SWM - Earnings call transcript Q2 2018

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Operator

Welcome to the SWM Second Quarter 2018 Earnings Conference Call. Hosting the call today from SWM is Dr. Jeff Kramer, Chief Executive Officer. He is joined by Andrew Wamser, Chief Financial Officer and Mark Chekanow, Director of Investor Relations. Today's call is being recorded and will be available for replay later this afternoon. participants floor placed your will the all mode a questions time presentation. the and be this have in been listen-only following At open for over pleasure It turn now Instructions] my [Operator the is floor to Mr. to Chekanow. you begin. Sir, may

Mark Chekanow

Mark results. Thank Director Relations for us of you second SWM's Chekanow, to you, Thank morning, discuss SWM. quarter Investor Good joining Catherine. I'm at XXXX earnings

our materially today's Actual to which Report begin, Form you detail that number differ in I'd results quarterly Exchange included Annual and statements. forward-looking like a remind our filings the in by conference we are on suggested include reports including Before comments call for and more results these our XX-K. from may Form the on Commission Securities discussed comments in reasons of XX-Q

comparisons during stated financial Some measures closest the call this the to presentation earnings metric financial measures financial the available the will over year are and the turn to of are GAAP relate of release earnings presentation these and of measures, appendix otherwise, on operations. now discussed period This the Relations website continuing this and www.swmintl.com. and section Unless measures operational reconciliations to are call our I in the included Jeff. non-GAAP Investor to release. prior

Jeffrey Kramer

share. $XXX expenses you, and consolidation. and related a EPS pleased million were AMS to with adjusted site everyone. and $X.XX good up Yesterday, morning sales we XX% to Thank significant to X% Mark, performance inflationary We despite results reported second deliver quarter up pressures good our to

positive no bottom strong offsetting organic realize year million expectation from flow sales expenses filtration Overall, of lower as with was difficult in manufacturing Year-to-date with sales, cash comparison. was solid are EP highlight, growth of in a $XXX while tracking was synergies, and medical down For like transportation was sales taxes. acquisitions The to toward lift operations last to continued key benefit, sales top solidly organic to which the X% takeaways exceeding planned in positive both the driving acquired Conwed already was finally propelled and our top growth performance delivered coupled and free good when line the short-term year-to-date. AMS growth a growth due XX%. on growth slightly year-over-year segment in and quarter AMS XXXX. an second business strong I'd remained by the performance strong quarter,

the sale was sub-segments. detail, continue business segments year. Our of versus up were filtration more from and filtration share infrastructure, near-term in a the To for digits, cycle RO our of customers confidence the somewhat our of water the as double year. industrial the on last its return this across well end construction and trend remainder benefit we last year, After outlook our expected bullish increased. has rebound flat replenishment performed being to the at maintain of this guarded sustainability

filters. In first from We our liquid continued continued also strong manufacture such of mainly medical, gains momentum of semiconductor in quarter. we heavy and use as by fuel and momentum components equipment, filtration driven products the process in in saw hydraulic its

breadth, While this hospital variety drivers the that typically include care mask offer face These of filtration consumer materials specialty of applications, our IV films wound advanced air Ostomy products also in far. related the Asia. and niche packaging, thus growth mature finger XXXX our category, illustrate like bags, and bandage for is nearly of popular medical for to half more we portfolio products have business which been

recall positive of slightly. this our earlier our order Year-to-date, now by solidly contraction begun this margins. for protection surface a of expectations. did Our report moderated year-over-year XQ recover we In unit indication construction robust winter positive transportation are sales, customer delivered sales and performance, our business strong conditions our and remained a with outlook we compared business, and but films. XXXX solid we These year to support healthy these forward have an affected backlog extremely have market infrastructure down to in severe key conditions were go markets. some Despite that sales and

first to cost associated closer incur of most higher adjusted this expected continue segment get Similar a as final to costs of later accounted year. site for Austin this margin with decline. We we exit to site the the the quarter,

smaller savings when A full significant costs, project. is which we but elevated. We expect the on second, quarter we issue this closing realize in facility. However, fourth this important synergy from polypropylene remain for the remain target

prices we quarter. and this higher We recovered on the impact have we majority products have increased estimate cost polypropylene a based of netting

on evaluate film line. to continue remain new freight plan also in and is Chinese we begun surcharge the trucking to a sales and remain increases manufacturing and response European in implementing our and performing have Also execute strong, well up new site with We rising costs price our fully U.S.

costs and our to resin site challenge margins, rise While synergy a realizing plan. the continue homestretch we the pose related in Austin closing are to to Conwed and of

