Valmont Industries' CEO Discusses Q4 2012 Results - Earnings Call Transcript

Feb.13.13 | About: Valmont Industries, (VMI)

Valmont Industries, Inc. (NYSE:VMI)

Q4 2012 Earnings Call

February 13, 2013 9:00 am ET

Executives

Jeff Laudin - Manager, IR

Mogens Bay - Chairman & CEO

Terry McClain - SVP & CFO

Richard Heyse - EVP

Mark Jaksich - VP & Corporate Controller

Analysts

Charlie Clarke - Credit Suisse

Nathan Jones - Stifel

Arnie Ursaner - CJS Securities

Sean Williams - BB&T Capital Markets

Brian Drab - William Blair

Brent Thielman - D.A. Davidson

David Rose - Wedbush Securities

Operator

Good morning. My name is Jody and I'll be your conference operator today. At this time I'd like to welcome everyone to the Valmont Industries, Incorporated Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn the conference over to Mr. Jeff Laudin, Manager, Investor Relation. Please go ahead sir.

Jeff Laudin

Thank you, Jodi. Welcome to Valmont Industries fourth quarter 2012 earnings conference call. With me today are Mogens Bay, Chairman and Chief Executive Officer; Terry McClain, Senior Vice President, Chief Financial Officer; Richard Heyse, Executive Vice President and Mark Jaksich, Vice President and Corporate Controller.

Before we begin, please note this discussion is subject to our disclosure on forward-looking statements, which applies to today's talk and will be read in full at the end of the call. The instructions for accessing a replay of the call can be found in our press release.

I would now like to turn the floor over to our Chairman and Chief Executive Officer, Mogens Bay.

Mogens Bay

Thank you, Jeff, and good morning everyone. Thank you for joining us. I trust you've all read the press release, so I'll focus on some of the highlights for the quarter and in general.

The quality of our earnings improved significantly with operating income as a percentage of sales growing from 10.3% to 13.7%. Leading the increase was very strong performance in our utility and irrigation segments, coupled with some improvement in our Engineered Infrastructure Products segment. Our coding segments continue to operate at very satisfactory profitability levels, but results were down slightly from the year before.

Our utility business had a very strong quarter, benefiting particularly from continued high levels of investments by the electric utilities in North America. Our international utility business also saw a significant improvement in sales and earnings.

Backlogs at the end of December were a record $434 million ensuring a good start for the current year.

The high profitability level of this segment in the fourth quarter does not guarantee that we will see that level each and every quarter going forward. This business is to a great extent a project business and profitability levels may vary from projects to project. We anticipate that the utility business will continue very strong for a number of years. We've not seen utilities pull back on their significant transmission, distribution, and substation spending plans. To meet this increasing demand we've added significant capacity on this segment.

During 2012, we expanded our Monterrey, Mexico, Hazleton, Pennsylvania and Tulsa, Oklahoma plants, and we started up a new plant in Pune, India. We also expanded an Engineered Infrastructure plant in Texas to handle additional and accompany volume for the utility segment. We have a new plant on the construction in Tulsa, Oklahoma and we're retrofitting the recently acquired large facility in Columbus, Nebraska.

Our global network of pole plants capable of producing large poles in unrivaled in the industry and we have access to additional capacity in our China and India operations if necessary.

We've seen tremendous SG&A leverage in our utility business over the last couple of years, may be too much. We will be adding people to this organization to further strengthen our ability to serve our customers well. Also overtime, we believe our international markets will present significant opportunities for our utility segment and we will be making additional investments and market development efforts around the world.

Our irrigation segment ended the year on a high note with another very strong quarterly performance, as farm income levels and drought concerns continue to add energy to this business. As year ends, we typically do not have a very large backlog, but this last year was different. Our backlog of more than $230 million in this segment is very atypical, but a clear indication of the strong positive environment we're experiences currently in this business. This certainly will indicate that the rest of the irrigation selling season, which is the first two quarters of 2013, should be strong. I don't think we are in any business with stronger long-term global drivers than our irrigation business. The increasing demands worldwide for food production to meet the needs of a growing population and in many places better diet would put tremendous pressure on the way production agriculture uses water. This does not mean however that this business will not be cyclical anymore, short-term drivers such as farm income, growing conditions, and general economic conditions, as well as government policies, would influence the environment for this business also going forward. But the trend line I've no doubt will continue in an upward direction.

