AZZ Inc . (NYSE: NYSE:AZZ) has announced a record-breaking fiscal year 2024, with total sales reaching $1.54 billion, highlighting significant growth in its Metal Coatings and Precoat Metals segments. The company reported a 16.2% increase in sales and a substantial rise in net income from continuing operations to $101.6 million.
Adjusted earnings per share grew to $4.53, and adjusted EBITDA increased by 24.8% to $333.6 million. AZZ also reduced its debt by $115 million and received positive ratings from S&P Global and Fitch Ratings.
Key Takeaways
- AZZ Inc.'s total sales for fiscal 2024 reached a record $1.54 billion, with Metal Coatings sales at $656 million and Precoat Metals sales at $881 million.
- Net income from continuing operations rose significantly to $101.6 million from $66.3 million in the previous year.
- Adjusted earnings per share increased to $4.53, up from $3.36 in the last fiscal year.
- Debt was reduced by $115 million, with no debt maturities until 2027.
- The company received positive ratings from S&P Global and Fitch Ratings.
- AZZ plans to invest $100 million to $120 million in capital expenditures for fiscal 2025, including the construction of a new aluminum coating plant.
Company Outlook
- AZZ intends to spend $100 to $120 million in fiscal 2025, focusing on the construction of a new aluminum coating plant.
- The company expects equity and earnings from the AVAIL joint venture to be between $15 to $18 million.
- Debt reduction is targeted between $60 to $90 million, with potential small acquisitions on the horizon.
Bearish Highlights
- The company did not factor in any additional cuts in their plans and repriced in March 2024, which was not part of the original forecast.
Bullish Highlights
- AZZ's financial position remains robust, with no immediate debt obligations and positive credit ratings.
- The company is set to benefit from infrastructure investments and the transition from plastics to aluminum.
Misses
- There were no specific misses mentioned in the earnings call summary provided.
Q&A Highlights
- AZZ has a 21% statutory tax rate and estimates a 3-4% tax rate for North America.
- Around 75% of production is contractually committed, with the possibility of more business from existing customers.
- The company is not reliant on a single customer due to a seven-year contractual arrangement and diversified production capabilities.
In conclusion, AZZ Inc. is poised for continued growth with its strong fiscal performance and strategic investments. The company's leadership is confident in its ability to deliver strong results and generate substantial cash flow in the upcoming fiscal year. Shareholders and market watchers can look forward to updates on the company's first-quarter results in the coming months.
InvestingPro Insights
AZZ Inc. (NYSE: AZZ) has demonstrated a remarkable financial performance in its latest fiscal year, with a robust increase in sales and net income. The company's strategic focus on growth is further substantiated by insights from InvestingPro.
InvestingPro Tips suggest that AZZ's net income is expected to continue its upward trajectory this year. This aligns with the company's recent achievements and future plans for expansion, including the construction of a new aluminum coating plant. Additionally, AZZ has proven its commitment to shareholders by maintaining dividend payments for 15 consecutive years, which underlines its financial stability and investor-friendly approach.
InvestingPro Data highlights several key metrics that underscore AZZ's strong market position:
- The company's Market Cap stands at a substantial $1.91 billion USD.
- AZZ's P/E Ratio is currently at 27.34, with an adjusted P/E Ratio for the last twelve months as of Q3 2024 at 22.54, indicating a potentially favorable valuation compared to earnings.
- Impressively, the company has experienced a Revenue Growth of 34.96% over the last twelve months as of Q3 2024, showcasing significant growth in its operations.
It's also worth noting that AZZ has seen a substantial price uptick over the last six months, with a 66.6% price total return, which reflects positively on the company's market performance and investor confidence.
For those interested in gaining deeper insights, there are additional InvestingPro Tips available, which can be accessed at InvestingPro AZZ if that was the case, does that suggest that maintaining guidance is actually more of a positive thing, because you are able to backfill some of that revenue?
Tom Ferguson: That is a good point, John. I think on the Metal Coatings side, yes, getting an earlier start. It kind of depends on what - yes. So, we did see some of that pull in and stay active. Hopefully, there are some additional projects that come in the pipeline - as we get into summer months and into fall. Then on the Precoat side, the normal ordering cycle, so the construction ramp up. I'm not sure a whole lot pulled in from first quarter, but potentially a little bit in terms of inventory buildup among some of our customers. So yes, we feel like the guidance is solid and as traditionally, we try to be conservative. And then that will continue to update that as the year goes on.
John Franzreb: Fair enough. And you also mentioned in the press release there was market share gains on the Precoat side. Can you talk a little bit about the market share gains, and where you are getting them from?
David Nark: Yes, John. This is Dave. I think, as you look at it, there are a couple of areas in the end markets, where we are seeing some improvement. We believe we are outperforming the market in the Construction segment. Also, in the appliance market, is another area where we are outperforming and seeing, some conversions taking place. So, those are the two main areas I'd point to.
John Franzreb: Okay. And one last question and then I'll get back in the queue. You talked about pricing initiatives on the Metal Coatings side of business benefited the quarter. Can you just go a little bit deeper on that? Is that in response to zinc prices? What is going on in the pricing initiative front on MC?
