AZZ at Oppenheimer Conference: Strategic Growth and Resilience

On Tuesday, 06 May 2025, AZZ Incorporated (NYSE:AZZ) participated in the Oppenheimer 20th Annual Industrial Growth Conference. The company presented a strategic overview marked by strong financial performance and future growth plans. While AZZ highlighted its resilience and strategic initiatives, it also acknowledged potential challenges such as tariff impacts.

Key Takeaways

• AZZ is focusing on debt reduction and strategic mergers and acquisitions (M&A).
• The company aims for a debt-to-EBITDA ratio between 1.5x and 2.5x.
• Fiscal year guidance includes sales of $1.625 to $1.725 billion and EPS of $5.50 to $6.10.
• The new aluminum coil coating line in Washington, Missouri, is a major growth driver.
• AZZ’s toll processing model mitigates commodity price risks.

Financial Results

• Fiscal Year 2024 Sales:

- Metal Coatings: $665 million

- Precoat Metals: $912 million

• Debt reduction of $110 million last year, with a commitment to reduce at least $165 million this year
• Expected net gain of more than $200 million from the sale of a minority stake in a joint venture, aimed at further debt repayment

• Fiscal Year 2025 Guidance:

- Sales: $1.625 billion to $1.725 billion

- Adjusted EBITDA: $360 million to $400 million

- EPS: $5.50 to $6.10

• Metal Coatings EBITDA Margin: 27% to 32%
• $100 million share repurchase authorization, with $52 million remaining

Operational Updates

• M&A Activity:

- Resuming M&A with bolt-on acquisitions in both segments

- Expecting to close one acquisition in Q1 of this fiscal year

• Washington, Missouri Plant:

- $125 million investment completed, dedicated to aluminum coating for the beverage can market

- Take-or-pay contract for $50 million with a large customer

- Targeting full run-rate capacity by the end of the fiscal year

• Technology Advancements:

- Digital Galvanizing System and Coil Zone provide real-time updates and visibility for customers

Future Outlook

• Focus on growing faster than GDP with new investments and acquisitions
• Continued emphasis on infrastructure projects, clean energy, and sustainability
• Managing leverage and enhancing shareholder returns through dividends and share repurchases
• Targeting full capacity for the Washington, Missouri plant by the end of the fiscal year

Q&A Highlights

• M&A Strategy:

- Exploring acquisitions in both metal coatings and precoat metals segments

- Metal coating acquisitions are typically smaller, while precoat metals acquisitions are larger

• Tariff Impacts:

- No direct impact from steel or aluminum tariffs due to the toll processing model

- Some effects on secondary items like wire and acids

• Washington, Missouri Facility Ramp-Up:

- Full run-rate capacity expected by fiscal year-end

- Ability to balance capacity across multiple plants in the St. Louis area

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

John, Oppenheimer conference host, Oppenheimer: Morning, everyone. Thank you for joining us today, at the Oppenheimer conference. With us today from AZZ is David Nark, who’s the chief marketing and communications and IR officer for the company. And just to give you a little background, AZZ is the leading independent galvanizing firm in The US. But with its recent acquisition, not so recent, couple about a year ago, they acquired Precoat Metals, and they’re a leading player in now in the in the metal coating precoating steel and aluminum business.

Results have been very, very good over the last two, three years, and I look forward to seeing more, even better results going forward. And with that, let me turn it over to David, and he’ll give you a little background on on AZZ and we’ll have a q and a session afterwards. David, it’s all yours.

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Alright. Thanks, John. I I appreciate it. And welcome everyone. I appreciate you dialing in and and listening in on the web very,

John, Oppenheimer conference host, Oppenheimer: very good over the last two, three years. And I look forward to seeing more even better results going forward. And with that, let me

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Alright. Thanks again, John. I appreciate it and we’ll get started on the the presentation. Real quickly, if you’re not familiar with AZZ, just give you a quick overview as John mentioned, we’re a metal coatings provider based here in Fort Worth, Texas, specifically focused on the North American market. We coat both steel and aluminum through two segments, a metal coatings presentation.

Real quickly, if you’re not familiar with AZZ, just give you Okay. Well, we’ll give this a shot one more time with the technology. I apologize to everyone. We seem to have been having some technical difficulties this morning, but as I was saying, we’ll get through the presentation here, I’m going go much quicker in the interest of time since we’ve spent a little bit going through trying to resolve that. Jumping ahead, just to give you a quick snapshot on the company again, we’ve got two segments as I mentioned, a metal coating segment and a coil coating business called Precoat Metals, which we acquired back in 2022.

