AZZ incorporated (NYSE:AZZ) Q1 2020 Earnings Conference Call - Final Transcript

Jul 08, 2019 • 11:00 am ET

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AZZ incorporated (NYSE:AZZ) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Thomas E. Ferguson

and contribution from the acquisition of Tennessee Galvanizing in K2 partners. Overall we generated $289 million in revenue, which is over 10% growth versus Q1 fiscal year 2019. Metal coatings team improved operational efficiencies as usage of DGS which is our Digital Galvanizing System continues to grow in our galvanizing plants. We also experienced improved contribution from Surface Technologies and continued our emphasis on value pricing. We experienced lower cost zinc flowing through our kettles, although labor costs continue to rise as the craft labor market remains tight.

Overall we were able to drive net income up over 35% versus first quarter last year to $21.3 million. While our consolidated bookings were down 13% as compared to the first quarter last year. It is important to note during the first half of fiscal year 2019, we booked two large Chinese orders with $45 million in the first quarter and $55 million in the second quarter and also had a very large international order for welding solutions.

We continue to build on the positive momentum in the energy segment with a strong backlog of more than $300 million. This sets the stage for solid performance into the back half of the year, while our metal coatings business continues to gain traction from our key initiatives to drive growth both organically and through acquisitions. The metal coating segment revenue increased 6% from the first quarter of last year. Operating margins increased to 24.1% compared to 21.9% in the first quarter of fiscal 2019. This is due to lower zinc costs flowing through our kettles value pricing and the immediate contribution our two acquisitions made in the quarter.

We have taken steps to improve labor productivity and are seeing our digital galvanizing system driving greater operational efficiencies and productivity. We remain the industry leader in North America with 41 galvanizing plants. We are pleased to be gaining meaningful traction in our new businesses, powder coating plating (ph) and galvanized rebar. These make up our AZZ Surface Technologies business group. This gives us growing confidence that our investments will yield positive financial performance in the years to come.

Our energy segment high voltage bus business had a strong first quarter, executing on a large contract in China that along with other Chinese contracts will continue to be shipped throughout this fiscal year. While some of our electrical serve markets display an improvement compared to prior year our oil patch businesses are seeing somewhat reduced demand. We're especially pleased with the demand for our specialty welding solutions both domestically and internationally. Particularly as our investments in Europe, Brazil and Canada have positioned us to participate in these opportunities and reduced our dependence on the U.S. nuclear market.

We remain somewhat cautious due to the uncertainty related to tariffs and the Chinese trade situation. As well as the tighter market for labor in many of our U.S. locations. Looking forward we are reaffirming our previously issued fiscal 2020 guidance of earnings per share in the range