Good day, and welcome to the AZZ Inc. fourth quarter fiscal year 2026 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Phillip Kupper , Managing Director of Three Part Advisors. Please go ahead.
Good morning. Thank you for joining us today to review AZZ's fiscal 2026 fourth quarter and full year results for the period ended February 28th, 2026. Joining the call today are Tom Ferguson, President and Chief Executive Officer, Jason Crawford, Chief Financial Officer, and David Nark, Chief Marketing, Communications and Investor Relations Officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast of today's call is available at www.azz.com/investor-events. Before we begin, I would like to remind everyone that our discussion today will include forward-looking statements made in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are uncertain and outside of the company's control.
Except for actual results, AZZ's comments containing forward-looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the latest annual report on Form 10-K. These statements are not guarantees of future performance, therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will discuss non-GAAP financial measures, which should be considered supplemental and not as a substitute for GAAP financial measures. We refer shareholders to our reconciliations from GAAP to non-GAAP measures contained in today's earnings press release. I would now like to turn the call over to Tom Ferguson.
Thanks, Phillip. Good morning, everyone, and thank you for joining us today. We delivered a strong close to the year and achieved record sales and profitability for the third consecutive year. I'm especially proud of how our teams recovered from the major winter storm in late January to finish a strong fourth quarter. Full year sales totaled $1.65 billion. Adjusted EBITDA surpassed $367 million. Adjusted earnings per share grew 19% year-over-year to $6.19. Our performance reflects the strength of our strategy, disciplined execution, operational excellence, and commitment of teamwork and values-based culture across the organization. During fiscal 2026, we further fortified our competitive position by driving market share gains across our segments.
AZZ continued to win by delivering superior customer service and operating with discipline and consistency, while leveraging our proprietary technologies and galvanizing research capabilities to create differentiated value. Throughout the year, we made organic investments across both of our segments to enhance operating efficiencies and support our long-term growth. A key milestone was the completion of our greenfield Precoat Metals facility in Washington, Missouri. This investment advances our organic growth strategy and strengthens our Precoat Metals segment, expanding AZZ's participation in the growing aluminum coatings and beverage-related end markets. We further expanded our metal coatings platform last year through the acquisition of a galvanizing facility in Canton, Ohio, which extended our footprint and broadened our service offering for new and existing customers. At the same time, we continued to evaluate acquisition opportunities through a disciplined capital allocation framework while growing an active strategic pipeline of deals.
Jason will cover our fourth quarter results in detail, so I'll focus my remaining comments on the significant secular tailwinds that continue to propel our long-term growth. We are seeing momentum across our end markets driven by infrastructure-related investment themes that are reshaping the industrial landscape. These include industrial reshoring, bridge and highway investments, hyperscale data center expansion, investments in power generation, transmission, and distribution, and continued growth in renewable energy. Each of these trends are structural, multi-year, and increasingly central to our customers' capital spending priorities. As we've seen throughout the year, these markets rely heavily on galvanized steel and coated metal solutions, areas where AZZ brings meaningful scale, deep coating experience, operational reliability, and exceptional value. Our diversified portfolio positions us uniquely to be able to support large-scale, complex projects across multiple end markets and states, often simultaneously, and to do so with consistency and speed.
Together, these demand drivers and our differentiated operating model allows AZZ to capture market share and deepen existing customer relationships. Dave will share additional details on how industry dynamics translate into project activity in just a moment. We continue to drive incremental improvements across our network using our Digital Galvanizing System at metal coating plants and CoilZone in Precoat Metals. These systems strengthen customer engagement while driving productivity and margin improvement across our operations. Together, these custom digital capabilities reinforce our competitive advantages and support consistent, profitable growth. With that, I'll turn it over to Jason.
Thank you, Tom, and good morning. Starting with a summary of results for the year in fiscal 2026, which ended February 28th, 2026, we reported record sales of $1.65 billion, up 4.6% from the prior year.
