Q2 2021 Valmont Industries Inc Earnings Call
Greetings and welcome to the Belmont Industries second quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question. Please press star 1 on your telephone keypad, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Ms. Renee Campbell, Vice President of Investor Relations and corporate communications. Thank you. Please go ahead.
Thank you and good morning, welcome to Belmont Industries second quarter 2021 earnings call with me on today's call are Steve Kaniewski, President and Chief Executive Officer, After Appelbaum Executive Vice President and Chief Financial Officer, and Tim Francis Senior Vice President and corporate controller.
This morning, Steve will provide a brief summary of our second quarter results and comment on our strategy and long term business outlook.
<unk> will review, our financial performance and provide trends and key assumptions for the balance of 2021 with closing remarks from Steve This will be followed by Q&A.
A live webcast of the presentation will accompany today's discussion and is available for download from the webcast or on the investors page at Valmont dotcom.
A replay of today's call will be available for the next 7 days.
Please also note that this conference call is subject to our disclosure on forward looking statements, which applies to today's discussion and as outlined on slide 2 of the presentation. It will also be read in full at the end of this call.
I would now like to turn the call over to our President and Chief Executive Officer, Steve Kaniewski.
Thank you Renee and good morning, everyone and thank you for joining us.
Before we recap our second quarter results I would like to share some opening comments.
First I want to thank our employees around the world for their consistent execution against our strategic priorities and supporting our customers as global markets begin to recover from the pandemic.
Like many companies, we have faced unprecedented levels of cost inflation, especially raw materials and transportation since the beginning of the year. These.
These levels are pervasive and must be accounted for in market pricing. So it has been an imperative for us to quickly increase prices globally across all of our businesses.
Current economic trends lead us to believe that inflation will not mitigate in the near term, especially for durable goods and.
And we will continue to take additional pricing actions in all segments as needed while inflationary pressures continue.
For example in North America irrigation. This year, we've raised price 5 times on irrigation systems totaling more than 30% inclusive of upcoming increase.
And then utility utilizing our pricing mechanisms, we've raised price 7 times on steel monopoles.
As we have demonstrated over the past few years price leadership is a strategic priority for us and we will continue to be in all of our served markets.
Next I would like to thank our global operations and production teams.
Who have done an excellent job this year with productivity and managing through these unique supply chain dynamics.
I want to commend them on the improvement in ship complete and on time metrics, even as our business is accelerating.
We're proud of our team's persistent focus and we expect to continue building on this strong momentum going forward.
Now, let me start with a brief recap of our second quarter summarized on slide 4 of the presentation.
Record sales of $894.6 million increased $205.8 million or nearly 30% compared to last year and increased more than 26% on a constant currency basis.
Sales growth was realized in all segments, most specifically in irrigation and utility support structures.
Starting with utility sales of $267.9 million grew $36.5 million or 15, 8% compared to last year.
Higher volumes were driven by strong broad based demand from ongoing investments in grid hardening and modernization as well as renewable energy generation.
Moving to engineered support structures record sales of $269.4 million increased $16 million or 6.3% compared to last year.
Favorable currency and pricing impacts.
As well as sales growth in wireless communication products and components were slightly offset by anticipated lower North American transportation market volumes.
Global lighting and transportation sales grew 3.3% as pricing improved in all regions in international markets benefited from increasing stimulus and infrastructure investments, especially in Europe and Australia.
Wireless communication products and components sales grew 7.2% compared to last year.
Carrier spending in support of 5 day build outs continues to drive strong demand globally.
Evidenced by significantly higher sales of our small cell integrated products.
Favorable pricing also contributed to sales growth.
I want to take a moment to congratulate our E. S. S team on delivering a record quarter of sales and operating income.
I'm, especially proud of our commercial teams for their demonstrated price leadership during this inflationary environment.
Turning to coatings sales of $98.2 million grew $18.2 million or 22, 7% compared to last year and improved.
Sequentially from last quarter, due to improving end market demand favorable pricing and currency impacts.
During second quarter, we commenced operations at our new Greenfield coatings facility near Pittsburgh, Pennsylvania.
Built with enhanced processes to generate less heat and humidity and providing additional recycling opportunities. This facility aligns well with our ESG principles, while serving the growing demand for new infrastructure in this region.
