All right. Good afternoon, everyone. Thank you for joining Valmont Industries session. This is Tomo Osada, Small Cap Industrial analyst at JP Morgan. With me, we have Avner Applbaum, President and CEO, Thomas Liguori, Executive Vice President and CFO, Renee Campbell, SVP, Capital Markets & Risk. Thank you, Avner, Tom, and Renee for joining today. Before we begin, I want to highlight why Valmont Industries is such a key participant of this conference. As a global leader in infrastructure and agricultural solutions, Valmont sits at the intersections of powerful megatrends, electrification, grid modernization, and food security. With a record backlog and disciplined capital allocations, driving sustainable growth and margin expansion.
Renee, to kick things off, I think it would be great to start with introductions to Valmont, like who they are, who you are, and then like what you do with the stories, please.
Perfect. Thank you, Tomo, and thanks very much again for having us here today. Good afternoon, everybody. Before we begin, I just want to briefly note that today's discussion will include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from those projected, and please refer to our SEC filings on our website for a discussion of those risk factors. With that, for those of you who may be less familiar with Valmont, we're a global leader in engineered infrastructure and agriculture productivity solutions. We recently celebrated 80 years as a company as of March 8th of this year. We were founded in 1946 in Valley, Nebraska, which is just outside of Omaha, where we're headquartered. We pioneered the mechanized irrigation industry with the center pivot, and that technology remains the industry global standard today.
Over time, we expanded that engineering expertise into infrastructure markets. Today, about 75% of our business is infrastructure, and 25% is agriculture. We operate in more than 100 countries with about 70% of our revenue generated in North America. On the infrastructure side, we provide highly engineered structures and solutions that support critical systems and networks, from electric utility transmission, distribution, and substation structures, telecom components, lighting and transportation structures, and galvanized coatings that extend the life of infrastructure products and assets. On the ag side, through our Valley brand and our Valley dealer network, we help growers improve productivity and manage water and other inputs more efficiently with advanced irrigation systems and digital technology solutions. Our portfolio is also aligned with several durable growth drivers, global growth drivers.
First is rising energy demand, connectivity, grid expansion, and that's really being driven by load growth, electrification, data centers, onshore manufacturing, and overall industrial growth. Second is the need to replace aging infrastructure and drive resiliency across power, transportation, as well as communication networks. Third is the increasing need for productivity and resource efficiency, notably in ag, where farmers and growers must produce more with limited land and water resources. Strategically, we're focused on capturing these opportunities through specific value drivers, which we've outlined to achieve $25-$30 of EPS over the next three-four years. Those include expanding capacity in our infrastructure business, notably in utility, positioning ag for the next cycle through technology and aftermarket parts growth, and maintaining disciplined resource and capital allocation.
For capital allocation, our goal is to deploy roughly half of the cash that we generate toward growth and half toward shareholder returns, which we actually did about 50/50 in 2025. We feel very good about our future. We're well-positioned to deliver continuous revenue and earnings growth over the coming years, and you can visit our website to learn much more about us at valmont.com. Tomo, I'll turn it back over to you.
Thank you, Renee. Congratulations on 80th anniversary for the Valmont. If you could talk about describing the company's core culture and values, could you do that for Avner?
Sure. First of all, Tomo, thank you for hosting us. We really appreciate the invitation opportunity to share our story, which as you mentioned, kinda goes back 80 years. Our core values start all the way from our founder, Robert Daugherty, around four core values, integrity, passion, continuous improvement, and delivering results. While I could talk about all of them, let me just focus on passion, which did start from Robert Daugherty. He had passion for the mechanized irrigation. As Renee said, we founded the industry. Why I really like passion is because it reflects all of our employees. They come to work. They're really passionate about what they do.
If it's building a pole, if it's shipping, if it's on our engineering side, if it's building a pivot, if it's our customer service, they all have passion because they see the impact we have on the world, and they see how their products have an impact in so many aspects. That I think once you have the passion and employees bring that every day to work, it really all the other values follow around integrity, driving results, and continuous improvement. In fact, actually it shows also when we hiring people, they wanna come, they wanna join Valmont, they wanna make a difference in the world, and we're all proud of what we do.
Thank you, Avner. For the Valmont's DNA you talk about have remained unchanged over the decades, and what recent cultural and/or organizational shifts are you most proud of?
You know, if you think about these core values I just talked about, they've been constant and consistent through the 80 years: A, because of the simplicity of them, and two, because of the effectiveness. Those have all stayed the same. The focus we had over the last several years where I'm proud of the change and that we're doing today is, it's really around focusing on the customer. I mean, we have a relentless focus today on how do we serve the customer? How do we help the customer solve their biggest challenges? When we innovate, we always have customer in mind. That's really a shift that we've done over the last several years.
