Good afternoon, everyone. My name is David Kearin. I am part of the investment banking team at Wells Fargo Securities, and I'm pleased to be joined on this stage this afternoon with Valmont Industries, their first time at the Wells Fargo Conference. CFO, Executive Vice President, and Chief Financial Officer, Tom Liguori, and Senior Vice President of Investor Relations and Treasurer , Renee Campbell are here with us today. Thank you for joining us, and welcome to the Wells Fargo Conference.
Thank you very much, David.
Thanks for having us.
Thanks for having us.
Thank you.
We're thrilled you're here. We're going to start off today with a presentation. Our format will be a presentation led by Tom and Renee, followed by audience Q&A. With that, I'll turn it over to you for your presentation.
All right. Thank you very much. There we go. Okay. Thank you again, David. We appreciate the opportunity to participate in the conference today. Tom and I look forward to sharing some of our strategies and opportunities with all of you in the next few minutes. Before we start, I would just like to remind everybody that today's presentation and discussion is subject to our disclosure on forward-looking statements, which is shown here on this slide. With that out of the way, I'll start with a quick snapshot of Valmont for those of you who may not be as familiar with us. We are a Fortune 1000 company and a global leader in providing products and solutions for infrastructure and agriculture markets. Simply put, we make products that you see every day, but that you may not actually notice every day.
I'll get into that and explain a little bit more in a few minutes. We were founded nearly 80 years ago. We're headquartered in Omaha, Nebraska. Last year, we generated about $4.1 billion in net sales. Our current market cap is about $6.5 billion, and we operate in over 100 countries with 83 manufacturing facilities and a global workforce of about 11,000 employees. Looking at our geographic sales mix, just over 70% of our revenue comes from the US and Canada, with the remaining diversified across EMEA, Latin America, and the Asia-Pacific region. This global presence really gives us both resilience and growth opportunities across multiple markets. We typically are number one or number two in the markets that we serve.
In terms of our business segments, infrastructure is our largest segment, with nearly $3 billion in sales last year, while agriculture accounts for just over $1 billion in sales and remains a strategic growth area, particularly as global food security and land productivity become increasingly critical. All of this aligns with our company's promise of conserving resources and improving life. While Valmont started as an irrigation company, and we actually founded the mechanized irrigation industry many years ago, as mentioned, today our larger segment is our infrastructure business. I would like to walk you through our portfolio of products and services. This portfolio is very diversified across many end markets like energy, transportation, communications, and renewables, and all aligned with strong secular growth trends.
Starting with utility, which is our largest product line in the segment and nearly half of segment sales last year, we manufacture transmission, distribution, and substation infrastructure. We can do that out of steel, concrete, and composite materials. We are seeing very strong demand driven by rising electricity consumption, the need to replace aging old infrastructure, and the continued build-out of renewable energy. We are making very focused capacity investments to meet this long-term growth, which Tom will touch on a bit later. Our lighting and transportation business is about 30% of segment sales and is primarily lighting, traffic, and highway safety structures. This business is pretty aligned to state and federal funding, including DOT investments and road and residential housing construction and single-family housing starts. It is our most global product line within the segment.
Our coatings business is primarily hot-dipped zinc galvanizing, and it aligns with regional GDP and industrial production trends, with about 30-40% of the sales in this product line at any given time supporting our own internal operations. It adds resilience and scalability and operational leverage across the portfolio. Our telecom business continues to benefit from carrier spending and 5G build-out programs. For telecom, we provide telecom components used at job sites. We do steel macro towers, concealment solutions, and small cell products. Our distribution model and customer service really continue to differentiate us in this space. Finally, solar. It is a smaller part of the portfolio, but we are seeing promising momentum in the European market, especially in agrivoltaic applications. We have exited some lower-return projects, and we are now focused on targeted value-creating growth opportunities there.
Altogether, across the infrastructure portfolio, you can see it is very diversified, it is well-positioned to grow, and it is anchored by strong secular demand and supported by targeted investments that we are making in capacity and capabilities. Moving to agriculture, let us take a closer look at this segment. Our core business is irrigation equipment and parts, and that continues to drive the majority of our sales. We have center pivot irrigation systems, linear machines, corner machines, as well as aftermarket parts. All of that is built around our industry-leading Valley brand. We are the market leader, and as I mentioned earlier, we founded the industry many years ago. What really sets us apart also is our dealer network. It is the strongest and most trusted in the industry. Valley dealers are embedded in local communities, and they provide farmers with support and installation and service.
