Boston, MA 05/15/2014 (wallstreetpr) – Valmont Industries, Inc. (NYSE:VMI) announced that its Board of Directors approved the capital allocation policy for long-term growth.
Why capital allocation
Valmont grew at a CAGR of 16% for last four years to reach $3.3 billion in 2013 and also completed significant acquisitions to increase its growth potential. Accordingly, the Company has improved its liquidity position with substantial cash balances and unused debt.
As of March 31, 2014, Valmont Industries, Inc. (NYSE:VMI) has cash and cash equivalents of $488.2 million and total long-term debt of $494.2 million. Therefore, the management agreed to allocate the available funds to support future growth.
What is Valmont’s capital allocation policy?
Valmont intends to allocate the available funds by returning the excess capital to its shareholders and sensibly fund the business for continuing growth either organically or through acquisitions.
A. Capital expenditure & Acquisitions
Valmont Industries, Inc. (NYSE:VMI) aims to spent capital of ~340 million to improve its existing infrastructure for the period of 2014-2016. In addition, Valmont keeps on looking for potential partners, so, to improve the business either through joint ventures or acquisitions. The Company will also focus on working capital investment to support its future sales growth.
B. Share repurchase program
The Company plans to return excess funds to its shareholders through share repurchases. The Board also authorized to repurchase up to $500 million of its ~26.8 million outstanding shares so to add value to its shareholders. The funding for repurchase program can be through the available working capital and short-term borrowings.
C. Dividend distribution
Valmont also plans to increase the dividend by 50% and will pay a dividend in a range of 15% on diluted net earnings of 2013. The Directors also approved the quarterly dividend of 37.5 cents per share that will be payable by July 2014.
Conclusion
Valmont Industries, Inc. (NYSE:VMI) allocates the available funds and manages its capital structure so to maintain the credit rating of Moody’s Baa2 and Standard and Poor’s BBB.