We're always customer centric, but we're making it easier for our employees to make decisions to support the customers. Every decision is having the customer in mind. In fact, maybe I'll just quote again, our founder, Robert Daugherty. I was walking through one of our plants, and one employee walked over to me and says, "I actually had the opportunity to work with Robert Daugherty." You know, this employee's been with our company for 50 years plus, which is not the only case we have because people, once they come, they join, they wanna stay. He said, "We always have the customer in mind, but for me, my customer is the next operator in the sequence.
“If I'm welding and I'm moving on to the next operator or if I'm in accounting, I think about the next one in line.” That's kind of the mindset we have. Every person, the next in the process is your customer, and you wanna make sure you make his job easiest as possible. You wanna give him the best value you can. It's kind of ingrained in our culture, kind of supporting our customers.
Thank you. Let's talk about the mega trends and growth strategies. How are these, as you're reading, you talk about there's some mega trends and how are you looking at the opportunities for the long term as well as how Valmont is well-positioned to capture those kinds of infrastructure and agriculture perspective?
Okay. Thank you. I'll start with infrastructure, right? When we're seeing the mega trends today around that's really impacting all our businesses and, you know, starting with the need for energy. I mean, we see it in all aspects of the economy and, you know, the one area I like to use as a microcosm, I like to point to Texas. If you think about Texas and you look at North Texas, you have a lot of new data centers built in North Texas. You have cities like Austin, where you have a lot of new population migrating to Texas. You see a lot more onshoring, industrial manufacturing. You see oil and gas, even Bitcoin mining.
You see all this need for utilities and for infrastructure and for power. We've also seen that grid that has failed several years ago. We've seen the ice storm. Not only do we need the power, we need the power to be resilient and that's where we come in. I mean, we support transmission, distribution, substation, how do we make sure the power gets to the right customer in this case. We've also not only do you need all this power, there's also many different sources of power these days, anything from wind to solar, hydro, gas, et cetera. Wherever you're building that power source, you need to again move the power. We definitely support that area.
We're seeing that as a very strong mega trend. On top of that, like I said, we also need to make sure the power needs, resiliency, and we need to support the replacement and the technology upgrades. A lot of the poles in this country are 60, 70 years old. They need to be replaced. We have those mega trends. When I talk about replacement, you know, I could also refer to our pivots into irrigation, right? There's a lot of pivots in the field. They've been there for many years. We have the largest fleet and part of upgrading, and we could dive into double-click in a little bit, but you know, just adding or replacing them and improving the technology. Then finally, there's the productivity, sustainability for many products.
I think using the pivot is another good example where how do you get more out of the current land and the water, and that's where that solution, food security that comes down to that as well. Those are the main mega trends that we're seeing today. I'm happy to kinda dive into, you know, how we play and what we're doing. Those are the kind of mega trends that are having a large impact on our business.
Thank you. If I may, dive into infrastructure, and could you talk about your market share positioning versus other competitors? Could you describe how you are differentiated from other competitors in front of those mega trends for infrastructure?
In these markets that we play, we're pretty much the leader in the market. We have the largest market share, the largest presence. The reason we're the leader in that space, I really look at a differentiation in three separate pillars. One of them is around the engineering and innovation. We have engineers that have been working with these customers for many, many years and decades in some cases, and we're able to help them solve their biggest challenges. When they're building a line, when they're working on roads and need lighting or signs, if they're trying to build a farm and wanna make sure they take into account the soil and the land, right?
We have our engineers helping them with the best solution. That's kind of on the engineering on the innovation side. We have on the commercial area the strongest channel. If you look at irrigation, we have the strongest dealer network, the Valley dealer network. It's the largest, it's the strongest dealer network. Not only do you have the support, but they know the farmer knows that if at 4 A.M. his pivot's not working, he knows he can call the dealer at that point in time, and he will help him. We have the channel that we use with our DOT customers, et cetera, with deep understanding of the industry. Like I said, we have the customer-focused organization.
Finally, you know, the operations, the manufacturing. We have a very large scale of manufacturing, which offers various solutions to our customers in different locations. On the pole side, we can do anything from steel to concrete to composite to aluminum, hybrid, et cetera. We could offer them distribution, substation and transmission solutions. If they wanna work on hardening, again, we could provide them with some solutions with composites, some with concrete. F or local, we have plants around the world to support. The final point, which is the most important point is we manufacture mission-critical assets.