That is something that is very difficult for others to replicate at scale. They are a core part of how we deliver value and maintain customer loyalty and also a major driver of our aftermarket parts sales. That is a growing and margin-accretive portion of the business. Overall, demand in irrigation and agriculture is influenced by three key market drivers. In the U.S. and in some more developed international markets, net farm income really remains the biggest influence. That is closely linked to grain commodity prices and input costs and interest rates. Demand is also being driven by ongoing conversion from less efficient or even non-existent irrigation to more advanced automated solutions like center pivot irrigation. We are also seeing farm consolidation taking place. That is increasing the number of large strategic customers that need scalable solutions and ongoing support.
As I mentioned, aftermarket parts is a key growth initiative for us. We are making very strong progress. One way is through our new online e-commerce platform that we introduced just a few months ago. That is really improving the customer experience by making it easier and faster to order parts and improve service delivery. We have enhanced our distribution capabilities here, and it is really about ensuring that the right parts are available when and where our dealers and our growers need them. Moving to technology and products and services, which is just under 10% of sales, it is still a smaller portion of our business, but it does represent a very high potential growth area.
These are advanced monitoring and automation tools, and they really help farmers make smarter, more precise decisions about when, where, and how much to irrigate in the field, and also the ability to control their pivots remotely. If you think about it, many farmers have fields that can be 10, 20, sometimes even 100 mi apart. It is a real labor savings opportunity for them and lifestyle opportunity for them to be able to control those machines remotely. It is also not just about improving yields. It is also about using less, less water, less energy, and doing more with fewer resources, which has become incredibly important all around the world. Just to break out, as a subset of our total sales, nearly half of our ag revenue today comes from international markets. That really is a testament to the increasing global demand for center pivot irrigation.
We're seeing strong momentum from government-backed food security programs, particularly in emerging markets like in the Middle East, where populations are growing and diets are improving. We're also supporting new land development in regions that previously were not farming before. These really are long-term opportunities that continue to build out our global footprint. Before I turn it over to Tom, I just want to build on some of the global market megatrends that I briefly touched on. These really are powerful structural shifts that are driving long-term demand across our businesses. They really play directly to Valmont's strengths across the portfolio. Starting with infrastructure, we're experiencing what we consider to be a once-in-a-lifetime transformation in energy generation, and it's accelerating demand for grid connectivity and electrification. Everything from electric vehicles to smart homes to the expansion of data centers.
These trends are really fueling and driving sustained infrastructure investment, creating strong demand for the highly engineered structures that Valmont is uniquely positioned to produce and deliver. Across the U.S. and also globally, infrastructure is just getting older. Think of roads and bridges and utility structures that have been up for 50, 60 years. They all need replacement or reinforcement. As storms and severe weather become more frequent, hardening the grid and building more resilient systems is really no longer an option. This is an area where our utility customers are investing in and where Valmont is especially well-positioned. As I mentioned, the rapid growth of data usage and technologies like AI are really placing new demands on both power and connectivity.
We are supporting this with both our utility products as well as our telecom solutions, really to help power and connect the world's digital future and enable the infrastructure behind it. Turning to agriculture, I touched a little bit on food security earlier. Again, governments around the world are working to improve or to reduce, I should say, their reliance on food or grain imports. In many regions like the Middle East and North Africa, our Valley irrigation systems are enabling farmers to grow more food where they previously were not able to do that. There is a very interesting graphic if you go to Google Maps or Google Earth, and you look in Egypt along the Nile River, you will see small little green circles. It is pretty amazing to see that that is farmland, which was previously desert, and they are actually growing crops like alfalfa there.
It's pretty amazing. With limited land and water, doing more with less has also never been more important. Our equipment, our machines are essential in helping farmers maximize their yields and conserving resources while making land more productive. Finally, population growth. I think the world's population is expected to grow something like 700 million people over the next 10 years. More people means greater demand for food with fewer available resources, which requires more productive farming methodology. To summarize, whether it's building critical infrastructure or delivering mechanized irrigation solutions, we are very well-positioned at Valmont at the center of these global megatrends and to grow as these global needs continue to evolve. Tom, I'll turn it over to you.
Thanks, Renee. Great job. Thank you, everybody, for coming. David , Wells Fargo, thank you for having us.
We had a really great list of investor meetings so far today. Appreciate it.
Great.
Appreciate it. Let's talk about 2025 this year. These are the critical objectives that everybody. The first is catching the infrastructure wave. Renee laid out the global megatrend utility. This is really important to us. Today, we're capacity constrained. We're very focused on making sure we have the people, the processes, and the production capacity to be able to meet demand. Today, our infrastructure backlog approaches $1 billion. Growth market, secular trends, very exciting, but that's what our focus is. Make sure we capture that. The second is on the agriculture side is positioning for growth. Renee talked about the e-commerce, the aftermarket. We're really focused on growing our higher margin products and services. That would be when we say aftermarket, we're talking about spare parts.
