Q1 2025 Valmont Industries Inc Earnings Call
Reading, Welcome to Valmont Industries, Incorporated .
Speaker Change: First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen only mode. 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 should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Please note this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Renee Campbell, Senior Vice President and the Investor Relations and Treasurer. Miss Campbell, you may begin. Good morning everyone and thank you for joining us.
Speaker Change: With me today are Avner Applbaum, President and Chief Executive Officer, Tom Liguori, Executive Vice President and Chief Financial Officer, and Tim Francis, Chief Accounting Officer.
Speaker Change: Earlier this morning, we issued a press release announcing our first quarter 2025 result.
Speaker Change: That press release and the presentation for today's webcast are available on the investors page of our website at Valmont.com A replay of the webcast will be available later this morning.
Speaker Change: We'll begin today's call with prepared remarks and then open it up for questions [inaudible]
Speaker Change: Please note that this call is subject to our disclosure on forward looking statements, which is outlined on slide two of the presentation and will be read in full after Q&A.
Avner Applbaum: With that, I'd now like to turn the call over to Avner.
Avner Applbaum: Thank you, Renee. Good morning, everyone, and thank you for joining us.
Avner Applbaum: I'd like to start with Fritz' corner highlights, summarized in slide 4.
Avner Applbaum: Demand across most of our markets has remained resilient amid a dynamic macro environment.
Avner Applbaum: Secular Megatron, such as the Energy Transition and Infrastructure Investment, continue to create meaningful opportunities for our business.
Avner Applbaum: While pockets of the business are more exposed to economic pressures, overall order activity and volume growth remain healthy as reflected in a growing backlog of $1.5 billion.
Avner Applbaum: We're confident in our ability to manage true disruptions while positioning the business to capture long-term growth.
Avner Applbaum: While consolidated net sales were down slightly, they increased modestly on a constant currency basis with both operating margins and earnings per share from innings table.
Avner Applbaum: Our Financial Performance is a result of our Discipline Execution Against Our Strategic Priorities.
Avner Applbaum: We've seen the streamline the organization to operate more efficiently and our operational and commercial excellence initiatives are delivering tangible results.
Avner Applbaum: Driven by a continuous improvement culture or strengthening our position to grow as certain markets recover.
Avner Applbaum: Importantly, our market leadership and commitment to deliver premier quality and service to our customers continues to set us apart in infrastructure and agriculture.
We're also actively mitigating near-term terriforce [inaudible]
Avner Applbaum: with 24 manufacturing and 18 coding facilities across the United States were well positioned to meet the messed up demand.
Avner Applbaum: A few years ago, we began implementing a local, local supply chain strategy to better serve our global customers and that work is paying off helping to reduce our exposure today.
Avner Applbaum: We also see success from other proactive efforts across the business.
Tom will share more detail later in the call.
Avner Applbaum: Turning to slide five. I'd like to share an update on a few of our 2025 critical objectives that I introduced last quarter.
Avner Applbaum: We're executing our strategy to catch the global infrastructure waves by expanding capabilities and optimizing capacity across our footprint.
Avner Applbaum: In the first quarter, we invested approximately $30 million in fabrics with a significant portion directed towards increasing utility production.
Avner Applbaum: Our expansion in Brennan, Texas is progressing as planned and is expected to be fully operational
Avner Applbaum: or prioritizing high-return capacity expansion investments scaling up our existing facilities to operate with greater efficiency and capture future growth.
Avner Applbaum: This corridor, we continue the equipment upgrades in Tulsa, Oklahoma, and also started new productivity investments at our manufacturing facilities in Florida, in Kansas.
Avner Applbaum: Our second objective is positioning our agriculture business for long-term growth.
Avner Applbaum: Lower crop prices, have pressured global ag markets, and have farmed income since late 2023.
Avner Applbaum: While conditions remain challenged, we're using this time to enhance our competitive strength, including dealer excellence, production and aftermarket capabilities, and customer centric innovation.
Avner Applbaum: These efforts will position the business to emerge stronger when the cycle recovers.
Avner Applbaum: As an example, expanding our aftermarket parts business is a key priority, delivering high margin revenue.
Avner Applbaum: Our new e-commerce platform enhances a customer experience with faster access to a broader range of parts and seamless direct order.
Avner Applbaum: We're very pleased with customer adoption rates and initial benefits are tracking in line with our growth plans.
