Q4 2019 Earnings Call
Greetings and welcome to the Valmont Industries' fourth quarter and for your 2019 earnings Conference call. At this time of participants really listen only mode.
Sure Retrocession will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press Star Zero Wonder telephone keypad as a reminder, this conference is being recorded.
So my pleasure to introduce your host relay Campbell, Vice President Investor Relations in corporate Communications. Please go ahead.
Thank you Kevin Good morning, everyone and welcome to Valmont Industries' fourth quarter and full year 2019 earnings call with me today are Steve Kaniewski, President and Chief Executive Officer, Mark Jaksich, Executive Vice President and Chief Financial Officer, and Kim Frances Senior Vice President and.
Corporate controller.
This morning, Steve will provide a brief summary of our fourth quarter and full year results and Mark will provide additional details on financial performance as well as our outlook for 2020, followed by Q1 day.
Slide presentation will accompany today's discussion and is available for download on the investors page of our website at <unk> Dot com.
A replay of today's call will be available for the next seven days and instructions for accessing it are included in the press release, which was distributed yesterday and also located on the investors page of our website.
Please note that this conference call is subject to our disclosure on forward looking statements, which applies to today's discussion and we'll be right in full at the end of this call.
I would now like to turn the call oversee our president and Chief Executive Officer, Steve Kaniewski.
Thank you were in a good morning, everyone and thank you for joining us.
I'd like to begin this morning by thanking our global team of nearly 10000 associates for their performance this past year.
Well, our full year results did not meet all of our goals, we made significant progress in many areas and 29 team.
And achieve sales growth in three of our four segments.
We elevated our commitment to drive lean and agile throughout the organization and accelerate innovation through new products and services.
We also generated over $200 million and free cash flow through a heightened focus on working capital improvement and we quickly responded to the impacts of historic flooding event last spring minimizing customer and business stirrup disruptions during a period of very strong infrastructure market demand.
All of these accomplishments our real Testament to the operational excellence of all of our global teams.
With that let me turn into a brief recap of our fourth quarter summarized on slide three of the presentation.
Net sales of $683.6 million decline, 2% compared to last year, primarily due to significantly lower sales in two areas of our business access systems and international irrigation.
Sales in North American markets were higher across all segments, despite a challenging agricultural market environment and reduced U.S. industrial production levels.
The higher sales were led by strong demands in wireless communication and transportation markets.
Irrigation technology sales.
Revenue from recent acquisitions and sustained pricing discipline.
During the fourth quarter, we finalized the agreement to purchase the remaining 49% stake in AG sense for $44 million a significant milestone in our technology strategy.
It's profitable recurring revenue model has provided a growth platform for technology sales over the past five years and has accelerated our technology leadership position in the field.
We're excited to welcome the accents team fully into the Valmont family.
Turning to the full year summary on slide four net sales of $2.8 billion were similar to last year.
We achieved sales growth in all segments, except irrigation, which was down nearly 8% compared to 2018.
Similar to other I'd players and representative representative of continued pressure on net farm income.
All segments benefited from disciplined pricing strategy and sales growth from recent acquisitions and we were very pleased to achieve 25% growth in both wireless communication and irrigation technology sales in 29 teams.
Offsetting sales growth were lower utility volumes due to a higher mix of smaller structures and less available capacity.
As well as lower volumes in irrigation and coatings.
In the engineered support structure segment access system products sales were down 12% compared to last year with most of the decline occurring in the fourth quarter.
Recessionary construction markets in Australia led to significantly lower volumes for the year.
Turning to slide five during 2019, we made meaningful advances in our strategy to accelerate innovation and technology into our products and services.
I'd like to take a few minutes to speak to you about some of these key initiatives across our businesses.
In our engineered support structure segment, we have expanded growth of our innovative smart Paul technology solutions, and our increasing investments in product development there.
Investment in Fiveg networks is also accelerating and we're capitalizing on cities are versions to unsightly antenna locations, which is leading to increased demand for small cells structures and integrated concealment.
All of these technologies are necessary elements of the smart city evolution.
And our products have been favorably they've been favorably received by the market.
In our utility business, we're piloting beacon technology on power grid structures. This solution helps utility customers identify and remediate line conditions on a real time basis at the source, reducing the time and cost of shutting down an entire section of the grid.
