Q4 2023 Valmont Industries Inc Earnings Call
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Operator: Subs by www.zeoranger.co.uk Greetings. Welcome to Valmont Industries Inc.'s fourth quarter and full year 2023 earnings conference call. At this time, all participants are on a listen only.
Greetings welcome to Vermont Industries, Inc, fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.
Operator: A question and answer session will follow the formal presentation. We ask that you please limit yourself to one question and one brief follow-up question and return to the queue. If anyone is required operator assistance during the conference, please press star zero on your telephone keypad.
Question and answer session will follow the formal presentation. We ask that you. Please limit yourself to one question and one brief follow up question and return to the queue.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: Please note this conference is being recorded. I'll now turn the conference over to your host, Renee Campbell, Senior Vice President of Investor Relations and Treasurer. Ms. Campbell, you may begin.
Please note. This conference is being recorded I'll 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 about what industries fourth quarter and full year 2023 earnings call.
Renee L. Campbell: Thank you and good morning. Welcome to Valmont Industries' fourth quarter and full year 2023 earnings call. With me today are Abner Applebaum, President and Chief Executive Officer, and Tim Francis, Interim Chief Financial Officer. This morning, Abner will provide a brief summary of our full-year results and current market dynamics. Tim will review our fourth-quarter financial results and provide our outlook and indications for 2024. Abner will close with an update on our long-term business strategy and new financial targets. 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 investor site at Valmont.com. A replay will be available on our website later this morning.
With me today are president and Chief Executive Officer, and Tim Francis Interim Chief Financial Officer.
This morning, I'm here will provide a brief summary of our full year results current market dynamics.
Jim will review, our fourth quarter financial results and provide our outlook and indications for 2024.
I've never will close with an update on our long term business strategy and new financial targets, but 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 site at Belmont Dot com.
A replay will be available on our website later this morning.
Renee L. Campbell: Please note that this call is subject to our disclosure on forward-looking statements, which applies to today's discussion, is outlined on slide three of the presentation, and will be read in full at the end of today's call. Finally, if you would like to be notified when Valmont publishes news releases and other information, please sign up for email alerts through our investor site. We also encourage investors and others interested in our company to follow Valmont and our brands on the social media channels listed on our website. With that, I would now like to turn the call over to our President and Chief Executive Officer, Abner Applebaum. Thank you, Renee.
Note that this call is subject to our disclosure on forward looking statements, which applies to today's discussion is outlined on slide three of the presentation and will be read in full at the end of today's call.
Finally, if you would like to be notified with Belmont publishes news releases and other information. Please sign up for email alerts through our investor site.
We also encourage investors and others interested in our company to follow Belmont and our brands and our social media channels listed on our website.
With that I would now like to turn the call over to our President and Chief Executive Officer.
Okay.
Thank you Renee.
Abner Applebaum: Good morning, everyone, and thank you for joining us. I'd like to begin my comments on the key messages on slide 5 by saying how proud I am of the global Valmont. We have navigated many challenges over the past year, and yet I firmly believe we are a much stronger organization today than we were at the beginning of 2023. Together, we're making progress on achieving our strategic objectives, and this gives me confidence in our enduring success. Over the past year, we made some hard but necessary decisions, ones that have shaped us into a more resilient company capable of delivering long-term sustainable value to our stakeholders. Turning to Foyer Highlights, the Valmont team executed well and delivered solid results in 2023. However, the dynamic demand environment we faced created top-line headwinds that adversely impacted our sales.
Good morning, everyone and thank you for joining us.
I'd like to begin my comments with the key messages on slide five.
By saying, how proud I am of the global settlement.
We have navigated many challenges over the past year.
Yeah, and I firmly believe we are a much stronger organization today than we were at the beginning of 2023.
Together, we're making progress on achieving our strategic objectives.
And this gives me confidence in our enduring success.
Over the past year, we made some hard but necessary decision.
Once that have shaped up into a more resilient company capable of delivering long term sustainable value to our stakeholders.
Turning to full year highlights.
The team executed well and delivered solid results in 2023.
The dynamic demand environment, we face create a topline headwinds that adversely impacted our sales.
Abner Applebaum: Despite this, we expanded gross profit margins by 370 basis points and Adjusted Operating Margins by 70 basis points. Our operations and commercial teams did a great job keeping costs under control and winning higher-value business. As a result, adjusted earnings per share grew more than 8%.
Despite this we expanded gross profit margins 370 basis points.
Adjusted operating margins 70 basis points.
Our operations and commercial teams did a great job keeping cost under control and winning higher value business.
As a result adjusted earnings per share grew more than 8%.
Abner Applebaum: The team also achieved an adjusted return on invested capital of 14%. We generated strong operating cash flows by managing working capital, supporting our disciplined capital deployment strategy of investing in growth and returning cash to our shareholders. In addition to solid operating performance, we continue to follow our pricing strategies in both segments. We are driving margin expansion amid lower sales and ongoing inflation by capturing the value we add to our customers. Turning to the segment, infrastructure net sales increased 3% year over year due to higher average selling prices across the portfolio, higher volumes, and our solar business, where sales grew more than 50% year-over-year. NTDNS were partially offset by much lower telecommunications volumes. Agriculture net sales were down 12% year over year.
The team also achieved adjusted return on invested capital of 14%.
We generated strong operating cash flows by managing working capital.
Supporting our disciplined capital deployment strategy.
Investing in growth and returning cash to our shareholders.
In addition to solid operating performance, we continue to follow our pricing strategies in both segments.
We are driving margin expansion.
Our sale and ongoing inflation by capturing the value we add to our customers.
Turning to the segments.
Infrastructure net sales increased 3% year over year due to higher average selling prices across the portfolio.
Higher volume in our solar business, where sales grew more than 50% year over year N. T. DNS were partially offset by much lower telecommunications volume.
Agricultural net sales were down 12% year over year.
Higher international sales were more than offset by lower volume in North America.
Abner Applebaum: Higher international sales were more than offset by lower volume in North America. As we wrap up 2023, I'm excited for our future based upon favorable long-term demand drivers and the hard work, resiliency, and dedication of the Valmonts. Turn to slide 6 for an update on our market. Starting with infrastructure, our favorable market outlook is relatively unchanged. This segment is supported by multi-year megatrends such as the energy transition, grid resiliency efforts, and replacing aging infrastructure. These demand drivers are leaving utilities to sustain their capex spending at elevated levels.
As we wrap up 2023, I'm excited for our future based upon favorable long term demand drivers and the hard work resiliency and dedication of the valve market.
Turning to slide six for an update on our markets.
Starting with infrastructure.
Favorable market outlook is relatively unchanged.
This segment is supported by multiyear megatrends, such as the energy transmission grid, resiliency efforts and replacing aging infrastructure.
These demand drivers are leading utilities to sustained their capex spending at elevated levels.
In addition, our solar business is supported by favorable policy and strong demand globally is expected to continue.
Abner Applebaum: In addition, our solar business is supported by favorable policy, and strong demand globally is expected to continue. Our lighting and transportation business is being supported by road construction investments, and benefits from the IIJA are expected to be an incremental tailwind in the U.S. later this year. Wireless carriers have communicated reduced CAPEX spending this year, which is leading to lingering softness in our telecom business.
Our lighting and transportation business is being supported by road construction investments.