The profitability of our Engineered Infrastructure Product segment continues to be unsatisfactory, as a result of downward pressure on public spending in many parts of the world. The businesses within this segment in the Asia-Pacific region access systems poles and highway safety products are operating quite well, but our businesses in North America, and in particular in Europe, continue to be under tremendous pressure. All these businesses are profitable however, just not to the extent these businesses have been and will be capable of in a better external environment. So we continue to focus on what we do control improving the way we run these businesses as we wait for market conditions to improve.

Our Global Coatings businesses continue to operate well and at a high level of profitability. These businesses for the most part will grow with the general economy. During the current quarter we experienced a weakened in demand in Eastern Australia, which led to this segment slight decline compared to the fourth quarter of 2011.

Since we last spoke we have closed on two acquisitions. In December, we acquired a Premier Canadian Galvanizer with three locations and this is our first move into the strong Canadian economy for our coding segment. We continue to see codings acquisitions in particular galvanizers as core through our growth strategy.

Last week, we acquired the Locker Group of Australia. This company has three main product lines, access systems, perforated, and expanded metals, and screening media for the mining industry. The Locker Group gives us complimentary products and geographic footprint through our Webforge line. The Locker Group operates three manufacturing facilities in Australia, one in India, and a small facility in China.

While we already have significant concentration and therefore exposure to the Australian economy, we feel that the Locker Group acquisition will strengthen the access system businesses we already participated in there.

Turning to other financial measures, the tax rate for the quarter was higher mostly reflecting final adjustments related to the 2011 legal reorganization. Our rate for the year was 35.2%. Our expectation is that long-term tax rates will be between 33% and 34%. The impact of currency translations and operating income this quarter was minimal.

Inventories increased compared to last year to support higher sales levels. Depreciation and amortization for the quarter was $18 million and capital expenditures was $38 million. For 2013, we expect depreciation and amortization of about $70 million and capital spending for the year to be above maintenance level as we invest in capacity support growth in our businesses. We expect a modest increase above the $97 million invested in 2012.

For the year 2012, we saw increased sales, increased profitability, and improved quality of earnings in every single segment, including the Engineered Infrastructure segment, where earnings increased more than 25% despite a very difficult environment in many parts of the world.

Our operating income as a company grew from 9.9% to 12.6% of sales reflecting good operational performance and leverage. Looking throughout the remainder of 2013, we expect continued strength in our utility structure segment with increased revenue, increased earnings, and better quality of earnings.

The current environment for our irrigation segment is as strong as I have ever seen it, which should lead to good performance in this segment at least for the first two quarters of 2013. As you know, come summer growing conditions in the Northern Hemisphere, commodity prices, farm income expectations will determine the strength of the next selling season which starts in the fall.

We expect our coatings business to continue to operate at high profitability levels and whereas we do not anticipate a significant change in the market environment for our engineered infrastructure product segments, we expect continued improvement in their earnings as a result of internal efforts to improve productivity and some additional revenue.

In summary, we expect the current time to deliver another record in 2013.

Before I take your questions, let me acknowledge that this is the last conference call for our CFO, Terry McClain. For the last two decades he has been my partner on every call with you and I want to take this opportunity to publicly thank him for his significant contributions to Valmont's success over many years.

And we will now take your questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Julian Mitchell from Credit Suisse.

Charlie Clarke - Credit Suisse

Hi, guys. It’s Charlie for Julian. How are you?

Mogens Bay

Hi, Charlie. Good morning.

Charlie Clarke - Credit Suisse

Good morning. On the utility support structure segment, I was just wondering, it seems like you are done a lot with capacity from 3Q to 4Q with sales going from about 215 to 250. Just didn’t know kind of what earning you are in terms of adding capacity and what we should see going forward?

