TEN - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to Tenneco's Second Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

Now I’d like to turn the call over to Mr. of President Vice Kwas, Investor Relations. Rich ahead. go Please,

Rich Kwas

available we Thank financial quarter second A Please corresponding remarks be today, our our section related include you good morning. presentation information is prepared our today and aware released to the XXXX website. measures. information. Investors of our financial Earlier on discussion earnings will that and results non-GAAP on

it reconciled release When add are earnings which to with adjusted EBITDA, attachments we website. materials earnings other of in refers press and available GAAP release specifically All our adjusted Unless on materials. and earnings say margin The described our means EBITDA. measures other are EBITDA otherwise, margin. value the

mind including projected actual from are that differ materially Additionally, near-term, any In XX, in could the our forward-looking conference Automotive of some to comments in three JPMorgan Conference will results of those our our in the forward speaking to we include Industrials the with Conference August RBC forward-looking September virtual of on looking We on statements. keep September many on statements. look Please participating XX. aftermarket forward conferences, X Jefferies you. the and

highlights then questions. with Brian before on will today our XXXX. shareholder value sheet from for remarks Kesseler, Matti will priorities segment CFO, Kevin Masanovich, for enterprise Our agenda creation and concluding we outlook take will the discuss performance; balance COO, CEO, and on provide Brian quarter; will your our start second updated details reviewing Baird provide more our and our

Brian. turn Now, it I will to Brian? over

Brian Kesseler

highlight results themes are There welcome. that and key everyone, morning, Good I'd to like Rich. in today. Thanks, three

execution. First, our solid operating

value. growth cash our And third, strategies free to and enhance our performance. flow Second, shareholder

favorable end OE for second and production and costs. guidance. encountered year-over-year four, auto we our temporary and XX% period. supported delivered our the the solid most businesses, mix. of despite of growth light start year by We headwinds our in mitigated second deliver $XXX vehicle Like downtime quarter, unforeseen million on on important the suppliers, We material In growth geographies of strong raw we we platform our other outperformed these savings market in Let's to in quarter results. customers page prior implemented conversion revenue growth, volume excess escalating top EBITDA at cost in delivered

savings In Accelerated improve margins. cost by addition, track is we in achieve savings end. run-rate structural And million remain that our generating program's the year program Plus to $XXX on annual will

increasing improve to focused our capital produce continues Second, on working and cash results. through conversion capital efficiency spending disciplined

free service we During $XXX debt $XX million cash the flow free bringing quarter, first to for of generated service, debt cash our million. flow for half

flow net Tenneco third, improved, As a And the value negative the ratio intensity. lowering near-term, in reducing At first capital highly remain quarter half year. leverage free in the has times. net of end, margin and historically expansion experienced our our debt, on the X.X to focused reminder, cash shareholder our increasing

time, objectives. achieving In important proud call. Air parks, Kevin the of commitment resiliency later incremental which because margin in quarter, Europe, enhance we're revenues I'm our business in segments battery cash business to Performance with American Performance At secured and in Solutions a to growth want vehicle we investing million their discuss which annualized in and electric $XX basis. and deliver Tenneco variety contributions. expected results, is team for Clean of on we entire the segments also more same new resolve, a of Solutions, go their will business forward to detail, our motor of Powertrain In and flow and play customers the long-term and Our profile. parts in motor roles our delivering to North the

of quarter I'll five, page second results. XXXX of an our to Turning walk through overview

$X.X revenue Second included pass-through quarter in as sales billion, was revenue total COVID of XXXX the our XX% substrate quarter, up $X.X lap total billion. we QX year-over-year

Converter substrates cost that manufacturer tier precious a customer fee. directly As Particulate sales Catalytic key passed reminder, Filter our through supplier. Diesel segment. X carried in small are emission into systems a substrates and include substrates only our The metals reduction our or Clean handling components are to in plus from to inventory source incorporated are Air the the Those our at

for end Driven industry both value add revenue our diversity Solutions ICE of XX%. revenue Performance The value the application value rates, currency like of light and Tenneco. from portion this diversified of foreign product favorably vehicle production our unrelated and truck that add adding vehicle over vehicle applications. further, by balanced light year-over-year this above was shows of revenue the excluding is came XX% top the add revenue $X.X the off quarter guidance. just our our is just differentiator EBITDA split in business, of up impact For a of aftermarket commercial step OE highway technologies. Taking exchange comparison quarter that growth The our by a scale portfolio by XX% generated the portfolio quarter XX% our is billion second and business to of industrial

vehicles, Europe product, outperformance in mix $XXX conversion strong growth light constant and growth off-highway and additional on China value-add a volume of truck XX% performance and rate growth and of all in that OE the drove We around Our strength revenue. in XX% EBITDA XX% the America diversity XX% our geographically had with service. commercial each at markets adjusted of and regional in value profit end very XX.X%. aftermarket dollar and XX% strong North as as The revenue and and flow a well This quarter industrial, delivered in improvement liquidity extends net in quarter. now and X.X was margin million includes team's resulted I'll $X.X of our better it seasonally sum cash view June and and continues debt leverage to net turn strong flow The the half remains since to net performance cash ratio the it of portfolio up, times, XXXX. X.X performance. of generation over debt of enable reduction. with a billion to earnings service To We strong leverage of outperformance XXth. ended generation times Available Kevin enterprise reduction. segment flow extended market, at for first free and for delivered cash the our a end Kevin? for