Speaker Change: As the market leader, investing in digital tools for more precise irrigation is essential.
Speaker Change: who are helping grow increased productivity with fewer inputs, improving yields, and resource efficiency.
Speaker Change: We're also allocating capital and talent with discipline and are focused on ensuring resources are directed where they can have the greatest impact for our customers and our business.
Speaker Change: Our people at the center of our success, investing in their safety, well-being, and talent development is essential to our future.
Speaker Change: Our progress on these five objectives reflects the dedication of our global valments [inaudible]
I'm proud of what we achieved together.
as we continue to execute.
Speaker Change: 2025 is shaping up to be a pivotal year that positions us for long-term success for long-term success.
Speaker Change: Now turning to slide six for an infrastructure market update starting with utility our largest product line.
Speaker Change: The business continues to show healthy volume growth driven by long-term demand drivers such as rising energy usage and the need to replace aging infrastructure.
Speaker Change: Our focus on value-based pricing and commercial execution has driven strong performance in a capacity constraint environment.
Speaker Change: The capacity additions mentioned earlier will begin ramping in the second half of this year, setting us up well for continued growth.
Moving to lighting and transportation.
U.S. Transportation Demand remains strong.
Speaker Change: Lighting markets have been soft but we're starting to see stabilizing order trends.
where we're expecting mixed regional market performance this year.
Speaker Change: Our coding business serves a variety of markets and typically follows industrial production and regional GDP trends while also supporting our internal demand.
Speaker Change: Ruthie North America was lost by a softness in international markets.
Speaker Change: Telecommunication sales are growing as carrier spending has recovered from software 2024 levels.
Speaker Change: Our components business leads the market with exceptional customer service and a product portfolio that aligns closely with carrier programs.
Speaker Change: RGA Graphics presence is a key competitive advantage with 11 strategically located warehouses enabling next state delivery to most of the US market.
Speaker Change: Looking ahead, Telecom has a positive long-term outlook supported by ongoing network expansion, modernization efforts, and the need for greater connectivity.
Speaker Change: Insular, as expected, sales declined this quarter, reflecting software market conditions, and our strategic decision to exit lower return projects.
In the US, policy uncertainty is impacting market activity
Speaker Change: However, current European regulations are driving industry innovation and the adoption of agrivoltaic application that I mentioned last quarter.
Speaker Change: Our team remains focused and agile in advocating this dynamic environment.
Speaker Change: Across the portfolio, we serve customers and markets aligned with multi-year secular mega-tracks.
Speaker Change: Our capacity and capability investments address the growing complexity of customer demand where our expertise brings the most value and impact.
Speaker Change: He reinforces our market leadership while positioning us for long-term growth.
Turning to slide seven for an agriculture market update.
North American market conditions remain challenged.
Speaker Change: Corn and soybean prices, which are key indicators of demand, are projected to decline mid-single
Speaker Change: These factors, along with ongoing trade policy uncertainty, are causing farmers to be more cautious with capital investment decisions.
Speaker Change: In the meantime, our Valley Dealer Network is working closely with growers to ensure we're ready to meet their irrigation needs as the cycle improves.
Speaker Change: We're leaning into our strategy to grow strategic account partnership by deepening relationship with large growers.
Speaker Change: These collaborations reflect our unique strength and ability to deliver meaningful, scalable solutions.
Speaker Change: In Brazil, our largest international market, Moore sentiment is improving, we're encouraged by early signs of market stabilization, including a return to volume growth in the first quarter.
Speaker Change: Earlier this month, we welcome our Brazilian dealers to our Nebraska facilities to share best practices, aligned on priorities, and strength and collaboration.
Speaker Change: I was once again reminded of the impressive industry knowledge and customer relationships of our dealers which reflects their deep passion for the business.
International projects are bright spot for our business.
Speaker Change: In the Middle East, demand is strong as nations place the highest priority on building sustainable
Speaker Change: The $45 million project we previously announced is on track and our robust pipeline in the region continues to grow [inaudible]
Speaker Change: To meet rising demand, our Dubai Manufacturing Facility has nearly doubled its outlook from a year ago. Our strong dealer network and proven ability to execute large scale projects gives us competitive advantage.
Speaker Change: We're proud to play a vital role in addressing the global need for a secure sustainable food supply.
Speaker Change: Our irrigation solutions help growers do more with less demonstrating Valmont's ability to deliver meaningful value.
