AZZ Inc (AZZ) Q4 2025 Earnings Call Highlights: Record Sales and Strategic Debt Reduction

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Wed, Apr 23, 2025, 1:04 AM 4 min read

Total Sales: Increased by 16.2% to $1.54 billion for fiscal 2024.
Metal Coatings Sales: $656 million, up 3% year-over-year.
Pre-Coat Metals Sales: $881 million, up 28.4% year-over-year.
Adjusted EBITDA: Increased to $334 million for the full year.
Cash Provided by Operations: $245 million for the year.
Adjusted Earnings Per Share (EPS): $4.53, up almost 35% from the previous year.
Fourth Quarter Sales: $366 million, up 8.9% year-over-year.
Fourth Quarter Adjusted EPS: Increased by 210% to $0.93.
Fourth Quarter Adjusted EBITDA: $74 million, up 29% year-over-year.
Adjusted EBITDA Margins: 28.6% for metal coatings and 17.8% for pre-coat metals.
Debt Reduction: Reduced by $115 million over the last year.
Capital Expenditures: $95.1 million for the year, including $47.7 million for a new facility.
Net Income for Fourth Quarter: $17.9 million, compared to $7.4 million in the prior year.
Gross Profit for Fourth Quarter: $81 million, or 22.1% of sales.
SG&A Expenses for Fourth Quarter: $38.8 million, including $6.8 million in legal accruals.
Interest Expense for Fourth Quarter: $24.7 million, down from $27.1 million in the prior year.
Effective Tax Rate for Fourth Quarter: 18.7%.
Free Cash Flow: $149.3 million for the year.
Fiscal 2025 Guidance: Sales of $1.525 billion to $1.625 billion, adjusted EBITDA of $310 million to $360 million, and adjusted EPS of $4.50 to $5.

Warning! GuruFocus has detected 4 Warning Sign with AZZ.

Release Date: April 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

AZZ Inc (NYSE:AZZ) achieved a record total sales increase of 16.2% to $1.54 billion for fiscal 2024.
The company significantly reduced its debt by $115 million, surpassing its target of $75 million to $100 million.
Adjusted earnings per share increased by almost 35% to $4.53 compared to the previous year.
AZZ Inc (NYSE:AZZ) improved its adjusted EBITDA by 24.8% to $333.6 million, reflecting strong operational efficiencies.
The company maintained a strong liquidity position with no debt maturities until 2027 and successfully repriced its term loan and revolving credit facility to lower interest costs.

Negative Points

Selling, General and Administrative expenses increased to $38.8 million in the fourth quarter, partly due to $6.8 million in legal accruals.
The company faces increased labor and other variable costs, which could impact future profitability.
Despite strong performance, the pre-coat metals segment continues to experience pressure in the container and transportation categories.
The company is exposed to risks associated with macroeconomic impacts, which could affect demand and inventory management.
AZZ Inc (NYSE:AZZ) has not made any share repurchases during the year, focusing instead on debt reduction.

Q & A Highlights

Q: With the leverage ratio at 2.9 times, do you plan to hold more cash on the balance sheet, and are there acquisition opportunities? A: We typically maintain low cash balances, using excess cash to reduce borrowings on our revolver. We have a $400 million revolver with $355 million in capacity, which can fund smaller acquisitions. Currently, we see potential galvanizing opportunities that could be funded through the revolver. These are typically bolt-on acquisitions with $10 million to $20 million in revenue.

Q: Was the warmer weather in Q4 indicative of business being pulled from Q1, and does maintaining guidance suggest a positive outlook? A: The warmer weather allowed for an earlier start, potentially pulling some business into Q4. However, we expect additional projects in the pipeline for the summer and fall. On the pre-coat side, the normal ordering cycle was followed, with some inventory buildup among customers. We believe our guidance is solid and traditionally conservative.

Q: Can you elaborate on the market share gains in the pre-coat segment? A: We are outperforming the market in the construction and appliance segments, seeing conversions and improvements in these areas. These gains are contributing to our overall performance.

Q: How do you see gross margins in metal coatings trending in fiscal '25? A: We expect to maintain and potentially improve margins through our Digital Galvanizing System (DGS) and leadership playbooks. As long as volumes hold up, we believe we can drive margin improvements.

Q: Regarding the new facility in Washington, Missouri, what are the startup costs, and will there be a drag on margins this fiscal year? A: We have planned for the ramp-up costs in our budgets, with contingencies in place. We do not expect a drag on margins. The facility is 75% contractually committed, with opportunities to sell the remaining capacity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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