AZZ Inc. Price & Performance (AZZ)

You for joining us today to review AZZ's financial results for the fourth quarter and full fiscal year that ended February 28, 2025. Joining the call today are Tom Ferguson, President and Chief Executive Officer Jason Crawford, Chief Financial Officer and David Nark, Chief Marketing Communications and Investor Relations Officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast for today's call can be found at www.azz.com/investorevents. Before we begin, I want to remind everyone that our discussion today will include forward looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. By their nature, forward looking statements are uncertain and outside the company's control. Except for actual results, AZZ's comments containing forward looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10 ks for the fiscal year ended February. These statements are not guarantees of future performance. Therefore, reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will discuss non GAAP financial measures.

Non GAAP financial measures should be considered supplemental to, not as a substitute for GAAP financials. Measures. We refer investors to the reconciliation from GAAP to non GAAP measures in today's earnings press release. I would now like to turn the call over to Tom Ferguson.

Good morning and thank you for joining us. Today, we will discuss AZZ's fiscal twenty twenty five financial results and achievements as well as our outlook for fiscal twenty twenty six. Then we will open up the call for questions. I am pleased to report that our Coatings segment delivered record sales profitability for fiscal twenty twenty five. Due to a combination of business momentum and disciplined execution of our growth Metal Coatings generated fiscal year twenty twenty five sales of $65,000,000 precoat metals generated $912,000,000 Strong sales for the full year were largely based on increased volume. As we processed higher tonnage in both fabricated steel and coil coating. For the full year, our top line results were primarily driven by infrastructure investments to support community growth, urban expansion, and economic development. More specifically, AZZ's record breaking performance was driven by growth in bridge and highway construction, including new projects and renovation projects across The U. S. The continued expansion in transmission and distribution including solar projects and general construction which for AZZ includes data centers. Jason will cover our fourth quarter financial results in a moment, but as a reminder the fourth quarter is typically our weakest season due to the winter holidays inclement weather that hampers construction activity.

During our fourth quarter, which ended 02/28/2025 the construction activity was impacted by significantly more inclement weather days than in a typical year. Collectively, we experienced over two hundred days of lost production in the fourth quarter due to adverse weather conditions. David will provide more color on this shortly. In fiscal twenty twenty five, Metal Coatings delivered an EBITDA margin of 39% primarily due to better operating leverage on expanding volumes and improved zinc productivity. As discussed previously, we believe our new margin range for AMC of 27% to 32% is sustainable. Preco Metals EBITDA margin of 19.6% exceeded its prior year comparable. Demonstrating strength based on increased volume, a more profitable business mix and improved operational performance. Our strong EBITDA generated in fiscal twenty twenty five converted to cash from operations of $250,000,000 This robust cash generation allowed us to pay down $110,000,000 of debt fund our new Greenfield facility near St. Louis, Missouri. Which is currently ramping up commercial production as we speak. This year we plan to continue to pay down debt and strengthen the balance sheet while prioritizing other capital allocation strategies. Including paying quarterly cash dividends. We also plan to invest in AZZ's enterprise wide technologies by enhancing DGS which is our digital galvanizing system in our galvanizing plants and CoilZone in the coil coating facilities.

These customer centric technologies continue to elevate service levels and enhance our unique value proposition. As well as provide effective business intelligence reporting for better decision making. Particularly in relation to improving operating productivity and efficiency. AZZ's pipeline of acquisition targets continues to grow and we are carefully evaluating M and A in markets throughout The United States. We focus on synergistic targets that present attractive risk adjusted returns for enhancing long term shareholder value. Are disciplined in our approach and decide on acquisitions based on timing, targeted valuation and appropriate balance sheet. Leverage. After solely focusing on debt reduction, we anticipate closing the single site bolt on galvanizing deal during the first quarter. AZZ continues to differentiate with industry leading market share positions in both segments. We believe our geographic footprint and scale across The U. S. And Canada as well as technical expertise, reputation for customer service excellence and longstanding customer relationships create a durable competitive mode for AZZ. Our three to five year strategy is anchored on organic market share growth as well as inorganic acquisition growth that we are pursuing for both segments. Under the Trump administration's current tariff mandates, we expect demand coating solutions of both steel and aluminum produced domestically to accelerate.

