AZZ Raises Outlook as Grid, Data Center Demand Powers Growth Strategy

AZZ raised its fiscal-year outlook, now targeting sales of $1.8 billion-$1.85 billion, adjusted EBITDA of $375 million-$415 million and adjusted EPS of $6.75-$7.15. Growth is being driven by demand for grid modernization, power infrastructure, data centers, reshoring and aluminum beverage packaging, with the Metal Coatings segment growing 14% year over year. AZZ has strengthened its balance sheet, reducing net leverage to 1.4 times debt to EBITDA, while investing in new capacity, including a $125 million Missouri coil-coating plant and expanded galvanizing operations.

AZZ NYSE: AZZ outlined its growth strategy, operating footprint and updated fiscal-year outlook at the IDEAS conference, highlighting demand tied to infrastructure, power transmission and distribution, data centers and aluminum beverage packaging. David Nark, AZZ’s chief marketing, communications and investor relations officer, said the company is North America’s largest provider of hot-dip galvanizing and coil coating services. The company operates 61 locations across North America, including 47 Metal Coatings sites and 14 Precoat Metals locations with 16 coil-coating lines.

AZZ operates as a toll coater, meaning its customers own the steel and aluminum that AZZ processes. Nark said the model limits the company’s direct exposure to steel and aluminum prices, while its primary input exposures are zinc, paint, natural gas, labor and freight.

For the fiscal year ended in February, AZZ reported $1.65 billion in sales, adjusted EBITDA of $368 million and adjusted diluted earnings per share of $6.19, according to Nark. The company’s consolidated adjusted EBITDA margin was 22%. The Metal Coatings segment generated $758 million in sales and $238 million in adjusted EBITDA, representing a 31% margin. The segment grew 14% year over year, which Nark attributed in part to investments in power infrastructure, transmission and distribution projects, utilities and data centers. Precoat Metals reported $891 million in sales and adjusted EBITDA margins of nearly 20%. The segment was down slightly in the prior fiscal year due to residential-market exposure, including metal roofing, doors and garage doors, Nark said. However, he said Precoat Metals returned to year-over-year growth in the first quarter of the new fiscal year, which began in March.

AZZ raised its guidance during the year. The company now expects: Sales of $1.8 billion to $1.85 billion, up from prior guidance of $1.725 billion to $1.775 billion. Adjusted EBITDA of $375 million to $415 million, compared with previous guidance of $360 million to $400 million. Adjusted diluted EPS of $6.75 to $7.15, compared with prior guidance of $6.50 to $7.00. Interest expense of approximately $35 million to $45 million. Further debt reduction of about $130 million to $170 million. Nark said the outlook excludes the impact of recently completed M&A activity and potential additional income from the company’s Avail joint venture.

Nark said AZZ has reduced net leverage to 1.4 times debt to EBITDA, from 3.6 times in fiscal 2022, following its acquisition of Precoat Metals. The company reduced debt by $385 million in the prior year, he said, while interest expense declined from more than $100 million at the time of the transaction to approximately $35 million to $45 million. The company expects annual capital expenditures of $80 million to $100 million, with about 80% design...