Speaker Change: In summary, we've had a good start to 2025, despite a dynamic economic backdrop, and the actions we're taking to improve performance, give us confidence in delivering strong results this year and beyond.
Speaker Change: I'll now turn the call over to Tom to review our first quarter financial results in 2025 outlook.
Thank you, Avner. Good morning, everyone.
Speaker Change: We continue to make progress with our capacity and margin expansion initiatives.
Speaker Change: I want to thank our team for their actions to control costs in the first quarter and the work performed to mitigate tariffs.
Speaker Change: Their efforts are helping to secure solid financial results for full year 2025.
Turning to slide nine.
First quarter net sales of 969.3 million decreased 0.9% year-over-year.
Speaker Change: Gross margin of 30%, decreased 130 basis points from the prior year.
The decrease funds in our agriculture segment.
Speaker Change: Primarily due to a higher mix of international projects that carry lower margins.
Speaker Change: The gross margin decline was largely offset by lower SGNA due to cost reduction activities.
Operating income was 128.3 million, or 13.2% of sales.
We incur $2.7 million of other expense.
primarily due to foreign exchange impacts.
A diluted earnings per share was $4.32. It's $4.32.
In line with prior Europeriod
Speaker Change: Our first quarter results include 3 million of cost for tariffs or 11 cents per share.
Turn it to the segments of slide 10
First quarter infrastructure sales decreased 2.4%
Speaker Change: Growth Intellicon and Utility was largely offset by significantly lower sales and solar.
along with softer results in lighting and transportation.
Speaker Change: Utility sales increased 2.4% to provide higher volumes and higher average selling prices.
Speaker Change: thousand contrary distribution structures were impacted by a strategic shift by a key customer.
which reduce volumes at that facility. [inaudible]
Speaker Change: This was a project-specific decision, with no impact on other concrete operations.
Speaker Change: Our utility backlog remains strong, and we're actively supporting our utility partners with their long-term grid heartening efforts.
Excluding Contrary, our Steel Utility Business grew 8% year-a-year.
Speaker Change: Lower sales and lighting and transportation and coatings for primarily due to softness in international markets.
Speaker Change: Artella Communications Business saw strong sales growth of nearly 30 percent.
driven by favorable carrier spending.
Solar Sales declined by more than 50%
Reflecting Lower Volumes [inaudible]
Speaker Change: including the company's Strategic Decision in 2024 to exit low-margin projects.
Infrastructure Operating Ecom decreased slightly to 117.2 million.
Speaker Change: Operating Margin improves 30 basis points to 16.7% of net sales.
The improvement was largely due to lower SGNA expenses. [inaudible]
Moving to Slide 11
First quarter agriculture sales increased 3.3% [inaudible]
and increased to approximately 6% on a constant currency basis.
Speaker Change: In North America, irrigation equipment volumes and selling prices for lower due to continued market softness amid lower green prices.
International Sales increased significantly.
Speaker Change: led by strength in the Amir region and higher volumes in Brazil.
Speaker Change: I recalls your operating income decreased to 36.2 million, or at 13.6% of net sales.
Speaker Change: Lower Gross Margin, due to the higher makes of international projects, was partially offset by lower SGNA expenses.
. . . .
Speaker Change: Moving to slide 12, and our cash liquidity and capital allocation priorities.
I liquidity remains strong.
We ended the quarter with 184.4 million of cash.
Speaker Change: and approximately 800 million of available liquidity on our revolving credit facility.
who generated operating cash flow of $65.1 million.
Thu earnings and lower inventory.
Our net debt leverage was below one times.
We remain committed to a balanced approach to capital allocation.
Speaker Change: Deploying approximately half of our capital toward reinvesting in our business
and the other half to share the returns. [inaudible]
In the first quarter, we invested $30.3 million in CAPS.
Speaker Change: primarily takes man capacity and our infrastructure segment with a focus on utility.
Speaker Change: We are pleased with our progress in expanding our manufacturing capacity for the coming years.
Speaker Change: We respect that for every hundred million dollars we invest in capacities.
We can generate over 100 million in annual new revenue.
and 20 million plus in Operating Income [inaudible]
Delivering over a dollar of diluted earnings per share
Speaker Change: We return $12 million to shareholders through dividends and announced a 13% dividend increase during the quarter.
Speaker Change: In addition, we initiated the trading program in the first quarter to begin executing our 700 million stock repurchase program.