Additionally, in fiscal twenty twenty six, we will continue to benefit from our tolling model which insulates us from commodity risks since we do not take ownership of steel or aluminum process through our facilities. Currently, our zinc and paint supplies have not been impacted by the tariffs. With that, I will turn it over to Jason. You, Tom, and good morning. Starting with a summary of the full year. We reported sales of $1,578,000,000 an increase of 2.6% from the prior year. By segment, pre coke metal sales increased 3.5% and metal coating sales increased 1.4% within which the galvanizing segment increased 2.6%. Gross margins for the year were 24.3% an increase of 70 basis points compared to a year ago Net income before the preferred stock dividend and redemption premium in fiscal year twenty twenty five one hundred and twenty eight point eight million dollars an increase of 26.8% compared to the prior year. This was another record year for the company in terms of sales and net income which speaks to the strength of the businesses and progress made on our strategic initiatives during the fiscal year. Turning to the fourth quarter results, sales for the quarter were $351,900,000 down 4% from the same quarter in the fiscal year 2024.

As Tom mentioned, bad weather impacted our quarter more than normal created lost production days for both segments. Despite the lower volumes in the quarter, gross margins improved to 22.4% primarily due to operational improvements. Up 30 basis points from the prior year quarter. In the fourth quarter, selling, general and administrative expenses were $38,300,000 or 10.9% of sales. Compared to $38,800,000 or 10.6% of sales in the prior year quarter. Operating income was $40,400,000 or 11.5% of sales compared to $42,300,000 even with last year on a percentage of sales basis. Interest expense for the fourth quarter was $17,400,000 down $7,400,000 from a year ago period. This is due to the lower weighted average debt outstanding and lower interest rates from debt repricings and Fed reductions that occurred in 2024. In addition, on March 3, after our fiscal year end, we announced a repricing of our $400,000,000 senior secured revolving line of credit that will allow us to continue to lower our interest expenses going forward. The performance and outlook for the business has allowed us to improve capital structure and reduce interest costs and we fully anticipate this trend to continue into fiscal year twenty twenty six. Equity and earnings of unconsolidated subsidiaries for the fourth quarter was $3,700,000 compared to CAD4.3 million for the same quarter last year.

These equity and earnings are from our 40% minority ownership interest in the AZZO joint venture. The current quarter income tax expense was $6,100,000 reflecting an interim effective tax rate of 23.2% to support the final full year 2025 tax provision. Provision of 24.5%. This was higher than the 2024 effective tax rate of 21.9% primarily attributable to favorable adjustments in 2024 related to uncertain tax positions partially offset by higher tax deductions for stock compensation in 2025. Net income from the fourth quarter was $20,200,000 compared to $14,300,000 for the prior year's quarter. On an adjusted basis, Q4 adjusted net income was $29,600,000 compared to $27,500,000 an increase of 7.9% from the prior year. [indiscernible] Fourth quarter adjusted EBITDA was $71,200,000 or 20.2% of sales compared to $73,900,000 in the prior year. Flat on a percentage of sales basis on lower volume. Turning to financial position and balance sheet. We generated significant cash flows from operations at $2,499,000,000 dollars in fiscal year 2025 ahead of last year's $244,500,000 after funding the company's annual capital expenditures of $115,900,000 which included $52,800,000 for our new coil coating facility our free cash flow was $134,000,000 As previously communicated, have expanded our coil floating capabilities by constructing a new 25 acre aluminum coil coating facility in Washington, Missouri.

This new facility contained within our precoat metal segment is supported by a contract for approximately 75% of the plant's capacity. During fiscal year twenty twenty five, our capital expenditures as previously stated were $52,800,000 and the remaining and final balance of approximately $8,000,000 is scheduled to occur by the end of Q1 and fiscal year twenty twenty six. This will bring the project online within our originally stated cost and timelines Further, we are pleased to announce that the facility has started to ship commercial production as of a few weeks ago and will continue to ramp volumes through the fiscal year. Aligned with our previously stated strategies, our disciplined approach to capital allocation includes paying down debt, investing for growth and returning value to our shareholders through dividends and share buybacks. During the fourth quarter of fiscal year twenty twenty five, we reduced debt by $30,000,000 and made debt repayments of $110,000,000 for the full fiscal year.

Our debt to adjusted EBITDA ended the year at 2.5 times which compares favorably to our leverage of 2.9 times at the end of fiscal year twenty twenty four.