Kevin Baird

Thanks seven Brian. start page Performance. on our I'll with Enterprise

XX% back is and in In the revenue market OE of the benefit SUVs, light our North growth pickups mix diversified to vehicle platform QX. quarter favorable is quarter Another sequential historically the the sequentially second around from is XXXX. the that is to the we our of twice And outperform while where the year weighted aftermarket, our portfolio CUVs, strongest quarter. America, motor rate parts toward us segment in in grew of enabling XX% our that in realized growth QX aftermarket,

EBITDA volumes. from the and As the reverse we experienced cost performance strong note, team that revaluation a into an driven in conversion higher on inventory material sold includes of executed well in our million quarter. Of third quarter $XX cost benefit will the Brian mentioned, approximate the goods

in light cost able improvement environment. uneven Solid last program were supply other disruptions and execution challenges. continuing in we to Overall, continuous cost vehicle solid and actions offset contribution production an our showed Plus temporary from personally chain Accelerate year's initiatives

Let's eight. turn our parts motor performance to business on page

end begun The million, saw has secured American constant business in North currency of quarter which continued the the second XX% Europe, we the strong order quarter. Also annualized quarter, a was year-over-year to $XXX Second quarter up the $XX in base. we million book at revenue basis. to first our of through aftermarket roughly new contribute on

training expanding we points share million, customers, and performance increased for XX.X%, in the Adjusted We continue prior to the American EBITDA to product our of mix. growth new up revenue, margin was Please region, The developing our basis XX improved of largest as Performance key focus XXX and on strong including X. technicians. for supported conversion quarter. saw turn brands segment cities quarter the page growth the on on with customers conducting North in compared leading was our sequentially. China, to volume year-over-year Margin initiatives in covering and profit $XXX up XX sessions distribution Solution sequential our year,

growth to XX% commercial year-over-year. strong off-highway Light Second up were XX%, truck XXX%, constant with were applications million quarter markets. up revenue vehicle up and currency was product was industrial up applications very XX% and $XXX all across service aftermarket in OE and

As product a the include this agnostic reminder, to broad offering are products and a in engineered a lines in our segment powertrain customers. vehicle highly solutions to of technology

technology branded Ӧhlins NASCAR For Gen with example, Exclusive suspension was a quarter, product for the our Shock selected advanced car. Absorber Next Cup as business Series this the during

one production programs in Europe, of with strengthened important an on strategic electric In and SUV two platforms; further also addition, in ASD and one relationship suspension advanced launched China. growth partner Europe in this

year, $XXX five XX% XX% in our add Strong XX, value-add business revenue and basis period. X.X%. programs, year Performance or second quarter the battery increased in million boosted awards business American million, year-over-year million adjusted industrial XX% an China increased electric and won year revenues EBITDA The the quarter battery ongoing XXX or in EBITDA were quarter a margin first revenues hybrid. is in we was $XXX pipeline electric X vehicle segments of $XX of business vehicle were China $XXX point of period. also Europe supported Value added year-to-date greater revenues commercial awarded at Solutions recovery of units, the in nearly value doubled EBITDA business off-highway Adjusted $XX for level which the compared growth, a business prior currency add XX And XX.X%, vehicle million. million XX of commercial from to XX% on value the importantly, and for are third of $XX of we OE to effects. second Adjusted to revenues and was see all can XXXX you good second and the Light annualized of awarded representing of current in launching program segment's up Clean Looking the new results. in compared our we commercial truck value-add XX, the the second adoption hybrid off-highway Air grew the emission conversion delivered Air’s Clean the value-add by excluding volume EV page expect truck, profit in compared XX% near across standards. to XX%. Clean XXXX. margin service and year-over-year, off-highway million quarter. over a performance than prior revenue On truck the of the increase higher hybrid growing the improve term. foreign margin the new to and Air’s XXXX, revenue Overall year-over-year. expanded and revenue North of with made the third half compared

the XX% the off-highway increased key year-over-year were second to the XX%, Adjusted and operating service sales XXXX. last the was The has vehicle improvement. was higher balance significant recovery the margin compared in and summary increase margin and on in as to million revenues and improvement. benefits, all revenues restructuring At second XX. of the volume growth. loss benefiting well to North X.X%. conversion volume, Light commercial guidance. markets I'll increased JV income, revenue XX% vehicle Commercial good contributor discuss Powertrain’s was its EBITDA Solid revenues turn developed applications. the highest as EBITDA quarter. of the delivered on increased conversion truck, increased Adjusted supported Page to the year-over-year, the performance volume significant in of constant Matti to XX%. main increased drivers a mix now on Europe, is compared content from year's recovery quarter $XXX OE our where sheet driving $XX by business quarter, the year-over-year, call EBITDA in the America million We industrial the increased the currency,