The program included a 30-day waiting period.
So, repurchases began in the second quarter.
to April 18th.
Speaker Change: We've re-ferred $59 million of shares in the second quarter at an average price of $269 per share.
Turning to our 2025 Outlook on slide 13
We are reaffirming our full-your-expectations.
Speaker Change: net sales are projected be in the range of 4.0 to 4.2 billion
Speaker Change: Deluted earnings per share is expected to be in the range of $17.20 to $18.80 [inaudible]
Speaker Change: For second quarter, respect both sales and earnings for share to be above first quarter levels.
while we are maintaining our 2025 guidance ranges.
Speaker Change: We now expect Folier EPS to land above the midpoint, inclusive of tariffs.
Regarding tariffs, our outlook includes tariffs as of April 18th.
Speaker Change: Always keep in mind for US-based customers. The vast majority of products shipped to them come from one of our 24 manufacturing facilities in the United States.
Significantly reducing our exposure.
When we started assessing potential tariffs, impacts earlier this year.
We estimated our total gross exposure could reach $80 million and $10.
In response, are teams developed? [inaudible]
Speaker Change: and are in the process of implementing comprehensive plans to mitigate the impact of terrorists this year.
Starting with Trace [inaudible]
as a Market Leader in both segments. [inaudible]
Speaker Change: We are working with customers to fail to reflect the increased cost of tariffs and pricing.
Speaker Change: We've increased the use of US or steel in our Mexico operations [inaudible]
Speaker Change: and shifted some coatings work to our own US-based galvanizing facilities.
Speaker Change: Products from our Mexico plant remain U.S. M.C.A. compliant with the majority of steel U.S. melted and poured.
or supply chain teams are focused on local sourcing.
As well as working with suppliers on cost sharing initiatives.
Speaker Change: We are working with U.S. suppliers to provide components that were previously sourced internationally.
Speaker Change: Lastly, we are using advanced tools to improve scheduling and drive higher productivity in our
Speaker Change: We believe these actions will enable us to be cost neutral with respect to tariffs on a dollar basis in fiscal 2025.
Speaker Change: Beyond mitigating tariffs, we are also taking actions to further optimize our cost structure.
Speaker Change: Our teams are focused on efficiency and productivity improvements in both our factories as well as back office operations [inaudible]
Speaker Change: Our procurement teams are actively working to reduce our spend on indirect materials and services.
Speaker Change: At Corporate, we are closely evaluating our use of outside-service providers with the intent to leverage our internal talent to perform more work in-house, more cost-effectively.
Result so far promising.
and we believe the savings will be sustainable beyond 2025.
Speaker Change: We truly believe that the work our teams are doing to mitigate tariffs and optimize our cost structure makes us a stronger company that would benefit Valmont for years to come.
to summarize on slide 14.
We remain optimistic about our 2025 Outlook and Beyond.
Our teams are executing well.
Speaker Change: with businesses aligned to end markets supported by long-term global mega-trans
Ford Basing, Growth Initiatives, Managing Terrace, [inaudible]
Speaker Change: Driving Class efficiencies and investing in capacity to better serve our customers.
Speaker Change: with clear competitive advantages, a focus strategy, and strong cash flow. We are well-positioned to create lasting value for our customers, employees, and shareholders.
We'll now turn the call over to Renee
Renee Campbell: Thank you, Tom. At this time, the operator will open up the call for question.
Speaker Change: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: and for participants using speaker equipment and maybe necessary to pick up your handset before pressing the start keys. To allow as many questions as possible, please let me yourself to one question and one follow up. One moment will we pull for questions? Let's begin.
Speaker Change: Our first question is from Nathan Jones with Steve Falle, please proceed.
Good morning. This is Adam Farley on for Nathan.
Nathan Jones: I wanted to start with pricing actions, have price actions been implemented to offset all the tariff impacts to date, and is there any type of lag that we should expect from pricing?
Nathan Jones: Well, first of all, you know, I think the team did a really good job on unmitigating tariffs and I want to reiterate, you know, for the total year will be cost-neutral, which we believe is very positive.
and it will be cost-neutral for both segments.
It'll make us have a strong second half.
Nathan Jones: To your question on pricing, you know, we mentioned that we had 80 million of tariff exposure about half of that is through pricing in the other half is through really supply chain movements and activities to to avoid avoid tariffs.
