Valmont Industries’ (VMI) profit surged in the second quarter of 2013, helped by a gain from the divestiture of its Australian galvanizing operation and higher sales across the board, led by the Irrigation unit. The company posted a profit of $89.6 million or $3.33 per share in the quarter, a roughly 49% year over year surge.
Valmont realized a one-time gain of $4.6 million (or 16 cents a share) as a result of the divestment of the galvanizing operation. Barring that impact, earnings came in at $3.17 per share in the reported quarter, outstripping the Zacks Consensus Estimate of $2.92.
Valmont, which is among the prominent steel-pipe and tube companies along with MRC Global Inc. (MRC), Edgen Group Inc. (EDG) and Tenaris SA (TS), logged revenues of $878.7 million in the reported quarter, a 15% year over year rise. It beat the Zacks Consensus Estimate of $877 million. Sales were boosted by gains across all segments, notably Irrigation, and contributions of acquisitions.
Segment Highlights
Revenues from the Utility Support Structures segment rose 8% year over year to $228.2 million in the reported quarter, driven by higher demand in North American transmission structure, backed by investment in the electric transmission grid. Sales fell in the international utility markets due to timing of big projects. Valmont continues to add capacity in anticipation of higher future demand.
Irrigation segment had a solid quarter with sales climbing 39% to $270.2 million, led by increased North American and overseas demand. Demand was supported by high levels of farm income and the impact of last summer's drought in North America. In international markets, sales increased on the back of increased market penetration and government policies that encouraged famers to buy more efficient irrigation equipment.
The Engineered Infrastructure Products division recorded sales of $250.6 million, up 6% year over year. Sales were mainly driven by the Locker Group acquisition. Revenues from lighting and traffic products rose narrowly in North America and were modestly lower in Europe as fiscal austerity continues to impact infrastructure investment. Wireless communication product sales rose in North America on increasing 4G network build-outs.
Revenues from the Coatings segment rose 11% to $93.8 million. Contribution of Pure Metal acquisition led to higher sales in North America. Sales were flat in the Asia-Pacific region.
Financial Position
Valmont ended the quarter with cash and cash equivalents of $490.5 million, up 49% year over year. Total long-term debt declined 0.4% year over year to $472.1 million.
Outlook
Moving ahead, Valmont expects its utility business to continue to benefit from market growth and additional manufacturing capacity coming online in the fourth quarter. For the Irrigation division, it expects demand in the second half to depend on several factors related to crop production and agricultural markets which are difficult to predict.
Valmont expects improved comparisons in the Engineered Infrastructure Products segment in the second half. Valmont expects its Coatings segment to benefit from Pure Metal acquisition and strong demand in North America.
Valmont envisions its earnings per share for full-year 2013 to exceed $11.00. While the outlook for sales and earnings comparisons for the second half is positive, it is less favourable than what witnessed in the first half.
Valmont currently carries a Zacks Rank #2 (Buy).
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