It is most important for our customers to have it when they need it, the highest quality, at the right time at the right location. Otherwise it could be very costly to utility customers. If they don't have the product on time, it could cost them millions. If you don't have the pivot on time for the growing system, it will cost the growing season. To know that they can rely on us to get the products on time. Anyway, all the way from engineering to delivering to the end user is, I think, what it puts it all together, and that really differentiates us from our competition.
Thank you. If you could talk about agriculture, how do you see Valmont's irrigations and ag tech solutions contributing to global food securities and sustainable resource management? I see some headwinds around the agriculture business these days, but if you look at the long terms, like how you contribute to all the global supply chains in a agriculture business.
Yeah. That's, you know, it's correct. We do have some headwinds today. The market has always been cyclical. It's in a trough now, been for several years. Since we can't really impact the market dynamics, what we can do is we could support our dealers and growers at this time. Ultimately, our objective is to help the farmers be more productive and be more profitable, make the best use they can with the land that they have available, minimizing the use of water, and that's our focus. How do we make sure the farmer can water the crops when he needs them to maximize ultimately the yield? The technology has many elements to him. One, it's just from operating the farms. I mean, the farmers are getting larger and larger.
Not practical for the farmer to be out on the field to check if his pivot's watering where it needs to work. Giving him the tools so he could do it remotely from his phone, as an example, is critical. Making sure they could identify issues in the pivot before they happen. Like, okay, if you're gonna have a flat tire, if you had the flat tire, it's already too late. Your pivot's not working. How could you identify that ahead of time and make sure we could provide them with support is another example. Our pivots are extremely robust, you know, nothing is immune to storms, but pretty much they can withstand a lot of storms.
We can help them maximize their whole field if it's using our linear solution, a pivot to support the small field, the large fields, corners, et cetera. How do we help them maximize as we know that land is a finite resource? Those are areas, maybe one more area is around the aftermarket. If you're missing a part for your pivot, how do we make sure it's very easy for them to order the parts, have it on a timely fashion, so again their pivot is not down? The whole idea is how to make sure that their pivot is running as effective when they need it. Of course, you mentioned food security, right? On the part of Middle East, Africa, a lot of these countries want to p rovide food security.
We have, again, a robust solution that can operate in the deserts. You could look today at some satellite photos, and it's pretty impressive to see where it was desert four or five years ago, and now you could see that they're growing wheat and providing for food. In fact, it's been so successful that some of these countries are now using it to actually export, so not only for food security. It's that's kind of the overall approach that we're taking is we're gonna focus on our growers, our dealers, strengthen it, focus on growth areas like international and Brazil, so when the market returns, we'll be ready to capitalize.
Thank you. If you could share your outlook for key metrics such as infrastructure segment sales growth, margin profiles, as well as the international sales mix and aftermarket growth in agriculture.
Sure. Let's start with infrastructure. Infrastructure is three-quarters of our revenue. The largest piece of that is utility. Utility is growing 9%-10% per year. Utility continues to exceed our expectations. In the fourth quarter, the growth was 20% year-over-year, and we expect the first quarter to be similar. It's going exceptionally well. Overall, infrastructure about 5%-6% growth rate over the next three-four years. Now, for margin expansion, it is kinda linked to this idea of growing the utility business. We're spending about $100 million a year in CapEx to expand our capacity, and all of these are taking our existing plants and bringing in more capital equipment, brake presses, automated welding, material handling. The idea is, can we add incremental capital to get more throughput?
If we do that, we'll get a lower unit cost. When we look at our utility business, we know if we spend $100 million of CapEx, we'll get over $100 million of additional revenue every year, and the contribution margin is close to 30%, and it adds $1 EPS. It's a really exciting opportunity. Last year, we spent $107 million. This year, we're gonna be $130 million-$150 million of capacity expansion, and we would expect that for the next two to three years. It's a really exciting story. You asked margins, Tomo.
Last year, infrastructure operating margins were 17%, and in three-four years, really by 2029, we think it'll be close to 20%. Good opportunity for us. In the agriculture business, that's about 25% of our revenues. You know, as Avner said, you know, the market's been soft. In all of our guidance, in all of our three-, four-year targets, we're not gonna assume a recovery in ag. If we get a recovery in ag, that'll be upside. When we look at ag, we're trying to position it for, let's get a higher mix of higher margin business. Avner described the aftermarket. That's the spare parts. That's the e-commerce. You know, if the farmer can order from the field, see if it's in stock, get it delivered tomorrow, they're less price sensitive.
