Q2 2022 Valmont Industries Inc Earnings Call
Speaker 1: of many nations and customers around the world. A recent World Bank study shows that global grain supplies, including corn and wheat, have tightened for the second year in a row. And the aggregate stock-to-use ratio is expected to drop for a third consecutive season. We are in unique positions to supply irrigation, solar, and technology solutions to improve land productivity and reduce input costs for the grower. With a global reach that provides us with a more resilient business model to adapt to these market dynamics and cycles. Despite current economic volatility, we believe our current demand environment will continue to be very positive. And with our line management structure as centralized operational framework, we are rising to the challenge to deliver results through a greater customer focus, improved productivity, and increased efficiency in our factories. We are a stronger organization today and have demonstrated that we are better positioned to navigate ongoing macroeconomic challenges. Turning to slide five. During the quarter, we acquired a majority interest in Conceal Time. This exciting transaction aligns well with our strategy to invest in high growth market sectors and enhances our portfolio of telecommunication solutions. Conceal 5 is a fast growing industry leader in 5G infrastructure and passive intermodulation or PIM mitigation. PIM interference arises when signals at the cell site are mixed, which can degrade system performance.
Speaker 1: and lead to underlieable coverage and spotting data speeds. The field-class portfolio of Penn Solos helps both identifiably issues and solve the problems and improve performance. Joining the Valmont team provides immediate commercial benefits as we are now able to accelerate expansion and telecom markets in partnership with the industry later.
Speaker 1: who remain minority honor of the faith.
Speaker 1: This is a tremendous effort toward enhancing our access to markets and carriers around the world. This allows us enough to change and make players stronger, through and further you
Speaker 1: With our combined experience in the space and leveraging Belmont's engineering expertise and global manufacturing footprint, we are positioned to address critical pain points and further accelerate the delivery of 5G technology to the market.
Speaker 1: We are excited to welcome the Conceal 5 team to Alma.
Speaker 1: to slide six and an update on our ESD initiatives.
Speaker 1: More about that, our first sustainability begins with our timeline.
Speaker 1: And preserving resources and proving lives.
Speaker 1: It's at the core of everything we do.
Speaker 1: It includes our commitment to our 2025 Environmental and Diversity Goals and the four United Nations Sustainable Development Goals that naturally align with our good.
Speaker 1: Today, I would like to share with you a couple of examples that exemplify our progress towards those goals.
Speaker 1: We recently opened a new spun concrete pole factory in Bristol, Indiana.
Speaker 1: Then plant expand production of concrete utility products and gives us an affordable tri-beats in the northern part of the US. The plant gives us an affordable tri-beats in the northern part of the US.
Speaker 1: The transmission balls manufactured here will be used by our customers to help build a more reliable and a resilient electrical grid.
Speaker 1: At this site, we are in the early stages of installing a 500 kilowatt solar array.
Speaker 1: Using our single-axis tracker solution.
Speaker 1: complement the production of highly engineered low-carbon concrete transmission poles.
Speaker 1: We have also signed a net meter agreement with the local power provider that will allow us to net meter at retail price.
Speaker 1: demonstrating that ESD initiatives when done right are good for business. And when done right are good for business.
Speaker 1: Upon completion, the solar field is expected to fully offset all of the site's electricity consumption.
Speaker 1: An example of a real zero emissions plan.
Speaker 1: We work with partners and formed agreements that make these capital investments compelling and enhance profitable growth. The true win-win.
Speaker 1: Elsewhere, Almonte was recently recognized by the Department of Energy.
Speaker 1: for our alternative energy-level source project.
Speaker 1: With successfully replaced 100 gasoline vehicles, with elected vehicles, had our Valley Nebraska campus. With elected vehicles, had our Valley Nebraska campus.
Speaker 1: This has reduced the site's SCO-1 greenhouse gas emissions.
Speaker 1: by more than 1-1-30 metric tons per unit.
Speaker 1: with an associated annual fuel cost savings.
