sales compared to $9.4 million or 10.5% of sales ($11.8 million or 13.2% adjusted1) in 2020. Profitability was impacted by operational impacts due to COVID-related labor inefficiencies, pricing actions that did not fully recover broad-based inflation, and a higher mix of internal volumes.

Agriculture

Irrigation Segment (28.7% of Sales)

Center pivots and linear irrigation equipment for agricultural markets, including parts, services, and tubular products, and advanced technology solutions for water management and precision agriculture

Global sales of $276.8 million increased 38.9% year-over-year due to higher average selling prices, higher volumes in all markets, particularly North America and Brazil, and higher technology sales.

North American sales of $150.5 million grew 55.1% compared to 2020. Sales growth was led by favorable pricing, higher volumes due to continued strength in agricultural markets and higher industrial tubing sales.

International sales of $126.3 million grew 23.5% year-over-year. Sales growth was led by continued strong demand in Brazil, Europe and Australia, and ongoing deliveries of the large Egypt project which commenced in the fourth quarter of 2020.

Full-year technology sales of $97.9 million increased more than 45.0% year-over-year, driven by growers' increasing demand for connected crop management and advanced analytics to reduce input costs, increase productivity and improve crop yields.

Global backlog increased 43.5% year-over-year to $471.0 million, demonstrating the underlying strength in agricultural markets globally.

Operating Income was $28.6 million, or 10.3% of sales ($33.0 million or 11.9% adjusted1) compared to $22.3 million or 11.2% of sales ($25.3 million or 12.7% adjusted1) in 2020. Operating income increased due to higher volumes and pricing actions. Operating margins were partially impacted by higher input costs that were not fully recovered by price and incremental SG&A expense from the Prospera acquisition completed in May 2021.

Non-Cash Impairment Charge on Long-Lived Assets

Valmont has previously highlighted significant, adverse challenges in the wind energy market in Northern Europe. The market environment has remained extremely competitive, despite the recent approval of protective tariffs in that region. A required impairment test in November 2021 showed that the offshore and other complex steel structures reporting unit will not generate sufficient cash flows to recover the carrying value of its long-lived assets. As a result, a $27.9 million non-cash, pre-tax impairment of customer relationship intangible asset, trade name, and property, plant, and equipment was recognized.

Balance Sheet, Liquidity and Capital Allocation

Year-to-date cash flows from operations were $65.9 million, primarily reflecting higher levels of net working capital to proactively manage supply chain volatility and support strong customer demand. At the end of the fourth quarter, cash and cash equivalents were $177.2 million. Valmont purchased $2.0 million of company stock in the fourth quarter and $121.9 million remains on the current authorization with no expiration. During the quarter, Fitch reaffirmed the Company's BBB-/Stable credit rating.

Updating Full Year 2022 Financial Outlook and Key Assumptions

The Company is increasing its 2022 full-year net sales and diluted earnings per share outlook from the previous indications that were communicated last quarter, and providing key assumptions for the year.

  • Net Sales estimated to be $3.8 – $4.0 billion, an increase of 9.0% – 14.0% vs. prior year
  • Unfavorable foreign currency translation impact of approximately 1.0% of Net Sales
  • Diluted Earnings per Share estimated to be $11.55 – $12.30 GAAP ($12.25 – $13.00 adjusted1)
  • Tax rate of approximately 25.0%
  • Capital expenditures to be in the range of $110.0 – $120.0 million to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives

Kaniewski continued, "As we turn our focus to this year, the safety and well-being of our employees remains our number one imperative, while we continue to execute and drive growth and performance. We entered 2022 from a position of strength and significant momentum in our business, with a team driven by our core values to deliver results for our stakeholders. This momentum is accelerating through the early stages of the year, and we are increasing our 2022 outlook due to several positive factors. Our record backlog of more than $1.6 billion reflects strong global market demand across the portfolio, and our customers' confidence in our ability to deliver products and innovative solutions. We continue to implement pricing strategies to recover the impact of broad-based inflation. Additionally, our strong balance sheet and cash flows give us flexibility to execute our long-term strategic plan. We remain focused on long-term growth, with an emphasis on ESG principles, return on invested capital, operational excellence and recurring technology revenue. We look forward to delivering another year of strong financial performance in 2022."

