VALMONT INDUSTRIES INC VMI

The Infrastructure segment delivered a strong quarter, with North America Utility sales growing 33.9% and North America Coatings sales up 16.6%. This performance was driven by robust market demand from grid modernization, power demand, data centers, and electrification, which management views as the early stages of a multi-year investment cycle. Commercial execution, pricing discipline, and ongoing investments in capacity and throughput are translating this demand into profitable growth.

Global agriculture markets remain challenged by tighter farm economics in North America and reduced financing rates for irrigation equipment in Brazil, with overall funding below last year's levels. The Middle East business is experiencing project delays due to regional conflict. Despite these headwinds, the segment's operating margin improved 90 basis points to 16.5% through disciplined cost and risk management, demonstrating resilience. Aftermarket part sales grew approximately 6% and technology services increased 7%.

North America Telecom sales decreased 26.1% as carriers adopted a more selective approach to capital spending following the peak of the 5G deployment cycle. Management expects these conditions to persist through the balance of 2026. Despite lower sales, the business maintained strong profitability through commercial execution, operational improvements, and disciplined cost management, with confidence in future investments driven by increasing data consumption and network capacity needs.

Across the portfolio, Valmont emphasized its focus on improving commercial execution and operational performance to enhance returns through the cycle. This includes disciplined pricing and cost management, which helped offset inflationary input costs like steel (up 27-30% YTD) and diesel (up 45% YTD). Management views these cost pressures as short-term and manageable, not impacting long-term margin trajectory or competitive position.

The company continues to deploy capital in line with its balanced strategy, investing $36 million in capital expenditures during the quarter, primarily for utility capacity expansion. Valmont also repaid $60 million on its revolving credit facility and returned $75 million to shareholders through $60 million in share repurchases and $15 million in dividends. Approximately $451 million remains available under the current share repurchase authorization.

Valmont reiterated its long-term financial framework targeting 7% annual sales growth, 17% operating margins, double-digit annual EPS growth, and a 21% return on invested capital by the end of 2029, using 2025 as the baseline. The strong Q2 results and ongoing strategic initiatives provide continued confidence in achieving these objectives and creating long-term shareholder value.