Greetings. Welcome to Valmont Industries, Inc. fourth quarter and full year 2021 results. 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 yourself to one question and one brief follow-up question and return to the queue. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Renee Campbell, Senior Vice President, Investor Relations and Treasurer. Ms. Campbell, you may begin.
Thank you, and good morning. Welcome to Valmont Industries fourth quarter and full year 2021 earnings call. With me today are Steve Kaniewski, President and Chief Executive Officer, Avner Applbaum, Executive Vice President and Chief Financial Officer, and Tim Francis, Senior Vice President and Corporate Controller. This morning, Steve will provide a brief summary of our Q4 and full year results, commenting on our markets and long-term business strategy. Avner will review our financial performance and provide our outlook and indications for 2022, with closing remarks from Steve. 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 investors page at valmont.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 two of the presentation, and will be read in full at the end of the call. I would now like to turn the call over to our President and Chief Executive Officer, Steve Kaniewski.
Thank you, Renee. Good morning, everyone, and thank you for joining us. Before reviewing our fourth quarter and full year highlights, I would like to acknowledge and thank our global team of 11,000 employees for their tremendous performance operating through another year of ongoing pandemic impacts and supply chain volatility. I could not be more proud of their hard work and dedication to serving our customers with innovative and essential products and services. Throughout this year, they have remained true to our core values. Operating with passion and integrity, driving continuous improvement, and delivering results while prioritizing safety in our workplace and in our communities. Moving on to the business. Our solid performance this quarter once again demonstrated strong demand across the portfolio and consistent execution of our growth strategies.
We delivered record sales and grew adjusted operating income 24% year-over-year, reflecting the resiliency of our business and execution by our teams. Like many others, we have faced the impacts of broad-based inflation, supply chain and pandemic-driven labor constraints impacting Valmont, our customers, and our suppliers. While we have been managing through this environment well, these constraints challenged our ability to achieve full productivity levels in many of our North American facilities in the quarter. Now, let me move to a brief fourth quarter overview, summarized on slide four of the presentation. Net sales of $963.3 million, a fourth quarter record, increased more than 20% year-over-year. Sales growth was realized in all segments, led by higher pricing and strong broad-based market demand, with another quarter of significant growth in Irrigation. Moving to the segments and starting with Utility.
Sales of $324 million grew nearly 20% year-over-year, led by substantially higher pricing and strong underlying demand as utilities continued to invest in upgrading and hardening the grid. Additionally, sales of solar tracker solutions were higher, driven by increasing investments for renewable energy generation. This is providing a favorable demand driver for us in 2022 and beyond, as our backlog of utility scale and distributed generation projects has grown 3x compared to one year ago. Additionally, our broad product portfolio uniquely positions us to supply every type of electric grid structure within the utility market, and we are making strategic investments in capacity and technology to meet the growing market demand. Moving to Engineered Support Structures.
Sales of $291.9 million grew 14% year-over-year, led by favorable pricing in all markets and sales growth of more than 50% in wireless communication products. Our swift and deliberate pricing actions in this segment benefited us throughout the year, and international markets continue to benefit from higher stimulus and infrastructure investments, especially in Australia. Demand in our wireless communications business remains very strong, driven by 5G build-outs and significant investments by the major wireless carriers. Turning to Coatings. Sales of $98.2 million grew nearly 10% year-over-year, driven by higher average selling prices, improved general end market demand, and sales from our new greenfield facility in Pittsburgh. Moving to Irrigation.
Global sales of $276.8 million grew nearly 40% year-over-year, with sales growth in all regions and higher sales of technology solutions. In North America, sales grew 55%. We continued to benefit from strong underlying market fundamentals and positive net farm income projections, which are driving farmer sentiment, as reflected in very strong order flow. International sales grew just over 23% year-over-year. We achieved another record quarter of sales in Brazil, and solid demand in Europe, Australia, Middle East, and Africa is giving us a good line of sight into 2022, including ongoing deliveries of our Egypt project. Last quarter, we highlighted our differentiated solar solutions for agriculture. Our market expansion strategy is leading to growth in North America, Africa, and Europe.