Speaker 1: For the project, we will present it with the better projects award as a part of the DOE's Better Building project.
Speaker 1: An annual award recognizes organizations throughout standing accomplishments in implementing industrial energy, water and waste projects at individual facilities that approve the patient's team, or rejects the missions and lights. Rogers's admissions and lights.
Speaker 1: These efforts have led to the launch of our Greenfleet Initiative across all of them.
Speaker 1: And we plan to use this project as a model and have sustainability throughout our global footprint. And have sustainability throughout our global footprint.
Speaker 1: Before turning the call over to Ab in summary, we will leave the form well in the second quarter. We will leave the form well in the second quarter.
Speaker 1: achieving record revenue, EPS and backlog.
Speaker 1: Our team is delivering innovative solutions for our customers.
Speaker 1: End market demand in both infrastructure and agricultural markets remains strong, as I will detail in a few minutes. We are also raising our 2022 outlook.
Speaker 1: Our financial strength enabled us to support strategic growth initiatives.
Speaker 1: while returning cash to our shareholders at home today with Lam ???? Yukley All of a sudden, theacia valuing to our 40% bills??electronic report can be reflected on our heads and certain billboards. Any serious concerns or JAY HORN VALENGE
Speaker 1: I am pleased with our results and excited about our future.
Speaker 1: With that, I will now turn the call over to happen for our second quarter financial review and update it out later.
Speaker 1: Thank you Steve and good morning everyone.
Speaker 1: During the Friday and second quarter results, my comments will focus on the adjusted result as outlined in the press release and in the right G-disclosure in the presentation attendants. I'm in the right G-disclosure in the presentation attendants.
Speaker 1: Second-quarter operating income of $122.9 billion or 10.8% of net sales grew 35% year-to-year driven by higher volume and improved six-class leverage and our ability to successfully execute unprisoned strategy. and our ability to successfully execute unprisoned strategy.
Speaker 1: Diluted earnings per share grew 21% to $3.70 due to higher operating income partially offset by a higher tax expense which is primarily due to a change in the geographic mix of earnings compared to last year. Diluted earnings per share grew 21% to $3.70 due to a change in the geographic mix of earnings
Speaker 1: Turning to the segments and starting with infrastructure on slide 9.
Speaker 1: Operating income increase to $84.6 million for 11.1% of net sale driven by favorable pricing and improved six cost leverage, including at Janay.
Speaker 1: Moving to slide 10. In the agriculture segment, operating income increased to $62.2 million for 16.6% of net sale.
Speaker 1: The benefit of higher average selling prices and additional value and leverage was partially lost by higher SGNA, including incremental R&D extend for technology and death.
Speaker 2: Thank you.
Speaker 1: Turn off the cash on slide 11.
Speaker 1: Year-to-date operating cash flow of $68 million reflects the sequentially improvement compared to first quarter as expected, even as working capital levels bring elevated to meet strong sales growth. Year-to-date operating cash flow of $68 million reflects the sequentially improvement compared to first quarter as expected,
Speaker 1: As previously stated, we expect that the notable improvement in cast generation and working capital level in the second half of the year.
Speaker 1: more confident that our actions of the team will help us deliver strong cash flows as working capital levels improve with full year operating cash flows expected to exceed net earnings in 2022. We expect it to exceed net earnings in 2022.
Speaker 1: Turning to slide 12 for summary of capital deployment.
Speaker 1: Year-to-date capital spending is $50 million, including $18 million for strategic growth investors. TV???? Triangle 103.000 or RFA 800 can't believe you can live up to $90 million in debt.
Speaker 1: We spent $39 million on M&A in the second quarter for the acquisition of concealed fabric.
Speaker 1: Additionally, over $32 million of capital has been returned to shareholders year-to-date through dividends and share repurchases, and we ended the quarter with approximately $155 million of cash.
Speaker 1: We continue to maintain a balanced approach to capital allocation that enables us to grow organically and inorganically, reinvesting in our businesses, and returning cash to shareholders.