For our core segments, we increased metal coatings sales 14.1% and generated strong EBITDA of over $235 million or 31% of sales. For Precoat Metals, despite a modest 2.3% sales decline driven by industry-wide softness in residential and other key markets, we generated solid EBITDA of $176 million or 19.8% of sales. Consolidated gross margins remained robust at 23.9% and operating income from the year rose by 12% to $265 million. Also, for the full year, GAAP net income comparisons included two noteworthy matters. First, in 2026, our Avail joint venture generated equity in earnings from unconsolidated subsidiaries totaling $210 million, primarily driven by successfully divesting businesses within the joint venture, which I will discuss in more detail in a moment. Second, for the fiscal year 2025, GAAP net income available to common shareholders included a preferred stock redemption premium expense totaling $75 million.
Adjusted net income, excluding these items, plus intangible asset amortization and restructuring charges, resulted in adjusted EPS of $6.19, an increase of 19% on the prior year. In addition, consolidated adjusted EBITDA increased year-over-year to $367.6 million or 22.3% of sales, up from 22% of sales a year ago. Shifting to our quarterly results. We reported record fourth quarter sales of $385.1 million, representing a 9.4% increase from $351.9 million in the prior year period. This was supported by strong double-digit sales growth from our metal coatings segment, up 25.7% year-over-year. Compared to the prior year, Q4 results benefited from continued momentum from higher infrastructure-related demand and less impact from inclement weather. Precoat Metals sales were down 2.4% for the same quarter of the prior year, primarily due to continued lower-end market demand in pockets of construction, transportation and HVAC.
The company's fourth quarter gross profit was $87.6 million or 22.7% of sales, up 30 basis points from 22.4% of sales in the same quarter of the prior year. Selling, general and administrative expenses totaled $30.5 million in the fourth quarter or 7.9% of sales. This compares favorably with last year's fourth quarter, which reported $38.3 million or 10.9% of sales, inclusive of $6.7 million in accrued costs related to legal, retirement, and severance expenses. Operating income for the quarter was $57.1 million or 14.8% of sales, an exceptional 330 basis point improvement compared with $40.4 million or 11.5% of sales in the fourth quarter of the prior year. Also in the fourth quarter, we reported a net loss from the Avail joint venture equity and earnings of $21.7 million, primarily reflecting a loss in the sale of the welding services businesses and an unfavorable prior period adjustment from Avail.
Excluding the loss on sale and prior period adjustment transactions, the Avail joint venture's equity and earnings for the quarter was approximately $700,000, compared with $3.7 million for the fourth quarter of the prior year. Interest expense for the fourth quarter was $11.2 million, an improvement of $6.2 million from the prior year, driven by debt paydown from continuing operations, debt paydown from the Avail joint venture distribution, the issuance of an AR securitization loan with favorable pricing, and a favorable repricing of the term loan. The fourth quarter's income tax expense was $8.7 million, and GAAP net income was $15.9 million, compared to GAAP net income of $20.2 million for the fourth quarter of the prior year. We reported adjusted net income of $40.4 million, excluding intangible asset amortization and the Avail equity loss discussed earlier, resulting in adjusted diluted EPS of $1.34, up 36.7% versus a year ago.
Fourth quarter adjusted EBITDA was $81.3 million or 21.1% of sales, compared to $71.2 million or 20.2% of sales for the same period last year. Turning to our financial position and balance sheet. Consistent with our capital allocation priorities for the year, we executed with discipline across our balance sheet, growth investments and shareholder returns. We reduced debt by $385 million and ended the year with a net debt to EBITDA ratio of 1.4 x, providing significant financial flexibility moving forward. We continue to invest in the foundations of the core businesses. During the year, we invested $80.8 million in capital expenditures, a growing portion of which was dedicated to internal growth initiatives. Also included in the year within our capital expenditures was approximately $7.9 million on our new Washington, Missouri facility.
Over the past three years, we've invested approximately $125 million in this aluminum coil coating facility, with the team delivering the project on time and on budget. With the facility now fully operational, volume continues to ramp in alignment with our partner customer, and was profitable at the contribution margin level in Q4. Finally, rounding off our investments for the year, we further strengthened our metal coating segment by acquiring a galvanizing facility in Canton, Ohio, for approximately $30 million, demonstrating our commitment to grow the core businesses organically and inorganically. At the same time, we remain committed to returning capital to our shareholders. During the year, we paid $23 million in cash dividends, and repurchased $20 million in shares at an average price of $99.28 per share. Together, these actions reflect our disciplined approach to capital deployment and our focus on creating long-term shareholder value.