I'm pleased that sales are expected to more than double in 2022 based on market demand and the current pipeline of orders. Turning to the full year summary on slide five. Net sales grew 21% year -over -year to a record $3.5 billion, driven by deliberate pricing strategies, strong markets in our businesses, and focused execution by our teams. We achieved considerable growth in all segments, exceeding our expectations for both revenue and earnings. Through strategic capacity expansions and lean methodologies, we successfully added incremental volume within our existing facilities, a testament to the hard work by our operations and planning teams. Turning to the segments. Strong sales growth of 12% in Utility Support Structures led to sales of $1.1 billion, driven by pricing actions and continued robust demand for grid resiliency and renewables.
In Engineered Support Structures, sales grew 6.9% to $1.1 billion, despite lower transportation volumes in North America as expected. Our relentless focus on pricing actions and improved operational performance benefited us throughout the year. Additionally, growth of wireless communication products grew 26% year -over -year to $240 million, exceeding our expectations. Turning to Coatings. Sales grew nearly 12% to $386 million, tracking in line with improved industrial production levels globally. Favorable pricing, higher volumes, and favorable currency impacts contributed to sales growth. Turning to Irrigation. Sales grew nearly 60% to more than $1 billion, a record for Valmont, supported by 2021 projected net farm income levels, which increased to approximately $120 billion, the highest level since 2013.
In addition, the long-term market drivers of food security, resource conservation, and reduction of input costs are supporting solid demand of our innovative products and solutions globally. In Brazil, revenue more than doubled year- over- year, and we achieved higher sales in Europe, Australia, and Middle East markets. Sales of Irrigation Technology Solutions approached $100 million, growing 45% year- over -year in line with our expectations. The acquisition of Prospera Technologies this past year accelerated our commitment to make the farm more efficient and increase productivity while considerably improving sustainability. This past year, we focused heavily on integrating the team and executing our strategy to scale and expand market presence. As we enter 2022, we are targeting growth of subscriptions under a recurring revenue model. Turning to slide six.
During 2021, we took significant steps to advance our ESG strategy and communication, capped by an overall improvement in ISS scores for environment and social since the beginning of the year. I look forward to the release of our 2022 sustainability report in late March. Over the past year, we have made remarkable strides to minimize our environmental impact while delivering increasingly efficient and sustainable solutions for our customers that support critical ESG principles. This year's enhanced report highlights additional programs and goals and alignment to new frameworks, including the United Nations Sustainable Development Goals, SASB, and TCFD, along with our continued commitments to invest in sustainable solutions and technology that will positively impact the future of our stakeholders.
I'm happy to announce that upon the release of our 2022 report, we plan to host a conference call to highlight our accomplishments throughout the year and share more about our ESG journey at Valmont. With that, I will now turn the call over to Avner for our 2021 financial review and 2022 outlook.
Thank you, Steve, and good morning, everyone. Turning to slide eight and fourth quarter results, my comments will focus on the adjusted results as outlined in the press release and in the Reg G disclosure in the presentation appendix. Fourth quarter operating income of $85.6 million or 8.9% of sales grew 24.4% year-over-year, driven by higher volumes in Irrigation and favorable pricing, notably in Engineered Support Structures. Diluted earnings per share of $2.73 grew 24% compared to last year, primarily driven by higher operating income and a more favorable tax rate of approximately 22%, which was realized through the execution of certain tax planning strategies.
We also delivered return on invested capital on an adjusted basis of 11.7%, an increase of nearly 16% year-over-year, and the highest level for Valmont since 2013. Turning to the segments and starting with our infrastructure businesses on slide nine. In Utility Support Structures, operating income of $36.9 million or 11.4% of sales increased 110 basis points compared to last year as the benefits of price recovery through contractual mechanisms became more aligned with raw material costs. I want to take a moment to comment on the wind business in Northern Europe. During the fourth quarter, the European Union announced a lower than anticipated tariff rate that will be imposed on imports of steel wind towers.
