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Daniel Fotinich , Mercedeh Sabeti , Nicholas Lee, Thania Amberiadis. Agenda. Industry Overview Company Overview Thesis Drivers Valuation. Industry. Acres Irrigated by Method (USDA). Irrigation is the application of water to land to assist in the production of crops

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daniel fotinich mercedeh sabeti nicholas lee thania amberiadis
Daniel Fotinich,MercedehSabeti,

Nicholas Lee, ThaniaAmberiadis


Industry Overview

Company Overview





Acres Irrigated by Method (USDA)

  • Irrigation is the application of water to land to assist in the production of crops
    • Traditional irrigation (gravity flow, flood irrigation)
    • Mechanical irrigation (center pivot, lateral)
  • Industry Players
    • Valmont and Lindsay (75% market share)
    • T-L Irrigation and Reinke
types of mechanical irrigation systems
Types of Mechanical Irrigation Systems
  • Micro-Irrigation
  • Micro-Irrigation has a shorter lifespan, is more labor intensive, has higher maintenance costs, but is more water efficient
    • Has a close by water source that releases slowly
    • Able to use waste water
    • Directly above the plant, can accommodate vine agriculture better
  • Micro-Sprinkler
  • Small sprinklers that spray water
  • Center Pivot
  • Center Anchor, spins in a circle
    • Long life span, automated, with low maintenance and labor costs
    • Considered the best irrigation system for a majority of farms
  • Lateral Move
  • Same as the Center pivot but follows a square pattern
  • Traveling Gun
  • Irrigation system that uses a hose with high water pressure to distribute water
  • Requires more energy
  • Labor intensive
center pivot irrigation
Center Pivot Irrigation
  • Self propelled system that rotates around a central pivot point
  • Depth of water determined by speed at which system moves around field
  • More water applied the longer it takes the system to complete a transition
  • Benefits:
  • Longer lifespan (20-25 years)
  • Low labor & maintenance costs
  • Used for rough terrain
  • Utilize pesticides in the system itself
company overview
Company Overview

9500 P

  • Leader in water management and road infrastructure products and services
  • Irrigation System Segment
    • Center Pivot
    • Lateral Move
    • Hose Reel
  • Infrastructure Segment
    • Moveable & Specialty Barriers
    • Road Safety Equipment
    • Railroad Structures

8500 P

7500 P

business model
Business Model



  • Process
  • Lindsay manufactures their irrigation systems on a project basis and distributes them through an extensive network of dealers
  • Dealers serve as a local point of contact and a holistic service, helping farmers pick customized solutions and solve any issues they have with their products.
    • Center Pivot itself is usually around 50% of the purchase
    • Other 50% is irrigation infrastructure: Pumps, base, electricity, etc
valmont industries
Valmont Industries

Valmont is the original pioneer of the center pivot irrigation system, under their banner Valley Irrigation

  • They are still the leading provider with a 43% market share, but we believe that Lindsay will outperform Valmont and is the top irrigation choice for three reasons:
  • Lindsay has more readily innovated its center pivot and has a stronger product, distributed through its expansive dealer network
  • Lindsay has taken ~6% market share from Valmont in the past decade
  • Lindsay is a pureplay on irrigation, while Valmont’s business lines are largely diversified
    • Positive tailwinds in irrigation industry will affect Lindsay more directly than Valmont
international opportunities
International Opportunities
  • Over 91% of the world’s irrigated land is irrigated through traditional methods, and less than 4% is fully mechanized.
  • Lindsay has the most widespread and reliable dealer network of any of its competitors.
weather concerns
Weather Concerns
  • Projections show that drought is likely to continue in the United States and many places abroad
  • When farmers fear drought, they’re more likely to purchase irrigation systems
dry land v irrigated farming
Dry Land v. Irrigated Farming
  • Dry Land Farming
  • Arid areas without irrigation
  • Drought resistant crops
  • Soil protected from evaporation
  • Yield enhancement opportunity
  • Irrigated Farming
  • Application of water
  • 17% of land is irrigated
  • 40% of the world’s food supply
  • 46% of irrigation systems sold by Lindsay
government involvement
Government Involvement
  • In the US and Europe, farming is heavily subsidized
    • $45B/y in EU, $30B/y in US
  • As developing countries grow, farmers’ wealth and farming subsidies will increase to drive food production higher
    • Growing populations

Leads to more moneyavailable

to spend onefficient, long

lasting irrigation systems

emerging market growth
Emerging Market Growth

GDP Per Capita % Growth

Per McKinsey

“By 2025, more than half of the world's population will have joined the consuming classes, driving annual consumption in emerging markets to $30 trillion.”

Wealth increases will shift consumer eating demand from agriculture to meat, requiring higher levels of output


Brazil is the fastest growing agricultural producer and is expected to one of the biggest, if not the biggest producer in the coming years

  • There is significant room to increase irrigation penetration
  • Area Available for Agriculture: 282 million hectares
  • Area Cultivated: 65 million hectares
  • Area Irrigated: 5 Million Hectares
  • World Trade Organization (2010)
  • Total spending in Agricultural and Livestock Planis $38 billion
  • $2 billion is specifically allocated for the financing of agricultural investments

Historically, % of agricultural land irrigated was flat at 5.26 % from 2006 – 2010

Since then, Ukraine has made serious moves to improve its agricultural sector

  • Lots of conversion to irrigated land, especially in southern areas starting in 2010
  • Currently in the end stage talks for China to loan $ 3 billion
    • Will start in mid 2014
    • Cover 1.3 million hectares
corn prices
Corn Prices
  • Expected and actual commodity prices can influence farmers’ decisions to purchase extra equipment
  • These fears are largely short-term and vary across regions
  • This largely affects only their US irrigation business
  • Long-term, corn price fluctuations shouldn’t dictate farmer demand for modern irrigation
variant perception
Variant Perception

The Street


  • Corn prices will continue to decline and affect their irrigation business
  • International markets can’t grow as fast as they have
  • Infrastructure segment is lagging
  • Much more irrigation international growth
    • Upside potential from large projects
    • Concerns over corn prices are very short-term and US-focused
  • Company valuation at 13 P/E does not factor in this growth

Purchase 5% position at current stock price of $77-$78 tomorrow morning

center pivot
Center Pivot

Before the invention of the center pivot, there were a number of inefficient irrigation methods that required lots of input (water, labor, energy) and were not very versatile.

  • Design
    • Span: pipe between two towers
    • Towers: Support and wheels
    • Outlets and Emitters/Droppers: Release water
  • Advantages
    • Water output precision
    • Automated process that requires little labor and maintenance
    • Long Lifespan of 20-25 years
    • Can emit pesticides
infrastructure segment
Infrastructure Segment
  • 15% of Revenue
  • Closely linked to government spending
  • As emerging market countries increase their wealth, there is greater focus on developing infrastructure
    • Golden Gate Bridge Highway
    • $14.1 million contract
    • Moveable barrier procurement from Lindsay as part of $26.5 million bridge project

Production as of 2011 has still not hit Soviet Union levels, and there is significant opportunity here for irrigation to increase yields

Historically, Russia has had very low irrigation penetration, especially after the disbandment of the Soviet Union and deterioration of previously state-owned capital