This gives you a quick look at the sales, the adjusted EBITDA and the blended EBITDA margin for the company. Next slide on slide five gives you an idea of our strategic journey over time. Again, starting back well over this slide shows you about twelve years of history, but more focused on the slide on the right here in 2025 to 2028, where we’re really focused on strengthening our core and investing in our future. We’re gonna do that through a couple of things, one of them is just growing faster than GDP, also bringing and ramping up our new investment in our Washington, Missouri plant, which is a new aluminum coil coating line and then focusing on again getting back into into acquisitions and growth mode through inorganic opportunities, which I’ll talk about in a minute. Quick look on slide number six, this gives you an idea of some of our achievements, what we’ve set it out to accomplish and our achievements to date, bringing leverage down, cash flow generation has been tremendous.

Our acquisition policy, again, we’ve said we’ve not going to do any acquisitions since we had acquired Preco back in May of twenty twenty two, we’re back into the M and A pipeline now and building that. And again, looking at our dividend policy and continuing to reduce debt as well, last year we reduced debt by 110,000,000, we’ve done that two years in a row. We’ve committed to reducing debt by at least 165,000,000 again this year. Quick look at the management team, this gives you a list of everyone on the leadership team at AZZ and again, we’ve all been together for a good bit of time, the new additions of course were Kurt and Jeff who came through us through the PreCode acquisition along with Jason, our CFO. But the rest of the team has been a long tenured team here at AZZ.

I myself have just recently had my twelve year anniversary and Tom Ferguson, our CEO has as well. Quick look at end markets, we do lump a lot of things into the construction end market that does include both residential and non residential. And you’ll see everything in there from work that we do with data centers and things like bridge and highway projects to building products that are again are focused on the pre cut side to the non residential and residential markets. Industrial generally tends to be industrial processing plants, whether those be ag or oil and gas type assets. Transportation for us generally is truck and trailer, buses and motor homes, motor coaches and RVs.

Consumer includes not only the beverage can market for pre coat, but also things like HVAC and appliances. And then of course electrical includes things like transmission and distribution end markets. Other things that are going to help drive the business forward is going to be continued focus on roads, bridges and major projects, clean energy and power and then water airports and other things. A lot of these were receiving funding through the AIIJA, we believe that that funding is continuing to pass through ultimately and has been, you know, already allocated to states and those states have been, you know, continuing to fund different projects associated with these type of major investments. Quick look at our metal coatings and pre coat metals segments together.

Again, I’ll start with the top line here, metal coatings is a hot dip galvanizing business, $665,000,000 in sales last year. The production method is a batch processing method, we have a numerous value added capabilities including our core, which is hot dip galvanizing and then several other things like spin, powder coating, plating and anodizing. You can see the market share, market size, number one position and the historical EBITDA to the right. With precoat metals, $912,000,000 in sales, the different here is that we’re processing coil coated steel through our continuous processing format, market size quite a bit bigger, 21% share and again a number one leading market position. I think what’s most important is that as you look at AZZ, the thing to remember is that we’re a independent toll processor.

So whether it’s metal coatings or precoat metals, we do not purchase steel or aluminum, that’s purchased by our customers and they provide it to us and we’re just caretakers of it as we’re processing the steel. So we have no risk to the fluctuations in those prices and we also have no commodity risk associated with tariffs, associated with steel nor aluminum. Our strategic value proposition, couple of things, again, standout market leader with number one market share position. I already mentioned the toll processing model. We have invested a lot in technology, we have some proprietary systems on our metal coating side, we call it our digital galvanizing system and on our pre coat side, we refer to that as coil zone.

And those things are providing a lot of customer efficiencies and and visibility to our processes and notifying customers when things are ready to be picked up, when they’re completed, when they’ve been coded and also a lot of different ordering capabilities that customers can place orders against their material. We are very much focused on a service driven culture, customer satisfaction I can tell you is priority, we do net promoter score on all of our customers as we’re processing things. And then on the ESG front, we do have a good ESG initiative here, we have for the past three years also issued a sustainability report which is available on our website and you can read more about it there. Gonna skip over a couple of slides in the interest of time, again, quick look at metal coatings historical EBITDA and sales, you can see a six and a 7% growth for sales and adjusted EBITDA over the past several years. And the other thing I would point out is the margin profile right across the the center of your screen here.