We also have a dedicated team that utilizes drone technology to quickly assassin identify issues, along power lines, reducing environmental impact and operator costs.
We recently partnered with the local Nebraska utility to take detailed photos of structures along a large power like.
This will allow our customer to quickly and efficiently assets required maintenance work and other issues without needing to use expensive cranes on the right of way.
In our coating segment, our proprietary Gallup track and Belmont coatings connector technologies are unmatched in the industry.
I will try to optimize the zinc application by integrating standard recipes and repeatable processes across all of our global locations.
Strong example of lean and standard work.
The coatings connect their provides customers with real time visibility into their order status with interactive capabilities to communicate specific instructions.
Our strategy to quickly grow customer adoption has led to over 2300 customers using that technology at 31 of our 37 global coatings locations.
In irrigation, we continue to drive our technology leadership position forward.
Technology sales in 2019 grew 25%.
Even by the increased adoption of accidents, which has led to more than 95000 connected devices in the field.
Last month I attended our North American dealer meeting, where we announced valley 365, our newest cloud based single sign on platform for connected crop management.
Valley 365 eliminates the need to switch between multiple applications on the smartphone or other device and the platform allows growers to collect control and analyze data to take action and remediate issues in the field.
One of these applications is valley insights, which was launched in early 2019 with our partner prospered technologies.
Valley insights uses advanced artificial intelligence to virtually detect and provide recommended remediation work <unk> crop health issues.
Grower adoption has exceeded our expectations.
We are already monitoring over 1.5 million acres and expect to monitor up to 5 million acres by the end of this year.
As you can see we continue to increase our investments in technology and new product development.
Two very important strategic pillars of our future growth strategy.
Before I turn the call over to Mark for our financial results and a 2020 outlook I want to briefly comment on the Corona virus situation.
The health and safety of our team in China is our top priority.
We are closely watching the situation and the impact continue to unfold.
As it does our thoughts our with our Valmont, China employees and their families our customers and suppliers and many others who have been impact.
I will now turn the call over to Mark.
Thank you Stephen Good morning, everyone. My comments on the fourth quarter of 2019 are based on comparisons to 2018 adjusted results as outlined in the press release.
Turning to slide six fourth quarter operating income of $55 million were 8.1% of sales was 16.8% below last year, largely driven by the poor sales and margin performance you may access systems product line, which impacted engineered support structure segment results.
In the utility support structures segment profitability was comparable to 2018 as improved performance in North America was offset by unfavorable comparisons in our international businesses, primarily driven by lower sales volumes and timing of large projects.
The irrigation segment profitability was below 2018 due to a lack of international project sales this year.
Coatings profitability was down as well due to some weaker demand from external customers answer my favorable productivity associated with recent acquisitions.
Lower raw material prices led to favorable LIFO expense in 2019 is a decrease of 8.6 million.
Compared to 2018 was realized the increase in net corporate expense was mainly due to higher deferred compensation expense, which is offset the income statement by higher investment income.
Fourth quarter diluted earnings per share of $1.66 decreased 11.2% compared to $1.87 in 2018, the fourth quarter tax rate of 21.2% was lower than 2018 due to differences in the geographic mix of earnings.
Moving to a full results on slide seven operating income of 237.7 million decreased 11.8% compared to last year.
Operating income was 8.6% of sales, which includes a 20 basis point headwind due to increased deferred compensation expense.
As previously mentioned this was offset the income statement by investment income.
In addition, corporate incentive expense decreased by $2.9 million.
The main impacts to operating income this year were $26 million lower earnings from irrigation segment or 90 cents per share and poor performance in the access systems business offsetting these factors wasn't approximately 20 million dollar benefit in life.
Currency translation effects were not significant for the year taken as a whole.
Our effective tax rate for the year was 24%, which was comparable to 2018.
Diluted earnings per share with $7, a six cents was 7% below last year. As you know there were a number of onetime items, we called out during the year. These items are summarized in the appendix or the presentation.
Turning to cash flow highlights on slide eight as expected we delivered very strong operating cash flows of 307.6 million in 2019 compared to 153 million in 2018. The improvement was driven by heightened focus on working capital process improvements, including a meaningful raw.