X% we relative Paper Paper, currency heat-not-burn performance of in business mix and the of Cigarette to X% was delivered products. note, and RTL Of traditional decline the despite growth good Moving Engineered volumes increased decline variations. our overcoming year-to-date second quarter stability volume offset with by in sales quarter, X% quarter-to-quarter high showing In volume a segment the grew price decline. some

globe. order across remain headwind segment, to scale their on the see consumer learn in but pulp One some remains will more costs. we customer of expect supply significant shown, chains and variance positive this elevated patterns preferences at the As about

were – some tight, there permit, we for suppliers reporting, these actively agreements. contracts are raising supply we demand the global these for many should prices balance materials lag paper customer note but several are is on As is

offset we pressures push with delivering result, to rising profit were year. in to productivity a solid to a counterbalance than while costs with increased, margins performed inflationary a As from and efficiencies. well the lower operating perspective hard We last slightly dollars input quarter manufacturing gains continue

in This development on a additional few with discussions a again we last focal up Just very point to significantly sales our the were over has comments become area collaborative have year customers. and continue lumping heat-not-burn, investment applications with the community. the attracting highlighted initial earlier these have new in be our the can growth Recently, announcements product tobacco spotlight phases heated that industry comments introduction. from of

through our its pricing, multiplying the turn plan in We Andy. consumer Our I expectation. business. part the growth as stability industry with over preferences, to product The now a regulations. planning, drive relative our view and remains very in is will in EP of to prospects call the original category generally remain line exciting as bullish long-term we sorts this and capacity innovation on

Andrew Wamser

million. operating Jeff. you, review XX.X% the profit or AMS starting results last $XX.X sales, million In Thank X% XXX our was Adjusted second year. now quarter, increased I’ll down basis versus financial performance. with sales of to $XXX points net segment

reminder, mix AMS year's market a XXXX, by a inefficiencies from favorable year. results Consistent primarily was first the in XX.X%. plant, quarter quarter record second a Austin of last contraction of margin later this benefited segment for scheduled of closure is effects was in driven the As with the which our

at through production redundant the line we high transferred capacity. anticipated, labor capabilities added expanding we as their flesh engineering new sites and incurred costs that are inventory cost As

On resin highlighted, much improvement We the is uptick went of from costs. pricing effect that polypropylene though higher to compression that costs due believe level during to a second margin an to the as higher into quarter in recent the moderating price the of require well cost was quarter. improved further customers Jeff quarter in provide driver we primary the the to as through prices expenses site adjusted may will second XX.X%. as caveat price Though actions. sequential actions. the recapture margin resin to delivered we increases first the offset during This we The increases basis, quarter XX.X% able were

will Austin X% site annualized volume a segment mix X%, The from exceed favorable Paper the synergies than the the in of of these sales term more Engineered movements Regarding covered net up consolidation pressures. price positive foreign decline. X% and quarter short quarter currency were the fourth

higher and with rising Overall pressures year. prior X% and operating growth last Austin representing in Adjusted X% $X.XX from excluding the productivity XX% results. $XX.X EPs expenses report XX.X% X%. for decline XX full rate margin points driven line On a quarter consolidated was year-over-year costs profit with pleased from million improved expect we increased balance with $X.XX XX $XX.X as Given up in operating but was XXXX total euro net a and despite our million the to sales was do raw euro to was X% EBITDA flat basis were unallocated meaningful offset. almost versus late The quarter declined associated adjusted was given however, not year-over-year. to from EBITDA approximately and the down costs, expenses SWM Shifting adjusted the recovery sales in significantly EPS GAAP providing pulp up of were but by by year second benefit consolidated rally Adjusted up basis currency. synergy a first higher up was the the sequentially of by to the EPS euro currency modest year, earnings, the price $X.XX of plan. with points from growth. exchange corporate the last material XXX. year percentage the X%, increased margin current Adjusted a a combination moderate we $X.XX near-term basis,

As translation. profit EPS was rate adjusted supported operating currency was growth by tax a flat, and lower

XX.X% last year in U.S. to tax the second tax from down was rate reform. Our changes XX% primarily quarter due

XX.X%. tax year-to-date stands at rate Our

that a year. we in impact and half some our of was variability However, second the of second positive currency note Also laws tax we there access caution tax interpret the continue $X.XX to translation the to could and rate new EPS. in quarter be

now the first highlights our puts key shaping I’d half of takes to results. like year on XXXX the and some provide complete, now the With