Speaker 1: Moving to slide 13, our balance sheet remains strong, and total debt to adjusted EBITDA of 1.8 times remains within our desired range of 1.5 to 2.5 times.
Speaker 1: Let me now turn to 514 for updated 2022 outlook.
Speaker 1: Based on our strong year-to-date results and positive outlook to the second half of 2022, we are increasing our full year guidance.
Speaker 1: Net sales amount is expected to increase 20 to 21% year-over-year to approximately $4.2 billion, primarily due to pricing to offset continued broad-based inflation.
Speaker 1: This also assumes an unfavorable foreign currency translation impact of 2%, a full year net sale and its associated unfavorable EPS impact.
Speaker 1: Full year volume growth is expected to be in the mid-single digits.
Speaker 1: Adjusted earnings per share is now estimated to increase 24 to 28% year-over-year to a range of $13.60 to $14.
Speaker 1: Disreflect a higher expected failure tax rate of approximately 27.5%.
Speaker 1: due to our expected geographic mix of earnings.
Speaker 1: Other metrics and assumptions are summarized on the slide and in the press room.
Speaker 1: The strong market demand across our businesses distroends and flexibility of our global team and our continued pricing strategies to keep us confident in achieving our financial target. Theobenad
Speaker 1: Additionally, investments in technology and strategic growth initiatives across the portfolio are running a priority for us this year.
Speaker 1: Finally, for modeling purposes in the agriculture segment, a reminder that the third quarter is typically a lower sales quarter compared to the rest of the year. However, we expect a lower seasonality impact this year due to ongoing delivery of back organ cyst.
Speaker 1: With that, I will now turn the call back over to Steve.
Speaker 1: Thank you, Adler.
Speaker 1: Turning to slide 15.
Speaker 1: We delivered great results this quarter as market demand remains with us and order activity is strong.
Speaker 1: evidence by another quarter of record revenue while drawing record global backlog of $2 billion.
Speaker 1: Up nearly 25% from year end 2021.
Speaker 1: Looking through the end of 2022 and into 2023, the strong demand of the momentum to continue. The strong demand of the momentum to continue.
Speaker 1: Turning to slide 16.
Speaker 1: In summary, I am extremely pleased with how our team has performed.
Speaker 1: Over the past few years, we have been very intentional with our strategy by leveraging our position of financial strength and flexibility, while continuing to invest in our employees and technology to deliver growth over the long term.
Speaker 1: Our diversified portfolio of products and solutions, focused on operational excellence, and the enduring long-term market drivers of our businesses haven't changed.
Speaker 1: We recognize that these are challenging times across the global current global economy.
Speaker 1: and there is growing uncertainty around recessionary pressures.
Speaker 1: Our markets are supported by strong, secular growth divers that are independent of the general economy and less correlated to macro economic cycles. And less correlated to macro economic cycles.
Speaker 1: giving us confidence into 2023 and beyond.
Speaker 1: We remain focused on our customers and driving growth in innovation and execution.
Speaker 1: And our disciplined approach to capital allocation has served us well as we have effectively balanced investing in growth with returning capital to shareholders. It is looking to fund sustainable investing in growth to share holders.
Speaker 1: We continue to focus.
Speaker 1: to focus on managing what we can't control. And I am confident this approach will lead to a continued strong performance in 2022 and beyond.
Speaker 1: enabling us to deliver shareholder value well into the future.
Speaker 1: I will now turn the call back over to her night.
Speaker 3: Steve, at this time the operator will open up the call for questions.
Speaker 3: Hello, if you would like to ask a question please press start followed by one on your telephone keypad now. If you change your mind please press start followed by two. When preparing to ask your question please ensure your phone is unmuted locally and we ask that you ask one question with one follow up and if you have multiple to rejoin the queue after your first question.
Speaker 3: So our first question is going to come from Chris Moore from CJS Securities and I will just open your line now.