This led to a required impairment test which resulted in a pre-tax non-cash impairment of $27.9 million related to long-lived assets. Our local management team has taken strategic action to reduce costs and increase gross profit. These actions are expected to limit anticipated losses in 2022 and position the business to best serve our customers in the future. Moving to slide 10 in Engineered Support Structures. Operating income increased to $29.2 million or 10% of sales, an improvement of 50 basis points year-over-year. We continue to benefit from pricing actions which more than offset the impact of cost inflation. Better fixed cost leverage, including SG&A, also contributed to positive results. I'm also very pleased that we achieved full-year operating margin of 10.8% of sales, an improvement of 180 basis points year-over-year. Turning to slide 11.
In the Coatings segment, operating income of $10.3 million or 10.5% of sales decreased 270 basis points year-over-year. Profitability was impacted by a lag in pricing to recover higher cost inflation, including raw materials, labor, and freight, and operational impacts due to COVID-related labor inefficiencies in many of our facilities. Margins were also impacted by a higher mix of internal volumes compared to last year. Moving to slide 12. In Irrigation segment, operating income of $33 million or 11.9% of sales decreased 80 basis points year-over-year. Profitability improvement from higher volumes and the benefit of continued pricing action were more than offset by higher input costs that were not fully recovered by price and incremental SG&A expense from the Prospera acquisition completed earlier this year. Turning to cash flow on slide 13.
In 2021, we delivered operating cash flows of $65.9 million, reflecting higher working capital level to support strong sales growth. As we've stated in prior quarters, we took decisive action to strategically source raw material throughout the year to help secure availability and meet strong customer demand. We expect to continue these actions in the first half of the year to help mitigate supply chain volatility and expect a notable improvement in cash and working capital levels in the second half of the year. As we have repeatedly demonstrated in the past, we're confident that our actions as a team will help us deliver strong cash flow as supply chain and material costs stabilize with full-year operating cash flows expected to significantly exceed net earnings in 2022. Turning to slide 14 for a summary of capital deployment.
2021 capital spending of $108 million included $45 million for strategic growth investments. Additionally, $67 million of capital was returned to shareholders through dividends and share repurchases, ending the quarter with approximately $177 million of cash. By far, the largest use of cash from a capital deployment perspective was the $313 million for two acquisitions in Irrigation segment, Prospera Technologies and PivoTrac, both of which fit our long-term AgTech strategy. We continue to maintain a balanced approach to capital allocation that enables us to grow our business while returning cash to shareholders. Moving now to slide 15. Our balance sheet remains strong and total debt to adjusted EBITDA of 1.9x remains within our desired range of 1.5x-2.5 x.
Let me now turn to slide 16 for our 2022 outlook, including a few key metrics and assumptions. We're increasing the 2022 full-year guidance metrics that we stated last quarter. Net sales are now expected to increase 9%-14% year-over-year to a range of $3.8 billion-$4 billion, which assumes an unfavorable foreign currency translation impact of 1% of net sales. Adjusted earnings per share is now estimated to increase 12%-19% year-over-year to a range of $12.25-$13, excluding any further restructuring activities. These metrics reflect strong market demand, our solid execution in 2021, and our confidence in our ability to continue this performance. We also assume that steel costs for the year have stabilized. Other metrics and assumptions are summarized on the slide and in the press release.
I want to also briefly comment on the operating margin expectations for the year. The rising cost of wages, logistics, and other broad-based inputs have not subsided, and we continue to work through some higher cost inventory. As such, we will continue implementing additional price actions as needed across our businesses to offset cost increases, and we expect these higher costs will be fully offset during the course of 2022. We anticipate some difficulty to gain operating leverage on higher sales in the first half of the year as we work through the higher cost inventory and other inflationary pressures. We expect margin improvement year- over- year as pricing becomes more aligned with cost throughout the remainder of 2022. Additionally, investments in technology and strategic growth initiatives across the portfolio remain a high priority for us this year.