And benefits from the Iia J E R.
I expect it to be an incremental tailwind in the U S. Later this year.
Okay.
Wireless carriers have communicated reduced capex spending this year, which is leading to lingering softness in our telecom business.
We are well positioned to quickly increase output when the market recovers and maintain confidence in the long term opportunity for this business.
Abner Applebaum: We're well positioned to quickly increase output when the market recovers and maintain confidence in the long-term opportunity for this business. Across all our infrastructure businesses, we continue to strategically invest in capacity and remain confident in the segment's growth. Moving to Agriculture
Across all our infrastructure businesses, we continue to strategically invest in capacity and remain confident in the segment's growth.
Moving to agriculture.
Abner Applebaum: We see market conditions. However, we remain positive about underlying ag fundamentals that are supporting long-term market demand. In North American markets, recent projections suggest a significant decline in U.S. farm income in 2024 compared to 2023 levels. Although income is projected to decline, we expect growers' balance sheets to remain strong. However, sentiment remains somewhat muted after coming off the 2022 peak income level.
We see market conditions soften.
However, we remain positive about underlying AG fundamentals that are supporting long term market demand.
And North American markets recent projections suggest a significant decline in U S farm income in 2024 compared to 2023 levels.
Although income is projected to decline, we expect growers balance sheet remains strong.
However, sentiment remains somewhat muted after coming off of 2022 peak income levels.
Abner Applebaum: Currently, we are seeing order rates for irrigation systems tracking ahead of last year, which is a positive sign as we begin the year. Turning to international... retail markets can be impacted by similar drivers seen in North America. We have performed well in Brazil, with three consecutive years of record irrigation. However, sentiment and expected farm income levels are softening due to lower grain prices and higher interest rates. Weather conditions are also playing a role in crop stress and influencing planting decisions.
Currently we are seeing order rate for irrigation systems tracking ahead of last year, which is a positive sign as we begin the year.
Turning to international.
Retail markets can be impacted by similar drivers seen in North America.
We have performed well in Brazil with.
With three consecutive years of record irrigation sales.
However, sentiment unexpected farm income levels are softening due to lower grain prices and higher interest rates.
Weather conditions are also playing a role in crop stress and influencing planting decisions.
Tim: Although these factors may impact short-term growth, Brazil remains one of the most attractive markets for Valmont and is a key part of our long-term strategy. In other regions, our industry expertise and leading market position provide attractive project opportunities; shipment of the previously announced Egypt project is expected to continue throughout 2024. These projects underscore our dedication to supply products and solutions that help address food security concerns while furthering sustainable development. They are also a testament to how our irrigation products and technology solutions provide compelling economics and return on investment for our customers. Technology is the anchor for our long-term global market leadership. It gives us a competitive advantage that enhances the return on a pivot, ultimately influencing favorable buying decisions. Now I'll turn it over to Tim for a fourth quarter financial review in 2024 hours. Thank you, Abner, and good morning, everyone.
Although these factors may impact short term growth, Brazil remains one of the most attractive markets for Belmont and is a key part of our long term strategy.
In other regions, our industry expertise and leading market position provide attractive project opportunities.
Shipment of the previously announced Egypt project is expected to continue throughout 2024.
These projects underscore our dedication to supply products and solutions that help address food security concerns.
While furthering sustainable development.
They are also a testament to how our irrigation products and technology solutions provide compelling economics and return on investment for our customers.
Technology is the anchor for our long term global market leadership.
It gives us a competitive advantage that enhances the return on a pivot ultimately influencing favorable buying decisions.
Now I'll turn it over to Tim for a fourth quarter financial review and 2024 outlets.
Thank you avner and good morning, everyone.
Tim: Turning to slide 8 and fourth-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. Our results this quarter reflect the strength of our increased global diversification. Solid operating performance in our infrastructure segment helped mitigate lower agriculture margins attributed to higher SG&A and continued market weakness in North America with slowing ag market demand in Brazil. Fourth quarter net sales of $1 billion decreased 10.3% year over year.
Turning to slide eight and fourth 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.
Our results this quarter reflect the strength of our increased global diversification.
Solid operating performance in our infrastructure segment helped mitigate lower agriculture margins attributed to higher SG&A.
And continued market weakness in North America, with slowing AG market demand in Brazil.
Fourth quarter net sales of $1 billion decreased 10, 3% year over year.
Tim: Accounting for the 2022 divestiture of the offshore wind business, reported in the other segment, sales decreased 7.5%. Operating income of $100.2 million decreased 11.9% year over year, and operating margin was 9.9% of net sales, diluted earnings per share of $3.18. Decreased versus prior year. Turning to the segments in slide 9, infrastructure sales of $748.3 million decreased 3% year-over-year; higher volumes in TD&S and solar, supported by continued strong utility market demand, along with favorable pricing across the portfolio, were more than offset by lower telecommunications and coding volumes. While operating income decreased slightly to $98.7 million, operating margin improved to 13.2% of net sales. Favorable pricing and deliberate actions to improve overall cost of goods sold were more than offset by lower volume. Moving to slide 10, agricultural sales of $271.6 million decreased 18.9% year-over-year.
Accounting for the 2022 divestiture of the offshore wind business reported in the other segment.
Sales decreased seven 5%.
Operating income of $102 million decreased 11, 9% year over year and operating margin was nine 9% of net sales.
Diluted earnings per share of $3 18.
Decreased versus prior year.
Turning to the segments on slide nine infrastructure sales of $748 $3 million decreased 3% year over year.
Higher volumes in TD, Ines and solar.
Supported by continued strong utility market demand.
Along with favorable pricing across the portfolio.
Were more than offset by lower telecommunications and coatings volumes.
While operating income decreased slightly to $98 $7 million operating margin improved to 13, 2% of net sales.
Favorable pricing and deliberate actions to improve overall cost of goods sold were more than offset by lower volumes.
Moving to slide 10, agriculture sales of $271 $6 million.
Decreased 18, 9% year over year.
Tim: In North America, irrigation equipment volumes were lower as the fourth quarter of 2022 benefited from the ongoing delivery of an elevated backlog. However, average irrigation selling prices were comparable to last year. International sales growth was driven by higher project sales and sales from the HR Products Acquisition, offset by lower sales in Brazil as lower grain prices are impacting grower sentiment, and backlog returned to a more normalized level as compared to the fourth quarter of 2022. Operating income decreased to $27.8 million, and operating margin was 10.3% of net sales, driven by lower volumes and higher SG&A.
In North America.
Irrigation equipment volumes were lower as the fourth quarter of 2022 benefited from the ongoing delivery of elevated backlog.
Average irrigation selling prices were comparable to last year.
International sales growth was driven by higher project sales.
Sales from the HR products acquisition.
Offset by lower sales in Brazil, as lower grain prices are impacting grower sentiment and backlog returned to a more normalized level as compared to fourth quarter of 2022.
Operating income decreased to $27 8 million and operating margin was 10, 3% of net sales driven.
Driven by lower volumes and higher SG&A.
Tim: Turning to cash flows on slide 11, strong cash flows in the fourth quarter contributed a full year operating cash flow of approximately $307 million and free cash flows of $210 million, through Earnings and Diligent Working Capital Management, primarily reductions in inventory. Turning to slide 12 for a summary of full-year capital deployment, capital expenditures were $97 million.