Tom Ferguson: We've always tried to talk about how we have tried to differentiate our value pricing versus zinc, but it does help. Zinc has been trending up. And so as zinc trends up, that tends to help support our price levels. I also think that, we continue to add services and anywhere from adding more transportation, so that we are able to be more responsive. But that also adds basically just revenue and flow through income and increases our price per hundredweight, if you will. So, I think all those things have - they bode well. We also have improved. We added another spin line late last year. So, we're getting the benefit of that. That tends to be at a higher price per hundredweight. It actually tends to be priced per piece. So, those are all things that have benefited us, and we hope to continue to benefit from, as we go forward this year.
John Franzreb: Great, great. Thanks for the additional color. I'll get back into queue.
Tom Ferguson: Thanks.
Operator: The next question comes from Adam Thalhimer with Thompson Davis. Please go ahead.
Adam Thalhimer: Hi, guys. Congrats on a strong quarter. And Philip, congrats on your retirement.
Philip Schlom: Thank you.
Adam Thalhimer: In Metal Coatings, so your gross margins were up 170 basis points in fiscal '24. Curious how that might trend in fiscal '25, if there is room for more improvement?
Tom Ferguson: I think as - we talk a lot about DGS and the leadership teams, and our playbooks. We believe we are benefiting from that, and we should continue to benefit. And hopefully, hold those margin improvements and continue to benefit, from the various or - tactics that we are using. We feel pretty confident with the team. As long - as volumes hold up, I believe we can drive those margins.
Adam Thalhimer: Okay. And then at Precoat, is this normal seasonality between November and February or sound like you also just had a really good quarter in Precoat in February?
Tom Ferguson: We did. So part of this is yes, it was a lighter winter than normal. But also I think just - we had mentioned last fourth quarter, where we were carrying a lot of customer inventory. And we cleaned that out as we got into the fiscal year. Good, good operating performance by the team in Precoat. And then, so this fourth quarter, I think it was the benefit of kind of normal customer inventory sitting in our facilities, which allows us to drive productivity and efficiency. And then the volume, just we start to get - when volume flows through, those margins tend to pop nicely.
Adam Thalhimer: Okay. And then, do you guys have - like an actual interest expense and tax rate forecast that is embedded in the guidance?
Philip Schlom: We do. I mean, we look at the forward curve on our interest rates. So, just like everybody else out there, we were expecting four to six cuts this year. Then we got out there and were able to reprice here in March '24, which wouldn't have been part of our original forecast.
Tom Ferguson: Well, we don't have cuts factored in.
Philip Schlom: We have the...
Tom Ferguson: Just the forward curve.
Philip Schlom: Just the forward curve.
Tom Ferguson: Not any additional cuts.
Philip Schlom: Not any additional cuts. Then on the tax rate, we have a 21% stat rate. Then we're primarily North America, so call it 3%, 3.5% to 4%. So that's kind of 23.5% to 24% tax rate is what we utilize.
Adam Thalhimer: Okay. I'll turn it over. Thank you.
Tom Ferguson: All right. Thanks, John.
Operator: Our next question comes from Jon Braatz with Kansas City Capital. Please go ahead.
Jon Braatz: Good morning, everyone.
Tom Ferguson: Good morning, Jon.
Philip Schlom: Good morning, Jon.
Jon Braatz: Tom, talk a little bit about Washington, Missouri. As you ramp up, what can you say about maybe startup costs, costs you're absorbing prior to production? And is there a little bit of a drag on margins for this fiscal year?
Tom Ferguson: No, there shouldn't be. I think we've got all that planned - in our budgets for how we're going to ramp up. And naturally, we've got a little bit of contingency in there, too. So, we've got some decisions to make, as the line gets tested out and comes online, whether we actually start producing at the end of the year, or whether we just carry in and meet the normal customer demand that's been committed. So, but in either case, I don't look for that to be a drag. So there should be an opportunity.
Jon Braatz: Okay. And how much of the production is committed at this point?
Tom Ferguson: 75% is contractually committed. And that's kind of - but that is how we've built the model and in fact that ends. So we've got 25% to go sell, although in this case, the customer that made that commitment, actually would have liked to have had 100% of it. So, we've got upside with this customer, which we hope to announce here in the next month or so.
Jon Braatz: Okay.
Tom Ferguson: And then secondly there's - it does give us the opportunity to go chase some other business, which I always like having that ability to do that.
Jon Braatz: At the most, what would you like to see committed by one customer? You're 75% now? I mean, would you be okay, at 85%, 90%?
Tom Ferguson: Yes, I think so. I always hesitate to get that dependent on one customer, but in this case, because it's a seven-year contractual arrangement. I'm less concerned, so to speak. And obviously, with that much business, we do have another plant in St. Louis that does - it's a smaller capability, but we do have another aluminum line well, too, actually. So, we do have that opportunity to pick up business and make sure that we balance it, between both plants.
Jon Braatz: Sure. Okay. Thank you very much.
Tom Ferguson: Sure.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tom Ferguson, for any closing remarks.
Tom Ferguson: Thank you for your time today. As you can tell, we're excited about our future, and I look forward to updating you, on our first quarter results in just a few months.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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