LINDSAY CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• International Irrigation: Delivered 37% year-over-year revenue growth, primarily from the MENA region project, with early positive sales trends in Western Europe and Latin America. Brazil order volume stabilized, and regional financing programs in Parana and Sao Paulo states are expected to support stronger volumes in H2.
• Infrastructure: Focused on cost management, finalized a $20+ million road zipper system contract in the Northeast, expecting full delivery in Q2. Saw growth supported by improved manufacturing efficiency and lower operating expenses.
• Market Outlook: North America market slightly weaker but affected by agricultural aid and federal spending bill. International markets, especially MENA, remain strong due to food security and water scarcity issues. Brazil market is stabilizing with lap of strong growth and credit programs as potential uplift.
• Innovation: Closed the acquisition of a minority interest in PESL Instruments, adding capabilities to FieldNET and FieldWise platforms and accessing over 240,000 connected devices.

Segment Performance

• Irrigation Segment: Revenues for the quarter increased 5% to $147.1 million compared to $140.2 million in the prior year. North America irrigation revenues were $77.7 million, down 13% due to lower unit sales volume and a less favorable mix of shorter machines. International irrigation revenues were $69.4 million, up 37% primarily from the MENA region project and growth in Europe/Latin America, but offset by lower revenue in Brazil. Irrigation segment operating income was $24.7 million, 2% lower than the prior year, with operating margin lower due to a larger proportion of international project revenues.
• Infrastructure Segment: Revenues were $19.2 million, down 9% compared to the prior year due to timing of Road Zipper System lease revenue and lower road safety sales. Operating income was $4.1 million, up 14%, with an operating margin of 21.5% of sales vs. 17.1% in the prior year, driven by improved manufacturing efficiency and lower operating expenses.

Guidance

• International Markets: Expect strong performance in developing markets, particularly MENA, with line of sight to additional projects in the region this fiscal year. Brazil market is stabilizing with regional financing programs supporting H2 volumes.
• Infrastructure: Anticipate growth supported by the large road zipper project, with the $20+ million project expected to be accretive to operating margin. No material changes expected to IIJA, but cost inflation impacts actual impact of federal funding.
• Profitability: Improved manufacturing efficiencies and margin mix from higher road zipper revenues are expected to bolster profitability in the infrastructure segment in the near term.

Risks

• Competitive Projects: International projects are very competitive with uncertain timing, making it difficult to predict project progression.
• Currency Translation: Unfavorable foreign currency translation effects impacted international revenues by approximately $2.1 million in the current year quarter.
• Timing Volatility: Volatility in infrastructure lease revenue due to timing gaps between project end and new project start, affecting quarterly results.

Question and Answer

• Q: Elaboration on irrigation mix effect of shorter systems.

A: Brian Ketcham noted it's regionally driven, like in the Pacific Northwest where smaller, shorter systems are added to odd-shaped ground, varying by quarter but margin-impacting.

• Q: Follow-on service for large infrastructure project.

A: Randy Wood said there will be parts consumption, initial stock parts for maintenance, with aftermarket potential, though service is mostly dealer revenue.

• Q: Timing of lease revenue volatility.

A: Brian Ketcham explained it's due to project start/end gaps, but stable over a full year though there can be quarter-to-quarter timing differences.

• Q: Brazil market bottoming.

A: Randy Wood stated Brazil is stabilizing, with lap of strong growth, and credit programs as potential uplift, but near term not significantly better or worse.

• Q: Pricing pressure in domestic irrigation.

A: Brian Ketcham said it's due to selective discounting, margin neutral overall, with steel coil prices softened but other raw materials still inflationary.

• Q: CapEx projects update.

A: Randy Wood reported CapEx projects like Nebraska facility expansion are on track despite short-term weather issues.