Yeah.
Moving to irrigation near record global sales of $282 million grew $131.3 million or <unk> 87, 2% compared to last year with.
With sales growth across all served markets, including more than 35% growth in our technology sales.
Higher volumes and favorable pricing were driven by the continued strength of AG market fundamentals and deliveries for the large Egypt project.
In North America sales of $156.1 million grew 57, 6% year over year.
Wrong market fundamentals and improved net farm income projections continue to positively impact farmer sentiment.
Generating strong order flow.
Significantly higher volumes higher average selling prices and higher industrial tubing sales all contributed to sales growth.
International sales of $125.9 million grew 1.4 times compared to last year led by the ongoing delivery of the Egypt project strong European market demand and record sales in Brazil.
Our sales through the second quarter have exceeded full year 2020 revenue.
A testament to our market leadership in this region.
Regarding our project pipeline in Africa, we recently were awarded more than $20 million of additional projects from new customers in Egypt, Sudan, and Rwanda demonstrating.
Demonstrating our market leadership global operations footprint and project management capabilities.
Turning to slide 5.
During the quarter, we completed the acquisition of Prosper Technologies, an award winning global leader in AI and machine learning.
For those who attended our virtual Investor day in May you will recall, how we outlined our strategic pillars for long term profitable growth.
Accelerating innovation through investments in recurring revenue services is 1 of the critical components of our industrial tech growth strategy.
Through this acquisition together Belmont and price Berra have created the most global vertically integrated AI company in agriculture.
<unk>, providing a highly differentiated solution focused on in season crop performance that is able to go beyond traditional irrigated acres.
No 1 else in the industry can offer this kind of solution.
Price barrier brings advanced agronomy and unprecedented visibility to the field.
Our technology is currently being used on over 5300 fields on a variety of crops, including corn, soybeans, potatoes, neat onions, alfalfa and tomatoes.
Growers are very excited about this technology as evidenced by strong adoption rates and the critical need for growers to reduce inputs, while increasing yields aligning well with our ESG principles of conserving resources and improving life.
Through price barrier solution [noise] vision.
Vision and talented team we are moving to the next stage of agricultural development.
Today, approximately half of our irrigation technology sales are generated from recurring revenue services.
With this acquisition, we expect those particular sales to grow more than 50% per year over the next 3 to 5 years.
We also expect this acquisition to be accretive to the segment beginning in 2023 as we continue investing in our in season data services.
Integration is going well and we plan to share more on our accelerated market growth strategy in future quarters.
Additionally, in today's market the war for talent is pervasive and competitive.
Price barrier brings the strongest team in the industry and we are fortunate to have 100 highly talented and motivated employees on board.
<unk> experts in data science and machine learning.
As you can tell I'm very excited about this acquisition.
Builds upon our demonstrated success over the past 2 years as we move forward together as 1 company.
We also completed the acquisition of pivot track.
Scripture based AG Tech company that provides remote sensing and monitoring solutions for the southwest U S market helping.
Helping grow our technology sales to $50 million year to date.
Turning to slide 6 our solar business is another area, where we are accelerating growth and new product innovation, while supporting our sustainability commitments.
During Investor Day, we talked about solar growth opportunities in both utility and agriculture, and I am very excited to see our growing pipeline of projects in both end markets.
Our backlog of utility scale and distributed generation projects has been increasing as we expand the solution globally and.
In the second quarter, we were awarded projects totaling $47 million. Additionally.
Additionally over the past 18 months, we received more than 30 orders for the North American market.
With our industry recognized classroom, 1 status and the benefits of our scale and global supply chain. We are uniquely positioned to help support global customers with the renewable energy goals.
Our solar solutions are also driving accelerated growth in agricultural markets.
In the second quarter, we were awarded 3 projects totaling $25 million.
We've already completed several others and sunbelt regions like Brazil in Sudan, and are planning an official North American market launch this fall at the Husker harvest base farm event.
We are also partnering with large global food producers to help them achieve their own ESG goals.
Working together with our utility solar team and World Class Valley dealer network, we have formed a global cross functional team committed to delivering integrated solutions to support AG players in their markets.
We're very excited about this growth potential.
