Valmont Industries, Inc.

Greetings, and welcome to Valmont Industries' fourth quarter and full year 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Renee Campbell, Vice President of Investor Relations and Corporate Communications.

Thank you and good morning. Welcome to Valmont Industries' fourth quarter and full year 2020 earnings call. With me on today's call are Steve Konieski, President and Chief Executive Officer, Abner Applebaum, Executive Vice President and Chief Financial Officer, and Tim Francis, Senior Vice President and Corporate Controller. This morning, Steve will provide a brief summary of our fourth quarter and full year results and comment on our strategy and long-term business outlook. Abner will review our financial performance and provide trends and key assumptions for 2021 with closing remarks from Steve. This will be followed by Q&A. A live webcast of the slide presentation will accompany today's discussion and is available for download from the webcast or on the Investors page at valmont.com. A replay of today's call will be available for the next seven days. Please note that this conference call is subject to our disclosure on forward-looking statements, which applies to today's discussion and is outlined on slide two of the presentation. It will also be read in full at the end of this call. I would now like to turn the call over to our President and Chief Executive Officer, Steve Koniewski.

Thank you, Renee. Good morning, everyone, and thank you for joining us. Before reviewing our fourth quarter highlights, I want to acknowledge and thank our global team of over 10,000 associates for their noteworthy performance throughout this past year. I could not be more proud of their efforts as they worked hard in the face of the pandemic to provide our customers with essential products and services while prioritizing safety in our workplace and our communities. Our team's dedication and focus has positioned us very well for success in the future. With that, Let me turn to a brief recap of our fourth quarter, summarized on slide four of the presentation. Net sales of $798.4 million increased $115 million, or 16.8% compared to last year, due to significantly higher sales in the irrigation and utility support structure segments. Starting with utility, sales of $271 million through 16.9% year-over-year, led by significantly higher sales of global generation products, as expected. Strong demand for renewable energy generation is increasing, and utilities continue to invest in a more resilient grid. Moving to engineered support structures, sales of $256.1 million were similar to last year. Favorable pricing and currency impacts were offset by lower volumes. primarily due to lower international sales as COVID-19 impacts continue to affect end market demand, mostly in France and India. Sales of transportation products were higher in North American markets, driven by states' continued investments in road and construction projects. Wireless communication structures and component sales were similar to last year's record fourth quarter, led by continued strong demand and favorable pricing in all regions. Turning to coatings, sales of $89.3 million were similar to last year, but improved sequentially from third quarter as demand continues to recover. In irrigation, sales of $199.3 million grew nearly 50% compared to last year, with growth across all global regions. In North American markets, farmer sentiment has improved significantly, as recent increases in agricultural commodity prices are leading to multi-year highs for soybeans, corn, cotton, and wheat. International sales growth was led by higher sales in the Middle East, European and South American markets, particularly in Brazil, where we recognized another record quarter of sales in local currency. Deliveries of the multi-year project in Egypt also began during the quarter and we are pleased at how the project is progressing. This project and others like it are helping nations conserve water, strengthen their local economies, enhance food access and availability, and support our commitment to improve life across the globe. During the quarter, we purchased the remaining 40% stake of Torrent Engineering and Equipment, a global designer and integrator of high-pressure water systems for the agricultural and industrial sectors. This acquisition supports our strategy to deliver full-service engineered turnkey water management solutions to our growers and is critical to large-scale agricultural projects. Overall, sales and profitability were better than expected across all segments as we continued to successfully manage pricing and operational performance. Turning to the full year summary on slide five, net sales of $2.9 billion grew 4.6% compared to last year and 5.4% excluding currency impacts. Earlier in the year, visibility of the pandemic's impacts on our global end markets was somewhat unclear. However, we exited the year with a more confident view of the tailwinds across the majority of our markets. I'm very pleased with our performance and our focused execution throughout the year. Turning to the segments, strong sales growth in the utility support structures was led by continued robust demand driven by renewables and grid resiliency and higher sales of global generation products. In engineered support structures, our pricing actions and improved operational performance benefited us throughout the year. In North America, Strong demand in transportation markets and an increasing number of site build-outs ahead of 5G rollouts offset lower international end market demand. Access system sales were down 23% compared to last year due to a strategic decision to exit certain product lines. Turning to coatings, sales were down 6.1% for the year but improved sequentially in the second half of the year. Tracking in line with improving industrial production levels. Turning to irrigation. 2020 began as the sixth consecutive year of an off cycle in North America. Low grain prices and food supply disruptions from COVID affected demand earlier in the year. But strengthening demand during the second half of the year led to a strong finish to 2020. In Brazil, Very strong demand led to record sales, with sales in local currency growing 32% year-over-year. Additionally, sales of advanced technology solutions globally grew nearly 20% year-over-year to $67 million. These proprietary solutions now connect over 110,000 of our growers' machines, helping them to maximize yields, improve water efficiency, and optimize input costs. Turning to slide six, during 2020, we made significant progress in many key areas. We elevated our commitment to ESG throughout the organization and set a solid foundation to share more in 2021 of what we're doing to conserve resources and improve life. We accelerated innovation through new products and services, including our spun concrete distribution poles and small cell solutions. as well as technology advancements in our Valley 365 platform for connected crop management. And all segments benefited from disciplined pricing strategies throughout the year. We secured the largest irrigation order in the industry's history to supply $240 million of products, services, and technology solutions to the Egypt market. And we generated over $200 million in free cash flow, through a continued intense focus on working capital management. We quickly responded to inflationary pressures, which occurred late in the year, by implementing price increases in all four segments and have implemented additional increases in early 2021. We believe that a persistent focus on price and delivering customer value is the primary way to deliver strong operating performance and generate shareholder value. Turning to slide seven. Last month, we announced a collaboration with the Republic of Kazakhstan to develop the first in-country center pivot manufacturing facility that will take advantage of the region's growing agricultural potential. Working with our joint venture partner, Kusto Group, this multi-year agreement is helping enhance mechanized precision agriculture, creating a network of farms that will accelerate efforts to address food security, resource conservation, and increasing export demand. Cousteau Group is a recognized leader in agribusiness and the application of innovative technologies in the region. Together, we have committed to build a local facility with an annual production capacity of up to 1,000 pivots. Groundbreaking is planned to begin in the second half of 2021 with production ramping by 2024. As the largest economy in the region, Kazakhstan is rapidly embracing agriculture as a key economic contributor, with a national plan to more than double the number of irrigated acres over the next 10 years. Growing regional demand coupled with excellent infrastructure will allow us to quickly and efficiently serve the greater market, starting with the multi-year agreement to supply a minimum of 4,000 pivots. We are excited for the partnership and potential growth in the region, and will provide further updates on our progress in future quarters. With that, I will now turn the call over to Abner for our 2020 financial review and 2021 outlook and key indications.