Nathan Jones: You know, I think as you look through the year and you look at our guidance [inaudible]
Nathan Jones: We expect higher pricing, possibly lower volumes, that's included in our guidance, but we feel very good about where we are. With respect to lags on pricing, yeah, things that are in backlog are generally not reprised.
Nathan Jones: You know, in utility, the bid market, that's pretty much, you know, immediate past on backlog. We'll see the, you know, effect on that. More in the second half has we have new orders being produced. Hope that helps.
You know, that's that's very helpful [inaudible]
Nathan Jones: I'm maybe shifting to telecom. I'm in a really strong quarter here, 30% growth.
and telecom.
Nathan Jones: You know, I should we think about that business for the rest of the year? I mean...
Nathan Jones: Do we actually expect, you know, this normalization to continue? Or are there any early signs of maybe curious deferent spending?
Nathan Jones: Good morning, Adam. So overall, we're very pleased with our Q1 growth of over 30% in Telecom. So we've definitely seen stabilization after a couple of years where carriers reduce their spending. [inaudible]
Nathan Jones: And now the carers are continuing to spend and focusing on the 5G upgrades.
Nathan Jones: Modernization, Expansion, etc. So, our order rate continue to be strong and
Nathan Jones: I believe the carers will continue, continue to insist. I mean, they're investing in the future.
Nathan Jones: You know, if you look at and we're tied very closely with a lot of their investments and their programs, you know, give you an example, you know, AT&T, they're focused on the multi-year ran transition and we're well
Nathan Jones: Well equipped to support them and their growth, and that's been a lot of our demand. In fact, if you see this morning, just Verizon came out with their earnings, and they reaffirmed their café spend and their outlook for the year.
Nathan Jones: So I'd say overall, we're going to keep on monitoring the order and take pretty closely, but the carriers are continuing to spend and we believe they're focused on the long term and we will continue to support them and we're well equipped to do so.
Great, thank you for taking my questions.
Speaker Change: Our next question is from Chris Moore with CDS Securities. Please proceed.
Speaker Change: You're talking about pricing as of 421, just theoretically if steel does increase meaning from here, does that just, you know, you can't reprise some of the back of, does that just push out, you know, that some of the two H earnings a little bit further?
Speaker Change: Well, this is what we're seeing. You know, prices for steel one up. They're starting to moderate. If you look at futures in the second half, they've actually come down. So that is affected in our guidance. [inaudible]
Speaker Change: But you know, we visited a steel supplier in the last two weeks, the largest plate producer in the U.S.
Speaker Change: and they have capacity. They invested in their plant in Houston. Houston is close to our Brennan and Monterey facilities, so we're talking to them about, you know, how can we use their steel at a lower freight cost.
Speaker Change: They're also talking to us about more evaluated operations that they can perform, like cutting the steel, doing some base plates, so, you know,
Speaker Change: Whereas February March still is very volatile, I think we have a better line of sight and road map to where we'll be toward the end of the year. And net net, I'd say it's positive to us.
Thank you. Thank you. Thank you.
Got it, very helpful.
Speaker Change: The EPS Guide Stage, 1720 to 1880, it sounds like you have more confidence that you'll get above that midpoint. Is that a margin discussion? Are you more comfortable? You get closer to the high end of the revenue guide just, you know, any thoughts there?
Speaker Change: You know, we think we have a good shot at being above the midpoint for both Revenue and EPS.
Speaker Change: We feel a better today. We're in a better position today than we were during our earnings call because of the work on on tariff mitigation. We're in a better position.
Speaker Change: But just as importantly, you know, we've taken a fresh look at our cost structure and the results are promising. That is not included in our guidance and it could be upside. Thank you very much.
Speaker Change: You know, later in the year but, you know, let me just talk a little bit about the cost initiatives.
You know, we're looking at the productivity in our factories.
Speaker Change: Avner and I went to Monterey earlier this quarter. We're really happy with the improvements being made there.
Speaker Change: You know, we're focused on making sure they have steel and material in their first operations. All of their time we get a better flow through Monterey. We have a lower average cost per poll, so to speak. We went to our Pell Dorito facility, same story. We're investing in catbacks. [inaudible]
Speaker Change: But it's not just some factories, you know, we're looking at our back office, we're looking at our organization, you know, we have an effort underway and corporate to take a look at us to a zero-based, what really should be done and corporate, what should be done in segment, what should the cost of that be?
