Valmont Buys Canadian Assets - Analyst Blog
VMI) has purchased the assets of Canada-based Pure Metal Galvanizing. The terms of the buyout were not disclosed.Fabricated metal products maker Valmont Industries (
Pure Metal, which has annual sales of roughly CAD$34 million ($34.4 million), is a market leader in custom hot dip galvanizing in Canada. It operates five kettles out of three locations in Ontario.
The purchase of the Canadian galvanizing operations reinforces Valmont's global galvanizing business. The company sees the acquisition to be modestly accretive to its earnings for 2013.
Valmont is seeing significant strength across the utility and irrigation markets. The outlook for irrigation equipment is healthy while demand for utility support structures is expected to rise. The company expects to post double-digit earnings growth this year despite the European slowdown.
Valmont's Irrigation and Coatings segments are witnessing healthy momentum recently. In the Irrigation segment, improving North American equipment demand amid the ongoing drought conditions and higher farm income is boosting sales and profitability. The Coatings segment is benefiting from moderating zinc prices.
The company is also poised to savor incremental opportunity in the utility market. The global transmission and distribution markets are seen as major long-term growth opportunities.
Valmont is actively pursuing capacity expansion through new constructions and extension of existing facilities to meet the increasing demand from utility customers in North America. Moreover, it remains committed to returning value to its shareholders in the form of regular dividend payouts.
However, the company's core Engineered Infrastructure Products segment remains challenged by the soft market conditions in Europe. Nevertheless, the passage of a two year highway bill and improvement across the wireless communications and commercial lighting markets represents positives for this business.
Valmont, which competes with Lindsay Corporation (LNN), holds a short-term Zacks #3 Rank (Hold). We currently have a long-term Outperform recommendation on the stock.