Decrease in raw material inventory and we successfully negotiated down payments on certain large sales contracts as a result of these efforts and the benefit of a more stable raw material cost environment. We're pleased to have delivered free cash flow conversion that exceeded 1.3 times net earnings for the year.
Turning to capital deployment summary of our accomplishments as shown on slide nine.
Capital spending for the year was $97 million compared to 72 million in 2018, driven by investments in a new steel structures facility in Poland, an expansion of our irrigation facility in the United Arab Emirates, and a new utility concrete structures facility in Fort Meade, Florida, all supporting strategic growth.
Across the businesses.
We deployed $82 million towards three strategic acquisitions in 2018, and the final purchase payment for convert Italia and returned $96 million to shareholders.
Through the share repurchases and dividends ending the year with just over $353 million a cash.
Let me now turn to slide 10 for outlook on 2020.
We expect full year diluted earnings per share to be in the range of $7.30 to $8. The range of earnings per share reflects timing uncertainty related or higher project business.
Our utility NSS segments as well as international irrigation.
We are revising our organic revenue growth projection from a range of 5% to 7% to a range of 4% to 7%, which excludes any future acquisitions.
Revision to the range downward is due to lower expected sales of irrigation segment and the Corona virus situation, which I will speak to further in a few minutes.
Foreign currency translation effects based on current race is expected to be a material and we expect a net tend to 40 basis point improvement in operating margins and average raw material costs, including freight are expected to be stable with 2018 levels.
Full year free cash flow is expected to be not quite as strong as 2018 due to the couple of factors.
First capital expenditures are projected to be between 101 hundred $25 million and includes strategic capacity additions to existing facilities in support of strong market demand in our North America structures businesses, and finishing up some spending from 2018 projects second we expect fewer large sales kind of.
Track down payments in 2020, but otherwise should benefit from continued efforts to improve working capital performance throughout the year.
We expect our after tax return on invested capital to be around 10%.
Our tax rate for the Irrs expected to be approximately 25% based on current tax laws and our estimate of geographic mix of pre tax income.
Turning to life will be.
Beginning in fiscal 2020, we are discontinuing the use of the LIFO inventory method in the U.S., which was the only country where it has allowed this change will provide a better matching of cost the revenues for our product lines and this change will also provide uniformity across all our operations with respect to the method of inventory accounting.
And enhances comparability to prior years results.
Beginning next quarter, our financial reporting will also exclude the previous impact of LIFO from 2019 comparisons.
With respect to the first quarter of 2020, there are a couple of items I'd like to highlight last year's impact of 18 cents per diluted share from the west flooding event is not expected to repeat this year and it'd be utility support structures segment, while we expect full your growth in both our offshore wind and solar tracker businesses.
Sales in the first quarter expected to be lower by a combined $30 million compared to 2018, along with associated lower operating income mainly due to project timing.
For modeling purposes, we expect first quarter revenue for the company to be flat to slightly down compared to 2019 from the lower expected sales the international utility.
Finally, there are some uncertainty around the impact from the current of Iris and our business. We're pleased to report that all of our facilities have resumed production and our operational although a slightly lower capacity levels due to the mandatory quarantine restrictions.
We continue to closely monitored assess the situation.
As of today, we estimate first quarter revenue impact to be $2 million to $4 million, mostly due to mandatory extended factory closures and resulting effects on operational efficiency. These impacts have been included in our full year outlook.
With that I will now turn the call back over to Steve.
Thank you Mark.
This quarter, we celebrated the grand opening of our new steel structures manufacturing facility in Poland. I was excited to personally attend the celebration with their management teams and local employees and we were honored to host several local officials and dignitaries as well as the Poland Minister of energy.
Building this facility as a true center of excellence positions us well to best serve our customers in global infrastructure markets.
Moving to slide 11, and looking ahead to 2020, we're off to a solid start to the year.
Engineered support structures has entered the year with a solid global backlog.
Growth in transportation markets is being driven by continued government investments in infrastructure development.
We expect continued growth of wireless communication products and components and anticipate carriers investments in fiveg to accelerate in the second half of the year.
