Q1 2022 Valmont Industries Inc Earnings Call
Greetings and welcome to the Valmont Industries, Inc. First quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation. We ask that you. Please limit yourself to one question and one brief follow up.
And return to the question queue.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Renee Campbell Senior Vice President Investor Relations and Treasurer Ms. Campbell you may begin.
Thank you and good morning, welcome to Belmont Industries first quarter 2022 earnings call.
With me today are Steve Kaniewski, President and Chief Executive Officer.
Erinn Schapper group president of infrastructure.
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 first quarter results, commenting on our markets and long term business strategy.
Erin will provide an overview of our new infrastructure segment, and Avner will review, our financial performance and provide our outlook and indications for 2022.
Closing remarks from Steve.
This will be followed by Q&A.
A live webcast of the presentation will accompany today's call and is available for download from the webcast or on the investors page at Belmont Dot com.
A replay will be available on our website later this morning. Please.
Please note that this call is subject to our disclosure on forward looking statements, which applies to today's discussion is outlined on slide two of the presentation and will be read in full at the end of today's call.
I would now like to turn the call over to our President and Chief Executive Officer, Steve Kaniewski.
Thank you Renee.
Morning, everyone and thank you for joining us.
We delivered record first quarter financial results, driven by effective price management and strong demand across our portfolio.
Our pricing actions were helped by our strong operational and quality performance.
Our teams continued focus on pricing.
And our ability to meet our customers' expectations has led to a strong start to the year.
Once again, our 11000 Belmont employees around the world demonstrated diligence and dedication.
Having our customers with innovative and essential products and services.
Through an unwavering commitment to our core values. They continue to operate with passion integrity, driving continuous improvement and delivering exceptional results.
I am thankful for and proud of their success.
Before reviewing our first quarter I would like to acknowledge the devastating events that are happening in Ukraine.
We recognize the profound effect. These banks are having on the world and everyone in the region, whose lives have been disrupted and changed as a result.
Historically, our sales to Russia, and Ukraine represent less than 1% of our total revenue.
Our thoughts are with those who are impacted by this growing humanitarian crisis.
We wish for a quick resolution to the conflict and a return to peace in the region.
Now let me move to a brief first quarter overview is shown on slide four.
Net sales of $988 million grew 27% and adjusted operating income improved 28% year over year due to continued strong end market demand and effective management of strategic pricing initiatives.
Our valmont culture, and our core values and power high performance organization that drives us to execute and deliver results.
Even amidst a very dynamic market environment.
Because of this we are building momentum into 2022.
Now the gating supply chain volatility continuing to implement our pricing strategies and realizing value for the innovation.
We bring to our customers.
Our price leadership has allowed us to successfully manage inflationary costs and we expect to continue to do so as the year goes forward.
You'll notice that we are now reporting our financial results in two segments as we announced in our April six release.
I will share more about the strategic rationale for this new segment structure in a few minutes.
Moving to infrastructure sales of $687 million grew 24% year over year with double digit sales growth in nearly all product lines.
Led by considerably higher pricing and strong underlying demand from continued investments in critical infrastructure globally.
Ongoing investments in grid, hardening, and resiliency and renewable energy development and utility markets, along with cross regional strength in lighting and transportation markets are contributing to increasing revenue across the thing.
Additionally, telecommunications markets remained strong as capital spending by the major carriers is driving macro tower investments, while five gene deployments continue to rent.
As evidenced by sales growth of more than 30% in this product line.
Turning to agriculture.
Yeah.
Sales of $306 $6 million grew 33% year over year due to higher average selling prices appear occasionally equipment globally and higher technology sales.
In North America sales grew 54% led by considerable increases in pricing and higher volumes.
No.
International sales grew 8% year over year led by higher priced par.
Partially offset by lower project sales.
Not really related to the large Egypt project.
As we mentioned last quarter the pace of local infrastructure development for this project has slowed in recent months and in response, we have aligned our shipments accordingly to match our customers' expectations.
We also recognized another record quarter in Brazil, where sales grew more than 70%.
