AZZ (AZZ) Q4 FY26 earnings call: guidance and Q&A

What are the specific growth expectations for Metal Coatings and Precoat Metals in FY27, and what is Precoat's residential construction exposure?

Metal Coatings is expected to grow mid-to-upper single digits. Precoat Metals is expected to be relatively flat year-over-year, with about one-third of its construction-driven end markets (75% of total) having residential exposure.

“So from a metal coatings point of view, if you look at the projections for the next year, somewhere in the mid-single to upper single digits for that business. Obviously, ending the year very strongly, and that builds momentum coming into the year. As you look at the pre-cometals business, probably in and around where we've seen them. So relatively flat year-on-year as you look at the overall market...”

asked by Ghansham Panjabi · answered by Thomas Ferguson

What are the trends in zinc prices and the overall raw material basket, especially considering recent geopolitical events, and how is management mitigating these?

Zinc prices were trending up before recent disruptions, and general inflation is seen across both segments (acids, caustics, chemicals). The company uses value pricing and surcharges (for transportation/fuel) to offset these costs and maintain margins, noting that the marketplace expects price increases.

“I think from a zinc perspective, there hasn't been much effect. Prices were trending up before all of the disruption. And as you know, that's about to months in our kettles and we were feeling that coming into the year anyway. So we've but there's general inflation going on within both segments, whether it's pay prices going up, which also which is more of a pass-through on the precise side, but on the albanizing side, it's acids, caustics, chemicals, as I like to call it, super open do all that stuff is inflating.”

asked by Ghansham Panjabi · answered by Thomas Ferguson

Beyond high interest rates, what other significant affordability or hindering factors are impacting the commercial non-residential market?

Project costs have increased due to inflation and geopolitical events. Additionally, tariffs on imports are causing constraints in the availability of sub-grade materials for Precoat Metals customers, leading to less inventory holding and more quick-turnaround, customized orders.

“Yes, Daniel, really pretty much everything we've described in the remarks. When you think about nonresidential, we've seen project costs overall from some of our end markets and customer go slightly up and get inflated due to some of the things that Tom mentioned. Obviously, when we put our budget together, the war in Iran had not started yet.”

asked by Daniel Rizzo · answered by David Nark

Does the Metal Coatings segment have a sizable backlog given the long-term nature of its projects?

Metal Coatings generally does not have a formal backlog because of its quick turnaround times (e.g., Monday delivery, Friday return). Customers rely on AZZ's reliability. While not formally recorded, the company has good visibility into future demand through customer communications and broad-based infrastructure growth.

“Yes, it's really not part of our business. We I say this jokingly. A lot of our sites, they look out on the yard and then that's their demand and backlog for the week. But and we're really good at turning stuff. And so our customers depend on the fact that we're very, very reliable. They get it to us on Monday. We're going to have it back to them on Friday.”

asked by Daniel Rizzo · answered by Thomas Ferguson

How is AZZ handling data center demand across its facilities, how is this revenue categorized, and what does the M&A pipeline look like?

Data center projects are broad-based across many Metal Coatings plants, leveraging the network for large or multiple projects. Revenue categorization varies, often falling into electrical & industrial or construction. The M&A pipeline is strong, particularly for Metal Coatings bolt-ons (single sites, ~$15M sales, $4M-$6M EBITDA), with 3-4 active discussions and one in due diligence. Larger deals are further out.

“I'll let David answer the second part of it. On the first part, we just had our annual Metal Coatings, plant managers and sales managers meeting and so we've got 120 folks in there, and there was hardly a 1 single plant manager or sales manager, I talk to that isn't working on one, 2 or 3 data center projects at any given time right now.”

asked by Adam Thalhimer · answered by Thomas Ferguson

What is the potential EBITDA impact of hot dip capacity expansions within the $90 million CapEx guide, and what is the company's appetite for buybacks versus M&A?

New kettles (like the one in North Texas starting soon) are low-risk investments with demand already present, potentially adding a couple of million in EBITDA each. The current FY27 guidance already includes these. Regarding capital allocation, AZZ is committed to minimizing dilution with stock buybacks but prefers using cash for M&A opportunities due to the strong pipeline and immediate EBITDA uptick from acquisitions.

“I think as we're looking at adding kettles, we're adding 1 here in North Texas because of demand. It will be starting up here in the next month or so. So it's going to have some impact. I'm struggling to want to publicly say what a new cattle is worth in terms of EBITDA. But it is going to have an impact. It's at a large site. So it's going to give us incremental capacity.”

asked by Nick Giles · answered by Thomas Ferguson

What is the current utilization of the Washington facility, and how is it expected to ramp up through the year?

The Washington facility is currently at about 40% utilization and is expected to ramp up to around 45,000 to 50,000 tons of production this year. It's progressing as expected, with different processes at slightly different stages, aiming for closer to 50% utilization in Q1 FY27.

“I'd say it's at about 40% now. It's going to continue to ramp and we've got yes, it's got to produce around 45,000 to 50,000 tons this year and we're feeling pretty comfortable with the trends that it's going to get there. And so that's really going to ramp up as we get to second quarter, third quarter, fourth quarter.”

asked by Gerard Sweeney · answered by Thomas Ferguson