With our investment in the new Washington, Missouri facility largely behind us, and our debt to adjusted EBITDA below 2.5 times and overall improvements to our capital structure we will start to transition our focus to a more balanced capital allocation with greater emphasis on M and A and returning value to our shareholders. Finally, subsequent to the end of the fiscal year, on March 10, we announced that our JV partner has entered into a definitive agreement to sell the Electric Products Group to nVent Electric PLC a purchase price of $975,000,000 This transaction is expected to close in the first half calendar year twenty twenty five subject to customary closing conditions at which time we will receive a pro rata portion of the cash proceeds from the sale which we estimate to be approximately $200,000,000 after accounting for debt repayments, deal costs and cash retained in the remaining businesses. Post transaction, AZZ will continue to own 40% interest in Avel, will then consist of the industrial lightings approximately 30% of pre transaction group revenue. With that, I'll turn the call over to David Knopf. Thank you, Jason. Good morning, everyone. During fiscal twenty twenty five, customer demand in key industries drove annual sales growth primarily in our largest category construction and in meaningful end markets that include industrial and electrical sectors.

Smaller categories at AZZ also experienced growth in fiscal twenty twenty five and those were related to HVAC and container industries. As Tom and Jason mentioned, the demand environment for overall construction was weaker in the fourth quarter due to inclement weather. We believe that both wet and cold conditions meaning temperatures below 40 degrees, impacted construction days throughout our final quarter of the fiscal year. Put this in perspective, for December, the number of wet days increased 13% versus the same month a year ago. In January, the number of warm days available for construction down 29% year over year. Finally, in February, the number of wet days increased by 10% while the number of warm days available for construction down 27% year over year. For the full year, organic top line growth was 2.6% over the prior year. Looking into fiscal twenty twenty six, we expect a continuation of infrastructure spending related to the AIIJA program. We expect public and private investment to continue to remain resilient with infrastructure spending from planned projects and recent natural disasters. Also, as Tom mentioned, growing populations and urbanization will continue to support the need for infrastructure related projects especially bridge and highway, transmission and distribution and airport construction.

In addition, we know that pre painted aluminum and steel will continue to play a critical role in many reshoring projects the conversion of plastics to aluminum and food and beverage industries will continue to be a longer term secular trend. With that, I'd now like to turn the call back over to Tom. Thank you, David. To summarize our fiscal twenty twenty five, we posted record results for revenue, operating income, adjusted EBITDA, adjusted earnings per share and adjusted net income. Sales expansion that grew to almost $1,600,000,000 consisted of 100% organic volume growth. Which speaks to our market leading segments and service driven culture. Our ability to improve margins demonstrates our emphasis on value add service to our customers and disciplined focus on operating quality, efficiency and productivity. We improved our capital structure by eliminating the preferred equity continuing to reduce debt and improving our net leverage ratio to below 2.5 times. Looking ahead to fiscal twenty twenty six, we anticipate delivering above market growth while getting some bolt on acquisitions done.

Importantly, we will be sticking to the disciplined approach to investments, capital allocation and growth. That has made us so successful.

Today, are reiterating our fiscal year guidance for 2026 which reflects our confidence in the company's strategic execution, operational resilience, and market positioning. Starting with sales, our best estimates given market conditions and sentiment are $1.625 to $1,725,000,000 adjusted EBITDA of $360,000,000 to $400,000,000 and adjusted earnings per share of $0.5.0.5 dollars to $6.1 The midpoint of these ranges demonstrates business expansion ahead of any future M and A activity. So that we can utilize the cash to reduce debt and invest in growth. For this reason, we're leaving our EPS estimates unchanged. Also capital expenditures for the fiscal year are expected to be 60,000,000 to $80,000,000 and debt pay downs are expected to exceed $165,000,000 This amount excludes any additional debt reduction from the AIS sale proceeds as well as any capital used for acquisitions. Additionally, we are off to a good start in the first quarter and have not seen any significant impact from the tariffs, particularly in our Metal Coatings segment. I am proud to recognize AZZ's thirty eighth consecutive year of growth and profitability from continuing operations. This accomplishment was due to the dedicated efforts of our employees. I sincerely thank them for their hard work and continuing commitment to excellence.