Turning to cash flows on slide 11.
Strong cash flows in the fourth quarter contributed to full year operating cash flows of approximately $307 million and free cash flows of $210 million.
Through earnings and diligent working capital management.
Primarily reductions in inventory.
Turning to slide 12 for a summary of full year capital deployment.
Capital expenditures were $97 million.
Tim: We returned nearly $400 million of capital to shareholders through dividends and share repurchases, inclusive of the $120 million accelerated share repurchase program announced in the fourth quarter. We ended the year with approximately $203 million in cash. Moving to slide 13.
We returned nearly $400 million of capital to shareholders through dividends and share repurchases inclusive of the $120 million accelerated share repurchase program announced in the fourth quarter.
We ended the year with approximately $203 million in cash.
Moving to slide 13.
Tim: The total debt to adjusted EBITDA of 1.84 times was within our desired range of 1.5 to 2.5 times. Our cash balances, available credit, and flexible balance sheet provide us with ample liquidity to reduce short-term borrowings and execute our capital allocation strategy. I would now like to introduce our 2024 outlook, as shown on slide 14. We are guiding net sales to be in a range between 3% down and flat compared with 2023. Turning to our segment assumptions, in infrastructure, we expect to approach mid-single-digit growth this year. However, softness in the telecom markets is expected to continue through 2024, and we expect first quarter telecom sales to be similar to fourth quarter 2024. For the year, this softness will be more than offset by expected strength across our other infrastructure markets. In Agriculture, building on Abner's comment,
<unk> debt to adjusted EBITDA of 184 times was within our desired range of one five to two five times.
Our cash balances available credit.
And flexible balance sheet provide us with ample liquidity to reduce short term borrowings and execute our capital allocation strategy.
I would now like to introduce our 2024 outlook as shown on slide 14.
We are guiding net sales to be in a range between 3% down and flat compared with 2023.
Turning to our segment assumptions and infrastructure, we expect to approach mid single digit growth this year.
Softness in the telecom markets is expected to continue through 2024, and we expect first quarter telecom sales to be similar to fourth quarter of 2023.
For the year is soft this will be more than offset by expected strength across our other infrastructure markets.
In agriculture building on <unk> comments.
Tim: At this time, we expect more challenging global market conditions in 2024 due to lower grain prices in our farm income projections. As a result, we expect sales for the segment to be 15-20% lower. Additionally, we are paying close attention to purchasing trends in Brazil, which is our largest international market. To help mitigate some of this softening demand, we remain focused on price leadership, strengthening our international project pipeline, and increasing adoption of our technology solutions. As a reminder, the timing of international project shipments can be hard to predict from quarter to quarter. We do expect a tougher first quarter sales comparison in this segment compared to the rest of 2024 due to the ongoing shipment of the elevated backlog in the first quarter of 2020. We expect diluted earnings per share to be in the range of $14.25 to $15.50.
At this time, we expect more challenging global market conditions in 2024, due to lower grain prices and farm income projections.
As a result, we expect sales for this segment to be 15% to 20% lower <unk>.
Additionally, we are paying close attention to purchasing trends in Brazil, which is our largest international market.
To help mitigate some of the softening demand we remain focused on price leadership.
Strengthening our international project pipeline in.
And increasing adoption of our technology solutions.
As a reminder, the timing of international project shipments can be hard to predict from quarter to quarter.
We do expect a tougher first quarter sales comparison in this segment compared to the rest of 2024 due to the ongoing shipment of elevated backlog in first quarter of 2023.
We expect diluted earnings per share to be in the range of $14 25 to.
To $15 50.
Across both segments, we've sharpened our focus on gross profit margins and reducing SG&A expense.
Tim: Across both segments, we've sharpened our focus on gross profit margins and reducing SG&A expenses. Through this focus, coupled with some of the structural changes we already made to our businesses. We expect modest consolidated operating margin improvement in 2024, despite lower sales projections. Our commitment to price leadership and ongoing improvement in operational efficiencies will offset de-leverage from volume decline. We expect much lower corporate expense and segment SG&A reductions from the benefit of the realignment actions taken in 2023 that will more than offset expected inflationary units. A reminder that in October we announced an organizational realignment program as a proactive initiative to more effectively align our teams with our long-term growth strategy. These actions resulted in pre-tax cash expenses of approximately $35 million in 2023, which we expect to recover through lower SG&A expenses this year.
Through this focus.
Coupled with some of the structural changes, we already made to our businesses.
We expect modest consolidated operating margin improvement in 2024, despite lower sales projections.
Our commitment to price leadership and ongoing improvement in operational efficiencies.
We'll offset deleverage from volume decline.
We expect much lower corporate expense and segment SG&A reductions from the benefit of the realignment actions taken in 2023.
That will more than offset expected inflationary increases.
A reminder, that in October we announced an organizational realignment program as a proactive initiative to more effectively align our teams with our long term growth strategy.
These actions resulted in pre tax cash expenses of approximately $35 million in 2023, which we expect to recover through lower SG&A expense this year.
Tim: These actions are part of our commitment to ensure the sustainability and success of our organization in the years to come. We are focused on profitable growth and reviewing outliers across our business. And we pursue cost-saving actions with a focus on enhancing productivity and operational efficiency. The recent dynamic steel cost environment is expected to continue this year.
These actions are part of our commitment to ensure the sustainability and success of our organization in the years to come.
We are focused on profitable growth and reviewing outliers across our businesses.
And we pursue cost savings actions with a focus on enhancing productivity and operational efficiencies.
The recent dynamic steel cost environment is expected to continue this year.
Tim: This cost variability can lead to variations in quarterly gross profit margins, which we expect will benefit us in the first quarter of 2024. 2024 capital expenditures are expected to be in the range of $125-$140 million to support strategic growth initiatives, such as our expansion underway in Brenham, Texas, to increase infrastructure segment capacity. We expect free cash flows to improve this year through our ongoing focus on working capital management. With that, I will now turn the call back over to Adam. Thank you, Tim. Turning to slide 15.
This cost variability can lead to variations in quarterly gross profit margin, which.
Which we expect will benefit us in the first quarter of 2024.
2024 capital expenditures are expected to be in the range of $125 million to $140 million to support strategic growth initiatives.
As our expansion underway in Brenham, Texas to increase infrastructure segment capacity.
We expect free cash flows to improve this year through our ongoing focus on working capital management.
With that I will now turn the call back over to Andrew.
Thank you Tim.
Turning to slide 15.
Abner Applebaum: Before we conclude our prepared remarks this morning, I would like to shift our focus from the near term to beyond 2024. Today, I'll share our current view of the future with new financial targets. Importantly, this view reflects our dedication to managing expectations and returning to Valmont's foundational principles of consistent growth and achievable financial performance. Moving to slide 16.
Before we conclude our prepared remarks. This morning, I would like to shift our focus from the near term to beyond 2024.
Today I'll share our current view of the future with new financial targets.
Importantly, this view reflects our dedication to managing expectations and returning to Belmont foundational principles of consistent growth and achievable financial performance.
Moving to slide 16.
Abner Applebaum: I want to start with our Valmont business model. This model was first introduced several years ago. It communicates our priorities and shows that everything we do is centered around value creation. To start, our core values as a company remain the same. We have passion for our customers, the markets we serve, and the products and solutions we provide. We operate with absolute integrity, and we strive for continuous improvement, always. And we consistently deliver results. These core values are deeply ingrained in how we do business, and they serve as a competitive advantage. Next!