Finally, for modeling purposes, we will recognize a full year of SG&A associated with the Prospera acquisition in the Irrigation segment. To summarize, the strong market demand across our businesses, strength and flexibility of our global teams, and our continued pricing strategies give us confidence in achieving our sales and earnings per share targets. With that, I will now turn the call back over to Steve.
Thank you, Avner. Turning to slide 17. We are benefiting from the long-term drivers in all of our businesses, as evidenced by our record global backlog of more than $1.6 billion, an increase of 40% from year-end 2020. These demand drivers are providing momentum as we enter 2022, and our business portfolio is well-positioned for growth. Like others, we are closely monitoring inflation, supply chain volatility, and labor availability. We are ready to take additional actions to address these issues across all our businesses as needed. Moving to the segments on slide 18. In Utility Support Structures, we expect solid margin improvement from strong market demand and the benefit of previous pricing actions. Turning to Engineered Support Structures. We expect continued stable market conditions in North American transportation markets and order rates continuing to improve.
Demand for wireless communication products and components remains very strong, and we are on track to grow sales 10%-15% this year, in line with expected market growth. Moving to Coatings. We remain focused on pricing actions to recover cost inflation of zinc and other broad-based inflationary items, and expect continued improvement in industrial production levels globally. Moving to Irrigation. We expect a strong year based on strength in global underlying ag fundamentals, a robust global backlog, and continued technology adoption. We are taking deliberate steps to address labor constraints and employee retention, notably in our U.S. facilities. We're doing so through a deliberate approach that's specific to the markets where our factories are located, working with communities and enhancing training programs to attract and retain talent. Turning to slide 19.
In summary, I'm very pleased with our strong results and our team's ability to navigate through challenging market dynamics. We've demonstrated our ability to grow sales through innovation and execution while being flexible and responding quickly to meet customer needs. We've increased operating income by executing on our pricing strategies and advancing operational excellence across our footprint. We have invested in our employees and technologies to drive new products and services and build upon the strength of our operations. We remain disciplined in allocating capital to high-growth strategic investments while also returning capital to shareholders through dividends and share repurchases. When we entered 2021, our focus was on managing what we could control, and that's exactly what we've done.
As we look ahead to 2022, we plan to apply the same focus on execution, serving our customers, and ESG principles to further build upon our success while maintaining investments for growth, generating positive operating cash flow, and improving return on invested capital. I will now turn the call back over to Renee.
Thank you, Steve. At this time, the operator will open up the call for questions.
Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question today is from Chris Moore of CJS Securities. Please proceed with your question.
Hey, good morning, guys. Thanks for taking a couple questions. Yeah, when you look at the fiscal 2022 revenue guide, you know, 9%-14%, roughly, you know, how does that break down between volume growth and price growth overall?
Yeah. Hi, I'll take that. Good morning. This is Avner. So if you look at the lower part of the range, you know, you get more volume than pricing.
Then if you look at the higher part of the range, you'll get more pricing than volume. A lot of the pricing is, you know, dependent on kind of the steel as we have our pricing mechanism with utility. I'd say more volume than pricing on the lower end and higher pricing than volume on the higher end.
Got it. That's helpful. I think we've probably gotten a little spoiled by you providing, you know, some specific near term along with the annual guidance. Can you provide any more, you know, kind of specific thoughts on, you know, kind of the Q1 outlook? I know you had said that, you know, margins should be improving second half of the year. Anything else in terms of Q1 that we should be thinking about?
Yeah, sure. Well, first of all, we just remember Q1 does have a bit seasonality in some of our businesses, so we always need to factor that in. Overall, right, we still have some inflation working through some higher cost inventory. We did start the year, we had a little bit of a COVID impact with Omicron. All that kind of factor into the guidance, and we will continue to see strength and continued margin expansion throughout the year.