For the remaining Avail joint venture investment, we account for our 40% interest as equity in earnings and unconsolidated subsidiaries, which also constitutes a separate operating segment. In 2026, Avail generated equity in earnings of $210 million, which includes the sale of its electrical and welding businesses, and provided cash distributions of $287 million during the year. AZZ's cash flows from operations of $525 million includes $273 million of cash distributions from Avail, net of the associated taxes paid. The remaining $14 million of cash distributions from Avail were classified as cash flows from investing activities. Finally, as expected, 2026 cash taxes were higher in the year, associated with higher equity in earnings from Avail, offset somewhat by positive effects from the One Big Beautiful Bill Act on depreciation, R&D expenses, and interest expense. With that, I'll turn the call over to David.
Thank you, Jason. Good morning, everyone. Consistent with our disclosures found in the company's 10-K, total sales for the full year grew at 5% as compared to the prior fiscal year. Construction, our largest end market, grew at 3%, while electrical and industrial delivered strong double-digit sales growth, resulting in 17% and 15% growth rates respectively. As Tom noted, AZZ continues to benefit from early stages of a longer investment cycle, driven by sustained U.S. infrastructure-related spending and the continued expansion of large data centers. These often pair with the construction of significant co-located power generation, driving our electrical, industrial, and construction end market results. Our consumer end market performed well, growing at 6% on higher volume of coated aluminum, driven by the shift from plastic to aluminum in the beverage market and the continued ramp of the new Washington, Missouri facility.
While our transportation category declined by 3% due to weaker overall end demand for semi-trailers. Looking forward, industry research characterizes the AI data center build-out as more structural rather than cyclical, and the U.S. data center electricity demand is expected to roughly double by the end of the decade. Despite ongoing geopolitical and interest rate uncertainties, we believe AZZ's demand is driven by fundamental shifts in the economy rather than traditional construction cycles. External forecasts indicate that the U.S. hyperscale data-related spending will be approximately $700 billion in calendar year 2026, with AI investments accounting for the majority of that capital. This infrastructure-heavy spending environment aligns well with our end markets. Modern data center construction requires advanced corrosion protection and usually drives significant investments in on-site power generation, grid reinforcement, and transmission infrastructure. These are complex, multi-year projects that require substantial hot-dip galvanized content.
As a result, our metal coating segment is well-positioned to support this expanding market. Excluding data centers, we anticipate non-residential construction will continue to remain subdued in fiscal year 2027, primarily driven by interest rate, geopolitical, and lingering tariff-related uncertainties. Within the residential housing market, current industry research indicates that single-family housing starts are expected to be flat to down low single digits as a large stock of homes already under construction dampens new starts. Additionally, current estimates project 30-year fixed mortgage rates will remain above 6%, limiting affordability and slowing demand for new construction. As a result, builders are increasingly focused on finishing existing projects and offering incentives to reduce current inventory. We expect the softness in both non-residential and residential construction may provide a headwind for our Precoat Metals segment in the current fiscal year. With that, I will now turn the call back over to Tom.
Thank you, Dave. We anticipate the number of data center projects entering the construction phase in 2026 will increase, which will drive further infrastructure build-out. Importantly, our customer demand is not isolated to data centers. We are seeing continued strength across key end markets, including bridge and highway construction, power generation, and electrical transmission and distribution, all of which are supported by long-term secular tailwinds.
These projects drive sustained demand for hot-dip galvanizing services and may create incremental opportunities for Precoat metal solutions. We win in competitive markets because we provide delivery, reliability, high quality, and speed of execution. While we're off to a good start in the first quarter, it is early in the year. Today, we are reiterating our fiscal 2027 guidance. Sales are expected to be in the range of $1.725 billion -$1.775 billion, adjusted EBITDA in the range of $360 million -$400 million, and adjusted diluted earnings per share in the range of $6.50-$7. We estimate debt reduction to range from $130 million -$170 million in fiscal 2027. We are confident that our strong financial and market positions will enable us to capitalize on strategic growth opportunities while executing on our broader capital allocation plans.