We're trying to grow that. Today, that's about 20% of our revenue, and we'd like to see that get up to 23%, 24% of our revenue, and it's higher margin. On the technology, you know, today, a farmer controls their pivot from their phone app, and it's monitor and control, predictive maintenance. That is a subscription-based model. It's a small piece of our revenue. It's about 3% of our revenue, but it's very high gross margin, 70%-80%. Every time we add connectivity, that adds to our margin. When you look at penetration, you know, North America is fairly well penetrated, but if you go to Brazil and Middle East, penetration rates are much, much lower, and that's really what the opportunity is 'cause those are newer markets. The pivots are, they're not as old. They're newer and provides us a pretty good opportunity.
The third margin opportunity is really in our corporate costs. You know, we've talked about our corporate costs. We're approaching 3% of our revenues. We see a path to get that below 2%. This year will be about 2.2%. If you put this all together, you know, we call it our value drivers. What is our plan for the three-four years out by 2029? We think infrastructure margins can go from 17% to about 20%. We think ag margins can go about 13% to 16%. Total company is 16%-17%. More importantly, last year, earnings per share were $19, and we see that getting to $25-$30. Internally, we call it the path to $30, and everybody's very excited about that. How do you get to $30 earnings per share?
We got 11,000 employees. Each of them fit into either the infrastructure growth, the ag positioning with aftermarket and technology or on the corporate side, and we feel very good about it.
Thank you, Tom. What are the most important strategic investments for making sure that you capture these opportunities?
You know, on the utility side, it's CapEx, plain and simple, and that's our highest return opportunity for capital allocation. On the ag side, it's more people and technology, right? We're trying to develop systems that'll advance our aftermarket to make it easier for the farmer to order, and the same with our technology. We have a software development team. We have AI tools being added to the predictive maintenance, and this is what it's all about, increasing the productivity for farmers and lowering their cost. On the corporate side, you know, AI's a big part of it. Casey's using AI in Investor Relations. Our accounting teams are using it for the 10-K. It just goes on and on. You know, another piece of AI is we have a fellow named Amit, which you'll see him at Investor Day if you come to Investor Day.
Amit's very creative, and one of the things we're focused on is how do we get better factory scheduling? The whole idea is, right, if you can use AI tools to really aggregate orders, sequencing them better, make sure you got the right material at the right time, you're trying to improve the utilization of your factories. Think of it in terms of, let's say today we're at 80% utilization. If through AI tools we can get to 85%, 86%, well, not only is that better operating margins, but it means we need less CapEx to expand revenue. There's a lot of really exciting things going on.
Thank you, Tom. I was impressed when I visited your headquarters and plants and when you talk about the CapEx, like how you like plan to expand your CapEx by, you know, automations or expanding more facilities and could you describe like how you manage the capital, like a discipline plus the like making sure the margin profiles to capture those growth?
It's very detailed, but it's very easy to explain because if you came into any of our factories, we're starting with coil or plate steel, and we're cutting it, rolling it, welding it, adding arms, adding base plates, and this is all about getting more throughput for the factory. How do you do that? You add brake presses, you automate the welding, and then material movement's a big part of it because these are very large structures, hundreds of feet long, very heavy, very hard to move, but that's what we do very well. We manufacture and we move large structures. The simple part of it is, our model is spend $1 of CapEx, get over $1 of revenue, get a 30% contribution margin.
If we spend $100 million, we know we'll get $1 EPS. It proved out very well in 2025. In 2025, we spent $107 million on utility CapEx, and we expanded our revenue by $147 million. It's actually, now that we're seeing the proof of it's actually exceeding our expectations, Tomo.
Thank you, Tom. If you could touch on the divestment side of the solar business recently announced, and then could you talk about why and why now, the situations of the business?
Yeah. Last year was really about getting the company positioned for this value driver path for the next three-four years, growing $500 million-$700 million of revenue and EPS up to $30. There were different pieces that we had to prepare the organization for. One was the organization, which was reducing the layers in the organization. There's new leadership. The second part was rationalizing our portfolio, and we really did a deep dive on everything, looking at opportunity, where was the best use of capital, what was the return on investment. We determined that, you know, the solar business, while it had its moments in our history, it just, we were better off taking the money and putting it into utilities.
We got out of the North America solar market, and right now solar's a small business, mostly in Europe. For reporting in 2026, we're not gonna report solar anymore. We're gonna change that and fold it into one of the other product lines. Other than that, we determined all of our businesses were contributing and they had a very healthy future. What was the last part of your question, Tomo?
The divestments, like how you see the divestments in terms of the next portfolios.
