Valmont Announces Second Quarter Results

OMAHA, Neb., July 15 /PRNewswire-FirstCall/ -- Valmont Industries, Inc. (NYSE: VMI), a leading global manufacturer of engineered products for infrastructure, mechanized irrigation equipment for agriculture, and a provider of coating services, reported sales for the second quarter of $481.6 million compared with $498.8 million for the same period of 2009. Second quarter 2010 net earnings were $17.1 million, or $0.65 per diluted share, versus second quarter 2009 net earnings of $44.2 million, or $1.69 per diluted share.

For the first six months of 2010, sales were $849.0 million versus $954.0 million in 2009. Valmont's first half net earnings were $33.6 million, or $1.27 per diluted share, compared with 2009 first half net earnings of $80.1 million, or $3.05 per diluted share.

Second Quarter Review:

"The key driver of second quarter results was the substantial decline in global utility sales and profitability, and deal expenses in connection with the acquisition of Delta plc. The addition of revenues and profits from the Delta Segment and positive comparisons in the Irrigation and Coatings Segments, and other operations partly offset the weakness of the Utility Support Structures and Engineered Support Structures Segments," said Mogens C. Bay, Valmont's Chairman and Chief Executive Officer.

"Engineered Support Structures Segment results were lower globally due to reduced government spending on infrastructure, weakness in commercial and residential construction, and weaker demand for wireless communication structures. Irrigation Segment sales increased due to improved farmer sentiment worldwide. Coatings Segment sales increased as a result of modest improvement in demand for custom coatings.

"Lower volumes, particularly in the utility business contributed to substantial de-leverage of fixed costs and a 46% reduction in operating income for the Company.

"Expenses and fees related to the acquisition of Delta plc of approximately $12.0 million after-tax were an additional burden on earnings."

Second Quarter Segment Review:

Utility Support Structures Segment (23% of 2nd Quarter Sales)

Steel and concrete structures for the global electric utility industry.

Sales decreased 48% to $112.8 million compared with $216.2 million in 2009. The decline in sales was mostly due to reduced investment by North American utility companies on transmission infrastructure following very high activity levels last year, combined with lower electricity consumption due to the economic recession. International utility sales were higher, driven by an increase in export projects for developing nations.

In North America, a decline in electricity consumption lowered electric utilities' revenue. While there is a substantial pipeline of large transmission projects under development, we believe utilities responded to the recessionary environment by delaying some capital projects until signs of economic recovery become clearer. Further project delays also occurred when some larger transmission projects faced increased rights-of-way and permit challenges.

Operating income fell 76% to $11.9 million and was 10.6% of sales. Profitability was impacted by substantial manufacturing and SG&A de-leverage combined with a very competitive pricing environment.

Engineered Support Structures Segment (28% of 2nd Quarter Sales)

Structures for lighting and traffic, wireless communication and other specialty structures worldwide.

Second quarter sales were $134.7 million, a decrease of 10% from $150.4 million in 2009. In North America, the main driver was a decline in intercompany utility sales and weakness in the wireless communication structures market. Lighting and traffic sales were slightly higher benefitting from the extension of the 2005 highway bill until December, 2010. Commercial lighting sales fell due to continued weakness in real estate development.

International lighting and traffic product sales declined due to global economic weakness. International sales of wireless structures were lower due to a decrease in carrier network investment in China.

Operating income decreased 30% to $8.1 million or 6.0% of segment sales. The decline in operating income resulted from a more competitive pricing environment, lower volumes and operational de-leverage.

Delta Segment (15% of 2nd Quarter Sales)

Engineered steel products, galvanizing and the production of manganese dioxide.

The "Delta Segment" was formed upon the completion of Valmont's acquisition of Delta plc on May 12, 2010.  Delta Segment sales for the period from May 12 to June 26, 2010 were $74.2 million. Operating income was 9.7% of sales or $7.2 million, net of approximately $2 million of acquisition related amortization expenses.

Irrigation Segment (23% of 2nd Quarter Sales)

Center pivot and linear move mechanized irrigation equipment and parts for agriculture in global markets.

Sales increased 11% to $112.2 million compared with $101.1 million in 2009. In North America, sales increased from the weaker levels of 2009 partly as a result of favorable government conservation and financing programs that aided North American sales. International sales were higher with most regions posting sales increases.

Operating income increased 69% to $16.6 million and was 14.8% of segment sales. The improvement in operating income was primarily the result of increased leverage of fixed factory costs and some improvement in pricing.

Coatings Segment (7% of 2nd Quarter Sales)

Hot-dip galvanizing, anodizing and powder coatings to protect against corrosion of steel and aluminum in North American markets.

Sales of $33.4 million were 17% above last year's $28.6 million. The sales increase reflects improved demand in the regions served by Valmont's coatings locations, more than offsetting a reduction in internal demand.

Operating income improved 19% to $7.6 million, or 22.7% of segment sales. The increase in operating income was the result of higher sales volumes and associated leverage of fixed factory costs, and a favorable sales mix.

Outlook:

"We now expect earnings for the year to decline around 35% from our record earnings in 2009, before the impact of Delta and any transaction expenses related to the Delta acquisition.

"The driver of our outlook is the pace of incoming orders and lower margins in our Utility Support Structures Segment. Incoming orders are not at the level we expected earlier in the year and the pricing environment is very competitive," Mr. Bay said.

"For the Engineered Support Structures Segment, we expect a modest decline in sales mostly driven by budgetary constraints facing the state economies in North America. We do expect improved operating income performance comparisons in the second half of the year as we continue to address our cost structure in view of soft markets.

"Results in the Irrigation Segment for the year should show modest improvement in sales and a good improvement in operating income.

"Our outlook for the Delta Segment for 2010 is for operating income to largely offset financing and deal expenses related to the acquisition.

"We expect continued good activity in our Coatings Segment.

"While current global economic weakness has slowed investment in infrastructure world-wide, we believe Valmont, with its leadership position in most of our markets should be well positioned to benefit from the inevitable renewed investment in infrastructure spending."

An audio discussion of Valmont's second quarter results by Mogens C. Bay, Chairman and Chief Executive Officer and Terry J. McClain, Senior Vice President and Chief Financial Officer, will be available live by telephone by dialing 1-877-493-2981 and entering Conference ID#: 48123061 or via the Internet at 8:00 a.m. CDT on July 16, 2010, by pointing browsers to: http://www.valmont.com/page.aspx?id=445&pid=21 After the event you may listen by accessing the above link or by telephone. Dial 1-800-642-1687 or 706-645-9291, and enter the Conference ID#: 48123061 beginning July 16, 2010 at 10:00 a.m. CDT through 12:00 p.m. CDT on July 23, 2010.

Valmont is the global leader in designing and manufacturing poles, towers and structures for lighting and traffic, wireless communication and utility markets, industrial access systems, highway safety barriers and a provider of protective coating services. Valmont also leads the world in mechanized irrigation equipment for agriculture, enhancing food production while conserving and protecting natural water resources. In addition, Valmont produces a wide variety of tubing for commercial and industrial applications.

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management's perceptions of historical trends, current conditions, expected future developments and other factors believed to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond Valmont's control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Valmont's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time to time in Valmont's reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry conditions, company performance and financial results, operating efficiencies, availability and price of raw material, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and actions and policy changes of domestic and foreign governments. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.

SOURCE Valmont Industries, Inc.