In addition to the continued positive trends in farmer sentiment.
Commodity prices remain at elevated levels fueled by strong global import demand and tightening stocks in major exporting countries.
Further the events in Ukraine have disrupted exports in that region pushing grain prices higher.
Yes.
Technology sales grew more than 27% year over year, driven by growers, increasing demand for connected crop management and advanced analytics to reduce input costs increased land productivity and minimize farm labor costs.
Turning to slide five.
We released our 2022 sustainability report last month and held a dedicated conference call to discuss the report and answer questions.
If you have not yet done so I strongly encourage you to listen to the archive webcast on our website.
In the report and on our call. We discussed the progress we have made on our ESG journey.
For Valmont, our approach to sustainability begins with our tagline.
Conserving resources improving lives.
It's at the core of everything we do.
This year, we recommitted to reaching our 2025, environmental and diversity goals and identified and committed to for the United Nations Sustainable development goals.
The business naturally aligns.
I am proud of what we accomplished and excited about the trajectory of our ESG journey.
As seen in the sustainability report, we have shared detailed case studies, which demonstrate the value we add to customers and meeting their own ESG priorities and how we responsibly manage key resources.
A recent example of this is the completion of a three megawatt AG solar project in Brazil.
<unk> continues to be a strong market for our solar solutions and new government legislation has enhanced axle or opportunities in the region.
This cotton gin farm and its complex engineering requirements showcase the value, we add and the incredible execution of our teams in delivering sustainable solutions to our customers.
Now I'm, an exclusive software monitor sustainability and return on investment in real time.
Allowing users to track power generation and efficiency of their solar installation.
Our World Class dealer network is fully embracing our complimentary solar products, which is leading to considerable growth in the region year over year.
Belmont is truly paving the way for AG solar solutions by offering unparalleled service and support while sustainably meeting customer needs and supporting ESG efforts globally.
Earlier in this call I referenced our new segment reporting structure.
Turning to slide six I would like to discuss this new framework within the context of our long term strategy.
As we stated in our April six press release, we are experiencing a transformative time in Belmont is history.
Our goal as a company is to Institute a culture of positive change that will have to crazy.
Advanced productivity and optimize talent and technology to accelerate enterprise wide innovation.
Recalling our three strategic pillars that we introduced during our 2021 Investor day at.
The new structure aligns with and supports the successful execution of each pillar.
It also reflects how our businesses are managed in a way that we have been moving towards organizationally for the past four years.
During that time, we have been executing a transformation plan and our operations.
Celebrating lean standard work and driving performance through improved productivity and quality metrics.
Our commercial teams have leaned in on the voice of the customer developing new products to drive solutions to some of the more critical problems.
Bill pathways to growth focusing on strategic technology investments to generate operating efficiency and increase revenue.
This organizational structure allows us to further elevate our focus on capital allocation technology development and market growth strategies across our leadership teams.
We're centralizing operations of all of our global manufacturing footprint across both segments to better focus on improving productivity, increasing output and driving a more efficient use of capital.
We believe these actions position us to achieve our three to five year financial targets, including operating margins greater than 12%.
Combining the previous utility support structures engineered support structures and coating segments into one infrastructure segment.
Fosters a more efficient and collaborative collaborative environment across our global commercial markets.
Enhancing operation excellence initiatives.
I have asked Aaron Shafter group President of our new infrastructure segment to join US today and discuss the benefits of this structure.
I feel it is important to spend time on our earnings calls discussing relevant items that are critical to understanding our culture and strategy.
To hear directly from our team.
Orange participation today is an excellent example of this.
And we May look to highlight key topics with other members of our executive team on future calls.
Before passing the call over to Aaron I would like to comment briefly on agriculture.
Agriculture has experienced a more subtle shift than infrastructure.
We were simply renaming the irrigation segment.
Recognizing the journey, we have been on to expand our focus on product and technology solutions globally beyond irrigated acres.
The name change captures the evolving nature of technology to include non irrigated farmland and.
And detection of anomalies, such as pest and disease to help farmers reduce input cost while increasing land productivity.