Speaker 4: question or two
Speaker 4: Good morning. Thanks for taking.
Speaker 4: and a couple questions. So just in terms of the growth...
Speaker 4: by segment. Could you break out the price and volume a little bit further within infrastructure and agriculture?
Speaker 5: Hi, good morning. I think three questions. Overall, as we stated, if I start from agriculture, we do have double digit volume growth in the quarter and expectation is to be the same for remainder of the year. When you look in infrastructure, pretty much across the board, we are getting volume growth as we stated kind of mid single digit and expecting to get mid single.
Speaker 5: digit volume goes throughout the year, pretty much across the product lines in the segment. privilege Democrats and Democrats to give ????idi drones to Republicans and generators to have their Sub arab champion on brother in state. So Internet, could speak, very much across the dormant lines, very much across the product lines II. Let's take a look.
Speaker 4: Got it. And just for my follow up. So you're talking about strategically expanding capacity and key growth markets. Can you provide just maybe a little more detail there and talk about which segments or sub-segments or perhaps closest to capacity at this point? Or perhaps closest to capacity at this point?
Speaker 1: Hi Chris, this is Steve. Irrigation we've been methodically adding capacity in different parts of the world. Brazil notably obviously to meet the increased demand down there. In Dubai we pretty much doubled the size of the facility over the past two and a half years.
Speaker 1: We had added in the utility area, and telecom area, in Monterey, Mexico, again over about the past year and a half.
Speaker 6: And so those are some of the areas that we...
Speaker 1: you know are watching closely and making sure that we keep a proper balance of capacity versus you know volume coming through them. Also, that's one of the reasons we're really pushing our lean efforts and productivity efforts around you know advanced manufacturing and robotics so that we can continue to gain production hours without a lot of new brick and mortar.
Speaker 4: Got it. I appreciate it. I'll leave it there.
Speaker 3: Thank you. Our next question comes from Nathan Jones from Stifle. Nathan, your line is now open.
Speaker 7: Good morning everyone. I wanted to start with a question on gross margins. In the face of heavy inflation and a lot of price pass through, I thought it was pretty impressive that gross margins actually expanded 10 basis points.
Speaker 7: I hope that you can provide a little bit more color on whether or not you're able to pass through the inflation with some margin on it. The operational efficiency, leverage on volume, keeping those gross margins really healthy given all the inflation that's running track.
Speaker 5: Thank you Nathan, this is out there. I'll take that one. So first of all, yes, we're pretty pleased with our ability to expand margin in this inflationary environment. And pricing is pretty much product line by product line, market by market. It differs and we do have opportunities to expand our margin through pricing in many areas. Additionally, we are getting beverage and additional volume.
Speaker 5: We're taking advantage of productivity improvement. As we mentioned, we're doing localization.
Speaker 5: For region that is driving improvement as well. And so all in all we are able to expand large and critical please with the fact that we're doing that in this difficult environment. …
Speaker 6: And they've been out of the side. Just to put it in that way, guys. Just to put it in that way, guys.
Speaker 1: Sorry, I was just gonna add that, you know, inflation is this ever evolving?
Speaker 1: you know, seeing that's out there. And so we're just saying hyper attentive to any parts of the business that have inflation. Obviously in the second quarter fuel and fuel surcharges really ramped up above most people's expectations. And so that's something that we'll still play catch up on. But as Adler talks about productivity perspective, the plan has done an excellent job.
Speaker 7: Great, thanks. I guess I'll ask a price dose of volume question on the backlog as well. Just to get a final point on that, is there any colleague who can give us on how much the backlog is outpriced as the volume?
Speaker 5: I think it's pretty reflective of what we're seeing right now in the business where we're getting additional volume in the backlog as well as pricing. So I think it's pretty indicative of what you're seeing in our results today and for the remainder of the year.
Speaker 7: Cassette profile is the revenue then.
Speaker 1: Yep, that makes great. Thanks very much for taking me questions.
Speaker 3: Next question comes from Brian Drab from William Blair. Your line is now away from Brian .