Turning to slide 7 at our Investor Day, I talked about several of our ESG initiatives and highlighted the many ways that our products and services to conserve resources and improve life.
And help build a more sustainable world.
As we've said before ESG is a strategic priority for us it's embedded into our strategic deployment process that drives our most important initiatives of Belmond and.
And we are pleased that our efforts are being acknowledged externally.
1 example is with institutional shareholder services or ISS.
Our environment and social quality scores have improved significantly this year.
From a 6 to a 2.4 environment and from a 6.2 or 3 for social.
While governance has held steady at a solid too.
While this is a continuous journey we are proud of the progress we have made so far.
I want to congratulate our teams and business partners, who are strengthening our commitment to grow and innovation as a company with ESG in mind.
With that I will now turn the call over to Avner for our second quarter financial review and 2021 outlook.
Steve and good morning, everyone.
Turning to slide 9 and second quarter results My comments will focus on the adjusted results as outlined in the press release and in the Reg G disclosure in the presentation appendix.
Operating income of $90.9 million or 10, 2% of sales grew $25.2 million or 38% compared to last year.
Driven by higher volumes in irrigation improved operating performance and a favorable pricing, notably in engineered support structures.
Diluted earnings per share of $3 and <unk> grew more than 50% compared to last year, primarily driven by very strong operating income and a more favorable tax rate of 22, 5%.
This rate was realized through the execution of certain tax planning strategies.
Turning to the segments on slide 10 in utility support structures.
Operating income of $21.2 million or 7.9% of sales decreased $4.1 million or 300.
<unk> basis points compared to last year.
Strong volumes increased pricing and improved operational performance were more than offset by the ongoing impact of rapidly rising raw material costs during the quarter, which our pricing mechanisms do not allow us to recover.
Moving to slide 11, and engineered support structures record operating income of $31.9 million or 11, 9% of sales increased $9 million or 290 basis points compared to last year.
We're extremely pleased with the results from deliberate proactive pricing actions, taking by our commercial teams to more than offset the impact of a rapid cost inflation.
We're also recognizing the benefits of previous restructuring actions.
Additionally, our operations team continued to drive performance improvement across the segment through improved productivity and product quality and better ship complete and on time delivery metrics.
Turning to slide 12 in the coatings segment operating income of $14.7 million or 14, 9% of sales was $4.3 million or 190 basis points higher compared to last year.
Higher volumes favorable pricing and operational efficiencies more than offset the impact of raw material cost inflation.
Moving to slide 13 in the irrigation segment operating income of $42.9 million or fishing, 2% of sales nearly doubled compared to last year and was 80 basis points higher year over year.
Significantly higher volume and favorable pricing were slightly offset by higher R&D expense for strategic technology growth investments, including product development.
Turning to cash flow on slide 14, we delivered positive operating cash flows of $37 million and positive free cash flow. This quarter. Despite continued inflationary pressures, increasing our working capital needs.
This quarter, we closed on prosper acquisition for a purchase price of $300 million funded through a combination of cash on hand, and short term borrowing on our revolving credit facility.
We also acquired 100% of the assets of pivot track for 12, and a half million dollars funded by cash on hand.
As we've stated in prior quarters rapid raw material inflation can create short term impacts on cash flows.
The current MAU.
Market outlook indicate that general inflationary trends may not subside in 2021. So we would expect some continued short term impacts we expect.
Working capital levels and inventory to remain elevated to help us mitigate supply chain disruptions and opportunistically lock in better raw material pricing.
Accounts receivable will also meaningfully increased in line with sales growth.
As our historical results have shown we will see improvements in working capital as inflation subside.
Turning to slide 15 for summary of capital deployment.
Capital spending in first half of 2021 was $49 million and we returned $42 million of capital to shareholders through dividends and share repurchases ending the quarter with just over $199 million of cash.
Moving now to slide 16, our balance sheet remains strong with no significant long term debt maturities until 2044.
Our leverage ratio of total debt to adjusted EBITDA of 2.3 times remains within our desired range of 1 and a half to 2 and a half times <unk>.
Now turn to slide 17 for an update to our 2021 outlook, including a few key metrics and assumptions.
We are increasing sales and EPS guidance for fiscal 2021.