Finally, we are excited announce that we will host an Analyst Day on August 14 The event will be held in St. Louis, Missouri will include management presentations from our Preco headquarters and a tour of our new aluminum coatings plant. I encourage the analyst community to contact our investor Relations team if you are interested in participating later this year. With that operator, I would like to open up the call for questions.

Thank you.

We will now begin the question and answer session. Please press star then 2. The first question comes from the line of Adam Thalhimer with Thompson Davis. Please go ahead.

Morning.

Tom, I was hoping to start off with, and you addressed this at the end of your prepared remarks. But what you're seeing in the May and what kind of a bounce back you've seen from the bad winter weather?

Yes, great question. Yes, we just in April alone, we've recovered the shortfall in from the fourth quarter for Metal Coatings. And probably exceeded that. So we're looking for a very strong first quarter on the metal coating side and they're out of the gate really, really well. So March was great. April was solid. The outlook for May is good as well. On the precoat side, little about the same. They were weather impacted, but somewhat differently. So instead of as much lost production days, it was more customers who who were closed and then take delivery on some finished goods inventory. So we look for a solid first quarter for pre coke Jason will talk he probably want to add something to my comments. But we have a lot going on in the first quarter for Precoat. We've got the new site ramping up, which is great news for us. Production in play.

And we do focus more on market share growth. So if you just look at last year, the our markets generally were down And yet, we were able to grow in both segments. So Jason, you may want to add a little bit on pre Yes. I mean, the only other thing I would add in preco is is round about their inventory and the seasonality ramp that we would normally see with the good weather out of January, February with impact of Q4 and we never seen that We carried a little bit more inventory from Q3 into Q4 and that happens in relation to where steel prices is at. And obviously as we kind of enter Q4 there was a lot of uncertainty around about the administration and what that was going to impact. Or how it was going to impact. And essentially, you go back eight years ago, how it impact us was around about supply and price. So to be fair, our customers stopped up a little bit. And we carry that. So that was probably the main impact to Q3 and then we'll see that getting back out the system as we go into Q1 here.

Okay, great color. And then Jason, what's in the what's in the guidance for the AZZZ JV?

Yes. I mean if you look at the AZZO JV, and obviously the guidance that Tom reiterated, there is no impact And the reason we have looked at no impact is it was 15,000,000 to $18,000,000 in the guidance. For the JV. And as Tom I think as I highlighted, there's round about 30% of that JV continues after the sale So it comes down to a fairly nominal level. Once we complete the sale of electrical products division. If you take the incoming cash and convert that into lower interest rates. It's within the ZIP code of one for one. So obviously, we've not fully decided that capital allocation of that, but from an EPS point of view, we're looking at it has been very insignificant terms of our guidance.

I'll turn it over.

Thanks guys.

All right. Thank you.

The next question is from the line of John Franzreb with Sidoti and Company. Please go ahead.

I guess I'd like to start about a little question about the tempo of the order book. I know you've had some catch up from weather. Have you seen any change in momentum based on the current macroeconomic [indiscernible] Be it positive or negative?

Yes. Interestingly enough, go we spend a lot of time going through our weekly reports from the field. And the optimism is positive. It's so projects are going forward. Customers are confirming we've got capacity. And so I'd say generally, while there's always concern, further out in the year, the short term outlook over first quarter and second quarter more positive than I think we would have expected So I think, like I said, mostly checking our capacity, making sure we've got shifts to run the infrastructure. Jason can probably comment on pre code a little better. He already alluded to the fact of the finished goods inventory. But generally, it's positive there too. And But construction season was a little slow to get started, but now it's getting off well.

Yes. John, the only other thing I'd add is, if you look at the couple of industry forums that we've been to start of the year and the general sentiment in those forums and conferences is relatively upbeat. So at this point, obviously there's a lot of turmoil outside. But within our four walls of our business, then we're not necessarily seeing it at the moment.

Great, that's good to hear. I guess the second thing I wanted to touch on was zinc. The U. S. Doesn't produce an awful lot of zinc. A lot of it comes from China and South America. Just curious how should we be thinking about zinc in this current tariff environment? Any kind of color you could provide would actually be very helpful.

Yes, John, this is Dave. I'll take that one. As we look at zinc one of the things, I think the biggest thing to note is that it is listed on the Annex II list that came out from the administration. As something that is exempt from the tariffs. So while your point, The U. S. Is a net importer of zinc, the vast majority of ours comes from North American sources. And again, it's not an impact for us because it's on the exempt list. Yes. And I'd also talking to all of our suppliers, they don't have any concerns at this point. So supply is good. We'd actually taken on some inventory at the end of the year just as a cushion. Look like we're going to need that extra inventory.