Due to our strong balance sheet and desire to provide above-market growth, we will remain selectively aggressive in our approach to M&A opportunities. We focus on investments that strengthen our metal coatings and pre-coat metal segments, expand our geographic reach, and deepen customer relationships. Using a proven disciplined playbook, we are pursuing opportunities that reinforce our competitive advantages and deliver sustainable returns for our shareholders. As we look ahead, we are confident in AZZ's ability to consistently improve performance and execute at a high level, while delivering profitable growth and long-term value for our shareholders. Finally, I'm proud to recognize AZZ's 39th consecutive year of growth and profitability from continuing operations. This achievement is a direct result of the dedication, expertise, and commitment of our employees across the organization.
Our focus on safety, quality, customer service, and execution continues to differentiate AZZ, and I want to sincerely thank our teams for the outstanding work they do every single day. Now, operator, we would like to open the call for questions.
We will now begin the Q&A session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ghansham Panjabi with Baird. Please go ahead.
Thanks, operator. Good morning, everybody. I guess first off, on metal coatings, obviously a very big year last year from a volume standpoint, including what you delivered in the fourth quarter. If you could just share with us, what are you embedding for growth specific to fiscal year 2027 for the segment? For Precoat, if I understood you correctly, I know you called out some headwinds as it relates to residential construction. Are you expecting a worsening of the trend in terms of volumes or just headwinds that may be offset with other tailwinds, including your Washington and Missouri plant?
Yeah. Good morning. I can pick that up. From a metal coatings point of view, if you look at the projections for the next year, somewhere in the mid-single- to upper-single-digit for that business. Obviously, ending the year very strongly, and that builds momentum coming into the year. As you look at the Precoat Metals business, probably in around where we've seen them, so relatively flat year-over-year. As you look at the overall market, where they have the benefit is obviously they've got better comps year-over-year to compare against versus the metal coatings business has got a little bit more difficult comps. One mid- to high-single-digit , the other relatively flat.
Okay, for Precoat, just to clarify, what is your exposure towards residential construction for that segment?
Yeah, I think if you look at overall the market that they cover. If you look around 75% of their end markets are driven by construction, and then round about a third of that has that residential exposure.
Okay, thank you for that. Just for my second question, as it relates to zinc prices and just maybe you comment on your raw material basket trends in context of what's been happening with commodities more broadly, obviously the events in the Middle East, et cetera. What are you seeing at this point, and how are you managing through that?
Yeah, I think from a zinc perspective, there hasn't been much effect. Prices were trending up before all of the disruption, and as you know, that's about six-eight months in our kettles, and we were feeling that coming into the year anyway. There's general inflation going on within both segments, whether it's paint prices going up, which is more of a pass-through on the pre-coat side, but on the galvanizing side, it's acids, caustics, chemicals. As I like to call it, soap, rope, and dope. All that stuff is inflating. That's why we call it value pricing. We try to keep up with pricing. The one thing we're doing from a surcharge perspective is in relation to transportation, fuel costs, things like that, because we do have a large fleet of our own trucks and trailers.
There we're using surcharges to offset that and make sure we protect our margins. We're not seeing that change. There's hardly a day goes by anymore that we don't get some price increase from suppliers, and so both segments are pushing price to offset that and maintain margin. It seems to be expected in the marketplace now, because everybody's facing the same issues.
Perfect. Thank you for that, Tom and Jason.
The next question comes from Daniel Rizzo with Jefferies. Please go ahead.
Thank you for taking my questions. Just thinking about the Precoat market, obviously higher interest rates are an issue, but are there other meaningful affordability issues that you can pinpoint for the commercial market? I think we all understand what happens with residential, but for non-res, I was wondering if there's other things that are kind of a factor that are a hindrance besides, again, high interest rates?
Yeah, Daniel. Really pretty much everything we've described in the remarks. When you think about non-residential, we've seen project costs overall from some of our end markets and customers go slightly up and get inflated due to some of the things Tom mentioned. Obviously, when we put our budget together, the war in Ukraine had not started yet. We've seen some escalation there, and again, interest rate uncertainties, I think, are going to be the main thing on the residential side.
I would add that one of the things we are facing is availability of substrate. It's with tariffs on imports, domestic supply ramping up. There are some constraints in terms of available substrate to be painted. Some of our customers are experiencing that. Which drives them to wait and probably to inventory less, wait until it's closer to the demand for the season to go ahead and place orders, to be able to best utilize the substrate that's available. That's one of the things we're seeing, which tends to drive us to it fits our profile. Quick turnarounds, small lots of customization. That's a little bit of an underlying trend, which does increase costs on projects and also makes demand a little less harder to predict, because they're not buying to the normal inventory trends.