Mogens Bay

As I have said in the past a good number to use and plus or minus a little bit is that every year for the last couple of years we have added about a $100 million in capacity. And I think we will have probably another $100 million for capacity available in 2013 compared to 2012. And we will probably have $100 million on top of that so 2014 compared to 2013.

Some of the investments transition capacity are now online Monterrey, Mexico; Tulsa Oklahoma, I think Hazleton is about there. The new plant in Tulsa, Oklahoma will not be online until towards the end of the year. And we will see some capacity out of the Columbus, Nebraska, facility but that is really also capacity more geared towards 2014 and further.

Operator

Your next question comes from the line of Nathan Jones from Stifel.

Nathan Jones - Stifel

Mogens, you said a few months ago you talked about 15% margin expectation in the utility support structures business and put a range of 13% to 17% around that depending on makes and lakes of production round, etcetera. You just put up an 18.7% margin which hasn’t been changed into Q, getting some of that still back in 2009. Can you give us some more color on how you achieved this margin in the fourth quarter, and what the potential is to repeat those margins or closest to them even in one quarter next year?

Mogens Bay

I addressed that in my talk as you clearly picked up, you said even one quarter next year. I can’t promise you that we will not retain that in one quarter of next year. But as I said, looking at the fourth quarter we have some good projects come through we have good productivity, we didn’t have any major issues we had to deal with. And then we get very good levels.

Going forward, I think that I have said that in basically good markets we should count on mid-teens operating income, I think that’s still the case. But, when things go well - we have good projects going through we can be slightly above that as you saw in the fourth quarter. But, I’m not expecting the year 2013 to run at 18.7%.

Nathan Jones - Stifel

Are you accepting the year 2013 should be above that 15% expectation that you laid out previously?

Mogens Bay

Yes.

Nathan Jones - Stifel

In irrigation with the backlog up 140%, could you talk about how you think revenue is roughly progressed throughout the year? If your major competitor talked about demand being put forward earlier in the year as customers are concerned about actually being able to get caught up. Are you seeing the same thing?

Mogens Bay

Well, I would say that the industry probably is basically sold out. And I would say that, what I would call, the tsunami of orders coming into towards the end of the year is probably reflecting some concern. But, it will take a while to get through that backlog. We have no concerns that we won’t have very strong revenues and basically operating at capacity through at least the first four, five months of this year.

Nathan Jones - Stifel

Are you continuing adding capacity in irrigation?

Mogens Bay

We are flexible on capacity and obviously we have been adding capacity by becoming more productive and adding more people and adding equipment. We have currently under construction with a second gearbox manufacturing facility. We're the only company in the industry that manufactures our own gear boxes and we are adding a second facility to keep up with demand in that component of the business. But as this business continues to grow over time and, as I said, cyclicality hasn’t disappeared from this business, but the trend line I have no doubt is hot. We will be able to respond to that and add capacity where needed not only in this country but also around the world.

Operator

Your next question comes from the line of Arnie Ursaner from CJS Securities.

Arnie Ursaner - CJS Securities

First, I'll congratulate Terry, and I know you have got a lot of things you are looking forward to doing and again thank you for all your help along the years.

My first question relates to corporate expenses obviously you've had a pretty good jump. What in that might be non-recurring and how should we think about a run rate on corporate expenses for the upcoming year?

Mogens Bay

Arnie, I'm going to turn that over to Mark Jaksich, but I know we can always count on a question from you on corporate expense so I'm sure he's prepared.

Mark Jaksich

Good morning, Arnie, really what drives that corporate expense number quite a bit is incentives, not only and really in particular it’s the long term plans and the movement of the stock price and how that affects the expenses in that plan. As you know, the stock price went up quite a bit during the fourth quarter and so that resulted in some additional expense. And I think in the past week Heyse indicated that we would be around $12.5 million to $13.5 million in the quarter at normal kind of targeted incentive range, and that still remains to be the case.

Arnie Ursaner - CJS Securities

Well, that’s what I was trying to get to. Obviously, you can’t control where your stock will be but when it does do well it dramatically affects your long term comp plan, which is what you are indicating it did.