When we talk technology, we're talking about the apps and the tools that we provide farmers to be able to control their pivot irrigation system. The third is disciplined resource allocation, which really encompasses two things. The first is making sure we have an optimal cost structure. The second is a disciplined allocation approach to what do we do with our cash flow. We're going to talk about each of these in the next slide. The last two, probably most important, is about people. First is world-class safety. We begin every management meeting with a safety report. We have 24 plants in the US. We have plants in Poland, throughout Europe, throughout APAC. If you walked into one of our plants, these are large steel manufacturing facilities making large, heavy structures. The safety of our workforce is extremely, extremely important.
But along with that is developing our skills. As we go through this path of expanding our capacity, catching the wave, growing aftermarket technology products and services, we need to help our employees develop their skills and provide them good career opportunities. With that, I'm going to go to the next slide. We'll take a look at where have we been over the last six years financially. More importantly, what are we focused on for the next three to four years? If you look at revenue, we had good growth up through 2022, and then our revenues plateaued. A few reasons. One is on the utility side, we have this great demand, but we are capacity constrained. At the same time, the North American ag market has slowed down. I think you all heard about the plight of the North American farmer, but we're growing internationally.
The third is our solar business. I'm going to talk a little bit more toward the end of the slide about how we look at solar, but our solar revenues have been down. The good news is with plateaued revenues over the six years, our operating income has doubled, and our earnings per share has more than doubled. So we feel really good about the work the Valmont team did to manage the business over these last six years. What are we doing over the next three to four years to grow revenues, operating income, and EPS? The first is catching that infrastructure wave. With the capacity constraint, we have 24 plants. At every plant, we're looking at what type of equipment and flow do we need to increase capacity. It's things like brake presses, welding machines, automation. This is all in our existing facilities.
We're not talking about building new plants. Our goal is to expand capacity by $300 million-$400 million over the next three to four years. What we've said is we're going to spend $100 million of CapEx each year. What we know is by spending $100 million of CapEx, we can grow our revenue capacity by over $100 million at a 20% gap operating margin, which would provide an additional dollar earnings per share each of those years. I think you can get an appreciation of why we're so focused on this area. In the agriculture side, we're looking at how do we grow our spare parts and technology services. Let me explain that. If a farmer pays $100,000 for a pivot, they're going to probably spend $50,000 on spare parts over the next 10 years.
As you all know, things like spare parts, services, aftermarket are typically higher margin. The team, we have software developers, software engineers in our ag business, put together an e-commerce platform. If a farmer is in the field, the pivot is down, they can take their phone out, look at the fitting or whatever it is that is down, find the SKU, find a vicinity stock in the dealer or in our warehouse, place an order, get it delivered in the next day or two. What we are doing is helping the farmer, partly convenience, but more speed, right? We are going to get the pivot up and running. By doing that, we feel we can grow our spare parts business. It is the same with our technology products.
Through last year, we had about five different apps that a farmer could use to manage their pivot, things from start to stop to controlling the watering pattern during the day. The software development team put it all into one app called Accents 365. That is our platform going forward. This is a subscription-based service, and we are adding more functionality. This last month, we added functionality to be able to measure tire pressure. The intent here is that if the tire pressure is getting low before it does go flat and it stops the pivot, the farmer now has much advanced time to schedule maintenance on that. Our current initiative is looking at machine diagnostics, things like sensors to detect vibration in any given span. Vibration may mean that a gearbox is wearing out.
This is all about making the farmer more productive, letting them be able to plan their maintenance versus having to wait till failure. The goal in ag is today it's a billion-dollar business. We think by growing aftermarket and services, we can get another 6-7% of revenue at a fairly healthy margin. The third on resource allocation is all about cost control. Renee is on an initiative. It's called the Corporate Cost Team, not a very glamorous name. It is really a very exciting opportunity because our corporate costs have increased to about 2.7%, a little higher of revenue. We believe that should be below 2% of revenue. We meet weekly and we're finding all sorts of initiatives, opportunities with our outside service costs, our insurance costs, our legal costs, outside service providers using shared services. We think there's a lot of opportunity there.
The last part of resource allocation is our buyback. We just initiated in January a new $700 million share buyback authorization. That's a little bit over 10% of our market cap. This morning, we were meeting with Adam, and he heard this and he said, "Okay, great. What does that mean? Can you convert that? What does that do to these charts?" The way to think about it is we'd like to get our earnings per share from $18 to somewhere in the mid-$20 range. If everything went well, up toward $30 over the next three to four years. How do we do that? Expand the capacity, get a dollar EPS every year from that, grow our aftermarket and services business in ag, reduce our corporate costs, and shrink our outstanding shares. Really exciting opportunity.