Which is quickly becoming a priority across global markets.
The agriculture sector continues to evolve globally, and we are evolving with it to best serve our customers.
At this time I will turn the call over to Aaron.
Thank you, Steve and good morning, everyone. It's a pleasure to be with you today.
He said I'm group president of infrastructure.
Bandwidth Belmont 10 years with previous roles as Vice President and General manager of International Irrigation and group President of the utility support structure segment I'm excited to share with you. How we're thinking about this new segment and why we believe this alignment will further our ability to serve customers and benefit our stakeholders.
Turning to slide eight.
With an increasing convergence of key market drivers and funding the infrastructure realignment allows us to collaborate more effectively and generate greater customer focus as we create innovative smart infrastructure to bring to the market.
New structure enables a more efficient and strategic allocation of capital so.
So we can manage the portfolio with greater focus on opportunities that offer profitable growth higher return on invested capital, while accelerating innovation by optimizing our talent and technology.
We're also optimizing our mix of products focusing on product lines and geographies that generate higher returns and improved quality of earnings.
I believe this will enable us to maximize long term profitability for the larger segment as we execute our strategies more efficiently.
Finally, the new segment structure Leverages Belmont size scope and scale that has been developed over the last 75 years to position us as a leader our strategic global footprint and market leadership allows us to do things other companies simply cannot.
Which is critical to our continued success moving forward.
I'm very excited to see what we can accomplish together as a United infrastructure segment and I'm confident our organization will continue to deliver exceptional value to our customers with that I will now turn the call over to have for our first quarter financial review and updated outlook.
Thank you, Eric and good morning, everyone.
Turning to slide 10, our first quarter results.
<unk> will focus on adjusted results as outlined in the press release and in the Reg G disclosure in the presentation appendix.
First quarter operating income of $99 million or 10, 1% of sales grew 28% year over year, driven by substantial pricing across our portfolio, leading to higher gross profit margins and improved fixed cost leverage and coding SG&A.
Diluted earnings per share grew 19, 5% to $3 seven attributable to higher operating income, partially offset by a higher tax rate, which was primarily due to a change in the geographic mix of earnings compared to last year.
Turning to the segments and starting with infrastructure on slide 11.
Operating income increased to 77, and a half million dollars or 11, 4% of sales as we realize the benefits of pricing across all product lines, notably in transmission distribution, and substation and lighting and transportation, which we will refer to as T. D. M. S. N O N T respectively.
In future quarters.
Moving to slide 12.
The agriculture segment operating income increased to $41 $6 million or 13, 7% of sales.
Higher operating income was driven by favorable price management, and a higher north American volumes, partially offset by incremental SG&A from the press for acquisition and lower international projects.
Turning to cash flow on slide 13, we delivered operating cash flows of $2 $7 billion, reflecting higher working capital levels to support strong sales growth.
As we've stated in prior quarters, we have taken decisive actions to strategically source raw materials throughout the year to help secure availability and meet strong demand.
We expect to continue these actions in the second quarter. We also expect a notable improvement in cash generation and working capital levels in the second half of the year.
We've demonstrated in the past, we're confident that our actions will help us deliver strong cash flow.
<unk> chain and material costs stabilize with full year operating cash flows expected to considerably exceed net earnings in 2022.
Turning to slide 14 for a summary of capital deployment.
Capital spending was $27 million this quarter, including $10 million for strategic growth investments.
Additionally, $11 million of capital was returned to shareholders through dividends and we ended the quarter with approximately $150 million of cash.
We continue to maintain a balanced approach to capital allocation that enables us to grow and reinvest in our businesses, while returning cash to shareholders.
Moving to slide 15.
Our balance sheet remains strong and total debt to adjusted EBITDA of one nine times remains within our desired range of one and a half to two and a half times.
Let me now turn to slide 16 for updated 2022 outlook.
We're increasing the full year guidance metrics that we stated last quarter.
Net sales are now expected to increase 11% to 17% year over year to a range of $3 nine to $4 $1 billion, which assumes no foreign currency translation impact.