More so for metal coatings, are backlogs a thing, just given the size of your projects and what people are planning out, I assume years ahead, but I was wondering if you have a sizable backlog or is that not something that's part of your business.
Yeah, it's really not part of our business. I say this jokingly, but a lot of our sites, they look out on the yard, and then that's their demand and backlog for the week. We're really good at turning stuff, and so our customers depend on the fact that we're very, very reliable. They get it to us on Monday, we're gonna have it back to them on Friday. We're aware of it because in our sales process, we're forecasting it. As customers are communicating to us what their demand's gonna be month in, month out, and even week in, week out. We feel really good on the metal coatings side right now. Most of our customers, it's a broad-based growth profile in infrastructure, so it's not any one, whether it's data centers, poles, towers, substations.
All of the stuff that has to go in, whether it's roads, lighting, electrical systems to support data centers and substations and things like that. It's a really broad-based market, and our network of facilities plays well to it. We don't record backlog that way. We can look forward and say, our customers are bullish on demand in the metal coating space.
Thank you very much.
The next question comes from Adam Thalhimer with Thompson Davis & Co. Please go ahead.
Hey, good morning, guys. Congrats on the strong quarter and the strong year.
Thank you.
Hey, on the data center piece, how are you guys handling the demand? Do you have certain facilities that seem to be dedicated towards those projects? From a disaggregated sales standpoint, do you put that revenue into construction or into industrial or some other bucket?
I'll let David answer the second part of it. On the first part, we just had our annual metal coatings plant managers and sales managers meeting. We've got 120 folks in there, and there was hardly a one, single plant manager or sales manager I talked to that isn't working on one, two or three data center projects at any given time right now. Very, very broad-based. What they like about us is we've got a network of facilities, and so we can handle large projects across multiple facilities or, in many cases, one facility can handle the entire project. It gives them surety of delivery, reliability of execution, all those kind of things that just play well for picky and AZZ for your galvanizing. In terms of how we code it, that gets a little dicier, so I'll turn that over to David.
Yeah, thanks, Tom. There's some variation in how it gets coded based upon how the order really comes to us, whether it's from a general fabricator or a dedicated project development team, et cetera. So sometimes we'll see that show up, as you can see in our end results, by electrical and industrial, because we know we can v isually see it, and we know that, for instance, it's a monopole, and that's obviously going to be in Electrical.
Whereas some of the structures, and you've been to some of our plants, Adam, so you've seen some of the things that we're working with. It can be a little more unclear as to if it's going into a data center or if it's going into an LNG project, for instance. That sometimes will get a little bit more clouded, and will go into either Construction or Industrial as a result.
Okay. Good color on that. I wanted to ask about M&A. Potential M&A.
Yeah.
You mentioned a pipeline of deals. Can you just update us on what the pipeline looks like and potential timing?
Yeah, the pipeline's looking good, particularly on the metal coatings side. Mostly what we're looking at, they're one-off sites, and so if you just take our average fleet sales and then EBITDA, call it $15 million in sales, $4 million-$6 million in EBITDA, that's kind of the size that we're looking at in terms of bolt-ons. We've got three or four in fairly active discussions. We've got one underway in due diligence. Love to get one closed before we talk again, and then see if David and his team can get a couple more closed this year. On the Precoat side, we've got one that I'll call in active discussions. It's not a big one, so it's kind of a single line sort of thing. That about sums it up. There's obviously the bigger things that we're looking at, but they're going to be further out.
I don't know that I'd project any of the larger ones for this year.
Awesome. Good luck closing out Q1. Thanks.
All right. Thank you.
The next question comes from Nick Giles with B. Riley. Please go ahead.
Thanks. Good morning, guys. My first question was just, CapEx is around $90 million at the midpoint. I saw in the assumptions that hot-dip capacity expansions are part of that. Can you just speak to what the potential EBITDA impact could be? How much of those expansions are embedded in this year's guide versus something that may be more visible next year? Thanks.