Yeah. Now that we're through the portfolio rationalization, we don't really see any further divestments. We're happy with all of our businesses. You know, what we don't talk about is things like our international infrastructure. There's an opportunity to improve performance there. Our L&T business, opportunity to improve performance. Those are not part of the value drivers, and those are really our upsides and our risk mitigators .
Thank you, Tom. That was really comprehensive. You know, other than, you know, divesting businesses that don't have the right financial performance or criteria for us as a business, to me the real benefit is around the focus, right? We have these tremendous megatrends, once in a lifetime opportunity. We as a company need to focus on those opportunities, and I think by getting rid of of distractions, making sure every person in the organization know how he could support our path to $30, I think that that's significant and drives a lot of value for us. We're gonna take advantage of the current market conditions.
Thank you, Avner. I would pause here and take questions from audience.
Hey, guys. Thanks. Can you give us a quick update on the Dubai facility, its status? Are you able to manufacture? Are you able to send product, or do you have an alternate plan to meet the needs of getting product into Africa or the Middle East? Then secondarily, also some disruptions, I think, in the global zinc markets, if you guys are experiencing that at all in North America or anywhere else.
Thanks for the question. Overall, right now our Dubai facility is operating at a very minimal level right now. I mean, the safety of our employees is right now the highest priority for us. Of course, there's also guidance that we're following from the government. Right now we're really, I see that plant as almost at a standstill. It's about 15% of the ag business. But right now we are, you know, even through the Strait, we really can't get products in or out of Dubai, and they're right now prioritizing food versus equipment. That's the largest impact to our business today is that element of the business. We do have many other facilities.
We have a China facility that actually could support some of our other products going more into Europe, not into the Middle East, Africa, but from Dubai, we also support Europe. We can bring that from other locations, so we're able to mitigate some of that. Overall, that is the largest impact for us. We're able to flex down that facility pretty efficiently. It’s not gonna be a material impact at this point in time. Other than that, around the commodity pricing, I mean, the largest impact are, you mentioned zinc, you mentioned aluminum. Those are the ones that have currently the largest, could have the largest potential impact. We don't see any shortages at this time right now. It's just pricing.
We'll, you know, as that continues, we'll make sure we price appropriately so we could recover that cost. A lot of what we're seeing right now is wait and see. As of now, we're not seeing a material impact, and we'll continue to monitor and put plans in place to address the situation.
Thank you for your great questions. Go ahead.
There's always been this great promise of smart cities in where the infrastructure is builds in, you know, builds in the smartness, particularly around things like smart cars and EV and all that stuff. Where are we in that? Because it would seem that your capabilities are a potential connecting point through all that smart capability, and it hasn't seemed to materialize all that much, and it seemed it could also potentially be a nice bow wave for you as well too at some point.
Yeah. I agree. We've been talking about smart cities for quite a while, and it really has not materialized. Really what we're focusing right now is we're gonna support the cities and the states and, you know, as they're trying to build their infrastructure, but we're gonna stick to where we're really good at, and that is, you know, engineering these solutions. If it's lighting solutions, if it's poles, so they can add their capabilities to it. We're gonna kinda stick to our lane, and as we see these opportunities materialize, we'll just help with the infrastructure for it, but we're not gonna play directly with providing those smart solutions.
The other thing that seems to always be this interesting, it's not a battleground, but it's like this tension between an engineering firm like a Jacobs or an AECOM, and that you certainly have a lot of expertise in your domain as well too. At some point, they start to certainly build knowledge in your domain. How do you start to make sure that you're protecting the value of your expertise, particularly in an age of AI, where all of a sudden consuming gobs and gobs of historical engineering data becomes something that takes place in a half an hour?
Yeah. It's a good question, and we're actually using AI as well to help our engineering with the non-value add. To me, it's as long as the judgment part, right? I mean, when you look at AI, you'll have the prediction and you'll have the judgment. As long as the judgment remains a critical part, our customers, the utilities, which are also risk averse, wanna make sure that we can give them the right solution because a mistake on a drawing could cost tens of millions of dollars. Just making sure you have that eye of the engineer is gonna be critical for them. On top of that, we give them the whole solution. We'll start from the engineering, but then we'll go all the way commercially, all the way through our plants to the final product.
If you're kinda disconnecting the two, it again creates some risk. We're keeping our eye on AI. We're leveraging AI. I don't see at this point where it actually comes in and eliminates all the engineering. We're utilizing it to help us be more productive. I still think there's still the element for kinda the judgment part that we're gonna utilize our engineers.
Thank you for a great question. We wanted to wrap up here. Thank you very much Avner, Tom, Renee, and everyone for joining today.