Speaker 8: Thank you.
Speaker 8: I wanted to ask this question about interest rates and whether you're seeing any change in project activity. I was looking at interest rates of 320.
Speaker 8: or conversations around larger projects, particularly in utility.
Speaker 8: changing at all as maybe the ROIC and some of these projects doesn't look as attractive given a higher interest rate environment.
Speaker 8: you know, in the second half of 22 and into 23. Is that a concern?
Speaker 1: Yeah, we don't really see anything as of yet.
Speaker 1: that has been impacted by interest rates. The return on equities, particularly in utility, are still very strong. They outperform most other investment vehicles in the market. And so therefore, I think with the renewables targets, with the amount of electrical grid congestion that we're starting to see, and just the need for grid hardening, I think that those will continue fairly unabated.
Speaker 1: Everything we've been looking at from a demand profile, we look into 23 and 24, still looks very strong in terms of not just maintaining the base but continuing to grow on top of the base.
Speaker 1: I think telecom providers, while it may be affecting their financing to a degree, the fact is they spent a kind of money on the C band auctions and some of the subsequent auctions where they're going to, and they have performance guarantees to get coverage, they're going to have to install what they have out there too. So the two areas that would be most affected by financing actually look to be pretty healthy.
Speaker 8: Okay, thank you. And I hate to blow my second question on tax rate, but I'm going to just, because it's gonna have bearing on the 2023 models here. But it looks like if 27 and a half percent is the right number for the, or the best gets for the full year, 22, does that put us in the kind of a 27 and a half to 28% range for the second half of the year? And is there any reason to think that that?
Speaker 5: would not be the best guess for 2023. Yeah, so really the main drivers, like we mentioned, was geographic mix. And we are seeing very strong performance out of Brazil, which currently have higher tax rate, as you're all familiar with the going back and forth with its treasury and kind of Brazil on getting penalized for double taxation there. Assuming that situation stays the same, we continue to get strength in Brazil.
Speaker 5: We will see a slightly higher tax rate. So that's our light trying to look at it right now.
Speaker 1: So 27 and a half is...
Speaker 1: where we believe it will stay at this point.
Speaker 8: Okay, all right, thanks very much.
Speaker 3: Our next question comes from Brian Wright from Roth Capital Partners. Your line is now away from Brian .
Speaker 1: Thanks. Good morning. Congrats on the quarter, really impressive results. Wanted to just drill down a little from just.
Speaker 1: and get a little help on the modeling side as far as breaking down the revenue growth profile kind of between infrastructure and the ag irrigation side for the year. Any help you could give on that would be great.
Speaker 5: So this is on here. So the way I look at it right now is, when you look at the remainder of the year, you look at agriculture, we should continue to expect to see double digit volume growth in both North America and internationally actually. And then when you look at adding for structure, let's assume that we're gonna grow mid-single digits, volume growth pretty much across, across those infrastructure product lines.
Speaker 5: the way I would look in the remainder would be pricing.
Speaker 9: Okay, in, in, in.
Speaker 1: If you're just following up on that, recently the commodity prices in the past month or so has come in a bit, and just kind of think about where the sensitivities are on that and if things were to continue. It's just kind of how that.
Speaker 10: with impacting?
Speaker 1: Yeah, if it's on the coast side, with spiel and zinc and others on the decline, we have no plans to give that back other than where it contracts well in our utility space. Other than where it contracts well in our utility space.
Speaker 1: There's so many other inflationary factors on the, you know, through the other parts of the business that there's no need to get it back at this point. And we've been able to do that with the supply demand profile that exists.
Speaker 6: from a
Speaker 1: If you go to the farmer input cost side if those are the commodities that you're thinking about with corn and soy And some recent pullback there a lot of that's due to the dollar strength As the dollar has strengthened you'll see those pull back if the dollar were to weaken that they probably go back up
Speaker 1: And we're kind of in this law of varied from a North American harvest perspective or even a crop health assessment to see what's gonna happen out there. But farmers who remain very positive, we actually had some economists in who kind of rightly predicted the upturn of the ag markets who believed 2023 to see no difference from 2022. And so...