Thank you. I appreciate the clarity.

The next question comes from Marc Reichman with NOBLE Capital Markets.

Thank you. By my calculations, it seems like you would need to reduce debt about $300,000,000 to offset the impact from the sale of the of the JV transaction. I'm just wondering with that $200,000,000 that you're expected to receive could you just maybe elaborate on your debt reduction goals and how you might look at that from a capital allocation standpoint? I know you still have about $50,000,000 left on your repurchase authorization. So just some clarity regarding the debt reduction goals would be helpful.

Yes, certainly. And I can certainly pick that up At this point, we've not fully decided the capital allocation up to $100,000,000 but if you go back to the loss impact from the JV income, that doesn't affect our our calculation on 2.5% that we ended the year. So that's that's excluded from that calculation. As you look at the opportunities from an M and A point of view, potentially returning shareholder value via increased dividends or share buybacks, that's all in the table. And if we decide there's no opportunities there, then we'll continue to pay down debt. We're in the comfort zone of 2.5 and if we go slightly below that, then I think that's that would be our priorities there.

Okay. Well, just to kind of just for a little more clarity. So So basically, you'll go from that equity in earnings from unconsolidated subsidiaries, you'll go from 15 down to 4.5 to 5.4 So to make that up, you're going to have to pay down some additional debt to reduce the interest expense. And you've already said that you'll pay down more than 165,000,000 And I guess what I'm asking is, $300,000,000 is that unrealistic? In terms of what to expect in terms of your debt repayment in fiscal year twenty twenty six?

That's very realistic.

Yes. I don't think it's unrealistic. I think the That's what I'm assuming. So I'm hopeful it's Yes. No.

Mean, the math is correct. Yes. Yes, yes, absolutely. And that's still leaves us room for, as we've talked about, buying in stock to eliminate dilution from equity compensation and things like that. So [indiscernible] we fully intend to utilize a chunk of that $53,000,000 remaining remaining. Buyback authorization and addition to the debt reduction that you just mentioned.

Okay. And then just a second question and final question. The fiscal year 2026 capital expenditures of 60,000,000 to 80,000,000 what's the split between Metal Coatings and pre coat metals? I mean, we have a pretty good history for normalized run rate for metal coatings, but maybe not so much for precoat metals. So just was kind of curious about the normalized spending budget for each of those [indiscernible] Yes.

And I would say it's roughly to very close to within the pennies of a fifty-fifty split. I think you can look at the lower end of that as being a normal year. And then the upper end of that where maybe we're investing in some projects. I think we highlighted historically There's some projects that have sat in the sidelines as we focused on paying down debt. And they start to come into vogue in terms of generating a return. [indiscernible] to Jason's point, which yes, 30,000,000 each for the two segments. And then we did have so in that $140,000,000 we had some carryover on on the new Washington facility that just bills to pay carried into this year.

So that's part of it. And then we to Jason's point got a couple of nice new investments in blend cells and things like that that will give us new capabilities in in certain facilities.

So we'll always look at at some increment for growth capital.

Okay. Well, that's very helpful. Thank you very much.

Thank you.

The next question comes from Panjabi with Baird. Please go ahead.

Hey, guys. Good morning.

If you covered it, I missed it, but what do you estimate the impact from weather was on your 4Q year twenty five quarter And is that lost sales just add to the future backlogs? And is that in what you're seeing in the first quarter thus far?

Yes, that was so probably lost revenue that we can directly attribute on the Metal Coatings side of 8,000,000 to $12,000,000 Virtually well, almost all I'd say virtually all of it has now been recovered in March and April. On the Metal Coating side. On the Pre Coat side, as Jason talked about there was some weather impact but also this finished goods inventory build. But we've and it was about 200 loss production days and most of it hit. In from mid January through February. So, and we couldn't make it up on weekends just because of storms, ice, weather and also customers who weren't shipping stuff in. So but we saw that ramp up hit quickly in March and [indiscernible] worked a lot of weekends to take care of our customers.