My other question relates back to the utility business. . The $434 million in backlog that is roughly about a half a year of revenue, but it sounds like you are increasingly confident not just for the balance of this year but well into 2014 or maybe even 2015. Can you talk a little bit more (inaudible) about how we should think about the backlog relevant to the way orders come in and why you do have the confidence to expand capacity in this area?

Mark Jaksich

First of all, I did mention '14 and you added '15, but this is the way to look at it. When the orders that are in the backlog numbers that we announced are orders that are firm orders delivery time established final designs done. We know when to deliver et cetera, et cetera. We've visibility to orders that we know that are going to come in that we're working on, we've been awarded. But it isn't, the paperwork isn't finalized. So we are very confident that we'll have no problem filling up this year.

When it comes to 2014, we look at and talk to our utility partners as to what their plans are. And at the current time, we check or we follow mostly large projects. There are a lot of small projects going on but the larger ones are the ones with the most visibility. And when we look at the number and size of large projects, in '14 that we can see now compared to what we know what's going to happen in '13 that number is up. That's what gives us confidence for 2014 too. That's based on the current environment and the thinking of the utilities and who knows what happens between now and then. But that's the only thing we have to go on.

Arnie Ursaner - CJS Securities

Can I clarify question if I can. You've been impacted in the past by some lower margin work that you had taken on when demand wasn't there and you've talked about it impacting results. Is all the lower margin work that you had taken on essentially out of? Is it finished and moving forward, and can you speak about pricing trends given the tightness on the new work you're taking in?

Mogens Bay

Well to your first question, I'd say yes. The orders we had identified that were low margin have all been finalized and delivered. Pricing environment has been a little better, which is reflected in our better performance lately. Now this is also an industry that's attracting a lot of new interest players that are adding capacity and we don't control pricing. But in general the environment is better today than it was a year ago, and unless we get too much capacity added to the industry and not enough discipline in pricing into this industry, I think we should continue to see the environment we're in right now.

Operator

Your next question comes from the line of Sean Williams from BB&T Capital Markets.

Sean Williams - BB&T Capital Markets

Yeah, let me also add my congratulations in the quarter and thank you to Terry for wonderful years of service. I'm looking forward to reading that that history of Valmont book one of these days.

Terry McClain

Thanks.

Sean Williams - BB&T Capital Markets

Let me just start off with irrigation. I mean incremental margins, obviously you're talking about running in a near the top of capacity utilization for that segment. But I mean, incremental margins in irrigation have been running in a north of 50% in the back half of 2012. I mean can you continue to put up kind of, should we be looking for 20% plus operating margins, based out of kind of 50% incremental margins for that business or just help me think about what's driving that significant year-over-year margin expansion? Are you getting some juice on pricing? What should we really be looking at there?

Terry McClain

Well, I think a lot come from mix and the lot comes from North America versus International. And I'd say that we are very pleased with the kind of operating income, percent of this, we've seen lately in the irrigation business. I do not count on 20% operating income in this business going forward, does that mean it couldn't happen for a quarter, no that's possible. But again it comes down to mix. And I would say, if we can hang on next year to the same type of operating margins that we've had this year, we'll be happy.

Sean Williams - BB&T Capital Markets

Okay. Thank you. That's helpful. And then, for the backlog that you currently have for irrigation you would expect most of that to get delivered in the first and second quarter of 2013 or would you go beyond that?

Terry McClain

No, no that's all for the first and second quarter.

Mogens Bay

First and second quarter.

Sean Williams - BB&T Capital Markets

And then, one additional question here, could you just talk about where we're in terms of the acquisition pipeline? You've gotten little bit more active here recently but your balance sheet remains -- you've got plenty of fire power there. Can you talk about what's on the horizon, could we see something larger or should I be looking for more kind of these kind of smaller bolt-on?