I want to start with our Belmont business model.
This model was first introduced several years ago.
It communicates our priorities.
And shows that everything we do is centered around value creation.
To start our core values as a company remain the same.
We have passion for our customers the markets, we serve and the products and solutions we provide.
We operate with absolute integrity, and we strive for continuous improvement always.
And we consistently deliver results.
These core values are deeply ingrained in how we do business and they serve as a competitive advantage.
Next.
Abner Applebaum: We turn to our four focus areas. These priorities have been refined to ensure we deliver on our promises to our stakeholders. Our legacy is built on the solid foundation of a high-performance culture. It has enabled us to become leaders in our market. We have a great team at Valmont, and we have set high expectations.
We turned to our four focus areas.
These priorities have been refined to ensure we deliver on our promises to our stakeholders.
Our legacy is built on the solid foundation of a high performance culture.
It has enabled us to become leaders in our markets.
We have a great team at Belmond, and we have set high expectations.
A rigorous focus on ROIC ensures our investments generate attractive returns.
Abner Applebaum: Our rigorous focus on ROIC ensures our investments generate attractive returns. Through this lens, we're allocating our resources and capital more effectively. Sustainability is core to Valmont.
Through this lens, we are allocating our resources and capital more effectively.
Sustainability is core to Belmond it is.
Abner Applebaum: It is embodied in our tagline of conserving resources and improving life. We integrate sustainability into our own operations and into our products and solutions for our customers. It is essential for long-term success and resilience in a rapidly changing world. Finally, Innovative Customer Solutions. Our customer-centric approach to innovation improves the adoption rate of new products and helps us retain and gain new customers. Valmont innovates in many ways.
As embodied in our tagline of conserving resources improving life.
We integrate sustainability into our own operations and into our products and solutions for our customers.
It is essential for long term success and resilience in a rapidly changing world.
Finally innovative customer solutions are.
Our customer centric approach to innovation improves the adoption rate of new products and helps us retain and gain new customers.
Now I'm going to innovate in many way.
Abner Applebaum: By enhancing our product offering, refining processes, and introducing AI-enabled technology, we can bring exceptional value to our customers. Through these focus areas and with our core values driving how we do business, we will achieve sustainable value creation for all our stakeholders. Turning to slide 17, our view on markets and expected sales, beginning with infrastructure, we believe our markets will see stable growth of mid-single digits over the long term. We are at the beginning stages of a multi-year energy transition; power sources are transitioning towards renewable energy sources, and energy needs are increasing due to a rise in energy consumption. Aging infrastructure and severe weather have raised concerns about grid hardening and reliability.
By enhancing product offering refining processes and introducing AI enabled technology, we can bring exceptional value to our customers.
Through these focus areas and with our core values driving how we do business with.
We'll achieve sustainable value creation for all our stakeholders.
Turning to slide 17, and our view on markets and expected sales growth.
Beginning with the infrastructure we.
We believe our markets will see stable growth of mid single digits over the long term.
We are at the beginning stages of a multiyear energy transition.
Power sources are transitioning towards renewable.
Energy needs are increasing due to a rise in energy consumption.
Aging infrastructure and severe weather have raised concerns about grid hardening and reliability.
Our products and solutions in a wide variety of resilient and sustainable materials will support the needs of our customers and clean energy mandates.
Abner Applebaum: Our products and solutions, in a wide variety of resilient and sustainable materials, will support the needs of our customers and our clean energy mandate. In agriculture, despite swings in the ag cycle, we expect an average market growth rate of mid-single digits through the cycle. However, farmers are consistently challenged to increase land productivity with fewer inputs.
In agriculture, despite swings in the AG cycle, we expect an average market growth rate of mid single digits through the cycle.
Farmers are consistently challenge to increase land productivity with fewer inputs.
Abner Applebaum: Our irrigation and technology solutions are designed to help growers do more with less. Factors such as climate change, water scarcity, and sustainability considerations are driving improved farming practices. Ongoing food security concerns and population growth will support global irrigation market demand for years to come. In each segment, we expect to grow above the market, leading to a consolidated net sales growth target above mid-single digit. With our manufacturing capabilities and engineering expertise, we can do things no one else can; we can move these capabilities to new geographies. We have deep customer relationships, and they look to us for innovation through new products and solutions. Our broad and flexible footprint makes us more competitive and profitable. In terms of growth initiatives, we are prioritizing profitable growth over just expansion. I will continue to take a measured approach when discussing these opportunities.
Our irrigation and technology solutions are designed to help grow us do more with less.
Factors, such as climate change water scarcity and sustainability considerations are driving improved farming practices.
Ongoing food security concerns and population growth will support global irrigation market demand for years to come.
In each segment, we expect to grow above the market leading to a consolidated net sales growth target above mid single digits.
With our manufacturing capabilities and engineering expertise, we can do things no one else can.
We can move these capabilities to new geographies.
We have deep customer relationships and they look to us for innovation through new products and solutions.
Our broad and flexible footprint makes us more competitive and profitable.
In terms of growth initiatives, we are prioritizing profitable growth over just expansion.
I will continue to take a measured approach when discussing these opportunities.
Abner Applebaum: I look forward to sharing more with you as these initiatives become meaningful to our business. Turning to slide 18, and our long-term financial..., beginning with Operating Mark, we will capitalize on our growth and sustain strategic pricing actions across our portfolio, reflecting the value we deliver to our customers. Our recently streamlined organization allows for quicker decision-making and greater adaptability.
I look forward to sharing more with you as these initiatives become meaningful to our business.
Turning to slide 18, and our long term financial goals.
Beginning with operating margins, we will capitalize on our growth and sustained strategic pricing actions across our portfolio, reflecting the value we deliver to our customers.
Our recently streamlined organization allows for quicker decision, making and greater adaptability.
Abner Applebaum: These factors, combined with continued operational efficiencies, guide us to an operating margin approaching mid-teens. We are reinforcing a disciplined capital allocation strategy. We will persist in making strategic investments to drive sustainable, profitable growth. Internal projects and acquisitions will be filtered through strategic and financial criteria to ensure resources are deployed effectively.
These factors combined with continued operational efficiencies guide us to an operating margin approaching mid teens.
We are reinforcing a disciplined capital allocation strategy.
We will persist and making strategic investments to drive sustainable profitable growth.
Internal projects and acquisitions will be filtered through strategic and financial criteria to ensure resources are deployed effectively.
Abner Applebaum: We are confident these actions will result in ROIC in the high teens. Our net earnings to pre-cash flow conversion goal remains at 100%, and we have a proven track record of generating strong cash flows. With a focus on working capital management, we will improve our capital efficiency to fund future growth. Additionally, we are committed to maintaining our investment-grade credit rating. In summary, our takeaways from today are straightforward.
We are confident these actions will result in ROIC in the high teens.
Okay.
Our net earnings to free cash flow conversion goal remains at 100%.
We have a proven track record of generating strong cash flow.
With a focus on working capital management, we will improve our capital efficiency to fund future growth.
Additionally, we are committed to maintaining our investment grade credit rating.
In summary, our takeaways from today are straightforward.