Net sales are now estimated to grow 16% to 19% year over year, driven primarily by very strong agricultural market fundamentals. Further we now expect the irrigation segment sales to grow 45% to 50% year over year and continue to assume a foreign currency translation benefit of 2% of net sales.
2021 adjusted earnings per share is now estimated to be between $10.40, and $11.10.
I want to take a moment to discuss the rationale for providing an adjusted earning outlook going forward.
As a technology company the cost structure of prospera is very different than any acquisition and Belmont history, including a significant restricted restricted stock grant for talent retention purposes.
We have also acquired intangibles technology assets, we believe that by excluding <unk> intangible asset amortization and share based compensation in the adjusted financials. The metrics will provide a better comparison of future <unk> segment performance as compared to historical results.
A table outlining the reconciliation of these adjusted items to GAAP is included in the presentation Appendix and press release.
Other metrics and assumptions for 2021 are also summarized on this slide and in the release.
Turning to our second half 2021 segment outlook on slide 18.
In utility support structures, we expect a meaningful sequential improvement to the quality of earnings beginning in the third quarter driven by margin improvement as pricing becomes more aligned with steel cost inflation.
Moving to engineered support structures. We expect continued short term softness in North American transportation market and improved demand in commercial lighting.
Demand for wireless communication products and components remains strong and we expect sales growth in line with expected market growth of 15% to 20%.
Moving to coatings end market demand tends to correlate closely to general economic trends, we're focused on pricing excellence and providing value to our customers.
Moving to irrigation, we expect a very strong year of 45% to 50% sales growth based on strength and global underlying AG fundamentals day estimated timing of deliveries of the large Egypt project and another record sales year in Brazil a.
A couple of reminders that I wanted to mentioned for this segment. The first is that the third quarter is a lower sales quarter compared to the rest of the year due to normal business seasonality.
Second deliveries of the large Egypt project began in fourth quarter, 2020, which will affect year over year growth comparisons index.
And as Steve mentioned earlier, we have been consistently raising prices to offset inflationary pressures with that I will now turn the call back over to Steve.
Thank you avner, turning to slide 19, and our long term drivers of our segments. Overall, we continued to see strong demand and positive momentum across all businesses evidenced by backlog of more than $1.3 billion.
At the end of second quarter.
And the demand drivers are in place.
To sustain this momentum into 2022.
Like many others, we are closely monitoring the Covid Delta Varian and continuing to follow state and local regulations to keep our employees and customers safe.
At present government mandated shutdowns and Malaysia have led to the temporary closure of 3 of our small facilities there.
The expected impacts from these closures have been included in our full year financial outlook.
Turning to slide 20 in summary.
I am very pleased with our strong second quarter results and our team's ability to navigate and capitalize on challenging market dynamics.
We believe this demonstrates the strength and sustainability of our business and long term strategy favorable.
Favorable end market trends and strong price leadership in the marketplace.
As we discussed at our Investor Day, we remain focused on the execution of our strategy, which is fueled by our dedicated and talented team of 10000 employees and our differentiated business model.
Through our acquisition of Prospera technologies, and pivot track, we're accelerating growth through investments in innovation technology and Iot.
Building on our strategy to grow recurring revenue services.
Finally, we're very positive on the year as demonstrated by our updated financial outlook, and our poised and well positioned to capture growth and drive shareholder value in the future.
I will now turn the call back over to Rene.
Thank you Steve at this time, the operator will open up the call for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you would like to ask a question. Please press star 1 on your telephone keypad at this time.
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Our first question is coming from Chris Moore of CJS Securities. Please go ahead.
Hey, good morning, guys.
Maybe we could just start with with solar so utility solar contracts $47 million in orders in Q2.
Trying to get a feel for how big the projects or is that 1 or 2 customers is it 10.
Hi, Chris This is Steve So we're targeting both utility scale and distributed generation, because we think that that will be the mix of generation going forward.
So it's a number of customers, it's not just 1 or 2 I wont say its 10.
But it's the project size is a couple of million dollars kind of each.
When you look at that so it's a way to support developers of solar and distributed and then we would typically call out the larger scale utility orders like we had at the end of last year, where they were somewhere in the range of about 25 to 30 million each.
