Valmont Industries, Inc.

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. I will 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 Belmont Industries' second quarter 2023 earnings call. With me today are Abner Applebaum, President and Chief Executive Officer, Tim Francis, Interim Chief Financial Officer, and Jean Padgett, Senior Vice President and Chief Accounting Officer. This morning, Abner will provide a brief summary of our second quarter results, commenting on our markets and long-term business strategies. Following that, Tim will review our financial performance and provide our current outlook and indications for 2023 with closing remarks from Abner. 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's site at Belmont.com. A replay will be available on our website later this morning. Please note that this call is subject to our disclosure on forward-looking statements, which applies to today's discussion, is outlined on slide two 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 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 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 Applebaugh.

Thank you, Renee. Good morning, everyone, and thank you for joining us. Before discussing the results of the quarter and current market dynamics, I would like to spend a few minutes on my recent CEO appointments. I am extremely humbled and honored to be addressing you today as the CEO of Valmont. This is a great company that delivers products and solutions our customers need to solve their most pressing challenges. Our global team is dedicated to our purpose and united by our core values to achieve our goals. The people at Valmont are one of the primary reasons I joined the company in 2020. and I could not be more proud to be part of this outstanding team. Having worked closely with the entire leadership team to develop and implement our strategy over the past three-plus years, I understand what is required of this role. The executive team and board of directors are aligned around our long-term strategy to accelerate our journey towards becoming a leading industrial technology company. This strategic framework which I will discuss in a few minutes, is the right approach to continuing the momentum we have built and provides a clear path to achieving our long-term financial targets. As CFO, I led the transformation of the finance organization using data, advanced technology, and processes to drive better business decisions and value. This focus has led to a more disciplined approach the organization in using data and analytics to achieve our financial goals with an emphasis on ROIC. As CEO, I look forward to leading Valmont along the strategic path we have been on over the past several years, driving strong financial performance for the company and our shareholders while remaining committed to our sustainability journey. Finally, I want to thank Tim Francis for stepping into the role of interim CFO. I am confident in his ability to lead our finance organization and contribute to the executive leadership team until we are prepared to name a permanent CFO. Turning to slide five for a review of second quarter financials and key messages. Our results in this quarter were strong, achieving adjusted operating margin of 13.2%. Adjusted diluted earnings per share grew to a record $4.37, building on the momentum from 2022 and the first quarter of this year. I am very pleased with our growth and profitability and proud of the entire Valmont team for what we have accomplished. Infrastructure demand globally remains robust, benefiting from several secular long-term growth drivers, including the global energy transition and ongoing investments in grid hardening. We are seeing strong demand across nearly all our markets. Global agriculture market fundamentals are being influenced by uncertainty in North America as farmer sentiment is muted pending the outcome of this year's harvest, which I will expand on shortly. We continue to be excited about the long-term growth potential of agriculture and our ability to transform the industry with disruptive technology that improves land productivity and enables growers to do more with less. In both segments, our discipline and strategic pricing has ensured we are capturing the value we add to our customers, which has driven margin expansion amid lower sales and ongoing inflation. Wrapping up our key messages, we are executing a run, grow, transform strategic framework that we outlined at our recent investor day. Earlier this month, we announced an agreement to acquire HR Products, a strategic bolt-on that expands our irrigation aftermarket part capabilities and drives international expansion. This is an excellent example of harnessing our strong balance sheet to further our strategic initiatives. Moving to slide six for an update on current market conditions, starting with infrastructure and utility markets. Utilities have increased their capex spending to support grid hardening initiatives and an evolving electricity generation portfolio. Transmission demand is outpacing market capacity as indicated by industry lead times that exceed 40 weeks. We are strategically adding capacity to meet the strong multi-year demand. In lighting and transportation, transportation market demand is being supported by increasing investment in road construction, and we continue to see some increased courting activity related to IIJA funding. Commercial street lighting product demand globally is muted due to impacts of inflation and higher interest rates leading to softness in single-family housing and commercial construction markets. In telecom markets, we are seeing capex spending by wireless carriers more aligned with historical trends following record level of investment. At the onset of 5G, the industry predicted this rollout to be more rapid than previous generations. In reality, the build-out timing is proving to be similar to past experiences as pauses in capex spending are common during network expansions. Major carriers will continue to invest in wireless networks to meet nationwide coverage