Mogens Bay

Yes, to all of the above. Actually, we've not become more active, we've just been able to close a couple of acquisitions. As I've said many times, timing our acquisition is impossible to predict. Our pipeline is pretty robust in all of our business units. When we will be able to find the right value on an acquisition that fits into one of our segments, is unknown, but we are actively pursuing. And I would say, currently there is nothing that's close to being finalized of basically any size.

Sean Williams - BB&T Capital Markets

Is there any one segment or geography that you're focusing on? I mean, at one point EIP seemed to be the focus for M&A, is there -- is that still the focus?

Mogens Bay

Well, I would say that in all our segments we have positive cash flows. We're not -- so we don't have to make decisions that one segment has to fund the growth of another segment. We look at the returns we can get from acquisitions and if we can get a good return in the coatings business that looks better than one in EIP and if we had to choose between the two we'd pick the one with the best returns.

So we're not prioritizing -- we're also not prioritizing between International and North America. We don't have a objective that says that 60% of our revenue should come from outside the U.S. We've lately seen great growth in North America particularly in utility and irrigation and we love it that would mean that the relationship between North American revenue and international is swinging a little bit back towards North America, which does bother us on any order.

Operator

Your next question comes from the line of Brian Drab from William Blair.

Brian Drab - William Blair

All right, also for the comments for Terry thanks for all the years of helping me and I can get up to speed on the company and learn about the company and congratulation on a excellent career.

Terry McClain

Thanks.

Brian Drab - William Blair

Just first question on the irrigation segment. What's the outlook for International irrigation business and could you talk a little more specifically about the pressure that's on that business in the fourth quarter just on the international irrigation?

Mogens Bay

Well in the broader sense over the last couple of years when we've seen tremendous growth in North America, driven by the factors, farm income, and the additional catalyst being the drought in this country. Internationally we've seen growth also but not to the same extent. There are still many parts of the world where we're doing pioneering work the concept of center pivot irrigation is being more and more accepted around the world. There is no competing technology for large-scale agriculture that delivers water more efficiently than center pivots. Well there is still a lot of pioneering work taking place.

And I would say also profitability internationally whereas its good its double-digit operating income it's not as strong as in North America as a result of the additional expense involved usually receivables go out a little longer, we've to have more footprint around the world that adds SG&A expenses but long-term of course the international markets should outpace the North American market, but these are really long-term plans. The question of efficient use of water for agriculture is a global issue and how fast it gets implemented is really up to local governments and local conditions. It's a long answer to a short question but the future lies around the world.

Brian Drab - William Blair

Okay. I appreciate the long answer thanks. And next question is on the coatings segment. There has been ongoing consolidation in that industry, you have some of your competitors making positions of smaller coating businesses and specifically galvanizing businesses. Has that contributed to a favorable pricing environment there, and can you talk about your expectations for pricing and margins in that segment over the next 12 months?

Mogens Bay

The answer to your question is probably yes, the more consolation, the more pricing discipline that may be in that market. Operating at the levels we are now, which is around 20% operating income, is in my opinion a very solid level for that business. Can it eek up a little bit or slide a little bit? Yes, but I wouldn’t expect profitability in that business to move significantly up from where it is today. I think our growth in that segment is kind of come from as you pointed out acquisitions and from general economic growth.

Brian Drab - William Blair

And then just one more on the other segment. What can we expect from margins there going forward, I think the highest level of operating margin in the other segment since the acquisition of Delta and so have difficulty forecasting margins for that piece of the business?

Mogens Bay

I think for now expect that segment to stay above the operating income level where it is today.

Brian Drab - William Blair

The level that it was for the full year or for the quarter?

Mogens Bay

For the full year. I think for the full year of -- it was about 14% for the full year and this is up a little bit, couple of tenth of a percent from the year before. So I think that’s what you should model.

Operator

Your next question comes from the line of Brent Thielman from D.A. Davidson.

Brent Thielman - D.A. Davidson

Yeah, I guess from the utility business trying to get a feel for the revenue run rate over the next few quarters obviously you are growing but is the $250 million you did in Q4 a base we should think to build off for Q1 and then ramp through the year. But does anything stick out to you as far as Q4 goes that we shouldn’t be thinking to build off of?