A live audio discussion with Stephen G. Kaniewski, President and Chief Executive Officer, and Avner M. Applbaum, Executive Vice President and Chief Financial Officer, will be accessible by telephone on Thursday, February 17, 2022 at 8:00 a.m. CDT by dialing 1-877-407-6184 or 1-201-389-0877 (no Conference ID needed), or via webcast by pointing browsers to this link: Valmont Industries 4Q and Full Year 2021 Earnings Conference Call. A slide presentation will simultaneously be available for download on the Investors page at valmont.com. A replay of the event can be accessed two hours after the call at the above link or by telephone at 1-877-660-6853 or 1-201-612-7415. Please use conference identification number 13726874. The replay will be available through 10:59 p.m. CST on February 24, 2022.

About Valmont Industries, Inc.

For over 75 years, Valmont® has been a global leader in creating vital infrastructure and advancing agricultural productivity. Today, we remain committed to doing more with less by innovating through technology. Learn more about how we're Conserving Resources. Improving Life.® at valmont.com.

Concerning Forward-Looking Statements

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, the continuing and developing effects of COVID-19 including the effects of the outbreak on the general economy and the specific economic effects on the Company's business and that of its customers and suppliers, 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.

1 Please see Reg G reconciliation to GAAP measures at end of document

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VALMONT INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in thousands, except per share amounts)

(unaudited)

 

 

Fourth Quarter

 

Year-to-Date

 

13 Weeks Ended

 

Year Ended

 

 

 

 

 

 

 

 

 

25-Dec-21

 

26-Dec-20

 

25-Dec-21

 

26-Dec-20

Net sales

$

963,278

 

 

$

798,377

 

 

$

3,501,575

 

 

$

2,895,355

 

Cost of sales

 

740,994

 

 

 

593,796

 

 

 

2,617,686

 

 

 

2,129,841

 

Gross profit

 

222,284

 

 

 

204,581

 

 

 

883,889

 

 

 

765,514

 

Selling, general and administrative expenses

 

165,034

 

 

 

150,442

 

 

 

590,608

 

 

 

522,923

 

Impairment of goodwill and intangible assets

 

6,496

 

 

 

 

 

 

6,496

 

 

 

16,638

 

Operating income

 

50,754

 

 

 

54,139

 

 

 

286,785

 

 

 

225,953

 

Other income (expense)

 

 

 

 

 

 

 

Interest expense

 

(11,146

)

 

 

(10,509

)

 

 

(42,612

)

 

 

(41,075

)

Interest income

 

298

 

 

 

443

 

 

 

1,192

 

 

 

2,374

 

Gain on investments (unrealized)

 

364

 

 

 

1,341

 

 

 

1,920

 

 

 

2,443

 

Other

 

2,501

 

 

 

1,724

 

 

 

12,798

 

 

 

3,073

 

Other income (expense), net

 

(7,983

)

 

 

(7,001

)

 

 

(26,702

)

 

 

(33,185

)

Earnings before income taxes

 

42,771

 

 

 

47,138

 

 

 

260,083

 

 

 

192,768

 

Income tax expense

 

15,092

 

 

 

10,443

 

 

 

61,414

 

 

 

49,615

 

Equity in (loss) of nonconsolidated subsidiaries

 

135

 

 

 

(249

)

 

 

(944

)

 

 

(1,004

)

Net earnings

 

27,814

 

 

 

36,446

 

 

 

197,725

 

 

 

142,149

 

Less: earnings attributable to non-controlling interests

 

(958

)

 

 

(631

)

 

 

(2,095

)

 

 

(1,456

)

Net earnings attributable to Valmont Industries, Inc.

$

26,856

 

 

$

35,815

 

 

$

195,630

 

 

$

140,693

 

 

 

 

 

 

 

 

 

Average shares outstanding (000's) – Basic

 

21,227

 

 

 

21,184

 

 

 

21,193

 

 

 

21,315

 

Earnings per share – Basic

$

1.27

 

 

$

1.69

 

 

$

9.23

 

 

$

6.60

 

 

 

 

 

 

 

 

 

Average shares outstanding (000's) – Diluted

 

21,523

 

 

 

21,342

 

 

 

21,493

 

 

 

21,425

 

Earnings per share – Diluted

$

1.25

 

 

$

1.68

 

 

$

9.10

 

 

$

6.57

 

 

 

 

 

 

 

 

 

Cash dividends per share

$

0.500

 

 

$

0.450

 

 

$

Full story available on Benzinga.com

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