Got it. Last one from me. On the Irrigation front, as the Egypt contract rolls off at the end of 2022, do you have enough visibility in 2023 to know if there will be, you know, a meaningful gap on the international revenue side?
Chris, this is Steve. I would say that when we put together our guidance, if you look at the low end, we assume maybe about $25 million for this year related to that project. On the high side, about $75 million. You take the midpoint around $50 million. We have enough as we look into the pipeline for 2023 that would then continue probably around that level of $50 million just on a normal pipeline basis. We don't see a big gap developing between 2022 and 2023.
Got it. I appreciate it, guys. I'll jump back in line.
The next question is from Brian Drab of William Blair. Please proceed with your question.
Hi, thanks very much. Just following on the Egypt project. I thought that was running more, Steve, at like a $25 million a quarter run rate. Has something changed there? I thought it was, what was it, $240 million and started in the fourth quarter of 2020, right? Or in the-
Yeah. What-
Fourth quarter of 2019. Yeah. Or 2020, I guess. Yeah. I thought it was gonna run $25 million a quarter all the way through 2022.
Yeah, they're a little behind in the infrastructure there locally in terms of canals, roads, and other things. There's been already a little bit of a pullback in shipments in the fourth quarter of 2021. As we go in, that's about what we're anticipating. There will be some carryover into 2023 as that infrastructure gets built out. If they were keeping up completely on pace on that side, then your original assumption would have been correct.
Okay. Some of this project, this specific project will carry over into 2023. Also, is there potential for add-ons to this project, you know, following the completion of this phase?
Yeah. President El-Sisi had just visited in December the site. Very excited about the progress and the fact that they're already producing a lot of crop, you know, and talked up the agricultural story in Egypt. We do see a pretty strong pipeline, not just with our customer, but there's other customers in Egypt as well. There's a very distinct possibility of follow-up projects coming out of this project.
Okay, great. You gave such a, you know, optimistic and, you know, positive forecast for 2022 on the top line. Has the infrastructure bill influenced your forecast, or is that possibly still more of a 2023 impact on Valmont?
That's correct. It's what we've included in 2022 is basically, you know, the current pipeline, I'll say pre-infrastructure bill. That will help as we go into 2023 and 2024 specifically. Right now, a lot of that is coming from the utility industry. It's the stronger irrigation numbers, the pretty robust telecom numbers that we've been seeing come through the pipeline, and then just the general pickup of industrial production, helping coatings.
Got it. Last one for me is since we talked to you a couple months ago, I guess three, like three months ago we heard from you on the third quarter call, what has changed? What are the most significant changes that you've seen that influenced the increase in the guidance for 2022?
Again, it's just a strong pipeline of orders. I think our operational execution through that time period allows us and gives us a good visibility into what we can produce coming into the year. I think the fact that the pricing and the great work done by the teams on pricing is enhancing some of that. Just the general ability to kind of motor through some of the supply chain constraints, the COVID issues, et cetera. You know, we were taking a conservative view early on, and as we've gotten closer to the year, we can see a better path forward.
Got it. Thank you very much.
The next question is from Brent Thielman of D.A. Davidson. Please proceed with your question.
Thank you. The utility business historically has had longer lead times. Steve, just wondering how much of that year-end backlog you think will convert in 2022 versus the out years?
Yeah. Hey, this is Avner. I can take that. At this point, the majority of the backlog is for 2022. We have, you know, we have several long-term projects that kind of go into 2023, but the way I look at it, I'd say that the vast majority is for the upcoming year.
I guess my follow-up would be on the solar tracker business. Sounds like things are moving along well there. Could you talk about the impact of the supply chain issues around that business in particular? Certainly heard some challenges in certain places, and I guess to what degree that's kinda disrupted timing of projects.