Got you that's helpful.
And maybe just 1 more from me.
The Egypt contract total $40 million kind of estimated.
Roughly how much of that will have been recognized by the end of 2021.
Well it would be a little over half we started in fourth quarter last year, it's been pretty even.
So by the time, we get through 2021, I would say yes.
50, 560%.
But the rest being delivered in 2022.
Got it I just want to make sure it wasn't really accelerate this year.
Leave it there thank you guys.
Thanks, Chris.
Thank you. Our next question is coming from Nathan Jones of Stifel. Please go ahead.
Good morning, everyone.
Good morning.
Maybe we could start on prosperity.
Actually in the portfolio.
Can you talk about the expected contribution of revenue in the second half we expect the contribution to EPS.
Just start with that.
Yeah, Hi, Nathan this is avner so as it relates to revenue in 2021, I would say it would be nominal.
As we start ramping up so not a large impact for 2021.
As it relates to EPS it will be actually Decretive in 2021, as Steve mentioned, we will start to be accretive to the segment in 2023. So if you want to ballpark it I would say about 30% to 35.
The accretive for our results in 2021 right.
Alright, and Nathan I would just add that since we were in partnership with prosper.
We were already recognizing revenue.
So that's why the the increase in revenue or the incremental piece would be more nominal it'll be there'll be some growth.
But it won't be.
A substantial because we were already seeing that.
I can say our understanding that this is a bit of a.
Different acquisition for you guys.
Can you talk about.
How long does it take brown line to get these visa on every time, it's greater than your cost of capital.
Just I guess that for our first question Walt.
<unk> future here do you think that a price there is going to reach out for valmont, that's greater than your cost of capital.
Sure.
The margins that are associated with prosper are.
Very much higher than our typical.
Industrial margins and so as we think about 60% to 70% gross margins.
With the way that we kind of see the growth.
Roughly around 50% over the next 3 to 5 years.
<unk> revenue.
We would anticipate.
This is more of a transformative acquisition. So normally we would say within 3 years. This is probably more like 4 maybe 5.
It really does start to change that.
That the segment looks as we go forward.
Particularly on the growth side, where you could see 500 to 800 basis points of improvement as we look out.
The longer term.
Maybe I'll just add 1 more point as you think about this business the working capital needs are really minimal being kind of a tech business.
Very little working capital intensity.
Another good driver for return on invested capital.
Where are the margins today, and where do you think there'll be a 3 to 5 years.
Yeah on the growth side, we are already seeing margins and that again that 60% to 70% range.
So we will continue to invest so the SG&A line will look a little heavier than it would be for a traditional industrial business.
But overall.
This is a strong margin business, we would expect that to continue as adoption picks up.
And so we can see.
That 60% to 70% range really holding pretty steady through the period, we saw that even though the market had been declining.
Over the past 6.7 years as we started our tech sales. So I think we're on pretty solid footing when it comes to those margin levels.
And on the operating margin levels, where are they today and wish day in that 3 to 5 year timeframe.
Well Theyre Decretive right now and will be through 2022.
Because of the reinvestment back into the business for growth.
And so if you think about 'twenty, 1 and 'twenty 2 again, we would start to get closer to breakeven by the end of 2022 and then.
Building in 'twenty, 3 and really is at year 4.5.
You would really start to see things that would be.
But closer to 30%.
Kind of operating.
Okay, great. Thanks, I'll pass it on.
Thank you.
Thank you. Our next question is coming from Brian Connors of Boenning and Scattergood. Please go ahead.
Great. Thanks for taking my question.
Wanted to get your take on this announcement kind of on the tape from P. G any that theyre going to try to Berry.
Out of their power lines out there because of the fires and the fact that the.
Above ground lines are apparently 1 of the causes behind some of these these you.
Tragic events there.
Driving some concern I guess that you know maybe underground lines or the other way from the future can you I mean, that's not a new risk, but this is kind of a hope from high profile example of that front page of the Wall Street Journal.
What's your can you just give me sure reaction your take on that is a substitution risk and USS.
Yes, it's very small Ryan.
What we see we saw this with Lake Champlain, we see it.
Kind of in other.
Selected areas is.
They may take something that is really through part of maybe a tinderbox and.