This year, which is the farthest right lower part of the slide, what are we focused on? It's really getting the company and the people and our teams aligned on this journey. The capacity expansion is well underway. We expect you'll be able to see the benefits of that in our fourth quarter, clearly in 2026, 2027, 2028. Avner, our CEO, has an initiative. We're looking at our organization structure. This is all about being able to make quicker decisions, being more agile. We're looking at things like expansive controls, number of layers. It's about speed, but one of the results out of that is that more cost reduction activities. The last is looking at our product portfolio. This is really focused on our solar business. Solar is a small piece of our total revenues.
It's about $150 million last year, but it's about a break-even, slight loss. When we look at it by region, our European business is doing very well, but it's a tough market in the Americas. I think we all know what's going on with solar and renewables right now. Similar situation in South America. What we've told our investors is in Q2, we're taking a good, hard look at this. It's probably a combination of cost reductions, figuring out which markets we want to stay in, which to exit. We have $60 million-$70 million of goodwill associated with this. We're going to have to do an impairment test. The whole idea is let's get solar to a point where we can build on it, where it meets our hurdles.
More importantly, if you look at those top graphs, it's been somewhat of a drag on our revenue growth and our earnings. We're going to give very good clarity on this at our next call. As far as capital allocation, we came out in January. It's a very balanced approach, half to growth, half to shareholder returns. The growth is all about expanding the capacity, investing in CapEx, investing in our plants. There is a space for M&A. We've tried to be very clear about this. It would be smaller-tucking M&A related to our core. In ag, it would be somehow related to water irrigation. In infrastructure, it would be adding customers, acquisitions that would give us a different geographic, etc. On shareholder returns, we talked about the $700 million share repurchase program. We're also fine-tuning our dividend.
Over the last five years, we had a healthy 10% CAGR increase in our dividend, but it was a little sporadic. Some years we didn't have a dividend increase. In January, we increased it by 13%. We said our intent is to make it more predictable for all of you, our investors, with the intent of every first quarter increasing our dividend. Finally, based on everything Renee went through and what I went through, why would you invest in Valmont? We're serving high-growth markets with secular growth trends. The biggest, of course, is utility. We're in telco, international ag. We're working to expand our margins. Everything we talked about with getting more throughput through our factories, growing our higher-margin businesses in ag, controlling our costs. We're focused on increasing shareholder returns by having effective capital allocation plans such as our share repurchases.
At the far right are our targets. We believe over the next three to four years, revenue growth in the mid-single digits. Our operating margins, today they're about 13%. Our target is mid-teens, but we think we're going to do far better than that. A return on capital, today our return on capital is 16%. We're very, very proud of that, and we think that can continue. With that, I'm going to turn it back over to you, David, for any questions from the audience.
Great. Thanks, Tom. Any questions from the audience? I'll kick off with one, Tom, to start. You mentioned adding capacity over the next few years, and I'm wondering if you can talk a little bit about, in a little bit more detail, how you're driving efficiencies and productivity in your facilities.
Good question. We have 24 plants in the US, and we travel to them all the time. Avner, our CEO, probably goes every other week. Renee and I join them once or twice a month. What you find is when you go through our factories, there are opportunities to improve the flow. When we talk about expanding capacity and bringing in brake presses and welding equipment, part of this is also to improve the flow. I'll give you an example. We went to El Dorado. These are big, big structures. The metal of the tube is formed. It's welded. It goes out into the yard. It comes back in to get the auxiliary products. As part of our adding capacity, we're going to make it so that it's just a continuous flow through the plant. The product will never leave the yard. It'll go right through.
When you think about it, if we can add just a small piece of incremental capital in that plant but get more throughput at a very similar cost, our cost per structure is going to go down. That is one of our margin opportunities. Just picture that process through 24 plants. Avner named a dedicated team for our capacity expansion and margin improvement in the factories. A fine man, Shannon Egbert, is running that, and that is what he does every day. It is all about improving the flow through the plants.
As you talk about capacity improvement, Tom, is it across your product portfolio, or are you concentrated more on any specific end markets?
This is predominantly utility. It is all about the electrical transmission and everything Renee talked about, hardening the grid, data centers.
Great. Pivoting a little bit to agriculture, you mentioned the Middle East and the fact that a lot of governments are funding these projects. Renee talked about the project in Egypt along the Nile River. Can you expand just a little bit about the international growth strategy for the ag segment?
