Valmont Reports Third Quarter Result
Third Quarter Highlights:
- Net earnings increased 9.4% to a record third quarter level of $40.5 million.
- Operating income increased 1.4% on a 12% decrease in sales.
- Operating income was 14.5% of net sales, an improvement of two percentage points.
- Utility Support Structures sales increased 33% and operating income increased 170%.
- Third quarter irrigation sales decreased 50% and operating income fell 78%.
Companies:Valmont Industries, Inc.
OMAHA, Neb., Oct. 15 /PRNewswire-FirstCall/ -- Valmont Industries, Inc. (NYSE: VMI - News), a leading global manufacturer of engineered support structures for infrastructure, mechanized irrigation equipment for agriculture, and a provider of coating services, reported third quarter sales of $434.0 million compared with $494.8 million for the same period of 2008. Net earnings for the third quarter were $40.5 million, or $1.53 per diluted share, versus third quarter 2008 net earnings of $37.0 million, or $1.40 per diluted share.
VMI 88.50 +0.88
For the first nine months of 2009, sales were $1,388.0 million versus $1,414.2 million in 2008. Valmont's nine-month net earnings were $120.6 million, or $4.59 per diluted share, compared with 2008 nine-month net earnings of $103.9 million, or $3.95 per diluted share.
Third Quarter Summary:
"Outstanding results in the Utility Support Structures Segment along with a slight improvement in the Engineered Support Structures Segment more than offset significant sales and earnings declines in our other segments," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer. "Profitability in the Utility Support Structures Segment was exceptionally strong due to excellent factory fixed cost and SG&A expense leverage and the benefit of falling steel costs.
"In the Irrigation Segment, results were significantly lower in sharp contrast to 2008's record third quarter results. Lower crop prices and the outlook for a decline in global farm income in 2009 deterred farmers from purchasing irrigation equipment.
"In our Engineered Support Structures Segment, sales were slightly higher, largely due to the contribution of acquisitions made after last year's third quarter. Sales and earnings improved in international markets, while North American markets faced continued weakness in commercial lighting and lower sales in wireless communication products.
"Coatings Segment revenues were lower due to a general decline in manufacturing activity as a result of the U.S. economic recession.
"In total, consolidated operating income improved 1.4% and was 14.5% of sales, mostly due to the strong earnings contribution from the Utility Support Structures Segment."
Third Quarter Segment Review:
Utility Support Structures Segment (35% of 3rd Quarter Net Sales)
Steel and concrete structures for the North American electric utility industry.
Sales increased 33.4% to $150.7 million compared with $113.0 million in 2008. The increase in sales reflects higher volumes and shipments to fulfill project orders that were in backlog.
Driving the demand for Valmont's utility structures is the need to increase the capacity of the electrical transmission grid following a period of under-investment. There is also a drive to improve the grid's reliability in order to lower the risk of service interruption. Increasing investment in wind and solar farms also adds to the demand for transmission structures. Valmont expects these trends to continue to support long-term sales growth in the Utility Support Structures Segment. Near-term however, some utilities are deferring projects in response to the economic recession. Therefore, we believe that in the short-term, sales will decline in this segment.
Operating income improved to $40.4 million and was 26.8% of sales due to better fixed operating cost leverage on increased volumes. Declines in material costs, particularly steel, also contributed to the increase in operating income.
Engineered Support Structures Segment (40% of 3rd Quarter Net Sales)
Structures and specialty structures for lighting and traffic, wireless communication and overhead signs, worldwide. Includes utility structures outside of North America.
Third quarter sales were 1.8% higher at $190.4 million. In North America, commercial lighting demand fell due to weakness in residential and commercial construction markets as a result of the current economic recession. In Europe, results were also impacted by the global recession, however third quarter sales improved due to an increase in project activity for export. Acquisitions completed after the third quarter last year contributed to the higher sales in Europe.
Specialty structures sales fell in North America, due to lower levels of activity among wireless carriers. In the Chinese market, specialty structures sales were essentially flat and utility product sales were lower.
Historically, the U.S. Highway bill has been a strong driver of demand for Valmont's lighting and traffic structures. The 2005 highway bill was recently extended for a short period of time and a new highway bill is not expected soon. Until a new multi-year highway bill is passed, we will not have good visibility in this business.
Operating income improved 12% to $18.2 million or 9.6% of segment sales. The increase in operating income resulted from improved results in international markets, operational improvements and the impact of acquisitions.
Irrigation Segment (17% of 3rd Quarter Net Sales)
Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.
Sales fell 50% to $75.2 million compared with $150.4 million in 2008. We believe the substantial decline in sales was the result of farmer's expectations for lower crop prices and income in 2009.
This year's results stand in sharp contrast to the record third quarter 2008 results. Last year global coarse grain demand was strong and commodity prices were higher. Irrigation Segment results this year also reflect a more normal seasonal pattern than last year's third quarter.
Operating income declined 78% to $5.6 million due to lower sales and the associated volume de-leverage of fixed operating costs.
Despite slower demand for irrigation equipment this year, we believe nothing has changed in the long-term outlook. A growing world population should continue to put increased pressure on farmers to increase productivity and use less water. We believe Valmont with its leadership position in the industry is well positioned to benefit from improved demand when conditions improve.
Valmont Reports Third Quarter Results - Yahoo! Finance 
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