Adjusted earnings per share is now estimated to increased 19% to 24% year over year to a range of $13 to 13 50, excluding any further restructuring activities.
These metrics reflect strong market demand for solid execution by our teams and our confidence in our ability to continue this performance.
We also assume that steel costs for the year has stabilized.
And expect a full year tax rate of approximately 26, 5% due to our expected geographic mix of earnings.
Other metrics and assumptions are summarized on this slide and in our press release.
The strong debt bracket demand across our businesses strength and flexibility of our global teams and our continued pricing strategies give us confidence in achieving our sales and earnings per share targets.
Additionally, investments in technology and strategic growth initiatives across our portfolio remain a priority for us this year.
Finally for modeling purposes.
Culture segment, a reminder, that the third quarter is a lower sales quarter in the segment compared to the rest of the year due to normal business seasonality.
With that I will now turn the call back over to Steve.
Thank you avner.
Turning to slide 17.
Benefiting from the long term secular drivers and all of our businesses as evidenced by another record global backlog of more than $1 $8 billion, an increase of 12, 5% from year end 2021 .
These demand drivers are providing momentum as we look ahead for the rest of 'twenty to them too and our business portfolio is well positioned for growth.
Like others, we are closely monitoring inflation.
<unk> seen volatility and labor availability.
We are ready to take additional actions to address these issues across all our businesses as needed.
Turning to slide 18 in summary, I could not be more pleased with our collective efforts as a team over the past few years to advance our journey as a company.
Together, we continue to demonstrate our ability to grow sales through innovation and execution.
At the same time, we have increased profitability by executing on our pricing strategies and advancing operational excellence across our footprint.
We have invested in our employees and technologies to drive new products and services to build upon the strength of our operations.
We remain disciplined in allocating capital to high growth strategic investments, while also returning capital to shareholders through dividends and share repurchases.
We continue to focus on managing what we can control.
Because of this we are poised to grow and drive shareholder value well into the future.
This playbook has served us well and I am confident in our continued performance in 2022 and beyond.
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.
Okay.
Thank you.
You'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Our first question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.
Hey, good morning, guys. Thanks for taking a few questions.
Uh huh.
Obviously, recognizing price was the big driver in Q1 was a volume growth stronger than either of the infrastructure or agricultural segments are you know in.
Roughly kind of where where it was at in the mid single digits or maybe just talk a little bit of volume at this point.
Alright. Good morning. This is all about.
I'll take that question so from volume than we've seen in Q1, if I break it by the two segments for infrastructure. It was around low single digits and just as a reminder, early in the quarter. We did have impact from other crime, which impacted mostly our coatings business, which probably drove it down from the mid single to the low single digits.
If you look at the Agriculture Agriculture volume was also up low single digits, but there we didn't have the Egypt projects that we mentioned.
If you kind of normalize that you would see double digit volume growth in agriculture.
MACRA culture.
The remainder was pricing.
Got it that's helpful.
Hum.
Obviously solar is an area that that lots of promise it seems like there is theirs.
Our supply chain has kind of got more difficult again recently just can you maybe talk about what youre seeing on the solar front, particularly in North America, and you know kind of how you see that playing out over the balance of the year.
Yeah, Chris This is Steve I'll also ask guy to comments here, but.
You know modules panel availability.
We'll be somewhat in question again, particularly with the.
Government investigations for.
Proceeding so.
The larger scale utility projects will probably feel the most brunt of that but as you know we've been targeting.
Targeting much.
Much more of a distributed generation utility scale mix and that's allowing for us to.
And not be as impacted by the delays because of the D. G projects tend to move much quicker through the system and then I'll ask Eric to talk a little bit about the international mix and how Brazil plays into that.
Yeah, I mean, a large portion of our businesses our international So we've really North America is just one of the markets for our solar products.
Obviously, you have with <unk>.
Tremendous strength in Brazil, as far as our market position, there and we feel good about what we're doing internationally.
Do you know the U S.
Climate will change obviously, it's a big priority for the administration to keep pushing our green energy along.