Abner Applebaum: We're managing what is within our control to maximize financial results. The actions we took in 2023 set us up for improved performance in 2024 and beyond. We serve attractive end markets supported by many long-term secular drivers. Our job is to manage the elements within our control to seize future opportunities and reach our long-term objectives.
We're managing what is within our control to maximize financial results.
The actions we took in 2023 set us up for improved performance in 2024 and beyond.
We serve attractive end markets supported by many long term secular drivers.
Our job is to manage the elements within our control.
To seize future opportunities.
And reach our long term objectives.
Abner Applebaum: Our ability to execute rests on our competitive advantages, which gives us confidence we can grow above our mark. Finally, we are united around the business model that will keep us focused on the critical objective of creating value. I'm very excited about our future. I believe we are well on our way to building on our successful legacy of conserving resources and improving life. I will now turn the call back over to Renee.
Our ability to execute rests on our competitive advantages, which gives us confidence we can grow above our market.
Finally, we are United around the business model that will keep us focused on the critical objective of creating value.
I am very excited about our future I believe we are well on our way to building on our successful legacy of conserving resources and improving lives.
I will now turn the call back over to Rene.
Renee L. Campbell: Thank you, Abner. At this time, the operator will open up the call for questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone key. A confirmation tone will indicate your line is in the question queue.
Thank you avner at this time, the operator will open up the call for questions.
Thank you at this time, we will.
I'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
<unk> tone will indicate your line is in the question queue.
Operator: You may press star 2 if you would like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. To allow for as many questions as possible, please limit yourselves to one question and one follow-up. One moment, please, while we poll for questions. Our first question comes from the line of Brian Drab with William Blair. Please proceed with your questions. Hi, good morning.
Maybe first start to if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to get your handset before pressing the star keys.
So allow for as many questions as possible. Please limit yourselves to one question and one follow up one.
One moment, please while we poll for questions.
Our first question comes from the line of Brian Drab with William Blair.
Please proceed with your question.
Hi, good morning, Thanks for taking my questions.
Brian Drab: Thanks for taking my questions. I wanted to first ask about the irrigation segment, just trying to reconcile, you know, the forecast for the decline in the year, you know, 15 to 20 percent, if you're seeing order rates earlier in the year that are up year-over-year, and you're seeing that order trend, I think, in the fourth quarter as well. Hi, Brian.
I wanted to first ask on the irrigation segment.
I'm just trying to reconcile that.
The forecast for the the decline for the year, 15% to 20%.
If you are seeing order rates.
Earlier early in the year that are up year over year.
And.
Youre seeing that that order trend I think in the fourth quarter as well.
Hi, Brian.
Abner Applebaum: Yeah, I'll take the I'll take the question. So overall, our projections of a reduction between 15 to 20% are based on what we're seeing, based on the USDA projection showing a 24% reduction in farm income. We're seeing softness in Brazil, based on grain prices for soybeans and cotton and higher interest rates. So they're impacting overall on farmers and farmers. That's why we provided that guidance on... production. However, starting the year in North America, we're actually seeing orders stronger than they were a year ago, so that is encouraging for us. But overall, our expectations are that the year is going to be down, and going into this year versus last year, we're actually going in without any backlogs, so it doesn't give us a lot of visibility. Can you say if you expect the international business or the domestic business to be, you know, which one's going to be down more than the other in 2024 in your forecast? They're going to be pretty much similar, both down the same thing.
I'll take the I'll take the question so overall our projections.
A reduction between 15% to 20% or based on what we're seeing based on the USDA projections, showing the 24% reduction in the net farm income.
Seeing softness in Brazil based on the.
Grain prices around soybeans and higher interest rates, so they're impacting overall, our farmers and farmer sentiment.
That's why we provided that guidance.
Reduction.
Starting the year in North in North America, we're actually seeing orders are stronger than they were a year ago. So that is encouraging.
Got it.
But overall our expectations are that.
The year is going to be down and going into this year versus last year, we're actually going in without any backlog. So it doesn't give us a lot of visibility into the year.
Can you say, if you expect the international business or the domestic business to be you.
Which one is going to be down more than the other in 2024 and your forecast.
We're going to be pretty much similar.
First of all.
Okay and then after you you've mentioned the Egypt projects well is expected to ship throughout 2024.
Abner Applebaum: Okay. And then, Abner, you mentioned the Egypt project is expected to ship throughout 2024. How far into that $85 million? incremental order are you, and what do you expect to ship in 2024? And also, can you talk about any challenges that you've had?
How far into that $85 million.
Incremental order are you and what do you expect to ship in 2024.
And also.
Can you talk about any challenges that you've had there it's been a little choppy and Egyptian governments.
Abner Applebaum: It's been a little choppy, and the Egyptian government's not too healthy at the moment. You know, just curious, you know, how much visibility you have on that and where you are in that project. Yeah, so of course, we're very much aware of the situation in Egypt, and we do consider monitoring that one very carefully, closely. As it relates to the project, we started shipping it last year. We do make sure that before every shipment, we make sure we minimize or reduce our risk by making sure we have our confirmation LC in place before we ship the product.
Not too healthy at the moment.
Yeah.
Just curious how much visibility you have to that and where you are in that project.
Yes. So of course, we're very much aware of the situation.
D J.
We do continue to monitor that one very closely.
Closely.
It relates to the project, we started shipping last year.
Do make sure that before every shift and we make sure we minimize that will reduce our rates to make sure we have our confirmation.
That will stay in place.
Before we ship a product so right now.
Abner Applebaum: So, right now, I'd say the majority of the project is still expected to ship in 2024. And, of course, the timing of these projects is very difficult to predict based on all the variability in that. Were you shipping for that project in the fourth quarter, can I ask? Yes, we were.
Yes, I would say the majority of the project is still expected to ship in 2024 and of course, the timing of these projects until we are difficult to predict based on all the variability in that region.
Were you shipping for that project in the fourth quarter can I ask.
Yes, we have.
Okay.
I'll pass it along for now thank you very much.
Thank you. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.
Abner Applebaum: Okay. Okay. I'll pass it along for now.
Good morning, everyone.
I guess I'll I guess I'll follow up on some of the AG questions.
Abner Applebaum: Thank you very much. Thank you. Our next question comes from the line of Nathan Jones with Speedful. Please proceed with your question. Good morning, everyone.
As we saw revenue increasing pretty significantly.
During COVID-19 and towards the end of Covid, we pay a lot of operating leverage.
'twenty three with revenue coming down we didn't pay a lot of operating deleverage.
Nathan Hardie Jones: I guess I'll follow up on some of the ad questions. As we saw revenue increasing pretty significantly during COVID and towards the end of COVID, we didn't see a lot of operating leverage. At 23, with revenue coming down, we didn't see a lot of operating de-leverage.
Maybe you could set expectations for for what margins are going to be what kind of deleverage you're expecting to see how some of the cost actions that you've taken offset some of that just anything you can do to help us with where we should expect margins in AG in 'twenty three 'twenty four.
Yeah, Nathan it's Tim I'll take that question.
We were pleased with the gross profit margin for the agriculture segment at 30% here in Q4.
Nathan Hardie Jones: Maybe you could set expectations for what margins are going to be, what kind of de-leverage you're expecting to see, how, you know, some of the cost actions that you've taken offset some of that. Just anything you can do to help us with where we should expect margins in agriculture in 23, 24. Yeah, Nathan, it's Tim.