Again, very consistent margin profile for the business. We have guided to 27 to 32% adjusted EBITDA for this segment and as you can see, we’ve been very consistent at maintaining that over time. As we move forward to pre coat, again, same slide, different numbers, a 811% growth respectively for sales and EBITDA. The margin profile is slightly lower, but again, this is a really a function of one of the the factors is their paint is the largest cost driver of the business and it equates for about 50% of of costs for for this segment. So a little more challenging to to get the margin profile up to the level of of our metal coatings business, but again, these are very very strong margins for an industrial business and we’re quite proud of it.

One of the things I do wanna touch on is our Washington, Missouri plant. We have invested a hundred and 25,000,000 over the past two years, it’s now been completed and is now operational just outside of St. Louis, Missouri. This plant is specifically dedicated to coating aluminum for the beverage can market. We do have a large customer in place that is a take or pay contract for 50,000,000 of exiting the fiscal year that we’re in today.

So we’re growing to that number over time this year as we continue to ramp the facility and again, that’s for about 75% of the committed capacity and we’ve got line of sight to filling the entire plant. So very exciting to to be adding a new coil coating line into the market and again, happy that this has been on time and on budget for a project this size. I mentioned technology a little bit earlier, again, just a quick deep dive into that technology differentiator for our business, we’ve got digital galvanizing system again on our metal coating side, really tremendous tool, it’s eliminated paper throughout our entire operations, it’s integrated with our operations as well as Oracle, it’s providing real time updates to our customers as well as internally on several things. I’ve often joked that it’s sort of the Domino’s pizza tracker of the industry. We’re really the only people in this space that’s providing technology to the extent that that we are in the galvanizing market today.

And coils own very much a similar story. It’s industry leading tool on the on the pre coat metal side, integrates with our ERP system, and again providing customers with real time visibility to their steel and aluminum, allows them to schedule different coils to be painted and integrates oftentimes with customer back end systems through EDI exchange as well. I did mention sustainability a little bit earlier, again, the interest of time, we’ll just let you know that, you know, I think the headlines are across the top here. We are a very essential business as well as being environmentally friendly. We have been very committed to continuing to be transparent with our sustainability initiatives through our sustainability reports that I mentioned we’ve issued for the past three years now.

That effort has been recognized by Newsweek, we have now for three years in a row from 2023 through 2025 been recognized as one of America’s most responsible companies and we continue to embrace diversity and understand that, you know, everyone is valued for their contributions at at ECC. I already showed this previously, but again, as you look at these two slides that were shown for precoat metals and for metal coatings on a stacked bar chart, this is what you see, it’s a combined CAGR of 68% on adjusted EBITDA and again, very strong business with a nice strong growth trajectory over time. Couple other things and I’ll wrap up and leave it some room for questions here. As you look at AZZ and you evaluate us compared to other industries, what I’ve done here is shown AZZ on the left side for revenue, for EBITDA and for net working capital and compared that to either coatings industries, building products, service centers or steel mills. And as you can see, as you look through over a two year period of time, you can see that, you know, we’ve been head and shoulders above all of the other areas with respect to revenue growth, EBITDA margin and then a lower net working capital as compared to sales.

So again, a very strong business and a very formidable position. We’ve also been very meaningful about deleveraging the business. We now as we talk today, had finished our our fiscal year back in February of this year, fiscal year ’20 ’20 ’5 as we call it at 2.5 times debt to EBITDA, that will number will come down even lower as we just announced that we had completed the sale of a minority stake in a JV that we owned that should net us some more than 200,000,000 in in additional proceeds, which we again will use for for debt repayment as well as opportunistic acquisitions. So that’s number will go even lower and we think that the business will be somewhere in the neighborhood of one and a half to two and a half times as a normal run rate going forward. Couple other slides, one of them is just the resilience.

I know there’s a lot of people that are concerned about, you know, if we’re entering into a cycle or not, particularly as GDP was just recently announced as coming down. So just a quick look at how this business collectively performed through the last cycle back in o eight when we had the big housing market crash. So as you can see, the dark blue bars down here is metal coatings EBITDA and it actually grew through the cycle, whereas precoat metals also grew over the the five year period of time, had a a modest decline between o eight and o nine just because of its exposure to the housing market, but again a very strong recovery from o nine and outward. So we feel really good about the business and its ability to weather through times of economic contraction. Capital allocation, again, what you can see here is we’re focused on several things, certainly strategic M and A, we have announced that we’re back in the game looking at bolt on acquisitions in both segments, making sure that those things are high ROIC investments, continuing to manage our leverage and again returning capital to shareholders through dividends as well as share repurchases.