Right now a lot of projects there will be some pause, but this is just in North America. So we've really primarily been internationally focus it is a global product for us. So as a result, it doesn't have as much the largest impact and in both our infrastructure and agriculture segments, we feel like our guidance is.
Still relatively conservative and you feel good about it.
Got it very helpful last one for me, maybe just could you give a quick update in terms of prosperity, where what your expectations are over the next 12 months.
Yeah.
<unk> is developing along quite nicely I would say from an integration perspective, where we're pretty much done. We're also working a lot of the back end office.
Integration with the existing irrigation group.
And.
From a technology rollout perspective, I think we're really working on highly innovative.
You know.
Big changes for the industry and we're seeing good traction and pick up of what we have out there the margins are coming in as we expected.
The growth of 27% is there.
Where we expected.
And.
Yesterday, a little bit as we lap last year. It will start to normalize Q1, we didn't have prosperity and part of Q2, we didnt. So what youre seeing there mostly it's just the.
Now in addition of <unk> this year versus last year.
Got it I'll leave it there I appreciate it guys.
Okay.
Thank you. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.
Good morning, everyone.
Okay.
Yeah.
Just wanted to pick up on.
It is the price volume I mean, you guys bake <unk> 22 revenue numbers here by a long way and you paid for <unk> 'twenty. One numbers also by a long way I would imagine you know how much growth youre going to get from pricing at the beginning of every quarter.
And the difference has to be volume here and I think Avnet, you said low single digit a mid single digit infrastructure, which would imply that you must've been expecting something like down mid single digits in volume in <unk> 'twenty. Two so maybe you can just talk about what came in better than you were anticipating.
Or were the disruptions you were expecting it didnt materialize or would you say the last couple of quarters. The revenue numbers it would be much much higher than it would be playing god.
Yeah. So first of all we're very pleased with our execution, we've been able to execute very well.
Lot of productivity through our through our our plans, which obviously helped drive try volume pricing.
Pricing, we keep on taking pricing actions right, it's not a one and done we continue when we take actions and where we're able to and in some areas.
Impact the within within the quarter as well so we've been able to.
[noise] execute them.
Kind of outperform.
We'll expect to do credit through throughout the year, and we will get more of the.
Mid single digit volume are the remainder of the year somewhere.
For it to kind of keep that momentum going and Nathan I would add that you know I think the pricing elasticity was a little better than we thought as well.
Across all markets.
And we were able to because the muscle reflects is there now that as an example of zinc went up we were quicker into the market as you know aluminum move we were quicker with pricing and I think the the over two years now.
Following metals.
The newer inflation, that's coming in around labor and.
Health care and gas costs and freight costs, we're just handling that all a lot better and I think that's a big piece of it.
I'd also say that our solar business, particularly in AG is kind of outperforming our initial expectations.
And you know, we're accounting for that now into the balance of the year and into the increased guidance.
It's a show that isn't being picked on for being the other way around.
I guess the second question I wanted.
Two to focus on ways a comment by are in there.
Our focus on product lines, and geographies that are offering better growth and margins.
Which I'm sure is not something new but maybe you could just talk a little bit about what are the most promising area. Just for you to invest in growth in terms of the product lines and geographies might be.
Yeah. So you know when we look at in terms of portfolio management I really tried to focus on.
You know the business is that we will have outside returned as opposed to the individual products and those so we look at those businesses, we look to make sure we maximize the right products within those businesses.
So if you looked at our utility market. There's obviously you know pieces and parts of utility that are are more profitable. So we just make sure that we prioritize capital.
And be very disciplined about making sure that capital follows the biggest opportunities in those markets and businesses and really so from just a philosophy point of view, that's the way to look at that portfolio.
Yes.
Okay. Thanks for taking my questions.
Thank you. Our next question comes from the line of Brian Drab with William Blair. Please proceed with your question.
Hi, Thanks for taking my questions. There's been just so much volatility again in the price of steel.
Especially towards towards the end of March.
Really impressive the guy that you were able to.
Provide given that what.
Rice of steel do you have incorporated into the guidance for the balance of the year or at least Directionally. What are you assuming in that guidance from here.
