AZZ Inc: Q3 2025 Earnings Call Highlights Strong Sales Growth and Improved Margins

AZZ Inc (AZZ), a leading independent provider of hot-dip galvanizing and coil coating solutions, reported strong financial results for the third quarter of fiscal year 2025, ended November 30, 2024. The company's robust performance was driven by increased sales and improved margins across both its Metal Coatings and Precoat Metals segments. AZZ's President and Chief Executive Officer, Tom Ferguson, highlighted the company's achievements and provided insights into its strategic initiatives during the earnings call.



Strong Sales Growth Across Segments
AZZ's total sales for the third quarter reached $403.7 million, up 5.8% year-over-year. The Metal Coatings segment saw sales increase by 3.3% to $168.6 million, while the Precoat Metals segment experienced a more significant growth of 7.6% to $235.1 million. This growth was driven by increased volume and market share gains in key end markets, such as construction, industrial, and transportation.

Improved Margins and Operational Efficiency
The company's improved margins were a result of operational efficiency and cost management initiatives. The Metal Coatings segment delivered an Adjusted EBITDA margin of 31.5%, up 150 basis points from the prior year third quarter, primarily due to lower zinc costs and improved zinc utilization. The Precoat Metals segment's Adjusted EBITDA margin improved to 19.1%, up 70 basis points, driven by sales growth, favorable mix, and improved operational performance.

Debt Reduction and Capital Allocation
AZZ generated significant operating cash of $185.6 million for the first nine months of fiscal year 2025, enabling the company to reduce debt by $80.0 million and continue to reduce its net leverage ratio to 2.6x at the end of the third quarter. The company's disciplined working capital management and improved earnings allowed it to pay down debt while maintaining a healthy cash position. Capital expenditures for the third quarter totaled $26.4 million, including $11.2 million of spending related to the new Washington, Missouri, facility, which is on budget and schedule.

Revised Fiscal Year 2025 Guidance
Based on its strong performance, AZZ narrowed and raised its fiscal year 2025 financial guidance. The company now expects sales of $1.550-1.600 billion and adjusted EBITDA of $340-360 million. This revised guidance reflects management's confidence in continued strong performance and improved profitability expectations.



AZZ's strong sales growth and improved margins in the third quarter of fiscal year 2025 demonstrate the company's ability to execute on its strategic initiatives and capitalize on favorable market conditions. The company's focus on operational efficiency, cost management, and disciplined capital allocation has positioned it well for continued growth and long-term value creation. As AZZ continues to invest in strategic growth opportunities and reduce its debt, investors can expect the company to maintain its strong financial performance and deliver long-term shareholder value.