Yeah, Brent. You know, when we look at 2021, we were, I'll say, disappointed in the fact that we couldn't get more out, both on the customer side, the projects that got pushed because of module availability, and then just the general upheaval with steel and what that kind of did to a lot of projects. You know, we only did maybe a little over $60 million in 2021. We expect that to kind of double next year or into 2022, as a lot of those issues, I won't say are going away, but are being tempered. Much like you see in the automotive industry, there's some supply coming online. There's better availability of modules. And I think that the market has generally understood kind of the steel dynamics that are out there.
That's allowing more projects to move forward. You know, our distributed generation approach, which is a little different than most, is also helping us give us a lot more visibility to you know, being able to ship you know, these smaller projects more frequently. That kind of limits our risk from you know, the one big project being pushed and then that kind of upending our forecast.
Really helpful. Thank you.
The next question comes from Ryan Connors of Boenning & Scattergood. Please proceed with your question.
Great. Thanks for taking my question. I wanted to sort of unpack this offshore wind issue a little bit. I mean, it's a pretty big number, especially for a relatively discrete business. I understand, you know, you're trying to pass it off as being, you know, one time, not material. You know, Avner, your comments about cost cutting there, on an ongoing basis and the team there trying to sort of take action suggests that there is actually a fundamental impact here to the competitiveness of that business. Can you just kind of unpack that for us a little bit? I mean, to what extent is this tariff issue an issue for that business rather than just sort of a one-timer that we shouldn't really pay attention to?
Sure, Ryan, this is Steve. You know, when you look at the wind business, particularly in Europe, this has been a challenge we've been under for, frankly, the last couple of years. Volumes historically are down. There's definitely forecasts out there for volumes to pick back up. A lot of strong data that suggests over the next, let's say, two to three years, we'll see an uplift in volume. When you get a very tight volume market and then don't have the protections that, let's say, the U.S. wind market enjoys, that's really what's affecting us in having to kind of reevaluate the cost structure of the business. You know, we've been trimming costs over the last couple of years. We've been doing a lot of self-help. That's not been in any of the adjusted earnings.
We've really been just kind of going at it, and working that angle. We do, and we are optimistic that the team there will be able to capitalize as volume recovers, in the markets because we are one of the few players left, specifically in Europe, that can do rotor houses, and some of the larger offshore wind structures. There will always be an element that, they will have to buy from Europe just for lead time purposes. There could be also some strategic purchasing done by countries, to make sure they secure local content. With the combination of other bankruptcies that have occurred in the industry, we would have liked to have gotten more help here because that would have been a quicker recovery for us.
We still do see a path to get back to profitability, but not in 2022.
Just conceptually, is it fair to say that, you know, certain types of one-timers, a discrete tax hit or closing down a defined benefit plan or something, I think we're comfortable looking at those as just complete, not related to the fundamentals of the business. I mean, is it safe to say that this charge and the impairment does actually reflect some fundamental difference in how the business is viewed in it from a profitability and competitive standpoint? Is that a fair contrast to draw?
Yeah.
Yeah.
Avner?
Yeah, I would say so, right? Kind of looking at your-
Yeah.
... future income and your discounted cash flows, et cetera. The answer to that would be yes.
Okay. I had one more just on Irrigation. You know, there's been a lot of talk about the bullish side of Irrigation, and we're there. Like, we think that it's a great outlook. There has been some talk recently about the fact that farmers are also facing their own inflationary challenges. Fertilizer costs are way up, and that could lead to a plateauing or a stalling of farm income despite the high commodity prices. What's your take on that side of things?
No, at present, the models that are out there show that net farm income is still growing faster than the inflation. We remain, I'll say, cautiously optimistic that that dynamic will continue. I think the other thing that, you know, nobody knows exactly yet, but it's been pretty dry around the world. We know historically that when you see both in South America and North America, these dry conditions that usually is a little more bullish for commodity prices, particularly as we get later into the spring and the effects of that are seen. I think right now the combination of net farm income kind of exceeding inflation and not the best growing conditions, you know, should remain to the benefit of those who can produce and have the water to produce good yields, going forward.
Got it. Hey, thanks for your time. Good luck.
Thanks, Ryan.
