Key Takeaways
- Valmont Industries reported a decrease in net sales by 4.3% in Q3 2023 compared to the same period in 2022.
- The company recorded an impairment of goodwill and intangible assets in the Agriculture Technology reporting unit, mainly due to slower growth in Prospera’s agronomy technology solutions.
- EMEA project sales and Brazil led international sales growth in Agriculture, while North America saw a decrease.
- Valmont announced an organizational realignment program to streamline administrative support and reduce costs.
- The company updated its full-year financial outlook, revising its net sales growth and earnings per share.
Agriculture Segment (28.2% of Net Sales)
Valmont’s agriculture segment saw a decrease in sales by 8.8% year-over-year. The decline in North America was primarily due to lower irrigation equipment sales volumes, attributed to muted farmer sentiment. However, international sales grew, particularly in the EMEA region and Brazil, which had a record sales quarter. The third quarter also benefited from approximately $5.5 million of favorable foreign currency translation impacts compared to last year.
The operating loss in the agriculture segment was recorded at ($99.7) million, primarily due to a $137.3 million impairment of goodwill and intangible assets. The impairment was mainly driven by the significantly slower growth of Prospera’s agronomy technology solutions compared to the original financial projections.
Organizational Realignment Program
Valmont announced a broad organizational realignment program aimed at reducing layers of management and offering a voluntary early retirement program, among other headcount reductions. These actions are expected to enable a more efficient and effective administrative structure for driving long-term profitable growth while still investing in growth initiatives. The program affects both reportable segments, including agriculture and corporate, and is targeted to take place during 2023.
Updated 2023 Full-Year Financial Outlook
Valmont updated its full-year financial outlook, revising its net sales growth to (-3%) to (-4%) and its GAAP Diluted Earnings per Share to $7.20 to $7.50. The impairment charge significantly reduces the future Prospera technology intangible asset amortization, and the realignment program announced in this release lowers future stock-based compensation to be recognized for Prospera employees.
CEO Comments
Avner M. Applbaum, President and CEO of Valmont Industries, emphasized that despite near-term headwinds in specific markets, the long-term outlook across all end markets remains positive. The company aims to maximize financial performance through cycles by maintaining discipline on capital allocation and Return on Invested Capital (ROIC).
Image provided by Valmont Industries