We expect 2020 sales growth to approach, 10% this year, considering our record growth in 2019 unexpected market delays due to the T mobile sprint merger.
As we have previously said carrier spending can be lumpy from quarter to quarter, which can have a meaningful impact on sales and profitability.
The significant underperformance of our access systems business in Australia, and uncertainty of market recovery associated with a 10 year low and construction levels.
Has led us to reevaluate our market strategy there.
As a result, we are accelerating the strategic analysis of this product line.
This may require for going revenue opportunity opportunities, so identify a path to profitability and an attractive return on invested capital profile that aligns with our stated financial goals.
We're also currently revealing other opportunities to improve ROI see across our businesses and we'll be sharing more details with you next quarter.
In the utility segment, we are starting 2020 with a record year end global backlog of nearly $500 million supported by increased demand across all substrates from investments in great hardening and renewables.
As we have previously mentioned, we are adding capacity to existing north American plants and expect the associated revenue to ramp throughout the year for this segment.
Turning to the coating segment, we expect sales to be similar to 2019, assuming current global industrial production levels remain fairly unchanged.
In the irrigation segment, while we were pleased with higher North American sales in the fourth quarter, we're not yet noticing a significant turnaround in demand.
We are seeing grower sentiment stabilizing in 2020, but us net farm income projections are not expected to substantially improve.
Without a meaningful change to these fundamentals, we expect irrigation segment sales to be flat to down 3% for the year.
In international markets, we expect growth in more developed markets, including Brazil, where we have been strategically expanding our dealer network to meet increased demand.
We have a good line of sight to project business, although as we've said the timing of shipments can be uncertain.
Turning to slide 12 and in summary.
Revenue growth of 4% to 7% this year is being driven by higher volumes and our infrastructure businesses supported by solid backlogs and pricing discipline across all segments.
We expect our coatings businesses to be flat with 2019 levels following us industrial production trends.
We remain cautiously optimistic on irrigation sales growth similar to others in the AG industry.
We are encouraged that raw materials and freight are expected to remain relatively steady which helps stabilize pricing in our markets.
And we will continue to perform against our stated capital allocation goals, while generating good cash flows I will now turn the call back over to Renee.
Thank you Steve Kevin at this time, you may open up the call for questions.
Thank you will not be conducting your question answer session.
I'd like to be placing your question. Please press star one under telephone.
A confirmation Tony will indicate your why isn't the question Q.
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One moment please poll for questions.
Our first question today is coming from Chris Moore from CJS Securities. Your line is now lives.
Good morning, guys.
Just yet our Christian good morning couple of questions on the operating margins.
So given the uncertainty and access systems can you talk a little bit about what's your.
[music].
2020, yes overall operating margin.
It looks like in relation to the.
The volume on operating margin guidance.
Yeah, Chris This is mark I would say first of all if you remember in the third quarter. We had the charge we took on those detention system orders, which will not reoccur suits for we're out of that business now so that would that would certainly help but we called that out but I would say that overall the margins should be pretty solid North America.
And although I think we're going to have some headwind continued headwinds in access systems, probably through the first half of the year depends.
As we start to develop our restructuring plans, we expect that to certainly stabilizes year goes along.
And I present.
The current rate of where access systems is is taken into account in our guidance range and so restructuring should help improve from that point forward.
Got it.
Question on the margins in terms of the.
The U.S. ramp is.
We're talking about 5% for the year you still it's probably going to take you another quarter so to get full capacity there.
Is there much margin impact in the first half on U.S.S., just trying to extend that ramp there.
Yes.
There's obviously some volume that we called out there that it will take once in the second half of the year based on the both the solar projects and some of the improved pricing in our SMB business.
Then it's really the north American capacity adds which will add the 5%.
Volume as we go through the year, So North America, we'll still see a very strong.
Or a very nice gross margin operating margin.
As we kind of ramp through the year, there so really you're going to see a first half of the here maybe a little more depressed in the second half of the year as a combination of both the capacity as well as just the timing of the volume.
Got it I appreciate guys.
Thank you. Our next question is coming from Brian Drab from William Blair. Your line is alive.
Hey, good morning, Thanks for taking my questions.
First one I just wanted to be clear on the capacity additions that you made for the utility segment that you are making.