Yeah. We're looking at adding kettles. We're adding one here in North Texas because of demand. It'll be starting up here in the next month or so. It's going to have some impact. I'm struggling to want to publicly say what a new kettle is worth in terms of EBITDA. It is going to have an impact. It's at a large site, so it's going to give us incremental capacity. The other things we're doing, and we are looking at other locations to add kettles, but those are fairly quick. We could put them in, and we approved the one I talked about just a few months ago, and it'll be up and running this quarter or June 1st. Not long cycle times on these things. Hopefully has a $2 million impact in EBITDA.
If you ask the metal coatings team, they would say it's embedded in their forecast. If you ask me, I'd say, "Yeah, maybe not." Other things we're doing, ground line coating, that's common with poles and towers and things like that. Doing more of that just because transmission distribution continues to boom, so adding that capability. Once again, $2 or $3 million investments for nice incremental sales and EBITDA. Jason, you want to add any color to that?
No. I think as you look at the growth in that business, it continues to go in the right direction, and some of these kettles are getting ahead of the curve and making sure when the volume hits, then we're in the right place to go deliver against it. I'd say the forecast and guidance that we have at the moment, plus or minus includes it. Really, as you look, it's more kind of long-term returns.
The good news is they're really low-risk investments because the demand is already there.
Understood. I appreciate that, guys. The stock's obviously been on the nice run, so I just was curious to ask about your appetite to do more buybacks here. Would you prefer to keep more cash on the balance sheet just for some of those M&A opportunities that you mentioned?
Yeah, I think given the activity we've got on the acquisition side, we're committed to minimizing dilution with stock buybacks, and so we remain committed to that. That remains in terms of capital allocation strategy. Given the list of possible or even becoming more probable deals that we can get done, I like using the cash for that because that's going to set us up. It brings immediate EBITDA uptick for us. As you know, our guidance does not include the M&A incremental that we would pick up.
Very helpful. Guys, appreciate all the color and continued best of luck.
All right. Thank you.
Thank you.
The next question comes from Gerry Sweeney with ROTH Capital . Please go ahead.
Good morning, Tom, Jason, and Dave. Thanks for taking my call.
Good morning.
We've hit upon metal coatings quite a bit, but just one follow-up question, especially on the transmission and distribution. It sounds like you talk a lot to some of the metal fabricators, et cetera, but I'm just curious as to, do you ever talk to some of the end users or the end purchasers, and how much visibility you have on that, or how far out can you see or at least some discussions in the general terms?
Yeah. We look at the general end-user trends in terms of their spending, where they're going to be adding capacity and things like that. David can add more to it, but we attend a variety of conferences where we're in touch with that, and a lot of that's generally available capacity additions in terms of gigawatt additions. That kind of stuff, we're in contact with them. We compare that to what our customers are telling us, and then we look at the general available market trending data, and David can put some color on it.
Yeah. Thanks, Tom. Yeah. Gerry, I would add to that. We've been more active than we have in the past at marketing directly to the industry and end users of it. The Metal Coatings team in particular has put together a nice bit of marketing materials, and as Tom mentioned, has recently been to some industry conferences as well to showcase our capabilities for that market. We're pretty pleased with what we're seeing there. It shows up in the results, and it also shows up in some of the backlog that those GCs and others that are calling on them share with us that give us a good forecast.
Yeah.
Got you. Just one more quick question, just on the Washington facility. I think you mentioned that it was profitable on a contribution basis in the fourth quarter. What utilization is that running at, and how should we think about that sort of ramping up through the rest of the year if it's not already there?
I'd say it's at about 40% now. It's going to continue ramping. It's going to produce around 45,000-50,000 tons this year, and we're feeling pretty comfortable with the trends that it's gonna get there. That's really gonna ramp up as we get to second quarter, third quarter, fourth quarter. We're watching that positive trend month in, month out. Jason, I don't know if you want to add something there.
Yeah, no. It's very much ramping up to our expectations. Getting beyond the 40%, closer to the 50%. There's three different processes and the three processes are at slightly different stages. All signs in terms of the plans for the year are very much in alignment with the expectations.
Got it. Great. I appreciate it. Thank you for your time.
Thank you.
Thanks, Gerry.
The next question comes from John Franzreb with Sidoti & Company. Please go ahead.
Congratulations on a great year, guys. Just want to stick with the Washington facility. What was the revenue contribution of that business in fiscal 2026?