We do have a 10 b five one program out there right now where we’re opportunistically buying in shares and that program currently, it was a hundred million dollar authorization from our board, we have $52,000,000 still outstanding on it to to work with. Give you an idea about guidance, so our guidance for the fiscal year is sales of 1.625 to 1,725,000,000.000, adjusted EBITDA of 360 to 400,000,000, and an EPS range of $5.50 to six ten. And so with that, I’m done. I will open it back up and hopefully we can get John on the line and see if there’s any any questions or anything that is on your mind.

John, Oppenheimer conference host, Oppenheimer: David, can you hear me?

David Nark, Chief Marketing and Communications and IR Officer, AZZ: I can.

John, Oppenheimer conference host, Oppenheimer: Okay. Just a couple questions, and maybe we’ll have some from the some of the in the audience that participating today. But when you think about the your M and A activity, would it be fair to say that maybe the precoat metals might you might be more active in that area and and and maybe a larger acquisition coming in that area as opposed to the the galvanizing area just because there’s more opportunities and it’s just a lot of mom and pops in the galvanizing area.

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Yeah, I would say, John, we’re looking at both segments for sure. The M and A opportunities on the metal coating side are certainly there’s more of those, they tend to be smaller in nature, single site locations, although there are some multi site facilities in North America, they’re just not in a position right now where they would be a, you know, open to being a target, but we continue to stay in touch with several on the metal coating side. To your point on the pre coat side, they generally tend to be larger in scale, multi site locations tend to be, you know, larger in terms of the acquisition cost as well. So we’re managing both of those as Tom had mentioned, our CEO on our q four earnings call, which was just about a month ago, you know, we do expect to close one acquisition here in our Q1 of this fiscal year. So we’re continuing to work on that in earnest.

We will have more to talk about, you know, when we actually get something done and announced, but we are looking at an acquisition right now hopeful to close something in Q1.

John, Oppenheimer conference host, Oppenheimer: Okay. David, you mentioned that you don’t see much impact directly from tariffs, But what are you hearing from your your customers who might be more impacted by by tariffs and how they’re handling this the tariffs the tariff wars, so to speak? Everything patterns?

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Yeah. So so a couple of things that, you know, for us, as I mentioned, you know, we’re we’re we don’t buy steel and aluminum, so we don’t have any exposure there. Our number one input on the the galvanizing side is zinc that is listed on the annex two lists currently of articles that are exempt from tariffs from the administration and then PreCo, you know, their number one input is paint that also has not seen tariffs. However, we are seeing tariffs impact on, you know, sort of secondary and tertiary items, things like wire and acids and other things that are used in the galvanizing process and so we’ll see some of that, Again, not as big of an impact as but it, you know, it is something that we’re looking at and have looked to offset through price increases that we’ve announced particularly on the precoat side too. The other thing we’re hearing from customers is to your question is a few things, know, one is that customers did buy some steel ahead of the tariff or the estimated, you know, impact of the tariff and and have brought in imported steel.

There’s a bit of a build, an inventory build that they’re working through now with us. So we have seen that on the pre cut metal side. On the galvanizing side, really what we’re seeing there is, you know, since our business is largely, you know, in North America here, all of our plants are based here in The US and then three up in Canada. We’re galvanizing here locally for the market and have seen a lesser impact from customers and what they’re saying there.

John, Oppenheimer conference host, Oppenheimer: Okay, okay. Lastly, you spoke a little bit about the new Washington, Missouri facility and that you have a large beverage customer that will take, I think, about 75% of the production. How quickly do you think you might be able to ramp up to full capacity? And I guess if you get to full capacity there, is that facility expandable so to speak to meeting greater demand or would maybe a new another facility, another new facility be possible?

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Yeah, so great question. We are looking to exit our fiscal year, which again will be February of next year at full run rate capacity for the plant. So we will continue to build you know, that up to that number from where we’re at today. We are in production now and producing, we’re excited about that. And, know, as you think about the capacity or you know, even constraints, we have other plants in the area in St.

Louis, some of them, in fact our first line for Precoat was an aluminum line that still exists today in the in the area. So what we can do is balance any additional capacity that we need between the multiple plants that we we have in the area, and so we’ll do that and we can always add shifts as well and and, know, run the plants twenty four seven.

John, Oppenheimer conference host, Oppenheimer: Okay. Okay. Sounds great. Let me see if there’s any questions from from the audience. I don’t see anything right now.

I guess we’re up at up to our limit, David. So I’ll let you go. I thank thank you very very much for for the presentation, and look forward to your get together in in August in in in beautiful Saint Louis.

David Nark, Chief Marketing and Communications and IR Officer, AZZ: Perfect. Look forward to it. Thanks, everyone. See you, John.

John, Oppenheimer conference host, Oppenheimer: Thank you.

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