VALMONT INDUSTRIES INC (VMI)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered modest top-line growth and strong margin expansion: revenue rose 2.1% to $1.04B, gross margin improved 230 bps to 30.2%, and operating margin expanded 530 bps vs. Q4’23 GAAP (170 bps vs. adjusted) to 11.6%; diluted EPS was $3.84 vs. $1.38 ($3.18 adjusted) a year ago .
• Infrastructure led performance with 2.1% growth to $763.6M and operating margin up 280 bps YoY to 16.0%, driven by utility pricing/mix, telecom recovery, and lower input costs; Agriculture grew 2.3% to $276.4M with operating margin up 510 bps to 10.3% on lower SG&A .
• Cash generation remained a standout: Q4 operating cash flow was $193.4M; FY24 operating cash flow reached $572.7M and free cash flow was $493.2M; year-end leverage ratio was ~1.0x (net debt/Adj. EBITDA) .
• 2025 outlook: net sales $4.0–$4.2B, EPS $17.20–$18.80, capex $140–$160M, ETR ~26%; tariffs (China/steel/aluminum) embedded; Infrastructure up low-to-mid single-digit, Agriculture down mid-to-high single-digit; management expects tariff headwinds of ~$0.20 at EPS midpoint and mitigation by 2H25 .
• Capital returns/catalysts: Board approved a new $700M buyback and raised the dividend 13% to $0.68; management outlined a 50/50 split of operating cash flows between growth and shareholder returns; Moody’s upgraded VMI to Baa2—potential supports for multiple re-rating and stock reaction on capital return visibility and balanced growth plan .

What Went Well and What Went Wrong

• What Went Well

  • Infrastructure strength: Utility sales +5.9% on pricing and favorable mix; telecom “increased significantly” as carrier spending normalized; segment operating margin rose to 16.0% (+280 bps YoY) .
  • Cash and deleveraging: Q4 operating cash flow $193.4M; FY free cash flow $493.2M; net leverage ~1.0x; revolver fully repaid in 2024 ($393M) .
  • Strategic capital allocation: New $700M repurchase authorization (~10% of market cap) and dividend increased to $0.68; plan to allocate ~50% of operating cash flow to growth and ~50% to shareholder returns .

• What Went Wrong

  • Solar and mix headwinds: Solar sales “declined significantly,” reflecting exit from low-margin projects; Lighting softness continued; these mixed impacts constrained segment sales growth despite strong pricing .
  • Agriculture softness NA/Brazil: North America volumes slightly lower as lower grain prices pressured sentiment; Brazil remained soft; FX was a 2.3% headwind; though EMEA offset with growth .
  • Tariff overhang and FX: 2025 includes steel/aluminum and China tariffs (EPS headwind ~$0.20 midpoint), while potential additional USMCA-related tariffs remain excluded; FX a modest revenue headwind embedded in the 2025 bridge .

Financial Results

Consolidated metrics (USD millions except per-share; periods oldest → newest)

Q4 Segment performance vs. prior year

Selected KPIs (end of Q4 2024 unless noted)

Notes:

• Other expense in Q4 included a ~$4.5M loss on divestitures, embedded in the $3.84 EPS .

Guidance Changes

Additional color:

• Tariffs included: additional 10% on China imports and 25% on steel/aluminum; not included: potential broad tariffs on Mexico/Canada and possible retaliation .
• EPS tariff headwind estimated at ~$0.20 at midpoint (up to ~$0.40 at low-end) with mitigation expected to offset by 2H25 .
• Seasonality: Q1 Infrastructure typically lower; Q1’25 revenue similar to Q1’24 with slightly higher EPS on lower SG&A .