We have a long history of knowing how to adjust our production levels.
To react to a reduction in customer demand, we have multiple teams focused on operational efficiency at the plant level, including our strategic sourcing team trying to figure out how we best buy the most important things for not only the pivot, but also on the infrastructure side of the house.
Tim: I'll take that question. Um, we were pleased with the gross profit margin for the agriculture segment at 30%. We have a long history of knowing how to adjust our production levels. To react to a reduction in customer demand, we have multiple teams focused on operational efficiency at the plant level, including our strategic sourcing team, trying to figure out how we best buy the most important things for not only the pivot but also on the infrastructure side of the house. So, in terms of our financial forecast for 2024, we expect just slightly lower gross profit margins versus that 30% we printed in Q4, but that would be better than the gross profit margins we recognized. And then, I guess, the...
So in terms of our financial forecast for 2020 for we expect.
Just slightly down gross profit margins versus that 30%, we printed in Q4, but that would be better than the gross profit margins we recognized in fiscal 2022.
And then I guess the B.
The SG&A doesn't move as quickly you said the operating margins should compress.
I'd say that our expectation is that SG&A as a percentage of sales stayed similar to the level. We have seen here in 2023.
As we discussed and as we put into the.
The earnings release, we had $35 million.
Realignment program.
$18 million or $70 million of that was infrastructure 9 million that with bag $9 million of it was corporate.
Tim: The SG&A doesn't move as quickly, so the operating margins should compress. Um, I would say that our expectation is that SG&A's percentage of sales stays similar to the level we have seen here in the U.S. As we discussed and as we put in the earnings release, we had the $35 million realignment program, $17 million of that was for infrastructure, $9 million of that was for ag, and $9 million of it That cost... is modeled out in our projections for 2024. And, in addition, we have found additional SG&A savings to offset the expected. Let me just add some context.
That cost is.
Is modeled out.
In our projections for 2024 and in addition, we have found additional SG&A savings to offset.
Expected inflation.
Let me let me just got some context.
We're very pleased with the fact that we're able to maintain our operating margin percentages. Despite a very challenging AG environment in the past when you have these similar type of reduction.
We'll have a much larger impact, but all these actions that we took in the approved profitability we have in the other businesses.
It really allows us to kind of maintain these profitability levels.
In 2024 and beyond.
Abner Applebaum: You know, we're very pleased with the fact that we're able to maintain our operating margin percentages despite a very challenging ag environment. In the past, when you'd have these similar types of reductions, it would have a much larger impact. But all these actions that we took and the improved profitability we have in the other businesses really allows us to kind of maintain these profitability levels in 2024 and beyond. Great, that's helpful, thanks.
Great that's helpful. Thanks.
Wanted to ask on the Oregon, all great design, all great alignment.
You've given us what the financial savings out of that.
I was hoping you could talk a bit more about the strategic rationale for that and what kind of strategic value you're hoping to derive.
From from the redesign realignment of the organization.
Yeah. Thanks Nathan.
It's very critical for us.
Nathan Hardie Jones: I wanted to ask about the organizational redesign and realignment. You've given us what the financial savings are out of that. I was hoping you could talk a bit more about the strategic rationale for that and what kind of strategic value you're hoping to derive from the organizational redesign. Yeah, thanks, Nathan, and that is very critical for us. What we've done with this organizational design really helps our organization to be more agile.
What we've done with this org design really helps our organization to be more agile, we can make quicker decisions we.
We can move quickly.
Better access to data, we're quicker to the market, we have better visibility into the market and we're able to work in this organization with better transparency.
And better collaboration will help us drive innovation. So so overall, we have an organization now that its structured so we can capitalize on these market trends and keep driving innovation and.
Abner Applebaum: We can make quicker decisions, we can move quickly, we have better access to data, we work faster in the market, we have better visibility into the market, and we're able to work in this organization with better transparency and better collaboration. It will help us drive innovation. So overall, we have an organization now that is structured so we can capitalize on these market trends and keep driving innovation and drive strong returns. So we're already seeing some of that impact on our business, and excited about our ability to move forward and capitalize on these strong markets. Okay, thanks for taking my questions; I'll pass them on.
Drive strong returns. So we are already seeing some of that impacts on our business.
I'm excited about our ability to move forward to capitalize on strong markets.
Okay. Thanks for taking my questions I'll pass it on.
Thank you.
Again as a reminder, please limit yourself to one question and one follow up question.
Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.
Hey, good morning, guys. Thanks for taking a couple maybe we'll start with the long term financial targets. Obviously they don't include 2024.
Do they began in 2025 or is that a function of some recovery in markets like AG and telecom.
Nathan Hardie Jones: Again, as a reminder, please limit yourself to one question and one follow-up question. Our next question comes from the line of Chris Moore with CJS Securities. He's received your question. Hey, good morning, guys. Thanks for taking a couple.
So when we look at our overall.
Long term targets, what we've done here, we've taken a more flexible long term approach.
<unk> commitment of driving sustainable profitable growth and value creation. So we're really not looking specifically at the beginning or end point.
Chris Moore: Maybe we'll start with the long-term financial targets. Obviously, they don't include 2024. Do they begin in 2025, or is that a function of some recovery in markets like, you know, agriculture and telecom? Yeah, so when we look at our overall long-term targets, what we've done here, we've taken a more flexible, long-term approach to our whole commitment to sustainable, profitable growth and value creation. So, we're really not looking specifically at a beginning or an end point.
To account for cyclicality of these businesses aligns well with the industry practices. So we're looking at through the cycle and how we're looking at it. It allows us gives us the ability to keep on investing innovating not even for the short term, but beyond five years.
So overall I wouldn't look at it at a specific time horizon, it's through the cycle.
And.
Our overall.
Goal is to continue to drive sustainable profitable growth and create shareholder value.
Abner Applebaum: It's to account for the cyclicality of these businesses. It aligns well with industry practices. So, we're looking at it through the cycle is how we're looking at it. It allows us, gives us the ability to keep on investing and innovating, not even for the short term, but beyond five years. So, overall, I wouldn't look at it at a specific time horizon.
We'll provide periodic updates on how we're doing on our strategy and how we're responding to the market dynamics.
Got it I appreciate it.
The only metric I don't see from last may as to 12% to 15% EPS growth that.
Is that correct.
Yes, we have not provided an EPS guidance I mean, we are of course expecting earnings to increase by <unk>.
However, since there are so many elements of Etfs that are tied to overall you Alan.
Abner Applebaum: It's through the cycle, and our overall goal is to continue to drive sustainable, profitable growth and create shareholder value, and we will provide periodic updates on how we're doing on our strategy and how we're responding to the market and dynamics. The only metric I don't see from last May is the 12-15% EPS growth. Is that correct?
Allocation of our capital allocation strategy, such as share buybacks dividends acquisitions were not included.
We felt that it would not provide any any better.
About provide any benefit to providing EPS guidance at this time.
Got it and maybe just the last one for me was on the AG side.
You had talked about.
Abner Applebaum: Yes, we've not provided an EPS guidance. I mean, we're, of course, expecting earnings to increase. However, since there are so many elements of EPS that are tied to overall capital allocation, our capital allocation strategy, such as share buyback, dividends, and acquisitions, were not included, we felt that it would not provide any..., did not provide any benefits or provide any PS guidance at this time. And maybe just the last one for me, on the ag side, you had talked about, I think Parts as a percentage of revenue last year was, The goal was... 27%, roughly in 27, is that still a goal moving forward?