Speaker Change: And, you know, just as important, we're working with our suppliers, you know, really happy with the progress of our Sherman teams on both Steel, which we just talked about, but with our, our indirect.
Speaker Change: And when we look at these, you know, cost initiatives, you know, altogether they could be quite sizable, 15 to 20 million, once they're implemented.
Speaker Change: So we're in the early stages of that work, but we feel that it's in a good place and that's why we're pretty confident about our total year 2025 and beyond.
Perfect, I'll leave it there. Thanks, Kess.
Speaker Change: Our next question is from Brent Thielman with DA Davidson. Please proceed.
Brent Seelman: Hey, great. Thanks. Good morning. I had a question on the the infrastructure segment. It sounds like, you know, pretty solid demand across the board in the US, but I was curious just on the international.
Brent Seelman: Sales exposure that you have are there's some areas that you're monitoring, you know, what's sort of handicapped in the guidance from a demand perspective for that business group in particular in particular.
Hey, good morning.
Brent Seelman: So overall, we do work global company and we do operate in global markets. And what we noted in the call is we had a slow start to the year. Mostly in our Asia pack, specifically in Australia, coming into the year, we had a week backlog.
Brent Seelman: We're happy about what we're seeing now in that business. The order rate has been as it has been improving in that region. And on top of that, you also seen the Australian government spending more money and infrastructure that helps our work.
Our business there as well.
So yeah, we're we're we're
Brent Seelman: One monitoring all the markets that we participate in, our results in Europe were actually pretty solid for the quarter. So it's mostly around Australia. The lighting is we're at highlight, but we're pleasantly
Brent Seelman: We're happy with where we see that the order is trending today and that is all factored into our guidance.
Nathan Jones: Okay, I appreciate that. And then maybe just on AG, he looked Brazil had been a meaningful market for you in preceding years. It sounds like you're starting to see some green shoots there, Avner. I don't know if you can elaborate on.
Nathan Jones: Maybe the order trends you're seeing in that market, if this is a true recovery or just some catch-up, then you had to tap your last year there, but curious in any comments you have around Brazil.
Avner Applbaum: Yeah, so, you know, I mentioned we had the Brazil dealers here in
Nathan Jones: In Omaha last week, we actually had a great meeting and conversations with our dealers there.
Nathan Jones: And, you know, we believe it kind of bottomed out in Brazil. And, you know, after a tough year, we're seeing stabilization, we're seeing order activity increasing into Q1. Q2 should also be a strong quarter fraud, but yet it's still mad.
Nathan Jones: The EBITDA margins are not as high as they were in the past, but improving, they're still profitable, and we're investing with our dealers in our growth and the potential and we know that that region will drive growth in the future. In fact, I did have an opportunity to speak with a leading economist from São Paulo and a former executive from the Brazilian market.
Nathan Jones: U.S. and China, Brazil is going to benefit from that. The overall global demand is not going to decrease, and even if it stays the same, and the U.S. farmer could negatively impact it, the Brazilian farmer will benefit from that, and they're investing there in infrastructure and in investments to support the growth. So we'll continue watching it. There's not a strong backlog there, but we're pleased with the order activity improving. And on top of that, we also have our, uh,
Nathan Jones: Middle East Africa, Project Pipeline. That is very strong. That is robust. We're having a strong year in that area, you know, around the food security and countries are continuing to invest there. So I'd say even with a weaker North America.
Nathan Jones: environment, where we should expect Brazil and the rest of the world to lost it, the weakness. Overall pretty positive signs and we'll keep on monitoring them.
Nathan Jones: The short answer is yes, or we're going to expect that a tough environment you know in this type of.
Nathan Jones: Uncertainty U S farmer as we all know he's gonna, it's gonna he's going to wait on the sidelines and we see that and we didn't expect to have a good year and it's gonna be a challenging year for us having said that you know we're not going to sit on the sideline. We continue to invest we're investing in technology as I mentioned, we're very pleased with the early.
Nathan Jones: The option of our access 365 with our eikon solution.
Nathan Jones: Connecting more of our pivots, creating that ecosystem, providing growers with value proposition, making sure their equipment is up and running when they need it and irrigated optimally, so and and focusing with our strategic accounts. So we can we're going to continue to invest when the market recovers we'll be.
Nathan Jones: To execute.
Nathan Jones: But when we we should expect a tough year in North America.