and capacity commitments after having spent over $120 billion on 5G spectrum. Our wireless communication structures and components business remains well positioned to meet this demand. Our coatings business tracks industrial production levels and has seen near-term strength from utility and transportation markets. Turning to solar, domestic contact guidelines related to the Inflation Reduction Act have been released. Even though the industry is awaiting clarity on the manufacturing tax credit details, IRA support is expected to provide strong market tailwinds for the next several years. Globally, renewable energy investments in markets such as Italy and Brazil are supporting demand in those regions. Belmont has a competitive advantage in the distributed generation solar market, and we prioritized that niche market due to its attractive growth rates and accretive quality of earnings. Turning to agriculture and starting with North America, demand this quarter was less robust than we and the industry originally anticipated. While U.S. net farm income is projected to decline year over year, it will still represent the third highest income level over the past 10 years. Additionally, recent USDA data suggests improving drought conditions for much-needed rain across key growing regions. However, many areas of the country remain at severe or extreme drought levels. We view these market tailwinds as positive, but growers have maintained a wait-and-see approach in purchasing decisions. This is supported by recent Purdue University reports, which highlight farmer uncertainties around higher interest rates and volatile commodity prices. We believe these uncertainties may continue to weigh on sentiment through this year's growing season and expect the outcome of this year's harvest to provide more clarity on order patterns for the remainder of the year. Moving to international markets, we continue to see strength in Brazil supported by the Finami financing program that was announced in late June. The Brazilian government demonstrated their strong support of agriculture markets with an increase in irrigation funding of nearly 25% over last year, with approximately 2.4 billion Brazilian reais available to growers. The terms of these loans are extremely favorable, making this program an attractive option to support continued irrigation investments. In other international markets, our project pipeline remains robust, not only driven by ongoing food security concerns, but also the ability to produce goods for export, which can help reduce trade imbalances and currency fluctuation. In more developed regions, the demand for increased resource conservation to further enhance land productivity has been a demand catalyst for our products and technology solutions. Project sales in the MIA region this quarter were lower compared to last year. We expected shipments of the previously announced $85 million Egypt project to begin in second quarter. However, there was a slight delay and the project began shipping this month. We anticipate shipments will continue into 2024. We have intentionally and strategically built exposure to diverse infrastructure and markets and a growing pipeline of international agriculture projects. This helps us to better manage softness in any one end market across the portfolio, delivering more consistent financial results. I am pleased with our second quarter performance and proud of our entire team's achievements. Moving to slide seven. In May, many of you joined us either virtually or in person at the New York Stock Exchange for Investor Day. I would like to take a few minutes to elaborate on our new Run, Grow, Transform strategic framework I mentioned earlier. This framework will move us forward as we evolve into higher quality and more dynamic organization, delivering shareholder value that is less dependent on cycles of any one end market. It guides our allocation of resources, capital, time, and effort. Our framework begins with a run. which is the idea that we are built for sustainable outperformance. This solid foundation allows us to operate well, confirmed by a proven ability to deliver results and drive profitable growth, even when economic cycles are volatile and uncertain. Our commitment to operational excellence, development business model, and a continuous improvement mindset are critical to maintaining the run. With an established run foundation, we can drive growth across our businesses that exceed expected market growth rates. This can be achieved through geographic expansion, such as our robust pipeline of international irrigation projects, or through optimizing our best-in-class distribution channel by creating additional touchpoints to serve our global customer base. When we speak to transform, making sure that we are being great stewards of the company long-term. It is a mindset where we look to be a disruptor in our markets. We operate in capital good markets where high barriers to entry are common. Leveraging our industry-leading position, including extensive distribution networks and trusted reputation, we bring innovative technologies to our customers and are focused on creating more stable and high-value revenue through recurring revenue streams while delivering proven ROI to our customers. Earlier this month, we demonstrated our commitment to making investments that align with our growth strategy with an announcement to acquire HR products summarized on slide eight. This Australian-based wholesale supplier of irrigation products provides geographic footprint expansion in this key agriculture market while enabling us to better serve our customers through expanded irrigation parts offering. With our large installed machine base in the region, we have a path to grow recurring, stable, high-value revenue streams perfectly aligned with our grow and transform objectives. We expect the transaction to close in the third quarter and look forward to this great business joining our portfolio. With that, I will now turn the call over to Tim for our second quarter financial review and updated outlook.