The next question is from Nathan Jones of Stifel. Please proceed with your question.
Good morning, everyone.
Morning, Nathan.
If I'm re-asking a question, just tell me to read the transcript. My phone cut out at the start of Q&A. I just wanted to ask a question around the 9%-14% revenue guidance. I wanted to see if we could get some color on, you know, what's price versus volume in that, and then what are the pivot points between the high and low end of guidance?
Okay. Overall, when you look at the volume part, I'd say, you know, look at it as a mid-single-digit volume for the year. The pricing, by the way, Steve mentioned a little bit about the Egypt order, right? That kind of can go from, you know, $25 million-$75 million. Factor that in as well. On the lower end versus the higher end, the big difference there is gonna be the pricing. A lot of that is based on kind of the utility mechanisms for pricing as it relates to steel costs. That's kind of how I would look at it.
The utility margins did pick up significantly. We've been talking for a few quarters about that contractual catch up to steel prices. Have you caught up now on those contracts that have the escalators in them? Or is there still reset to go in those contracts that should be a tailwind to margins as we get into 2022?
Yeah, we haven't quite caught up yet. You will see some headwinds in Q1, slightly in Q2, but as you go throughout the year, you'll see significant margin expansion.
Last one from me. You did mention adding some capacity in specific areas of the business. With mid-single-digit volume growth expected in 2022, are there other areas of the business where you're starting to butt up against capacity limitations? Is there a requirement for some additional CapEx to expand capacity? Steve , any color you can give us around that.
Yeah, Nathan, nothing really from the base business perspective. Our operations teams and lean teams have done a great job of giving us additional capacity with the current footprint. You know, as it pertains to kind of growth, you know, we have a new concrete facility in the utility segment that will come on that's growth oriented. We're looking at some diversification of our supply chain around the world, particularly in Irrigation. Some expansion in Brazil, and we're completing some expansion in Dubai. Most of what we're doing is either, you know, capacity maintenance, Industry 4.0, or these strategic additions for growth markets.
Great. Thanks for taking my questions.
Thanks.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Brian Drab of William Blair. Please proceed with your question.
Thanks. I just wanted to follow up and ask, given the backlog is up more than 40%, first of all, how does that break down between price and higher prices and volume? And why couldn't your revenue be up much more than what you've guided, given you're going into the year with such a strong backlog, especially, you know, given when you look at how much backlog was up, you know, a little over 20% going into 2021, and then you grew revenue kinda commensurate with that.
When you look at the backlog, the majority of the backlog is pricing. When you look at the volume, if you take out some specific projects or some project timing, it's mid- to high -single digit volume growth. Both of those factors kind of support our 2022 guidance. That's kind of how I'd refer to the backlog.
Right now, in terms of the overall revenue, you know, this is where we feel comfortable both on the kind of the low side and the high side, based on just constraints still out there in supply chain, potential reactions to inflation by our customers. If all those things were to moderate and to, you know, life moves back to kind of a pre-COVID era, then, you know, there obviously could be more upside, but this is where we feel comfortable right now.
Okay. Avner, just to clarify, you said that if you adjust for some specific projects, volume is up mid - to high -single digits. Why would we adjust specific projects out when those are gonna generate revenue?
Oh.
Right?
Yeah, no, just to give you an example, like if you look at the large Egypt project, right? When we booked it at $240 million, as you eat through that backlog, right? That backlog will shrink over time until the project is done. I was just trying to kinda exclude those to give you a better flavor of kind of the volume growth that we have projected based on our backlog.
Like, the run rate increase is mid- to high- single digits %. Would I be too optimistic to think that there could be potential upside if, I mean, if you got through all this backlog in 2022, no matter where it came from? It seems like you could potentially exceed the revenue guidance if you work through all, whether it's volume or price.
Yeah. I mean, as Steve said, right, as we kind of work through our productivity and get through COVID and, you know, bookings throughout the next, you know, several months and quarters, then the answer to that would be yes.