Speaker Change: Okay, Tom just a point of clarification you mentioned in the in the first quarter tariffs cost you $3 million.
Speaker Change: And your expectation for the full year is for it to be cost neutral are you, suggesting that youre going to recover those 3 million cost $3 million in cost in the last three quarters of the year.
Speaker Change: Yes, Oh, yes.
Speaker Change: Yes.
Speaker Change: Okay. Okay. So tariffs are a positive then [laughter].
Speaker Change: For the rest of the year for US Okay, Alright, alright, thank you very much.
Speaker Change: Yeah.
Speaker Change: Just had a little bit more color on the tariffs because you know, it's obviously top of mind I do want to point out and use this opportunity.
Speaker Change: I'm very pleased with the work our teams have done to manage it manage the impact of tariffs. We they operated with a sense of urgency tariffs not new for US we've been dealing with tariffs for as a global company for for decades.
Speaker Change: And we just we just got on it and you know Tom gave all the detail about about mitigating it but you know as as you'd think about us as a company and with.
With our presence in North America, I mean, we are engineered structures, they're heavy I. So if you think about it but by almost by definition, we're not gonna be important things from around the world are our footprint here is in North America to support North America. We took these actions to a local for local and overall.
Speaker Change: They were well so I don't want to use that opportunity just to say a very nice job by the team mitigating it okay. Thank you.
Speaker Change: Our next question is from Brian Drab with William Blair. Please proceed.
Brian Drab: Hi, Thanks for taking my questions.
Brian Drab: First wanted to see if you could just put a finer point on it.
Brian Drab: The expectation for volume growth in utility and L. N T.
Brian Drab: This here and what is it specifically what does the highway market looked like in in 2020 five in.
Brian Drab: Is it should we stop asking about are we going to see impact from that.
Brian Drab: Highway portion of the infrastructure Bill.
Or is this the year.
Brian Drab: Yeah, you know I'll I'll stop with with the with a high level you know for the growth for the year for for Val.
Brian Drab: We have we have high level of confidence in our forecast. So I'll just give you. The main factors is why we feel confident about our growth you know we're going into we have a we have a billion and a half of our backlog, which has increased over the quarter just reflecting the strong demand we have in the utility space and our projects.
Brian Drab: The middle East.
Brian Drab: Top of that we continue to invest in capacity our capacity investments, they're ramping up their they're there they're going to support our growth as well.
Brian Drab: Specifically on the lighting and transportation might the lighting activity. We started off we had a slow start to the year, but the order rate has been improving for us. So that is a positive sign although the lighting business will be impacted over the long term from a pressure around you know if a recession is to have a ground transportation.
Brian Drab: Patient that's been solid solid demand for us over the last several years to your point you know how much of that is driven by the infrastructure at its it's hard to see exactly but but that that does support a continuous strength for us in that in that business.
Brian Drab: And in overall, yeah, we mentioned the pricing actions that we took that support.
Brian Drab: So overall, it's well it's a it's a dynamic environment. So we'll keep on managing and monitoring, but a lot of our business because they have they.
They have long term drivers and long term Mega transit and those are not.
Brian Drab: Those are not changing at all the need for energy.
Brian Drab: The activity.
Speaker Change: Pardon me.
Speaker Change: Food security water scarcity them all those long term drivers are there.
Speaker Change: And we're operating with discipline, and where we're positioned to capitalize on them and continuing to drive growth.
Speaker Change: Okay. Thank you I'm just trying to gauge you know which of your.
Speaker Change: Businesses or what.
Speaker Change: What your expectation is for volume growth or decline in the businesses.
Speaker Change: In 25, just because you know you're were you.
Speaker Change: We're forecasting sales to be flat for the year really at the at the midpoint.
Speaker Change: And I know Theres strength, and you were talking about strength in some segments and it's soft in domestic irrigation.
Speaker Change: Like for example, I guess domestic irrigation is gonna be down.
Speaker Change: Volume the international irrigation is gonna be up.
Speaker Change: With a strong international project activity in Brazil recovering I, just don't know on the infrastructure side.
Speaker Change: You know can you can you make any.
Speaker Change: More precise comments on what you're expecting expectation is for volume growth or decline or we were expecting because we just started off the year down for L. N T.
Speaker Change: <unk>.
Speaker Change: Is that a business that we think by the end of the year can actually see volume growth or is it going to have a.