Parts as a percentage of revenue last year was I think 18% nickel was.
27% roughly.
In 27 is that still.
Our goal moving forward.
Yeah. So overall.
What we're looking at is we are.
Our growing our overall agricultural business.
And focusing on growing our parts sales by the way we're looking at it overall in the agricultural segment, we're going to grow above the market above mid single digit with a focus on how do we help our growers.
<unk> provide them with solution.
As it relates to our product offering and solution.
Including.
All the aspects and it is an important part of our business. It does have better than average margins, but overall, we're looking at the whole.
Abner Applebaum: And so, overall... What we're looking at is that we are growing our overall agriculture business and focusing on growing our parts sales. The way we look at it is, overall, in the agriculture segment, we're going to grow above the market, above mid-single digit. The overall focus is on how we help our growers provide them with solutions, as it relates to our product offering and solutions, including all aspects. And it is an important part of our business. It does have better than average margins, but overall, we're looking at irrigation and agriculture as a whole. I appreciate it, Abner.
Irrigation in agriculture as a whole.
Got it I appreciate it I'll leave it there.
Thank you. Our next question comes from the line of Brian <unk> with Roth Capital Partners. Please proceed with your question.
Thanks, Good morning.
Wanted to follow up on.
The slide 18.
In your.
Prior comments about not including capital allocation and long term financial targets.
I understand that that gives you a lot of flexibility.
I just wanted to kind of think just big picture, how how you think about kind of rank ordering.
Share buybacks dividends.
Acquisitions and how are you.
What your relative hurdle rates for each of those.
Abner Applebaum: Thank you. Our next question comes from the line of Brian Wright with Roth Capital Partners. Please proceed with your question. Thanks. Good morning.
Capital allocation decisions.
Yes, so overall when we provided our long term goals.
We expect to.
To generate strong cash flows.
Brian Michael Wright: I just wanted to follow up on slide 18 in your prior comments about not including capital allocation in the long-term financial targets. I understand that gives you a lot of flexibility, but just wanted to kind of think big picture about how you think about kind of rank ordering, share buybacks, dividends, acquisitions, and what your relative hurdle rates for each of those are. Capital Allocation Decision. So overall, when setting our long-term goals, we expect to generate strong cash flows, which we'll use for our capital allocation. And we specifically look at our long-term targets as organic, and areas like acquisitions and the share market are not included.
Which we'll use for our capital allocation and we specifically look at our long term targets as organic.
Areas like <unk>.
Acquisitions and share buybacks are not included but when I look at our capital allocation priorities.
Number one as we invest in ourselves it is capex, we know our business.
Yes.
Those organic opportunities we have today are significant when you kind of look at those market drivers the energy transition the aging infrastructure technology data and consumption around the infrastructure on agriculture around home security population growth sustainability, there's a lot of opportunity for us to invest in our own.
And ourselves in our own footprint and our own innovation. So that is that is the number one both have the strongest returns, but the second part of our capital allocation strategy is acquisition and when we look at the acquisitions, we're going to take a disciplined approach we're going to make sure that these acquisitions are closed tied to our core.
Abner Applebaum: But when I look at our capital allocation priorities, number one is that we invest in ourselves. It is CapEx. We know our business best. Those organic opportunities we have today are significant when you kind of look at those market drivers, the energy transition, the aging infrastructure, technology, data, and consumption around infrastructure, around agriculture, around food security, population growth, and sustainability. There's a lot of opportunity for us to invest in ourselves, in our own footprint, in our own innovation. So that is number one.
Logistics are there markets, we know the products window.
Keep on driving strong value.
At a very high level. Our objective is always to beat cost of capital by year three we like these acquisitions to be accretive.
Very quickly with year, one based on the synergies that we have.
And then we will look at.
Share buybacks based on other uses of capital in and then dividends. So that's overall, how we look at it and one last point is when you look at 2024 and our elevated capital. It's just a testament that we see a lot of opportunities to keep on investing in our business to drive sustainable profitable growth.
Abner Applebaum: Those have the strongest returns for us. The second part of our capital allocation strategy is acquisitions. And when we look at acquisitions, we're going to take a disciplined approach. We're going to make sure that these acquisitions are close, and tied to our core. They're synergistic.
Great. Thanks, so much that that was very helpful.
And my follow up just wanted to dig a little bit into Brazil, again irrigation side, I think I recall from the Investor day talking about the replacement cycle being.
Abner Applebaum: They're markets we know, the products we know, and could keep on driving strong value. At a very high level, our objective is always to beat the cost of capital by year three. We like these acquisitions to be accretive very quickly in year one based on the synergies that we have. And then we will look at... share buybacks based on other uses and needs of capital, and then dividends. So that's how we look at it, and one last point is when you look at 2024 and our elevated capital, it's just a testament that we see a lot of opportunities to keep on investing in our business to drive sustainable, profitable growth. Great, thanks so much.
Faster turn in.
Just.
We've had a lot of growth.
In Brazil in recent years I know.
Last nine months.
The exception, but but up until that point theres been a lot of growth and so just like how to think about like maybe you're seeing.
Some of that replacement activity kind of coming through and until the numbers is that more like a 2025.
Dynamic or how to think about that.
Yeah. So overall.
Brazil, when I look at it we are coming off three record years, so very strong years in Brazil.
And as we keep on increasing our.
Business in Brazil, all the new machine that will generate additional.
Brian Michael Wright: That was very helpful. For my follow-up, I just wanted to dig a little bit into the Brazilian irrigation side. I think I recall from yesterday talking about the part replacement cycle being, you know, a faster turn. And just, we've had a lot of growth in Brazil in recent years. I know, you know, last nine months is the exception.
Parts business, we're seeing that with a lot of activity were also have in middle East and North Africa. So as we keep on.
Putting pivots in the field, we will have additional part sales.
The other element in Brazil, so as we work on.
More than two crops three crops, we get a lot of you.
Usage, when we triple crop in Brazil, which again machine will run more don't meet more hours the same dynamics.
Brian Michael Wright: But up until that point, there's been a lot of growth. And so, just like, how to think about, like, maybe seeing, you know, some of that replacement part activity kind of coming through into the numbers. Is that more like a 2025 dynamic? Or how should we think about that?
Africa, So that will provide us a good runway for the future in those markets.
Great. Thank you so much.
Thank you.
Our next question comes from the line of Josh <unk> with D. A Davidson <unk> proceed with your question.
Hi, Thank you.
Can you share your views around the telecom business are there any signs of life for that group again in 2024.
Abner Applebaum: Yeah, so overall, you know, Brazil, when I look at it, we are coming off three record years, two very strong years in Brazil. And as we keep on increasing our business in Brazil, all the new machines, that will generate additional parts business. We're seeing that with a lot of the activity we also have in the Middle East and North Africa. So as we keep on putting pivots in the field, we will have additional part sales. The other element in Brazil is that as we work on more than two crops, three crops, we get a lot of usage when we triple-crop in Brazil, which again, machines will run more, they'll need more hours, same dynamics in Africa. So that will give us a good runway for the future in those markets. Great! Thank you so much.