Speaker 1: The net farm income will change if fertilizer costs have stabilized or come down a little bit. The net farm income will change if fertilizer costs have collapsed or come down a little
Speaker 1: as they think about 2023. So overall, not much change due to the recent commodity changes out there. Unb nonetheless...?
Speaker 1: Great, great. And it's part of it to just to think about it. It's a process and it takes time to get everything kind of through into the pricing. You know like the comments, the audience will feel great as well. So much that I think it's ruins of the pricing and so Yeah.
Speaker 1: Did the catch up so to speak is would more than off that kind of any year term kind of further pressure on on some of the. on.
Speaker 11: are on the metal side.
Speaker 1: Yeah, that's correct. And we have inventory that we purchase. And we have inventory that we purchase.
Speaker 1: with a higher rates.
Speaker 1: And that's why it was priced at that point and with a backlog, let's say...
Speaker 1: in the longest backlog in the utility area around 26 weeks.
Speaker 1: You've already kind of marked the market at the time that you purchased and you took your order.
Speaker 1: You know that should just move through without a lot of squeeze. Let's say for downward pressure on price
Speaker 1: Excellent. Thank you so much. Thank you.
Just to remind everyone, if you would like to ask a question, please press start, follow by one on your telephone queue pad. Now, if you change your mind, please press start, follow by two, and when preparing to ask your question, please ensure your phone is unmuted locally. We ask that you ask one question with one follow-up, and if you have multiple to read on the queue, ask the third question. Our next question comes from Ryan Connors from Norcoast Research. Your line is now open, Ryan.
Great, thanks for taking my question this morning.
I wonder, Steve, if you could discuss in a little more depth the decision-making process around deploying capital toward the new manufacturing plant. I'm not sure I'm my age. I'm old enough to remember the transmission industry kind of getting ahead of its skis. I guess that was 10, 12 years ago and a lot of capacity going in at a later point in the cycle and the result being a pretty tough pricing cycle. So with that background, I'm just curious.
I'm sure that there was a lot of due diligence, but he...
the thought process and the different considerations on that front.
Yeah, I think the dynamic is a little different than 12 and 13 specifically in this sense. One most of us are battle tested through that and we remember it quite distinctly and so now the real push is on productivity.
as a way to gain capacity through the plants. So the capital decisions are more personal, foremost focus towards automation, improve flow through the facilities, better cutting machines, better welding machines.
things can really help you just move more of the product through your existing footprint.
In terms of a big brick and mortar, it's like the last thing that we want to do. So therefore, we're going to stay very close to the market. We'll be very close on lead times. I think the other big dynamic is the market has acted very consistently, particularly over the last five years. It's been a steady growth curve with no real big projects like back then with Cres.
which was the big Texas build out for renewables, kind of lurking in the background. And so as long as we stay very close to the utilities on their demand profile, as long as we are continuing to build productivity year over year, which everyone expects on their operations teams, and then really putting the right capital, smart capital I'll call it towards the right people and not necessarily essentially the small town we need.
Those productivity things.
You know that was that's where we're going to pack out the market obviously if you compound these numbers out There may be a need somewhere down the line, but we've been fairly successful because of our operations model as one product line Declined slightly or volume is not quite where we expected we can quickly put in Another product lines product that came through the centralization of our operations group
So that's also given us a large boost of capacity that frankly was latent to sit in there for us to take. And so that's helped us to date.
Yep, okay.
That's very helpful. I guess my other one is more is for Avner really.
Abner, on the SG&A line is something we've been kind of having a tougher time modeling. In some quarters it seems like it grows in line with sales. Other times you seem to be getting some pretty good leverage there, some are seeping ahead. How can we think about that? Is there a growth rate in SG&A we should think about with inflation and that type of cost, or is it more of a percent of sales you're targeting? Anything you can help us out with there would be appreciated.