Mogens Bay

Well, again, revenue can move a little bit from quarter-to-quarter, and revenue from the year 2012 was about $870 some million. And we probably have a good chance of having that past the $1 billion mark by maybe a little bit.

Brent Thielman - D.A. Davidson

And I'll circle back up now, but when you think -- I guess second question, when you think about your revenue growth forecast this year, are you assuming any acceleration in some of the other segments I guess specifically coatings or other, was it all utility and irrigation?

Mogens Bay

I think we are seeing revenue grow slight in EIP. We are seeing a good revenue growth in utility business. We will see a little bit in coatings mainly as a result of the acquisition in Canada. And we may see a little bit in the irrigation, but we don’t count for a lot in the second half for irrigation because we don’t yet what’s going to happen there. And that’s how we kind of end up with the total numbers for the year, the other segment pretty flat from this year.

Operator

(Operator Instructions). Your next question comes from the line of David Rose from Wedbush securities.

David Rose - Wedbush Securities

I have like a follow-up to the international irrigation questions. In particular is there anything that we can expect in terms of specific projects that you are overlapping, you culled out North Africa in this quarter, is there anything that’s coming up in the first or second quarter of which we should be aware?

And then, secondly, if you can give us a little bit more color on what’s going on in the international utility support structure business that drove things a little bit better?

Mogens Bay

Okay. On the irrigation side of the business, there is really nothing significant coming up in the next couple of quarters. I mean, it’s a very broad base business in this last quarter, the fourth quarter we did have a major project in North Africa in 2011 that did not repeat. But there is nothing particular on the horizon that would skew quarterly revenue beyond the normal broad business.

On the international utility side, yes, the fourth quarter was a good quarter. The quality of earnings in the international utility moved more than in North America depending on geography and quality of the projects we have taken. But also keep in mind that the international utility business in relationship to the overall utility business is very small. I would say roughly that North America accounts for about 90% of the business in that segment.

Operator

Your next question comes from the line of Brent Thielman from D.A. Davidson.

Brent Thielman - D.A. Davidson

Yeah, just on the engineered infrastructure product segment. I guess your Australian coatings business in the season pressured the rest of the Australian business seem to see some pressure though the rest of the Australian business and EPI was stronger. Can you just help me understand that a little bit more?

Mogens Bay

Well, I think we had one quarter of what we saw some soften again Australian Coatings business, and I would not read too much into it. Our overall business in Australia has been pretty robust and the economy is pretty good down there. So, I wouldn't over interpret what happened in irrigation in one quarter in Australia.

Brent Thielman - D.A. Davidson

Okay. And then, just a second question on the EIP Segment. Does your North American businesses see better demand I guess specifically, in lighting and traffic? Will that be a positive impact on margins, if it becomes a bigger portion of the geographic mix, or does it matter much from a mix point of view?

Mogens Bay

No, I would say that if you look at the mix today, the best profitability in the Asia-Pacific region, next comes North America and after that comes Europe, all three regions are profitable. But if we get more revenue at decent margins in North America, yes, it will improve our quality of earnings in North America and the same will be the case in Europe. So, the core of your question is, does geographic improvement in North America and Europe lift the overall margins in that segment, and the answer to that is yes.

Brent Thielman - D.A. Davidson

Okay, thanks, and Terry, thank you and enjoy your retirement.

Terry McClain

Thank you very much.

Operator

Your next question comes from the line of Sean Williams from BB&T Capital Markets.

Sean Williams - BB&T Capital Markets

Just I wanted a follow-up on lighting and traffic as well. It seems like I mean, the macro pieces should start to fall together for that unit but I mean, it sounds like from your commentary you are maybe being still a little bit hesitant in terms of top-line growth. I mean, help me understand I mean should we only be seeing in a start seeing highway dollar starts to flow into U.S. business? I mean, certainly, state and local but this look like they are getting a bit better, housing recovery will certainly help that. I mean, should we be looking for that lighting and traffic business to start to accelerate I don't know in the second half of '13 or is it more of a 2014 story?