So we've seen.
Challenging environment in the telecom business as we noted in previous calls we've seen softness there based on the carrier spending.
We are a work expected to have a difficult comp in the first quarter of this year as well.
Looking at looking forward. So it's it's right now we're expecting in 2020 for it to be a difficult year for us and a lot of that is in North America, we have significant opportunities for us globally.
And we are investing in that area and we should be seeing.
Growth going forward and some of those geographies as we expand our business.
But as you look at some of those mega trends around data consumption.
Brian Michael Wright: Thank you. Our next question comes from the line of John Ramirez with D.A. Davidson.
Around five G densification, it bodes very well for us in the long term.
The need to keep on.
John Ramirez: You can proceed with your question. Hi, thank you. Can you share your views on the telecom business? Are there any signs of life for that group again in 2024? So we've seen a challenging environment in the telecom business, as we've noted in previous calls. We've seen softness there based on carrier spending. We're expecting to have a difficult comp in the first quarter of this year as well, looking forward.
Keep on.
The cycle of the.
<unk> so.
Excited about the long term 2024, it is going to be a bit challenging for us.
That's how I see it.
Yeah.
Thank you.
And shifting gears towards T&D still appears utilities are concentrated significant amount of capital towards <unk>.
T&D in the coming years are you guys, taking any different stands just structuring contracts with these customers and is the company finding opportunities to drive pricing or improving.
Abner Applebaum: So right now, we're expecting 2024 to be a difficult year for us, and a lot of that is in North America. We have significant opportunities for us globally, and we are investing in that area, and we should be seeing growth going forward in some of those geographies as we expand our business. But as you look at some of those megatrends around data consumption, around 5G densification, I mean, it bodes very well for us in the long-term, the need to keep on..., keep on the cycle of 5G. So, excited about the long-term. 2024 is gonna be a bit challenging for us.
Improving margins here.
So we are extremely bullish about the T. D. N S market, we are seeing very strong demand in those areas based on the.
The energy transition, we're seeing load growth.
Renewable energy.
We need to connect to the grid, we talked just a minute ago about data consumption data consumption you need more data centers.
Energy growth based on electrification those are all very very positive areas for us.
John Ramirez: And shifting gears towards T&D, it still appears utilities are concentrating a significant amount of capital and T&D in the coming years. Are you guys taking any different stands on structure and contracts with these customers? And is the company finding opportunities to drive pricing or improve margins here? So, we are extremely bullish about the TDNS market. We are seeing very strong demand in those areas based on the energy transition. We're seeing load growth, and renewable energy; we need to connect that to the grid.
And we're doing well in all those areas.
Our ability with our product offering to really help solve for our customer needs if it could be concrete steel.
Either we have strong alliances with our partners and we keep on strengthening and working with our alliance where we could.
Help them be successful in the years to come and then Theres a lot of projects that we bid on as well and we make sure that we price those based on the value that we provide and the services that we provide.
So overall, yes.
Yes, we continue to maintain our strong relationships and capitalize on the strength of these markets.
Abner Applebaum: We talked just a minute ago about data consumption, data consumption, you need more data centers, and energy growth based on electrification. So, those are all very, very positive areas for us, and we're doing well in all those areas and our ability with our product offering to really help solve for our customer needs.
So just to confirm.
When you say you know with the project you said the price based on the services you guys provide is that a.
To me is that a can we imply that year over year.
Sure.
Taking into account inflation and other factors, therefore, increasing pricing and we'll.
Tim: We have strong alliances with our partners, and we keep on strengthening and working with our alliance so we can help them be successful in the years to come. And then there are a lot of projects that we bid on as well, and we make sure that we price those based on the value that we provide and the services that we provide. So, overall, yes, we continue to maintain our strong relationships and capitalize on the strength of these markets. Um, just to confirm, um, when you say, you know, with the projects, you said the price based on the services you guys provide, is that a, can we apply that year over year? You're taking into account inflation and other factors, therefore increasing pricing. Will we see any margin improvements or growth into 2024? Am I reading that right? It's Tim. Let me take that question.
Will we see any margin improvement so growth into 2024 am I reading that right.
It's Tim let me take that question.
Remember the majority of our contracts and utility have pricing mechanisms in them we're stealing.
Steel index is what.
It ends up being the price ends up being tied to so.
I would tell you is.
As I had in my prepared remarks.
The cost of steel.
Dynamic has been a very dynamic markets.
As of right now we would not expect there to be much increase or decrease in average pricing for T. DNS based on today's cost of steel that we're projecting.
John Ramirez: So remember, the majority of our contracts in utility have pricing mechanisms in them where the Steele Index is what... The prices are being tightened. So, I would tell you. As I said in my prepared remarks, the cost of steel has been a very dynamic market. As of right now, we would not expect there to be much increase or decrease in average pricing for TD&S based on today's cost of steel that we're projecting. But as we get the improvement in volumes, we will leverage well at our factories as we are able to put more volume into our factories. Thank you. I'll hop back in.
But as we get the improvement in volumes.
We will leverage well at our factories as we were able to put more volume into our factories.
Yeah.
Yeah.
Got it understood. Thank you I'll hop back into the right.
Thank you we have reached the end of the question and answer session and I'll now turn the call over to Renee Campbell for closing remarks.
Thank you 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 speaking with you again next quarter.
These slides contain and the accompanying oral discussion will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Renee L. Campbell: Thank you. We have reached the end of the question and answer session, and I'll now turn the call over to Renee Campbell for a closing remarks. Thank you for joining us today.
Such statements involve known and unknown risks uncertainties and other factors that could cause the actual results of the company to differ materially from the results expressed or implied by such statements, including general economic and business conditions conditions affecting the industries served by the company and its subsidiaries the overall market acceptance of.
Renee L. Campbell: 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 speaking with you again next quarter. These slides contain, and the accompanying oral discussion will contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that could cause the actual results of the company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the company and its subsidiaries, the overall market acceptance of the company, and such products and services. The integration of acquisitions and other factors disclosed in a company's periodic reports filed with the Securities and Exchange Commission, as well as future economic and market circumstances.
Such products and services.
The integration of acquisitions and other factors disclosed in the company's periodic reports filed with the Securities and Exchange Commission as well as future economic and market circumstances.
Industry conditions.
Performance and financial results operating efficiencies availability and price of raw materials.
Availability and market acceptance of new products product pricing domestic and international competitive environments geopolitical risks and actions and policy changes of domestic and foreign governments.
Consequently, such forward looking statements should be regarded as the Companys current plans estimates and beliefs. The company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward looking statements that may be made to reflect any future events or circumstances. After the date of such statements or to reflect.
Renee L. Campbell: Industry conditions, Company performance and financial results, Operating Efficiencies, Availability and price of raw materials, Availability and market acceptance of new products, Product Pricing, Domestic and International Competitive Environments, Geopolitical Risks and Actions, and Policy Changes of Domestic and Foreign Governments. Consequently, such forward-looking statements should be regarded as the company's current plans, estimates, and beliefs. The company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
The occurrence of anticipated or unanticipated events.
This concludes today's conference you may now disconnect your lines at this time. Thank you for your participation.
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Operator: This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation. The Ultimate Parody Site! , www.globalonenessproject.org BF-WATCH TV 2021, The Ultimate Parody Site!