Yeah, Brian Steve. It's a you know it's a balance because we don't have any one piece of steel that we buy so it's indexed across the businesses differently, but I would just say what we did is we took kind of that mid March end of March.
Steel costs and that's what we've assumed as we look out the rest of the year.
So kind of taking the recent peak in projecting that forward not not forecasting a decline.
That's correct.
And then Steve you know.
About a year ago, you gave the longer term guidance that included getting to greater than 12% operating margin and I was wondering if you could just revisit that and you know given you know what.
What's happening with steel I know that's become out of reach in the near term, but what needs to happen to get to that level of operating margin.
Hey, I'll I'll I'll start off with so first of all right that is one of our long term kind of goal of three to five years clearly right at a higher cost it does impact your margin percentage.
But we do have a roadmap to get there and we have seen improvement in Q1, we will see a Q2, which is one of our stronger quarters throughout the year, especially with the bag markets will continue to see improvement.
So we won't we will show improvement in our margins in 'twenty 'twenty to.
'twenty 'twenty three is what we can really show additional progress towards the goal.
How do we get there there is true through the actions we've been taking.
Through our our pricing leadership, I'm getting that pricing over inflation well with what we're doing at all our operations with our with our productivity with our lean with our industry for Porno automation.
With focusing on those products that have a higher.
Margin profile telecom would be a good example, there so I think everything that we're kind of doing.
Gives us a roadmap and confidence that we can achieve our 12% operating margin.
Yeah, and Brian I would just add that the the focus on the two segments also is really allowing us to drive.
That growth towards that operating income percentage.
You know the demand drivers are pretty similar across infrastructure.
<unk> drivers and agriculture are there, it's really now developing and using this as an opportunity to continue to develop the organization and the management team.
To stay focused on exactly what Aaron just discussed go after growth allocate capital to growth and then really work on the operational excellence piece on the on the back side to get as much cash out of the business to continue to fund things like X or things like telecom growth et.
Et cetera.
Got it I appreciate it thank you.
Okay.
Thank you. Our next question comes from the line of Ryan Connors with Boenning and Scattergood. Please proceed with your question.
Good morning, Thanks for taking my question and congratulations on the on the record results.
I wanted to.
Talk a little bit about pricing from a more strategic angle Steven.
It's a lot about the tactical margin impact on price costs, but when you have these kind of this magnitude of pricing action. I mean are you surcharges for things and customers are expecting that to roll down and kind of able to watch the steel price in their wall Street Journal and you know look for a decline when it goes down or are these list price.
Creases and what's the long term structural impact on margins. If in fact, the fed does it seems like they they want to you know ultimately tamps this inflation down it brings down the commodities a little bit.
Yeah, It's a good question.
We avoid surcharges because of what you exactly describe this you're going to have to give them back as things change and what we're trying to do is continue to build value for the customer to deliver quicker less quality issues to be complete and on time.
And to be innovative with our solution. So that in the field things go up quicker and Theres more resiliency to our product less inspection etcetera. So over the I'd say the last four years, if you really take kind of that pricing advantage.
<unk> said, that's what we have developed across all of the teams and outside of the utility, which there is obviously some indexing to the what we call the a M M.
You know as we renegotiate contracts, we're looking for price outside of metals.
And getting really incremental pricing that can stick for the future. You know we've taken that mantra. It's just kind of as you saw during much of the pandemic people were willing to pay more if you could get it to them on time and deliberate.
Its quality and so if we can be that player.
And that will help us sustain pricing for the long term.
And that just have to turn around and get it back.
Got it okay. That's very helpful color.
My next one was you know that there was a comment earlier that you know.
Grid renewable projects and so forth are a priority for the administration, but there was some interesting.
News this week that apparently.
The administration is going to reimpose These nerpa environmental review and.
And permitting regulations and already some of the trade groups around you know the the electric grid.
Grid transmission, they've said that that's bad news that that those things were actually loosened a little bit under the prior administration of that helped project activity to to percolate.
The early read on what that could do to the to the to the backlog trajectory from here.