Yeah, yeah. Yes, as I mentioned, we're seeing a lot of activity coming specifically out of the Middle East, North Africa region. I would say probably have one of the most comprehensive project pipelines that we've seen in a very long time. It is not concentrated to just one particular country. It really is across the region. As I mentioned earlier, the drivers in many ways are food security. These are governments and nations that are investing a lot and working very hard to ensure that they're able to feed their own people. We really started to see that start to increase kind of around the time COVID, and we were seeing a lot of supply chain constraints and just being able to import and export food and grain around the world. It was very challenging.
We started to see those investments start to tick up at that time. We executed on the largest project, I think, in the history of the industry. It was a $240 million project to Egypt. That kind of, I would say, almost kicked us off in terms of the growth in that region that we are continuing to see. I would also add that with the breakout of the Russia-Ukraine war, that just sort of exacerbated those supply chain constraints and concern that many of those developing and emerging markets had with being able to have enough grain, wheat, corn, etc., to feed their populations. Again, these are very concentrated, deliberate, focused investments that governments are making to literally turn desert land into farmland, as I mentioned earlier, but also to take the existing ag land that they have and continue to make it more productive.
To be able to do a large project like that at any kind of scale, to irrigate it, you can't do it without pivot irrigation. It really puts us in a really great, unique position to serve those growth areas. We have a robust dealer network in the region. We have a manufacturing facility in UAE, in Dubai. It has been there for many years, but in the last few years, we've actually added capacity there, knowing that this market was growing. We primarily manufacture everything for that market from that Dubai facility and are continuing to look at opportunities to do more out of that factory. That is the Middle East. I mean, we are in many other countries outside of the U.S. Certainly, Brazil is a very important market for us. It is growing.
It has been growing for many years, but we have a manufacturing facility there as well. We've added capacity there in the last few years. The farmer in Brazil is a much larger farmer than what you would see in the U.S. market. These are very large farms. I think, Tom, you had an example earlier today of a 24-span pivot. If you think about the average size of a pivot in Nebraska or the U.S. market, it is maybe 7 spans. This is 24 spans. That is a very unique example, but it just goes to show you that there are parts of the world where these are very large farms. That is certainly the case in Brazil. Also unique to Brazil is they can get up to three growing seasons within a year, grow three crops within a season.
The pivot has a very compelling return on investment and is essential to enable them to have multiple growing seasons. They are benefiting from that. They are sensitive to soybean prices, similar to the U.S. farmer, but their profitability profile tends to be a little bit different because they have multiple growing seasons throughout the year. Of course, there is Europe and Australia and other markets around the world. Our strategy is really focused on penetration of those markets, continuing to build out our dealer network, grow our aftermarket parts sales, which adoption of technology and aftermarket opportunities are not as advanced as they are in the U.S. For us, that is just another opportunity for us to grow in those areas.
Sure. I think you said that about 50% of the ag business is international. Is that correct? And 50% is the North American market. As you know, it has been a difficult period in ag. Any signs that we're nearing a trough or that we're going to see an inflection in the ag market? Are you starting to see anything that gives you optimism that maybe we've hit the bottom and are changing the trajectory?
We do not want to give false hopes. We had a very good Q1 in our ag business. That said, the way we are running the business, we know North American ag will come back at some point, but we are not going to run the business counting on it. Everything we showed you before with the growth in earnings per share, operating margins, and the opportunities, it was not relying on North America. One thing that is true, when North America goes down, some of it is why Brazil is going up. North America is down because it is part of the tariffs, some countries will not buy food products from the US. If you go down to Brazil, their export market is growing rapidly. We are diversified. We are covering all bases, but.
Well positioned.
We're behind the U.S. farmer, and we hope it goes well.
Sure. Yeah, Tom, this is a fairly open-ended question, but I think you're 10 months in your seat now, new to the company. What excites you most about Valmont after 10 months in your seat that you think should excite investors as well?
I think the things we talked about, what excites me is just the secular growth trend in infrastructure, utility, the opportunity we have to add capacity to capture that. This is all under our control. In ag, the opportunity with aftermarket and technology. I'm really glad we have a supportive board that authorized our share repurchase program. If you ever have a chance or if you're ever in Omaha, come stop by. You'll find the team at Valmont is very passionate about the company, very passionate about infrastructure and filling out the grid and hardening it and supporting data centers, but also it's about food, right? We're feeding people. It's a really good, thoroughly enjoying my time at Valmont and with Renee and Avner and the team.
That's great. Thank you both very much. We appreciate your talking about Valmont today and hope you had a great day here at the conference.
We did. Thank you very much.
Thank you, Liz. Thank you.