Okay, got it. Thank you. And then relative to when you initially gave your fiscal year 2026 guidance back in February, I mean, obviously, there's more uncertainty as it relates to the macroeconomic backdrop. Tariffs and also mixed indicators on construction, including from the homebuilders. You're reiterating guidance for the year, obviously. Are there any incremental positives for fiscal year 2026 relative to your view back in February that's sort of underpinning your confidence? And then also how should we think about sequencing of earnings for fiscal year [indiscernible] Yes. I'll answer the first part and Jason can answer the sequencing. But yes, so a couple of things that happened. One, we're off to a strong start in Q1, particularly in Metal Coatings, which with that weather and things like that, they're we just did have a little bit of concern. Which is now gone. And two, we do intend to get at least one I hate to call it mom and pop, but I've called that for a while, but one mom and pop galvanizer done hopefully this quarter and then another later this year. So those would both be nice margin businesses incremental to to what we were looking at back in January.

And then we have been pushing price because while we're not impacted on the zinc and paint side, from a cost perspective, A lot of other things, we have seen inflation on, whether it's due to tariffs or just due to supplier taking opportunities. So we are pushing prices as I think most folks know we do in this case because we offer the value and want to make sure that we continue to deliver for our customers. So that's kind of the optimism that I would least that's my optimism as I'm looking forward this year and mostly what we're hearing from the field and [indiscernible] our sales resources and what our customers are telling us.

And then sequencing? Yes.

In terms of the seasonality, I would say it's going to be a normal seasonality pattern that we've seen historically other than three things and two of them we've touched on. In regards to the metal coatings division, we are going see a pop in Q1 as we've seen the negative side in Q4. Which is going to be nice for the quarter. And then as Tom highlighted if we execute on the acquisition, then Q3, Q4 should provide that additional level boost for that division. From a pre court point of view, business is normal from a seasonality other than bringing on the new facility. We highlighted Q1, we're starting to see commercial production Obviously, it's a brand new asset. So it's got a little bit of a drag, not materially [indiscernible] to pop in the second half of the year. So other than those three factors, at this point, we're not really seeing anything major in terms of seasonality for the calendar year or for the fiscal year, sorry.

Okay, great. And then just one final one. Your capital position on your balance sheet is already quite strong and clearly you're to get more proceeds post the JV asset sale. As it relates to acquisitions going forward, should we sort of thinking about slightly larger deals than maybe originally envisioned, just given balance sheet flexibility and just more holistically, what does the pipeline look like for acquisitions at point?

Yes. The pipeline is looking really good.

I think we've got deals we could do.

The [indiscernible] The one off galvanizing those are just slam dunk. That's kind of our history. What we do is normal routine.

We've got I think three active at the moment, one close to fruition. The two others that hopefully we can get done later this year And then on on the precoat side, they're just generally going to be bigger. We're probably I'd say there's active deal there's things that we could act on but we're taking a wait and see approach to see how the tariffs impact those businesses. But they're in our pipeline active, good solid relationships things that [indiscernible] we can get the right the right value for them and the timing is right and we prove out what happens to some of these businesses with tariffs because generally galvanizers are like our metal coatings has not been affected too much because they're focused on infrastructure. Construction spend that's going to go forward. But on the precut side, it's they are going to be bigger deals.

Thanks for taking my questions.

Sure.

Our next question is from Nick Giles with B. Riley Securities.

You very much. Operator, and good morning, everyone. Maybe just as a follow-up to the last question there. As you think about other potential bolt on opportunities, I mean, what geographies are most compelling and how does end market exposure come into the decision matrix?

Yes. I think and kind of back to for us on the on the galvanizing side specifically. Almost any geography is good. Whether we've got plants in the area or not, We're still going to be interested in those whether it's one site or five or six or seven sites. It's just our sweet spot. We've got a great playbook. We believe we can add value improve margins with virtually anything that acquire in that space. So if it's U. S. Or Canada, we're interested. We continue to have relationships with galvanizers outside outside of The U. S. And Canada. But that's not on our short term horizon. [indiscernible] the precoat side, I think back to it's everything we have is U. S. S.-centered. So probably U. S, Canada is the geography. The end markets tend to be relatively [indiscernible] of the things that we're aware of out there.

That are potential. They tend to be in the same served markets that we're in I'm not sure Jason might add to this or or David, but I'm not sure that there's any geography [indiscernible] [indiscernible] would limit us from looking at it if it's in The U. S. And Canada.