Yeah. I think it was about $11 million or so in revenue.
For the full year?
Yeah, for the full year. Believe that's correct.
Got it. All right. I'm curious about filling the balance of the plant. I think you had about 75% of it allocated. Where do you stand on the remaining 25%?
We've got a lot of interest in it. We're trying to make sure we take care of our partner first. We're continuing to ramp their volume up. As you know, the aluminum business is booming. Yeah, we won't have any trouble filling that capacity once we've taken care of our partner first. We would hope to, call it by the end of the third quarter, to be in a position to start filling the balance of that.
Got it. Understood. I just got off a conference call where the company mentioned that there was a concern about municipality spending in the coming year. Is that something that you share any kind of commonality with? I'm just kind of curious about your thoughts there.
Yeah. It's interesting because a lot of the communities we're in, we tend to be heavily concentrated in the Midwest, the South, and the West, a little bit up in Canada. Most of the municipalities we're talking to are in good shape. Like here in DFW, there's still a lot of growth in housing, multi-unit housing, commercial construction. They still got a lot of companies moving, and that's kind of the story throughout Texas, which is our biggest concentration of capacity for galvanizing. Every one of those communities is struggling with their budgets, but every one of the communities has to make these investments. It just is what it is. As you move up further through the Midwest, mostly, I'd say 2/3 are very comfortable. They're moving forward with these infrastructure projects because they have to.
Even in the other areas, the difficulty, I think the difficulty here is if you've got a big data center moving in, and it's gonna require you to expand roads, you're gonna have different demands on your electric utilities. I think those are still being sorted out. Not that we're having direct conversations with those municipalities, but just kind of looking at the challenges that they're facing. How do they balance their budget when you've got this big facility coming in? It's going to require infrastructure, it's going to require water, it's going to require electricity. Now some of the bigger data centers they're building, as David pointed out, they're now building the power generation concurrently with it, but you still got to get roads and other infrastructure things to it. I don't know. It's a challenge.
I don't see it creating problems for us this year, but I think as you go out further, that's going to become a bigger question for a lot of these municipalities.
Great. Thanks for the feedback. I appreciate it.
Again, if you have a question, please press star, then one. The next question comes from Eric Boyce with Evercore. Please go ahead.
Thank you. First, could you please remind how paint cost passthrough is typically incorporated in Precoat? Is it directly itemized for customers? And how many months of paid inventory does Precoat generally carry?
Yeah, Eric, I can pick that up. Generally, the paint is not itemized in the end quote. Obviously, the end customers have a very good understanding and typically have a relationship with the paint companies. Any paint pricing that comes from the paint companies is generally passed one for one through to the end customer. That's something that's within the industry and not just within AZZ.
Great. I appreciate that, Jason.
Sorry, you asked about the inventory, sorry. We're very tight on inventory. All inventory is bought to customer order. As you can appreciate, there isn't any speculation in terms of the manufacturing within that business, given it's all custom colors, et cetera. Generally, we have around about three or four weeks worth of inventory on hand. We hold a little bit more of the common product in terms of primers and backers, but when you really get to the top coats and the customization, then it's pretty much coming in the door to align with the production schedules.
Got it. I appreciate that. A second follow-up. I think you said earlier on the call that Precoat is expected to be roughly flat year-over-year, but on kind of a quarterly cadence, is that assuming some contraction in the first half and then in the back half we see some end market normalization, or is that more kind of flattish across the year? Thank you very much.
Yeah. I think we're looking at it more flat across the year. I would say, from a conservative point of view, we keep getting signals that things are turning and not quite transitioning into results, et cetera. The only thing I failed to mention in the first part of that question, that Ghansham had provided, is the addition and growth associated with the new Washington facility. Really, when you start to add that into the equation, then Precoat should show growth quarter and quarter as we go through the year.
Yeah. Thank you.
Thanks, Eric.
This concludes our Q&A session. I would like to turn the conference back over to Tom Ferguson for any closing remarks.
I just want to thank everybody for joining us today. Hopefully what you're taking away is we feel like we're off to a good start this quarter. Feel good about the year at this point. Even with all the external things that may be going on out there, what's within our control, we feel very good about, and we feel that we've got great teams working real hard to do everything they can for our shareholders. Look forward to talking to you at the end of the first quarter. Thank you. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.