Okay. Thanks. I just wanted to ask you, did I miss an update on the solar tracker business specifically? Is there anything you can tell us about that in terms of what the revenue was for 2021, and what the growth is expected to be in 2022, and how share if you're gaining a share in that market in the United States?
Yeah, Brian, I mentioned that we did a little over $60 million in 2021 and would expect that to kind of double in 2022. It's a combination of, you know, we know how to price it. We're not doing singular large projects, but a lot of different small projects, as a total envelope so that we have a little more consistency in the revenue throughout the quarters.
Are you getting more traction outside of Europe with that business now?
Of course. Oh, yeah.
Yeah.
We got, you know, backlog here in the U.S. Obviously, Brazil is a big market for us. The DG is kind of scattered throughout. That's where our international footprint and the fact that we do business in all these countries already is really helpful to us.
Got it. Okay. Thank you very much.
The next question is from Jon Braatz of Kansas City Capital. Please proceed with your question.
Morning, everyone. Steve, you know, it's a very favorable market out there on, in the agricultural area, and I could see maybe some incentive for growers to try and squeeze as many bushels per acre out of their production. Given this environment, are you seeing any acceleration or greater interest in some of your agricultural technology products? You know, the environment's pretty favorable. They have the cash. Are you seeing any additional momentum in adoption?
Absolutely, Jon. We're seeing a lot of traction across the technology portfolio. It's both a combination of, you know, productivity, that they get more yield. It's the fact that there are inflationary pressures on the inputs. Anything we can do to limit that input, they look at that as a cost savings. You know, kind of also just the overall labor availability/productivity issue. All of these solutions really cut down the need to go out to the field, to have people that are, you know, constantly circling back to different fields. And that now, you know, if you take the early generation of technology with kind of the remote telemetry, that's already proved its point.
Most growers, no matter what, you know, how long they've been in the business, realize that that is a true savings of time and money. Now as we bring more products and services into the technology area, they're more willing to take a look, and they're signing up to try things. You know, it's not so easy to get equipment right now, so they have to put cash somewhere. That's also a favorable thing for us and why we saw the 45% growth that we did in 2021. We're really optimistic as we look forward to people getting more accustomed to the technologies as a way to get that additional five bushels or 10 bushels per acre. We think ultimately our solutions will do even more than that.
They're satisfied even just getting those kind of incremental gains. We do believe that there's substantial gains that will be had as we go forward.
Okay, thank you. Two follow-up questions. Can you give us an update on your pilot program or pilot project in Uzbekistan? Secondly, credit availability is always important in Brazil. Any change in that dynamic as we enter into 2022 and 2023?
Sure. The first one is Kazakhstan. With Kazakhstan, obviously there were some geopolitical issues that occurred there. Our story there is we really helped the government to address some of those inequality issues, rural income, overall income for the country. We're still moving forward. We always take a look and make sure that everything is stable first, but that will continue, and we're very excited about the market. We saw a lot of organic growth in the market before our plant goes in, already over the last two years. It's been a very supportive market for growth, as we go.
You know, as we try to determine where the overall Kazakhstan business will go going forward, you know, we look at that as a real driver for the region all around, as we go there. What was the second part of your question, Jon?
About credit and availability in Brazil as we go through 2023.
Yeah. Right now, there's no changes. You know, the Brazilian government has been supporting the FINAME program quite well. They have a good economics team that really looks at that. You know, the growth in Brazil is notable because it will, if it keeps going at this kind of pace, will match the U.S. market, probably within the decade, in terms of overall agricultural productivity, especially 'cause they can do two or three harvests a year. We're very optimistic about that business. No credit changes. There are some favorable tax laws around solar and ag solar, with net metering changes that are going on in Brazil, so everything points to continued growth there.
Okay. Thank you.
We have reached the end of the question and answer session, and I will now turn the call over to Renee Campbell for closing remarks.
Thank you for joining us today. As mentioned, today's call will be available for playback on our website or by phone for the next seven days. We look forward to speaking with you again next quarter.
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