Yeah, so overall, you know, I look at SGNA, of course, it goes up and down with sale, that's clearly like you said, there's a correlation there. Continued investment in R&D is another area that you can track through the PNL.
you know, possibly when you look at incentive side, that can kind of, that will go up and that will impact your increase in your SG&A as well. Those are kind of the main areas I kind of focus on when I look at the SG&A. Yeah, and I would just say from a base SG&A, we are gaining leverage.
we're choosing to strategically invest in R&D both in agriculture and infrastructure along the technology
at a run rate that would exceed last year.
So if you throw that with the incentives piece
More than likely, you know, the two may offset from a leverage on the base side, what was reinvesting on the other side, but we gained leverage this quarter.
Thank you.
Okay, great. Hey, thanks for your time.
Thank you. Our final question comes from Bill Baldwin from Baldwin Anthony Securities. Your line is now open.?
Okay, thank you very much.
I was very impressed with the double digit growth, volume growth, and the North American Abdullah immigration system.
Can you provide a little insight as to what's driving that? That's an outstanding performance.
Thanks Bill. You know North America has been performing very well. It's a mature market. There is a lot of demand that's out there. And I think our team did a really good job of capturing that. We did have, let's say, a little bit more than normal storm damage from some of the events, particularly in the Midwest.
But the growth has been pretty universal across all different regions, whether it's the Southeast, the Northwest, the Midwest.
And a lot of our dealer performance program and what we're doing to incentivize the dealers, the additional services, the additional tech that they're selling really has led to that kind of volume growth. Yeah, but that being said, we probably have more backlog than we normally would this time of year that will carry over into the third quarter.
So it could have been maybe even a little bit better, but that'll be because of some of the supply-tank issues. So it could have been a little bit better because of some of the supply-tank issues.
So the market's strong and it really represents kind of the global...
Next far, Mink, I'm sorry, and the need for security, no different here than it is in the developing world for industry and Europe . And maybe I'll just one more thing this is out there. So on the production side, because of our localization efforts, we've been able to support region for region and North America can support the North America region, which helped us produce against the demand that we had.
Steve, does it look like you're actually gaining new customers in that business in addition to upgrading existing customers or replacement for existing customers? Are you capturing new customers?
I think to a degree, yes. In North America, we have some efforts around growing after cattle farmers. We have certain crops like potatoes and peanuts that I think are new to the mix of sales that we would have had historically. We've had some solar projects in North America that have also contributed to that. So I think the need for irrigation...
and conserving water is really becoming a somatic for all the growers because of who they sell to, also asking for conservation measures to be put in place. So the thick don't pepsica or unilever, they wanna have and buy from a sustainable farm and they want those farms to be able to substantiate that. And I think that's kind of the new driver that's driving the additional growth in the market, particularly in North Park.
Very interesting.
And just one last quick question. Do you think your technology platform that you developed in the Ag area is?
driving any of this demand for hardware for pivot systems.
I think the technology definitely enhances the payback story on a pivot.
the ability to operate remotely, the ability to get plant insights.
particularly around emergence and pest and disease really makes the pivot a much more valuable clue to the farmer. And so therefore, yes, to answer your question, it's the pivot we're spatic and just all it did was mechanical irrigation that I think it doesn't have the same value proposition because most growers equipment. Because most growers equipment.
Other pieces of equipment have advanced in technology as well. So it's, I believe, just a simple market expectation.
And our solution is pretty unique in the insights area and being able to look at the crop very early on and straight through to the harvest process.
Thank you very much.
Thank you very much. Thank you very much. Thank you.
Thank you.
Thank you. That concludes today's Q&A session. I will now refer back to Ms. Campbell for further remarks.
Thank you everyone for joining us today. As mentioned, today's call will be available for playback on our website or by phone for the next seven days. And we look forward to spending with you again next quarter. And we look forward to spending with you again next quarter.
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