Yeah. This is this is Aaron I'll I'll take this one you know when we look at it you know.
It is true that the administration, sometimes you you do hear mixed signals that are coming out from that however.
Our read is for the most part we're fortunate we're in a lot of distributed generation pieces.
There are smaller projects and they tend to get a better oh tend to move through faster some of the big utility scale projects absolutely run into this because of the environmental impacts are much larger so in North America, we tend to very much focus on the DG side of the business. We think that that is a a better route for us in north.
America and given all the regulatory issues, if it's proven out to be a successful strategy now what that looks like in the back half of the year.
And who's to say Oh, you know these things work through sometimes projects get pushed I think youre going to find more volatility on the large utility scale side.
And once again, we are we're a global solar business and so north.
North America is just a portion of our revenue in solar so we really make sure that we focus on the international side.
Got it Okay, and then I did have one really quick just a housekeeping if you don't mind I happen to catch a story in the Omaha World Harold there about the Nebraska, maybe lowering the corporate tax rate and that that did get traction in the state legislature and is that something that could actually benefit the tax line in the future.
Hey, this is Tim Francis I'll take that one.
There are there's a number of tax credit programs and the state of Nebraska.
That allow us to already benefit.
From a very very low corporate tax rate. So this new lower corporate tax rate really won't affect us much.
Got it clear enough. Thanks again.
That's right.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Next question comes from the line of Jon Braatz with Kansas City Capital. Please proceed with your question.
Morning, everyone.
Alright.
Steve Obviously food security has been a growing issue since COVID-19 and it's only been a central weighted by the Ukraine innovation.
And I guess my question is are you can read a lot about what maybe Egypt is planning.
But can you talk a little bit about maybe what what else might be happening beyond Egypt.
And if there isn't anything and and also.
What might be the impediments for some of these projects going forward is it water availability funding or is it everything.
Can you speak to a little bit more about the food security issues beyond maybe just Egypt.
Alright it.
If you look around we kind of segment Africa by.
North Africa, West Africa, and sub Saharan Africa, and there are very strong opportunities across all of those regions.
There's a lot of planning, there's oftentimes a lot of NGO money that's coming in.
At least to help with the financing of the programs.
And then I was going to be put in place.
And that is typically the biggest impediment is the financing.
And the fact that we will we and many others in the industry want to get paid upfront.
And in order to do that work and so if.
If you look at finance typically being the biggest impediment.
Their availability to dollars.
It will also be <unk>.
Issue as it goes across there.
But.
Secondarily to that as infrastructure and so do you have power do you have pumps do you have wells are.
And that's one of the things in Egypt as you know, we're just waiting for the infrastructure.
To catch up with their own progress there.
So one of the reasons, we developed the kind of solar pivot was so that you didn't have to have all of that infrastructure in place to start.
To grow and so in a place like Sudan, which I think we featured last quarter.
That was it allowed us to create a product out of a need and I think you'll see more of that particularly because grid expense is so expensive.
And to Ryan's earlier question you don't have the same environmental if you're not running across all buy some land and so.
Those are the things that we think will really help that market and it's not just Africa.
The middle East.
Has a number of projects going forward other places in eastern Europe I have.
If you take Romania, Hungary, and some of those places also have a real strong pipeline, which will probably be emboldened due to the Ukrainian crisis.
Because they know they have to feed the reach.
Okay.
Speaking specifically about Egypt, you know there are some reports that they wanna add incrementally.
1 million acres or 2 million acres I'm little bit confused about exactly what they want to add but.
Is any sense on how.
And you know assuming everything falls into place and fundings available home how quickly some of these projects can go forward.
In Egypt.
It usually depends on what level of the governments involved.
And right now the President is personally involved in the development and the south pasture area.
And parts of the military and and kind of west of Cairo. So when that happens you tend to see things move pretty quick.
And so.
Over the next year to two years, there can be some significant projects.
I have a million acres.
<unk> moved forward.
Okay, Alright, thank you very much.
Yeah.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to MS. Campbell for any final comments.
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Yeah.