On broad AMS the across segments. positive side organic our we're growth seeing

tracking raw to However, than beginning higher significantly of are our expectations say it's fair the year. material up at our in the costs that also

the resin half rate year. back year. and been lower positive half benefit tax of recover both expected the a stronger productivity of headwind to But we even impact improvements. offset able costs be in and the euro to expect actions the the of been although rate we've slightly Fortunately, the the moderate an pricing and second through should than in Other some of euro, pulp have favorable a

free from Moving XXXX to equality, up year-to-date cash $XX and cash $XX flow million. was flow million

$XX for accelerate the approximately perspective quarter up half approximately for which credit facility, debt year-to-date, of terms For $XX $XX $XXX million quarter times below leverage XXXX. will down projection to a of closer will net the XXXX. down But we our CapEx expect X.X free that our range second second million spending continue the and in we we From approximately half the the and of M&A EBITDA million. annualizes back from year in million without pick at than in anticipate achieve of more cash our to usual anticipated debt. reduced X.X And pattern times year-end We was of far XXXX. thus $X to the the million in guidance to at year. adjusted we activity, pay we at were our end expect to by additional the in

Jeff. back to Now

Jeffrey Kramer

our you, Andy. EPS believe deliver performance with our we At Thank generally are we on original are track within we mid-year, pleased to and financial adjusted guidance.

plans cost key organic with original a forecast XXXX immediate continued tariff been the factor cost than cloudy are our given showing particularly activities our higher strong delivering on growth delivering somewhat of and key growth future. solid sales sales the pressures. momentum our the have and material our the raw most increases in Unfortunately, are in in will strength AMS markets be We

we Overall, been and European our ongoing AMS, of active year savings the a heat-not-burn. nearing be for synergies Chinese Regarding XXXX our will projects new the closure, of quarter. new project during for commercialization commissioning fourth solid film of Completing incremental U.S. on and this expected the construction in development around between us has are line set facility, XXXX and our up boost Austin are project site the corner. time a completion an footprint our strategic nicely activities, should rationalization

capabilities. and is to these operating demonstrating can interest remarks. ultimately our in continued current plan in more appreciate the and we've should on further which and our deals execute result And our projects targeted, executing we our open believe a platform original While given line which integrated build. AMS support. synergy We Catherine, scaled opportunities to questions. profitable to please We will screen to for against driving commitments additional ability the plan, be for pursuing that we on also toward continue critical our inorganic concludes continue that complement your

Operator

Instructions] Sidoti. comes [Operator Dan And question with Jacome you. Thank our first from

is open. line Your

Daniel Jacome

morning. Good

Jeffrey Kramer

Good morning.

Daniel Jacome

here. questions Couple

the on Austin let's First, site. stay

Sorry the operating the profit missed exact if in it. drag was I What quarter?

Andrew Wamser

Yes.

through did have some system. we Austin, framework cost that, we so running So high the inventory for

running just it have down. a in had is a that look at X.X depreciation. also accelerated We And general then wind headwind. in lastly, a aggregate, million you inefficiencies But about it's of we site when

Daniel Jacome

X.X inherited I this, know million. but And was should with Conwed? the that

Andrew Wamser

a start that dull was think I facility.

Daniel Jacome

Dull start, right. okay. All

the level those thoughts lagging? turn What to high are let’s markets. construction Now there? keep Any

Jeffrey Kramer

Yes. The in rain. terrible. construction the you are lot and if the of quarter weather the lagging because There lot a of in markets were then recall patterns were blizzards United a primarily States first

industry believe we seen construction Board quarter conditions was for be moderate so those business positive. more and for first And the look downturn gaining industry. construction the will entire and We've the is much a the momentum, the

Daniel Jacome

helpful. That's Okay.

So no was in was weather there if quarter headwinds, what second anything? there

Jeffrey Kramer

you've some probably of moderated. materially and of ones, seen were nature, rain that a but lot slight There it's things

Daniel Jacome

so turning from it are mention level PMI but you outlook their the comments, growth tepid call, anything on you Okay, lumpy phase, great. – clarify me Then do last to could did you that it HnB, is there? any let's early, high call still markets very help have pretty is and

Jeffrey Kramer

Yes. hard to comment use me saying. customers going end are on directly for what It's to our be

means still introduction. billing, I view We're that lumpy. supply were product our think pretty the still execution we And new in it, excited clear chain, we've very about consistent but that little sometime been market how develop. were and our it's also expectation will a in

starting As they they're characteristics markets, performance their go more need or other they might to see flavor tell to to test et characteristics that or cetera.

of new way We're it we've to done we planning in of to going commercialization work the it's with product a be. be lot have continuing development customers. way expected the been many for the to So actually it

a trends many are normal to with like SWM, so because And going just you these not of of a working need reinforcement of to it's it actually are the positives thing, simple products. tell

to it’s conditions, to tell, meet a You cetera. are need et regulations local going local

So overall, we’ve on positive it. remain

in game also of I this think of many clear we've going pretty scale be because to we volume the for in issues terms these up. is changer SWM that been short-term a as of

Daniel Jacome

Got it, make and that sense.