Yes, I would agree. And in terms of the markets, both businesses is the number one player within the market. Cover all end markets and really all you would see via acquisition is a little bit more concentration and something bigger than what we have today. So there's not any new markets out there that we could take galvanizing or [indiscernible] It would just be a greater presence within those spaces.

Thanks guys. That's helpful. And working capital management was a key contributor to strong cash flow in 2025. So are there any working capital considerations you'd highlight as we think about cash flow in 2026? Or could we see further improvement?

Yes. I mean, I think there's further improvement. As you look at I think Tom had made a couple of mentions at, Tom in regards to bringing a little bit more zinc in than we had optimally got to. So certainly felt on that part through the system. And then as you look at our finished goods position, and our contract assets, it's called in the balance sheet, for our preco division, are certainly opportunities there. I think we've finished just below 11% in terms of working capital. And certainly getting up to single digit as a very strategic goal for us. So there is a little bit more movement, but certainly one of what you see the blockbuster that we've seen maybe two years ago.

Well, I would also add because we are ramping up the new Washington [indiscernible] There'll be some working capital, new working capital to get attached to that. So I think that's why we're really looking at working capital being relatively flat overall this year, but that includes absorbing a new location.

Got it. No, that's helpful. And then one more if I could. As we think about margin cadence over the year, should we be thinking about margins that could be closer to the high end as far as pre coke goes as Washington RIPS? [indiscernible] Mean, I think as we've previously stated then Washington definitively comes in the higher end just by the product, just the the margin profile of that product. Then above and beyond that, just the leverage of the fixed costs that are within that business unit. So certainly, once we ramp the Washington facility and get it fully capable and producing, then we should see an overall bump to the precoat margins that we've been operating up.

Got it. Well, guys, I appreciate all the color and continue best of luck.

All right.

Thank you. Thank you.

The next question comes from Timna Tanners with Wolfe Research. Please go ahead.

Yes. Hey, good morning. I had a few follow ups if I could on tariffs broadly.

So I just wanted to be pedantic on this, but on the last quarterly call, you said that there could be some project delays due to tariff uncertainty. So in this time, there is no mention. So were there no project delays? And are you not hearing anything about tariff uncertainty from your customers anymore?

Okay. On the yes, I think as we looked at it particularly and I'll start with the Metal Coatings side, but yes, there were concerns and it was but think what we saw was steel has been available, metal has been available. So as long as there was that available for construction, Those projects moved forward. They were under already agreed to price levels and things like that. So as we're looking out and what we did see weather delays in the fourth quarter, and I just mentioned the first quarter started off strong. So there's this natural level of concern about [indiscernible] construction costs spike, do I think it's less around construction material availability, more around do project costs spike. If they spike does that make some of them less viable later on this year? But so the general sentiment is still positive but let's see how it goes as we get to the latter part of this year. On the metal coated side, I think on the precoat side, Jason or David you may want to add, but I think it's relatively the same. Construction was a little due to weather was a little later to get the season was later to get ramped up, but it's ramping up fine at this point.

I'm going to guess that if we dug into more details and you get beyond infrastructure bridge and highway, T and D, electric utilities, data centers, then I think the sentiment may be a little weaker as you get further out only because of the unpredictability of the cost estimates and new projects become less viable.

Yes.

And I mean, to be fair, the only other thing I would add is, three months ago, it was all very new. And certainly, we were in a little bit cautious and maybe even speculating what could happen.

Versus three months later, we've engaged our customers. As I mentioned, we've been at the industry forums, etcetera, and we're not here in that same sentiment. [indiscernible] Okay. Thank you. And then similarly along those same lines, you mentioned that paint availability was not impacted by tariffs. We already talked about zinc. But are you in your or your customers finding any materials needed for your business impacted by tariffs? And then along those same lines, are you or any of your customers benefiting from some of the downstream tariffs on steel and aluminum? I just don't I'm trying to get my head around like how that could also maybe benefit you on the downstream side? Thanks.