Speaker Change: A challenge here and I'm, just wondering that for all of the sub segments.
Speaker Change: Yeah, Yeah, well I'll just give you at a high level you know when you when you look at the infrastructure.
Speaker Change: Should expect mid single digit volume growth for for the infrastructure with expecting with the exception of solar we should see growth in each one of those businesses on the volume side and overall very close to our long term targets of mid single digit plus and that is after accounting.
Speaker Change: From some of the Deselection, we've done last year, the strategic de selections too.
Speaker Change: Improve our business performance with FX headwind. So overall, yeah, we bought well we should have a good a good volume.
Speaker Change: Volume growth and sales growth in our infrastructure.
Speaker Change: So hopefully that answers your question.
Speaker Change: Okay.
Speaker Change: And then the last question I have is.
Speaker Change: How has your and if you could give us any insight into how your impression of.
Speaker Change: Your tariff situation your U S. M C. A compliance has changed and.
Speaker Change: Given you know it.
Speaker Change: That you you you did highlight you know you have the cigna.
Speaker Change: Significant shipments from Mexico into the U S and.
Speaker Change: First he thought they wouldn't be tariff if it if it was USD all than maybe it was gonna be tariff if its U S steel now.
Speaker Change: How has what has changed in the clarity you've been given in terms of U S. MCA compliance I guess.
Speaker Change: And.
Speaker Change: Just any insight into how that has played out and you know.
Speaker Change: Your impression of those those rules that you have to play by.
Brian Drab: Brian Our Mexico operations, our U S MCA compliant.
Speaker Change: We feel very good about that.
Speaker Change: And I would just add.
Speaker Change: You know, we're all concerned about the economy real concerned about terrorists and every day, we come into work and we manage the terrorists and we manage our cost.
Speaker Change: And is events change going forward well, we manage the tariffs going forward.
Speaker Change: While we come in every day to look at tariffs and costs. We're focused on the long term and I think that's something that you know.
Speaker Change: We really wanted to get across in the call think about everything that we've talked about just on the call. So far we've talked about cost cuts work that could be $20 million or above you talked about expanding capacity to meet and be able to meet those volume growth in utility.
Speaker Change: And every time, we spend $100 million, we'll get a dollar EPS going forward.
Speaker Change: We're actively.
Speaker Change: Were actively repurchasing our shares.
Speaker Change: Share repurchase authorization to 700 million, that's over 10% of our market cap, especially today and we know we have we have some upside in international edge and that's both on our tech products for more so you know we feel that we're managing through the near term we're concerned about.
Speaker Change: The economy.
Speaker Change: We think we're putting in actions that are very accretive to EPS over the next two to three years and we don't need a great economy to be accretive to EPS, we need a decent economy and that's why we feel pretty good about this.
Speaker Change: Got it thank you very much.
Speaker Change: Yeah.
Renee Campbell: We have reached the end of our question and answer session I will now turn the call over Q&A Campbell for closing remarks.
Renee Campbell: Thank you for joining us today, a replay of this call will be available for playback on our website and by phone for the next seven days.
Renee Campbell: Forward to speaking with you again next quarter.
Renee Campbell: This release contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Renee Campbell: These statements are based on assumptions made by management considering its experience in the industry, where philmont operates perceptions of historical trends current conditions expected future developments and other relevant factors.
Renee Campbell: It is important to note that these statements are not guarantees of future performance or results.
Renee Campbell: Risks uncertainties, some of which are beyond valmont control and assumptions.
Renee Campbell: While management believes these forward looking statements are based on reasonable assumptions numerous factors could cause actual results to differ materially from those anticipated.
These factors include among other things risks described it that month's reports to the Securities and Exchange Commission SEC the.
Renee Campbell: The company's actual cash flows and net income.
Renee Campbell: Future economic and market circumstances industry conditions company performance and financial results operational efficiencies availability and price of raw materials.
Renee Campbell: Availability and market acceptance of new products product pricing domestic and international competitive environments geopolitical risks and actions and policy changes by domestic and foreign governments.
Renee Campbell: The company cautions that any forward looking statements. In this release are made as of this publication date and does not undertake to update these statements except as required by law.
Renee Campbell: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Renee Campbell: Okay.
Renee Campbell: [music].
Renee Campbell: Okay.
Renee Campbell: [music].
Renee Campbell: Uh huh.
Renee Campbell: [music].
Renee Campbell: Yeah.