Are those and in place to the point, where you're able to to handle that.
George order and large orders that are coming through now and.
What's the lead time at this point.
Yeah. So we had done some things in the fourth quarter, particularly related to just personnel that you saw is one of the reason is that we can deliver around 27 million more sequentially from the third quarter that we'll obviously continue as we go through the year. There was some additional capacity additions that.
We put in that are starting to come online now slowly.
And ramping through the first quarter and then into the second quarter, we would expect really things to be in place at the end of the second quarter, So really third and fourth quarter will be at run rates.
Okay, and our you're shipping that large order at this point or what's the timing on the beginning of those shipments.
Yeah, we've been shipping that actually since the third quarter. When it was one of the reasons that the third quarter productivity was hit so hard.
We have been shipping and have ramped shipment of that product.
And that project all along so that has been going and we've been delivering that project.
Okay.
Okay got it and then you mentioned the solar business I'm. Just wondering can you go a little more detail on that that business now you know what what's the.
Are you still expecting strong double digit growth going forward and that that business and and.
What what are the margins there relative to the the corporate average margin and <unk>.
Just how big is that business at this point.
Sure. So what we had said is the business was approximately 80 million well be picked it up and this year and let's say in 2019, we saw a decline based on the project timing.
To the tune of about maybe 25 million.
Based on that we do expect it to be over $100 million as we look into this year.
And from a margin is perspective, we said that would ramp over the course of three years.
As we built some supply chain synergies.
Some comments specifications as opposed to very specific.
And so from as it relates to segment margins, it's a little decreases in the sense of of ER segment margins.
But we wouldnt expect.
Really by 20 say mid 21 that it'd be at segment margins.
Okay, and then I know this is always a little sensitive because of course competitions listening, but I'm. Just wondering you know as you continue to highlight the connected solutions and the technology that your injecting continually into the irrigation.
The men and you know that segment.
Are you seeing any changes and in a share or do you feel like that that's improving your share position in the U.S. or internationally.
It I.
I think long term, we always say that the U.S. market the share doesn't really change significantly from a a pivot systems perspective.
What we are seeing is our installed base more revenue opportunities and so with the.
The connection in the Agsense unit really bringing real productivity for the grower up as well as lower input costs.
That adoption rate has been strong it has the retention rate has been exceptionally strong and so it's really yeah. Obviously its share as a total of everything you go after so from that sense, because we have more rubber opportunity. We believe we're picking it up that way internationally.
It's definitely providing a door, particularly in markets like Brazil, and Europe, where labor is a big component.
That we're seeing real good opportunities there.
As far as our selling opportunities to increase to continue to increase the connected market across those markets.
So there is 250000 environment genes 250000 of our competitive machines.
All of them can take an eight cents unit on them and so we do believe there's still quite a bit of runway in that market.
Great. Thanks, and then can I just ask one last quick clarifying question Thats. My first question now that large order that you know.
No began to ramp began to ramp began to ship late last year, but the size of those shipments I guess, it's kind of what I was wondering does that does that start to ramp.
Materially or or is this kind of run rate per quarter related that project, we're already seeing that in the numbers now and in the yes ordered the way the orders were taken and to be delivered was roughly about 100 million per year.
So that's kind of way that you have to think about those big orders.
Okay.
Alright, thanks very much.
Thank you. Our next question is coming from Jon Braatz from Kansas City Capital. Your line is now lives mourn Steve Moore Mark.
Hey, John.
And the coating segment recently, we've seen zinc prices come down sharply Oh, and I guess my question Mark might be.
Are we going to see some improvement in the coatings margin.
As a result have fallen.
Seeing prices or are you having to pass it on.
Well I think for sure the on the internal business that we do there's a pricing mechanism that passes on long, but in the external markets. No I think work that we're making every attempt to hang onto pricing as best we can.
And that kind of drives from the valmont coatings connector, where we as we continue to.
Drive value for the for the customer hopefully that that's what we're hoping to get out of it was a little bit of sticky. This in pricing as long as we have good performance and so forth. So.
No we're not in some cases, you do get back a little bit here and there, but generally speaking we've generally been able to hang onto pricing with fluctuations, okay, Okay, and maybe I misunderstood I didn't hear well in terms of sort of the.
