Valmont Industries, Inc.

Greetings and welcome to the Valmont Industries Incorporated Third Quarter 2024 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 yourselves to one question and one brief follow-up and return to the queue. 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, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Thank you and good morning. Welcome to Valmont Industries' third quarter 2024 earnings call. With me today are Abner Applebaum, President and Chief Executive Officer, Tom Liguori, Executive Vice President and Chief Financial Officer, and Tim Francis, Chief Accounting Officer. This morning, Abner will provide a summary of our third quarter results, current market dynamics, and strategic priorities. Tom will review our third quarter financial performance and provide our outlook for the year. 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 3 of the presentation, and will be read in full at the end of today's call. Finally, to stay updated with Belmont's latest news releases and information, please sign up for email alerts on our investors' site. We also invite you to follow Belmont and our brands on the social media channels linked on our website. With that, I would now like to turn the call over to Avner.

Thank you, Renee. Good morning, everyone, and thank you for joining us. I'd like to begin by extending our thoughts to everyone impacted by hurricanes Helene and Milton. Our top priority during events like this is always the safety and health of our employees. I'm relieved all our employees are safe, and I'm incredibly proud of our local leaders for providing resources and assistance where possible. Although a few of our facilities encountered brief interruptions, we do not expect any disruption to our overall operations in the fourth quarter. We're also focused on helping our customers recover from the hurricanes. Our infrastructure teams are working to help restore damaged structures and assess future needs. And our agriculture teams are assisting Valley dealers to repair and replace damaged irrigation equipment. I'm proud of our team's swift and compassionate response to local needs during this difficult time. Now, turning to key messages on slide five. We delivered another quarter of solid performance, growing operating profit and expanding operating margins year over year despite lower sales. Our results were driven by effective commercial and operational execution pricing discipline, and a fundamentally improved cost structure. This reflects our focus on key areas to enhance profitability and return on invested capital. We also generated strong operating cash flows of $225 million, further strengthening our balance sheet. I want to extend my thanks to our global team of more than 11,000 employees for their dedication and hard work in driving these accomplishments. Their collective effort has been instrumental in not only delivering a successful quarter, but also laying the foundation for our future success. Building on that, I'm excited about the long-term outlook for our business. To drive growth, we've intentionally aligned with customers and markets positioned to benefit from multi-year secular megatrends. With strong competitive advantages and a focus on customer-driven innovation, our core businesses are well-positioned to outpace market growth as these trends continue. This quarter, we filled key roles on our executive leadership team through strategic hires and an internal promotion. This includes Tom, who joins us on today's call, and I will share more details shortly. We're making solid progress on our strategic priorities. We've streamlined the organization to be more efficient and productive while also structurally reducing our costs. We focus our go-to-market strategy on high return opportunities. And we're effectively managing working capital to maximize cash flow to support our capital allocation framework. This continuous improvement mindset is creating a high performance culture, driving results, and increasing ROIC. While I'm encouraged by the progress we've made on our strategy, there's still work to be done. I'm energized by the strength of our leadership team and confident in their ability to further advance its execution. Turning to slide six for current market dynamics and long-term megatrends for infrastructure business. Starting with utility, we were very pleased with the strong growth this quarter on a prior year and sequential basis. Utility capping spending has increased to meet load growth expectation and is expected to remain elevated for many years. Key factors like electrification, industrial development, and the rapid expansion of data centers are driving the need to upgrade existing systems and invest in new capacity. At the same time, utilities are investing in resiliency to combat aging infrastructure and be better prepared for extreme weather. Some of our customers better withstood the challenges posed by the recent hurricanes, highlighting the continued importance of proactive grid investments. Turning to our lighting and transportation business, sales were lower this quarter. While some of the decline was due to market factors and timing of projects, we also see clear opportunities to improve execution moving forward. On a positive note, Border rates for our U.S. transportation business are trending higher year over year, driven by DOT infrastructure investments. We expect this favorable trend to continue, further enhanced by IIJA funding. Turning to lighting. Our business historically lacks single-family housing starts by about 12 months. So while these markets remain soft in the near term, We expect our business to recover with a housing market rebound and continued suburban sprawl. Turning to telecommunications, we were pleased to see sales growth this quarter. Wireless carriers have returned to more normalized spending levels, which are expected to remain above previous cycles. This signals steady demand as we look ahead to next year. Over the long term, the adoption of advanced technologies such as 5G and more connected devices will require a more robust network. We're well positioned for growth both in the U.S. and key markets abroad. In solar, sales were lower, partially due to the selection of certain low-margin projects, which we announced last quarter. We're also seeing some near-term lumpiness as we adapt our strategy to market changes. Looking ahead, we're focused on selling our solar tracker solution where we're confident in our competitive advantages for distributed generation and select utility scale applications. Finally, our coatings business generally aligns with GDP trends of the regions we serve while supporting our internal production. Turning to slide seven for current market dynamics and long-term mega trends for the agriculture business. North America sales were slightly lower. Last month, the USDA released an updated estimate for 2024 net farm income, which continues to show a decline from 2023. They also forecast that current average crop prices will be lower than last year, notably Corn prices have declined 37% over the past two years, and soybeans are down 24%, which continues to weigh on grower sentiment. Turning to international markets, farm income in Brazil remains under pressure due to lower soybean prices, but we're encouraged by an improvement in order entry compared to last year. Brazil remains a key component of our long-term growth strategy. Currently, Only 10% of Brazil's agricultural land is irrigated, with the potential to expand nearly six-fold, unlocking significant opportunities for growth in the irrigation industry. CenterPivot offers a compelling return on investment, increasing profitability for growers and creating growth opportunities for us. Our international projects are progressing well, especially in Egypt and the Middle East, with a robust pipeline ahead. growing population, and geopolitical tensions have elevated concerns about food security, driving increased demand for these projects. Turning to slide eight, I'm excited to announce the key additions to our executive leadership team, starting with Tom Liguori, who has joined us as CFO. Tom brings over 30 years of finance experience, including previous CFO roles at Avnet and Advanced Energy, where he successfully led global finance strategies that have drove growth, increased profitability, and improved working capital. I'm excited to partner with Tom as we work together to execute our strategy. I also want to take a moment to thank Tim Francis for stepping in as interim CFO. Tim will continue to play a crucial role within our finance organization as chief accounting officer. I'm also pleased to announce that Darrell Matthews has been appointed Group President of Agriculture. Darrell is a well-regarded ag industry thought leader with expertise in global markets and dealer channel management. His leadership at Trimble, where he played a key role in advancing agriculture technology, will be invaluable as we execute our strategy for industry-leading mechanized irrigation solutions. In addition, I'm excited to share the promotion of Jennifer Paisley, the Senior Vice President of Human Resources. With over 20 years of HR experience, including seven years at Belmont, Jen has consistently demonstrated strong leadership and a deep alignment to our core values, making her the ideal choice to lead our HR function. With these appointments and the strength of our existing executive, we have the team in place to lead Belmont forward. Each decision has been intentional, ensuring we have the right talent in place to align with our strategic goals and uphold our culture. To summarize, our long-term growth outlook for both infrastructure and agriculture remains strong. We're well positioned in enduring markets with sustained multi-year demand drivers. With a sharp and strategic focus, we're ready to capitalize on growing infrastructure demand which will enable us to further expand margins. In addition, we remain optimistic about our growth potential in our agriculture business as the market recovers to capture future opportunities and continue delivering value to our shareholders. Now, I'll turn it over to Tom for our third quarter financial review and an updated 2024 outlook.