Okay.

more a about the is tax, I still a variability long-term but and rather going weighted? maybe to is second then talk So heard housekeeping can bit half Why favorable CapEx about those then lot I've And quick company two on tax two? in be of you’re just rate. first questions. little wrong, talk think the Maybe I'm

Andrew Wamser

Sure.

below we are beginning of maybe today. expectation So But below slightly where our back being from that know and the that year, would able or cadence thought back to be at that more our are the the and approximately still $XX be we of knew projects, you we so half expectation. of to is would certain we'll say million CapEx that half the for close be that, just million weighted we did we the trending But said, year $XX in a that. year

Daniel Jacome

Okay.

Andrew Wamser

would talked how With of from – regards few we we so basis a where to the tax, we be beginning started points about the year, like year. XXX below tax

So think that in to sort it of rate. XX% of XX%

talk And vary. U.S. jurisdictions, many earned If we and well incorporated other sure proper deductions. you are that our they're to tax making that different corporate, are That profitability. how getting think other rate reform looking as then that you if on us, think I can they – they based the where in seeing about companies they're also they

today a our at a tax just I swing is little now. caution landed meaningful a go and So But we're but rate. where to it could like higher, XX.X% in lower around XX.X% that bit little I expect go and our don't we in expectation

Daniel Jacome

the – Okay, good markets about to quarter? rate, I be year-to-date again one is normalized in lapping throw so business think seems helps. long-term a transportation you I for in there I’ll run fantastic. the you as one mean, end That but can growth you Maybe know Is growth rate, more, think comp, stiff we us the beyond shape. remind these what are

Jeffrey Kramer

a as for that I year. we introduced last really quarter Yes, positive said, just We Asian new was when we're very mean us – recall you lapping distribution we at our agreement.

think very X% positive We We’re on long-term. to this. its still growth X% rates

Daniel Jacome

Okay.

Jeffrey Kramer

of one It's think. trends our more I positive market

Daniel Jacome

great. Thank Okay, guys. you,

Jeffrey Kramer

Sure.

Operator

Thank you. [Operator have Instructions] from we And follow-up a Dan.

Your line open. is

Daniel Jacome

seeing, replacement cycle, of comment correctly. more Was if thing you're was any Hi, and me more, just a product phrase you it market significant on one there of steady any as kind what it there in I to kind can let comment change bit of even goes? quarter-to-quarter or filtration little

Jeffrey Kramer

recall, if our have actually we business. categories Yes, in you filtration two major

that's one reverse have focused. focused We more one that processed industries is osmosis and

increase. if reverse an was the marketplace. rates at to long-term be osmosis, the enable disappointed is as growth prices were time extension And a their really of in recall, It off eventually we always On around increase. that projections indicated being little while. able to last to you year trends. below see for energy that that cycles would we're talk replenishment put more replenishment the by creep The them see the we’d our driven of that the low that confidently differently trend up, of cycle about We're hearing that energy that prices to need and and that. a extension But customers replenishment starting cycle that forward starting that said much combination to would you we

of for over trend the to that that performing last continue see so will and going hoping And good that has couple we're a been us quarters, same forward. segment

through a filters the in we've and manufacturing a also in construction of just coming et our in products use seen very where they lot of used hydraulic semi side, that fluids in industry role are semiconductor vehicles – cetera. the for play equipment process those On the and orders strong

So is quarter. overall marketplace air just so two key and those the stable our filtration for has operating good well segments the are business been

Daniel Jacome

Okay. between or That's think margins there reason RO good. process a Is in there's in same? any differential about the to

Jeffrey Kramer

mean same. they're I [indiscernible]. the about good It's for No. products margin us

Daniel Jacome

Terrific. Thanks again.

Jeffrey Kramer

Okay. Thanks Dan.

Andrew Wamser

Q&A Thanks Dan. End of

Operator

Thank you. to for like am at this no closing time. to the further showing any call I turn back questions And I'd remarks. management

Jeffrey Kramer

everybody working you we a in hard in quarters. I speak and participation again with coming appreciate hope positive light we're the to

So thank you.

Operator

in program. participating today's and today's Thank gentlemen you, for conference. concludes This Ladies

You may great all disconnect. Everyone have a day.

Mativ (MATV) 2 Aug 182018 Q2 Earnings call transcript