And Barry it but it does cost 10 to 12 times more in total construction.
Which ratepayers.
Really do push back on the Puc's really pushed back on.
And from our high voltage perspective, and I think we said this before the heat generated really makes it impractical from a transmission perspective, so where you see the substitution tends to be more in distribution.
And distribution at least for US is a smaller part of our business.
And what we've seen from California is much more in the way of both concrete and fiberglass solutions, which we offer both on the distributed side at least for the I'll call. It the long haul miles.
Theres also a tech play for us that we've been participating in on that side, which is the remote monitoring of the right away.
And we have some solutions that are able to give the operators much more visibility.
At a specific structure level.
As to our right of way intrusion fire.
The earthquake those kinds of things so I think it will be out there.
It's something that does make sense in certain types of areas, but from a substitution at least as it pertains our business.
It's still pretty very small.
Got it Okay. That's helpful and my second 1 was.
Big picture in nature, and just looking at inflation.
And how it actually impacts your portfolio of businesses. I mean, you just talk about inflation is a headwind.
And sort of suggests that if it goes away that's a good thing but yet.
You just posted a record quarter right in the middle of this inflationary environment. So.
Obviously, you know that inflationary environment is helping the AG business to irrigation business because of commodity prices and farm incomes.
It doesn't seem to be hurting the other businesses I mean, if you think about why steel is up it's because you and your peers are seeing a lot of demand. So I mean, it's wood inflation going away.
And even though that helps you on the cost side would that really.
Help us from an earnings standpoint, or or or would that sort of be more than offset by you know negative demand.
Circumstances.
That's an environment changing.
Out there.
Yes, the reason for our comment about.
The headwind is particularly as it moves so fast.
Our pricing mechanisms mechanisms, most specifically in utility can't catch up fast enough and.
So.
As inflation abates, even if it just plateaus.
We will then see a pretty significant catch up in margins.
If you think about how we go into 2022, we will have a catch up in margin.
<unk>.
Long term, we've always said we like inflation.
It just when it moves this quickly it does provide some drag on the business, but if inflation were more typical 3% to 5% that's very healthy for our business.
<unk>.
Youre right.
You could worry about demand destruction, but it's not something that we're worried about in the present time.
Because markets are strong its just been the rate has been so dramatic that youre playing catch up.
With your pricing to catch that we've seen it in the irrigation, which is why we didn't get it maybe a little more leverage in irrigation.
Utility <unk>.
$8 million worth of.
Steel costs that we could not pass through in price.
But as you get to a more normalized either growth of inflation or.
Just even a plateau, we tend to catch up very fast it does consume a lot of working capital to in the meantime.
Which.
Is another consideration.
We've been well capitalized and we have the wherewithal to be able to handle.
Got it well Hey look I appreciate the comprehensive response.
Thank you.
Thank you. Our next question is coming from Brian Drab with William Blair. Please go ahead.
Hi, Good morning. This is Blake Keating on for Brian.
Hey, Blake.
You guys mentioned last call meaningful sequential improvement in the second half utility margin do you still expect that improvement to be around 200 to 300.
That's where it was the first day.
Yeah, it would be definitely approaching more of our.
Let's say normalized kind of margins in there. So if you think about the performance of the segment at 10% to 11%.
Operating we will get closer back to that as we look at the second half of the year.
Got it. Thank you and then just 1 quick follow up whats what are some of the drivers behind the international strength in irrigation you know outside of the Egypt projects.
Was any of that strength in Brazil, pre buying ahead of price increases or anything of that nature.
You know it's.
It is broad based it's every 1 of our served markets.
So if you look at Europe, it's based on just normal AG fundamentals.
Very good net farm income projections, and so Europe across the board, both Western Europe, Eastern Europe and.
And kind of the.
Ukraine, Russia area have all performed extremely well.
We're seeing additional project work outside of Egypt in Africa.
As we mentioned in our comments.
And Brazil, the phenomena program and the fact that.
It's still a U S dollar derived commodity.
Really have accelerated the demand there as Brazil.
Let's say next to the U S is really helping to get.
Protein stocks built back up.
That to chicken pork beef as.
As we know there is some pretty notable shortages out there around the world both.