Yes. I mean, I think it's hard to believe that there's any company out there that's not been impacted by tariffs. Certainly, biggest inputs are zinc and paint. And as we've highlighted, we're not seeing any impact to them, but you go to the great population of goods that we are procuring. And some of them in terms of production supplies, etcetera, are being impacted And obviously, have been very customer conscious in terms of pushing back in those, but some of those are sticking. So in terms of margin accountability, then we're driving appropriate from a pricing point point of view. So that's something that we continue to stay on top of. Obviously, it's the smaller part of our input cost, at the same extent every penny counts and we just stay on top of that and continue to monitor And that would be things like wire, additives, chemicals, acids. So those secondary supply items in both segments. Have been impacted, but like I said, we're trying to push price and also negotiate And in a lot of cases, we're still fairly large customers for certain of those items. So in reasonably good position. And have not seen much negative impact at this point if any.

Okay. Helpful. And on the opportunities on downstream side, is there much that you think you could pick up in terms of business on what might have otherwise I don't think you compete a lot with imports, but even some of the substrate that you buy maybe being domestic, is that are you able to see some volume improvement perhaps from more domestic production opportunities?

Absolutely, Tim. What we are seeing particularly on the Metal Coatings side, we know that imports pre painted imports in particular account for about 10%. Of the volume that comes in that equates to about 800,000 tons annually.

We do believe that a portion of that will be looking for domestic supply and obviously being a leading coil coater here in North America as they source domestically. It stands to reason that we'll pick up some tailwind from that this year.

Okay, great. Thanks again.

All right. Thank you. The next question comes from Jon Braat with Kansas City Capital. Please go ahead.

Good morning, everyone.

Tom, now that Washington has reached commercialization stage, and maybe along with the prior prior question and maybe some additional imports looking for domestic sources. Any reason to believe that Washington's ramp up might go better than expected? And and we might see some something more positive of Washington here in this fiscal year.

Yes. That's always I think the hope.

It's a big complex project. It's been run well. The team has done a great job of mitigating any issues with deliveries of equipment and getting things ramped up. So we're looking forward to to the Analyst Day there and in August. But absolutely, we've got they're working to a more aggressive plan than we've got embedded in our guidance. And so if they hit that more aggressive plan, which so far the team has shown they're able to do, then we would have some nice upside this year. So [indiscernible] the teams probably on this call just scratching their heads and But yes, they signed up to and it really hits as they they hit capacity mid year. So as we get into that third quarter and especially especially at that point, they're in full stride. And we've heard from at least one customer that they're forecasting higher demand, which is good news. So we'll have the demand [indiscernible] The facility comes online well, which we continue to see signs it is.

Then we're going to have a really good year there.

Okay. If I'm correct, we're initially initial revenue expectation is around 90,000,000 for this year. Is that correct?

I think it's a little lower than that.

The for this year is not 50,000,000 or $60,000,000 The revenue once we get to ramp We've previously stated that kind of $60,000,000 opportunity. That's obviously a variable number. There's actually feelings within that facility. There's obviously a pre slip lane and then a coating lane and then an overall slacking lane. So a lot of variables in that equation in terms of the type of product. But as you look at within our models then fill capacity is in the range of $60,000,000 number. Okay.

Thank you. And one last question, David, you spoke about the two hundred days of lost production, mostly in the metal coatings.

Was the inclement weather mostly impactful impacting your Southeastern locations? Or was it pretty much across the board?

Yes, we saw it pretty much across the board in the areas where we operate, the South in particular, was definitely impacted more than it was a year ago. As well as the Upper Midwest and and some of the the Eastern operations as well. [indiscernible] Texas, we haven't seen this since what [indiscernible] And even then we didn't have this many down days and so part of it was that natural gas got curtailed in North Texas and obviously with our big furnaces that we basically had everything on slow roll. So So it really and these are big so it happened to impact where we had big [indiscernible] but all of that has ramped back up in Q1.

Okay. All right. Thank you very much.

Sure. Thanks. Thank you.

This concludes our question and answer session. I would now like to turn the conference back over to Tom Ferguson, for any closing remarks.

Thank you, operator. I want to thank everybody for joining us and as we've implied on this call, we think the fundamentals of our business are outstanding. And pretty much unchanged in spite of a lot of the tariff uncertainty. We focus on providing outstanding value which allows us to take market share. We've made great investments in adding capacity, whether it's spin lines on the metal coating side, whether it's slitting lines on the precoat side. So we have added other services that are flowing through into our our revenue line and look forward to continuing to do that, getting some deals done and announcing some additional positives as this quarter goes on. And then talking to you all at the end of the first quarter. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.