Expectations for 2020 in terms of volume and revenues did you give any any any guidelines are.
For for the coating segment.
John This is this mark to its we're expecting it to be relatively flat I don't think the growth rate in industrial production is particularly robust right now and that's probably the best indicator.
Across that coding expenses that we watch okay. Okay.
Steve a question on on the Cronto virus.
You know we're hearing some that maybe there was some logistical challenges the emerging in China.
In addition to let's say the direct impact that companies are feeling are you seeing any any difficulties and moving product to the ports or any delays or anything in terms of logistical issues as a result growing of ours.
Yeah in terms of moving to the ports no because we're in provinces that are on the coast. Okay. It's it's where we have to get steel if it comes from a different province as it stands right now is the inter pravin shipments that are most affected because the truckers then have to go into quarantine <unk>. So that's the.
Only place, where we really see the logistics issues occurring now in our case with steel there's enough steel within provinces that we can secure.
It just it interrupts the supply a little bit from who were getting it from and when.
But we can still get it at least at this point.
We've also heard that the government is well aware of the issues.
You know as it pertains to getting supplies moved around and is contemplating let you know loosening some of those restrictions.
That would be helpful. But to date, we really have not seen a dramatic impact it's our south plant was the latest to get going.
And we do have you know still maybe a handful of people that are not able to come back into the plant until their quarantine is finished.
As they were coming from the who Bay Province.
But generally.
You know as Mark called out we right now we see it maybe is a top of maybe $4 million or revenue impact in the quarter.
And again all this is subject to how this thing develops but yes, that's where we're at right all right. Thank you very much.
Thank you as reminder, that star ones replaced the question Q. We ask you. Please ask one question and one follow up the return to the Q.
Next question is coming from Brett Feldman from D.A. Davidson. Your line is now wise.
Great. Thanks, Good morning, I apologize I got on a bit late year.
Just had one Steve I guess, just given the challenges in Australia. Following some of the issues you've had in the offshore business in Europe I.
I guess, you're going to step back how do you think about the portfolio you have today and what should be really core in the focus of Belmont going forward.
Well.
If I take access systems, we really do have an internal compare and contrast.
Our access systems business in Asia does very well.
But it is structured differently it carries a different overhead profile and so it's able to withstand the movements of revenue.
On that project work, you know kind of overtime. So we just believe that we have to go and basically look at the overhead structure within the Australian business.
As a way to really kind of.
Get that back it has been hit by again like I said about a 10 year recession and construction.
So it's just that had very depressed level right now.
Yes, the offshore wind business, we've talked to you overtime about that there was.
A movement to to get utility orders put in there as well for utility masks.
We actually have been successful and have obtained a a fairly sizable order that will ship later at the end of this year and into 2021.
And so keeping that business there at a very tight kind of profile, we are seeing improved margins.
We called that out and we do see that coming through towards again, the tail end of the year and into 2021, there's very long lead times, we just got done the bidding process.
And more successful because of the bankruptcies that occurred with our competitors there so.
They fit with our portfolio of going to market to utilities and or infrastructure development.
We just have to make sure that they are sized appropriately from an overhead.
Standpoint for the project business that they can taken.
Okay, and I again project the business has been asked but I guess on the utility side I mean phenomenal backlog here going into the new year, you look at that pipeline out there and obviously this would be a top level to build off of but do you think there's enough out there to sustain that sort of backlog through the year.
Oh, Yeah, we definitely are seeing the work continue if you recall the two large orders we have theres three more potentials as you go forward.
This year will be another 100 million plus order that that will be tendered.
Yeah, the reliability issues in California, and Florida are continuing unabated.
And we're also seeing other utilities really outlawing would use in selected states.
So that will continue to drive the market.
Very strongly and renewables is just going to continue to disperse the generation sources, meaning they need both substation and transmission lines to get them back to.
Where the electricity is used so there's nothing out there between 2020 or even frankly 2021 at this point that would suggest they would move anywhere, but where it is right now.
Okay. Thank you.
Thanks Brent.
Thank you. My next question is coming from Adam Farley from Stifel. Your line is allies.
Hi, Good morning. This is Adam Farley offer Nathan Jones.
