AZZ (AZZ) 2024 Southwest IDEAS Conference summary

Business transformation and strategic focus

• Shifted from a diversified portfolio to a focused metal coatings company after divesting non-core assets and acquiring Precoat Metals in 2022.

• Operations are concentrated in North America, with 41 galvanizing locations and three in Canada.

• Two main business segments: hot-dip galvanizing and roll coating (Precoat Metals), each holding a leading market share.

• Management team is highly tenured, with recent additions from the Precoat acquisition.

• Emphasis on high ROIC investments and efficient capital deployment.

Financial performance and capital allocation

• Sales reached $1.57 billion and adjusted EBITDA $346 million (22% margin) for the trailing 12 months ending August.

• Achieved 7% sales growth and 9% EBITDA growth, with steady, predictable performance.

• Debt-to-EBITDA reduced from 4.3x to 2.7x post-acquisition, with over $100 million in annual debt reduction targeted.

• Capital priorities: continued deleveraging, bolt-on M&A in core segments, and potential share repurchases if M&A does not materialize.

• Long-term dividend payer, with $52 million remaining in share repurchase authorization.

Growth drivers and market outlook

• Benefiting from secular tailwinds: infrastructure spending (IIJA), reshoring of manufacturing, and increased use of prepainted steel.

• Major projects in transmission infrastructure and semiconductor manufacturing (CHIPS Act) are fueling demand.

• Construction end market includes non-residential, data centers, industrial, and infrastructure projects.

• Greenfield plant near St. Louis is a $125 million investment, with 75% of capacity under a seven-year, $50 million/year contract.

• Plant is ahead of schedule, with production ramping up in the next fiscal year.