Earnings Call Themes & Trends

Management Commentary

• “Both our Infrastructure and Agriculture segments achieved sales growth, and we expanded consolidated operating profit margins year-over-year through strategic pricing, improved operational efficiencies, and disciplined cost management.” – Avner M. Applbaum, CEO .
• “Operating margin increased 170 basis points, reaching 11.6% of net sales. Earnings per share of $3.84 improved nearly 21%... includes ~$4.5 million in other expense related to the divestiture of 2 small underperforming operations.” – Tom Liguori, CFO .
• “We are investing in new capabilities and capacity across our footprint... Brenham, Texas factory expansion... significant upgrades in Tulsa, Oklahoma.” – CEO .
• “Our outlook includes ... 10% tariff on China imports as well as the 25% tariff on steel and aluminum imports... EPS headwind ~$0.20 at midpoint; ~$0.40 at low end.” – CFO .

Q&A Highlights

• Agriculture 2025 scenario: NA/Brazil pressured by low corn/soy prices; EMEA/ME projects robust; team focused on aftermarket and cost to position for margin upside when cycle turns .
• Tariffs pass-through and sourcing: Guidance uses steel futures; pricing/commercial levers, supply chain, and financial instruments to mitigate; most U.S. customers served from 24 U.S. facilities; Mexico <10% of infrastructure revenue .
• Margin roadmap: 2025 gross margin flat to slightly up; SG&A down as % of sales; depreciation up with capacity additions; Q1 revenue similar to Q1’24 with slightly higher EPS .
• Substations/data centers: Substations driven by data center load and renewables; strong margins due to complexity; broader halo to T&D poles, lighting, coatings .
• Capital allocation: ~$150M capex (2/3 for growth); disciplined, core-adjacent M&A with ROIC focus; new $700M buyback; dividend raised to $0.68; long-term net leverage target ≤2.5x .

Estimates Context

• S&P Global consensus estimates for Q4 2024 revenue and EPS were unavailable at the time of analysis due to temporary data access limits; as a result, we cannot present beat/miss versus Street for this quarter. We will update comparisons once S&P Global data is accessible.
• Management characterized Q4 results as in line with expectations and provided detailed 2025 guidance with tariff assumptions and mitigation plans .

Key Takeaways for Investors

• Infrastructure engine intact: Utility strength (pricing/mix), telecom normalization, and coatings resilience underpin margin expansion; substation demand tied to data centers is a multi-year driver .
• Agriculture mixed but stabilizing: EMEA/ME projects offset North America/Brazil softness; FX a headwind; targeted pricing and aftermarket initiatives should support margins through the down cycle .
• Cash flow and balance sheet provide flexibility: FY24 FCF $493.2M; leverage ~1.0x; revolver repaid—ample capacity to fund capex, buybacks, and a higher dividend .
• 2025 EPS growth despite tariffs: At midpoint, EPS +~5% with explicit tariff headwinds ($0.20) and clear mitigation; watch 2H25 for tariff cost neutrality and solar 2H rebound .
• Capacity expansions/automation are catalysts: Brenham/Tulsa and broader U.S. footprint investments should unlock volume and cost efficiencies, supporting mid-teens margin ambitions over time .
• Capital returns stepped up: New $700M buyback and 13% dividend hike to $0.68 per quarter signal confidence and provide downside support in volatile macro/tariff backdrop .
• Monitor policy risk: Additional or retaliatory tariffs (e.g., Mexico/Canada) are not in guidance; management has contingency levers but timing/extent are external swing factors .

Appendix: Prior Two Quarters (for Trend)

Key metrics (USD millions except per-share)

Segment notes:

• Q2: Infrastructure sales -1.0% with higher utility volumes and pricing offset by telecom/solar weakness; Agriculture slightly up on NA storm replacement but Brazil soft; raised FY24 EPS guidance .
• Q3: Infrastructure benefited from utility and telecom; Agriculture down on Brazil; reaffirmed FY24 outlook; EPS $4.11 .

Other Relevant Press Releases

• Valley Irrigation consolidated technology brands into the AgSense 365 app (available March 2025), streamlining digital irrigation management and positioning for recurring subscription growth .
• Update on tariff impacts (Mar 24, 2025): Company aims to be cost-neutral on a dollar basis in 2H25 under current tariffs via pricing, productivity, and supply chain actions (excludes potential retaliatory/new tariffs) .