Adam.
Turning back to yes.
Excluding the loss of access system margins are still.
We'd like you.
You guys highlighted pricing just want to North America.
So is there any mix impacting the quarter and then looking at your backlog.
Well should we expect on on margins ex access system sort of course assessments.
Yes, Adam this is mark I'll start off and then Steve can jump in as well, but in North America.
We really short we had some timing issues with some deliveries.
The ended the year that that would have affected the revenue that but thats more of a carryover into next year Telecom was still good but the rate of growth we had over between that need team had.
Had taper down a bit we expected some of that.
So I think that played into it and then collectively the international businesses were down a bit as well. So I think it was really.
North America was pretty solid for the most part and then of course, we had access than the rest of the international businesses were actually comparatively down a tick.
I'm, not substantially which which contributed to the overall margin comparison between 18 and 19.
Yeah, if you kind of normalized for the access [noise] loss, we probably margins were about on par with last year.
And as Mark mentioned, there were some timing issues getting some orders out.
And just to a lower mix of telecom in the fourth quarters compared to the rest of the here.
So those were the big highlights there.
Okay. That's helpful.
Backlog.
Pricing levels within that.
You know favorable.
Hmm.
Yeah.
As we said that raw materials being stable for the time period that they have been stable really allows you to work on pricing actions.
And so that has.
You know generated some good backlog.
Some good margins in that backlog itself and so we remain optimistic of the margin profile TSS again, as we fix access systems.
That we can get that business over 10% as we go into 2021.
That's helpful just shifting to international irrigation.
These larger projects in emerging markets seem to keep getting pushed.
Anymore color there on what's driving.
Visibility into your pipeline on projects.
Yeah.
It's it's mainly timing.
And what do you have is the dollar as many no have strengthened against.
A lot of these currencies in developing markets that usually slows down our ability to get paid and therefore to ship.
So that part of it is still in the process of kind of moving through we still have a good pipeline across Africa across the middle East and Central Asia, and so we feel that.
Albeit there the timing of stuff that's in there our guidance really has minimized the impact of the international projects. So that if we were to get them.
It would be more of an upside than a down not having them as a downside. So we took a more conservative approach.
That's great. Thanks for taking my questions.
Thanks.
Thank you. My next question is a follow up from Brian Drab from William Blair. Your line is allies.
Hi, Thanks for taking my follow up quite a sorry, there's little noise in the background here I'm just trying to draw the conclusion here like kind of outline of.
The bigger picture and and just wanted to get your feedback on this I mean, it seems like utility.
You know we've talked a lot about the record backlog and potentially great momentum there if we add some larger projects, but where.
Well, if you kind of rank order the other growth opportunities that you have over the next you know one to two years really where where are you most.
We expect and get that growth from what are you. Most excited about is that the.
You know the Fiveg opportunity is at solar is it some of the international irrigation projects, where where where else is the growth.
Going to come from over the next one to two years. Thanks, Sir.
Utility, we've obviously, we're offering a brand new suite of products.
We have a spun concrete distribution poll, we have pre assembled sub stations. In addition to just general strong market dynamics that are there. So we feel utility has the highest growth potential as we look over the near to medium term.
The telecom Fiveg.
If you'll recall, we said we would see a little bit of it in the fourth quarter. We did you said then it would be slow to ramp or starting to ramp through 2020, that's what it looks like and that 2021 would be the real growth opportunity in fiveg and all industry prognosticator still kind of.
Handicap, it that way that would be our second one.
And then yes third is international irrigation those projects when they do come through our tend to be large they tend to be sizeable.
And they really do as you know irrigation itself.
Drives our profitability pretty substantially so as we get any kind of you know even if markets were just a flattening to move up slightly irrigation would have a lot of earnings power behind it as we move forward. So.
Those are kind of the way we rank them internally here.
Okay. Thanks, very much Brian.
Brian This is mark just to add to the telecom opportunity as a global is a global trend. So we do we do have an exposure or we do have a presence in Asia Pac, but as we continue to build off of that we think there's some opportunity as well in other geographies as well, we don't do really quite as much telecom today.
Right. Okay. Thank you very much.
We reach of our question answer session I like to turn the floor back over to Renee.
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