Both here in the U S and in China. So those fundamentals are what's driving the order flow globally.
Got it thank you.
Thanks, Mike.
Once again, ladies and gentlemen that is star 1 if you would like to register a question at this time. Our next question is coming from Jon Braatz of Kansas City Capital. Please go ahead.
Good morning, Steve.
Good morning, Andrew.
In the solar area.
Solar bills your solar business seems to be gained some momentum in the solar industry is rather.
Strong at this point.
I guess my question is do you see yourself gaining share in that business in that industry. At this point or are you sort of just matching what the market is so is giving you.
Okay I'll answer it 2 fold I think in the short term.
We're very careful because of the cost profiles.
Particularly around steel and some of the PV shortages that are out there.
Kat we didn't so we forego some orders simply because it would've been lossmaking.
I think as we look at some of our awards that we've announced those margin levels, where we can make good money.
And I think that's accelerating as people.
See more and more of us, particularly in the U S market.
In the agricultural space.
That is a brand new business for us and accelerating very quickly and so as large food processors are thinking about ways to hit their own ESG targets.
They don't want to go to electrical contractor another electrical contract there.
Have risk of performance et cetera, So the bank ability of our balance sheet our valley dealer network.
As well as.
A company that's been in the utility power generation business for well over 40 years.
That's going to really help us to grow market share as we go forward. So it was it was a great quarter, but by both teams the utility and the agg.
And I think youll start to see that as the market kind of.
Recalibrates around the new cost structure.
Solar generation is still on.
Very solid ground as compared to other generation sources.
Thank you.
The market is the idea that cost minus kind of goes away in this kind of environment.
Okay. Thank you 1 other question on the.
On the irrigation side.
North American farmers going to have a pretty good year.
As they look at their.
Situation at year round would you would you envision that there might be a.
You know if you want to call a surge in business.
In the fourth quarter as has grown is try to reduce our taxable income.
As it would stand right now that kind of dynamic we've seen in the past so it's very plausible.
That that would happen obviously, if there were some tax tax changes out of Washington D C.
That could be more pronounced.
So.
We're standing ready to take advantage of it if it does occur.
But it's quite a plausible scenario as we've seen through the way farmers.
You know purchase and do tax planning together okay.
Okay, Alright, thank you very much.
Thank you. Our next question is a follow up coming from Ryan Connors of Boenning and Scattergood. Please go ahead.
Hey, Thanks for taking the follow up I, just I wanted to get your take on the <unk>.
The infrastructure Bill situation I mean.
It's sort of ironic we cover infrastructure stocks exclusively and we're 3 for 3 months a third company. This week for US to report infrastructure company to report record.
Revenue and earnings and yet we've got them.
Congress still kind of debating an infrastructure bill to quote unquote stimulate that market.
What's your take I mean, do you think that's going to happen does this does the market even need stimulus at this point seems like things are going pretty well.
Yeah, we had said in our outlook earlier.
Is that an infrastructure build to us would be incremental and not accounted for in our guidance, that's because states and state spending make up the vast majority of what we see in our business.
At a federal level if more came in.
It's really like additional adrenalin.
To the market and so it it would help it would move things along it would be definitely incremental to our business, but it is not necessary.
In terms of just the way our business performs quarter over quarter.
I think that the chances are still good that something will come out at least the long bridges highways and roads.
It's kind of the other side of telecom and transmission that you know.
It's still debatable based on funding and how they're going to pay for it.
So I would say right now at 50.50.
But we're not.
Banking the business so to speak on having to see something come out of that now.
In Australia, and Europe, we have seen stimulus.
They've gotten through it is a part of helping our business even in the current profile.
And can you just remind us what's the order of magnitude how big is U S Road and highway.
Just type projects as a percentage of total Belmont, let's say revenue.
Well I'd say within the ESI segment.
If the segment itself is close to $1 billion.
The traffic and lighting piece is maybe 3 quarters of it.
And of that D O T work.
I'd say probably half.
Okay. Okay.
But as commercial line.
That just goes to commercial and then we have the <unk>. So I think thats, probably the way to look at it.
Got it okay.
Thanks again for your time.
Thanks Ryan.
At this time I would like to turn the floor back over to MS. Campbell for closing comments.
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