Mogens Bay

Well, I would say that in North American structures we will probably see decent revenue growth this year and that should follow then also decent improvement in the quality of earnings. But remember, the highway bill used to be four, five year bills. Then, we had a number of short-term extensions, and then people got all excited about a two year bill. But a two year bill really does not do that much for major projects, it may accelerate or repair work and minor projects but communities whether local or state, they need to have better visibility of that. Now, the President now talks about more investment than our infrastructure, and if you can tell me when congress will get the act together, I'll give you a better forecast.

Operator

Your next question comes from the line of Arnie Ursaner from CJS Securities.

Arnie Ursaner - CJS Securities

Hi, quick follow-up on the acquisition of Locker Group Holding. It seems to be a nice expansion into the previous businesses you had bought, when you bought Delta Plc in perforated metal and non-worked -- non-res market, and Mogens, you talked about it possibly being a fourth leg at some point. Is this a pretty good indication that in fact you're ready to move this forward and at some when do you move it more into the U.S.?

Mogens Bay

Well, as we said at the time of the acquisition, there were two businesses that we acquired that could be platforms for growth. Highway safety products and the access systems, and these are two industries we continue to look closely at. And part of our acquisition pipeline companies that we have looked at or talked to, but haven’t come to any conclusion on yet, fit in a couple of these sub-groups in the segment. Now it so happens that the first one that actually became a buyable acquisition for us was in the same geography where we started out, and that is not an indication that we want to stay in Australia, New Zealand. It just is the one where the timing was right. So, we continue to look at those businesses in a global sense, but there's nothing right around the corner in the geography of North America.

Arnie Ursaner - CJS Securities

And you wouldn’t be able to organically grow in North America starting from scratch. There are other people who have already to established?

Mogens Bay

What I would say that in these businesses acquisition is probably the most likely way to go. It would be very difficult and long term, a very time consuming to start from scratch in these businesses.

Arnie Ursaner - CJS Securities

Okay. My final question is on the small acquisitions of some galvanizes in Canada. I think you mentioned you hadn't been there before. So could you give us a sense of how acquiring, you want to be market leaders in the markets that you go after. How does this three acquisition, three planned acquisition fit into the strategy of being a market leader, and maybe discuss the Canadian market for galvanized?

Mogens Bay

Well, first of all, we're already in Canada in our whole businesses and in our irrigation business. So we're not unfamiliar with Canadian economy which is pretty good. And yes, we want to be leaders in our market, but what is unique about galvanizing market is that leadership doesn’t necessarily mean broad geographic coverage. It's you actually create more leadership by concentration then diverse geographic footprint because you can only transfer products to be galvanized a relatively short distance, a few hundred miles. So, these three galvanizers are fairly concentrated in the Ontario area. And so, I think it's a good solid footprint to start. We'll relook at all opportunities in Canada? Surely, yes, but the way we look at leadership in our businesses is slightly different than in the coatings business as it is in the other businesses.

Operator

At this time, there are no further questions. I'll now turn it back over to the presenters for any closing remarks.

Jeff Laudin

Thank you, Jodie. This concludes our call and we thank you for joining us today. This message will be available for playback on the Internet or by phone for the next week. We look forward to speaking with you again next quarter, and at this time Jodie will read our forward-looking statement.

Operator

Including in this discussion are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions that management has made in light of experience in the industries in which Valmont operates, as well as management's perceptions of historical trends, current condition, expected future developments, and other factors believed to be appropriate under the circumstances.

As you listen to and consider these comments you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control and assumptions. Although management believes that these forward-looking statements are based on reasonable assumption you should be aware that many factors could affect Valmont's actual financial results and cause them to differ materially from those anticipated in the forward-looking statements.

These factors include, among other things, risk factors described from time to time in Valmont's reports to the Securities and Exchange Commission, as well as future economic and market circumstances, industry condition, company performance, and financial results, operating efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, and action and policy changes of domestic and foreign governments.

The company cautions that any forward-looking statement included in this discussion is made as of the date of this discussion, and the company does not undertake to update any forward-looking statement.

That does conclude today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!