Matti Masanovich

net the of comments EBITDA second fourth improvement XXXX my leverage our Thanks, At net of our EBITDA X.X the reduce from begin helped Kevin. trailing quarter, quarter our our represented X.X ratio. was XX. end ratio. a The second leverage I'll on quarter our ratio times, elimination times from which year-end Page

cash performance the second our flow boosted reduction. Additionally, in free positive quarter the

$XXX we flow cash Brian of million. delivered million the year-to-date said, to second quarter, debt bringing As for service free our in total $XX

working net capital reducing on is intensity higher focus and free cash continued expenditure efficiency driving flow. Our capital

of over hand. and at Our million $X.X cash the $XXX billion quarter on end the was of included liquidity

debt near-term had no at revolver significant and no end. have our drawn We balance quarter maturities,

revenue an range mature guidance XXXX our in prior to We future We Our revolving credit value-added of increased $XXX light XXXX At vehicle revenue million half facility billion refinancing by our prices, outlook. our the A is of and our $XX.X the the recovery higher loan $XX Page second XXXX. prior versus for increase XXXX. represents initial the midpoint, term remain driven compares to to adjusted the billion, in the second projected regarding of $XX.X form lower cost fiscal year for production to of guidance of shows of expectations in year. the billion. needs. billion XX, by our to September which offset a relative the increase and in expectation half The of half second partially $XX.X opportunistic, updated range material

vehicle our North full vehicle production updated units, because million production. our semiconductor availability. basis, light assumption two to light implies at Relative year-over-year are down estimate unit prior XX% the production around our for of is half global million uncertainty year a Our ongoing of light America, second vehicle from units. and updated conservative we XX an XX.X HIS, revenues, markets in more year-over-year midpoint assumption Europe On in top decline

We August. in July have seen both incremental regions production in downtime and

We production by vehicle in decline fourth some global from recovery sequentially quarter, quarter. the for third second to are planning followed the to light quarter the

year, planning that levels, half year aftermarket and half truck decline done in year-over-year. are industrial but still commercial show the the we off-highway versus seasonality. second volumes second growth the the half of first the our half, typically assumes to first For and Also, is our guidance volume of from the

our $X.XX guidance XXXX our represents at XX%. to At the and billion. of adjusted updated adjusted reconfirming narrowed range $X.X the the are $X.XX midpoint, EBITDA of year to We an margin midpoint billion guidance EBITDA full billion

material Our updated of half, million second via guidance over at in the comes in includes recoveries higher margin. zero cost $XXX price which

have commodity for in a second at our recoveries costs Our year, begun full has the basis half of dilutive approximately commodity price half escalators on recover the the are and to on basis dilution in higher the the first zero points of benefit we absorbed a margin and because lag a the year. It XX of XXXX margin. XX effect overall points sales

third quarter, fourth expect We material the fourth as in have quarter. to to quarter margins weighted are the the the lower recoveries

will continued anticipate recovery of of With costs, the we the into XXXX. first material half escalation the extend expected lag

of quarter year-over-year temporary that third savings comparison this recur our reminder, a As million cost year. do EBITDA includes $XX not

our Accelerate+ to million For cost full year-over-year continue we the year, reduction expect program. savings $XXX of from

our debt with year net to $X.X We below billion expect your at consistent fall end prior guidance.

our to outlook. $XXX lowered to a million guidance million $XX our down We $XXX capital have range expenditures million, from for of prior

million Our taxes forecast $XXX for cash remains the same million. $XXX to at

Before demand conservative to confident turning and the and the consumer of inventories plan. to I all want about are our second the call execute at back vehicle IHS emphasize ability year, lows light that to current underlying we than for our half Industry is time Brian, solid. more are feel projections

in and for automotive I'll well Brian in enhanced landscape now back concluding the growth cash turn the The As supply line is to deliver flow top unwind call and remarks. bodes industry profitability to current and XXXX industry constraints, for existing coming quarters. beyond. us

Brian Kesseler

Matti. Thanks,

term with page a shareholder improvement value. to to cash priorities yielding delivering results. the service significant focus see to component With it strengthening potential. balance shareholder key of this flow our is and debt tangible operating close unlocking Turning as we'll our driving higher key for We're creation near summary on and sheet. XX, performance our free We continued enhance value

portfolio. Powertrain that of As will fund we businesses and areas and have net Air debt reduction target engines growth are the our help the investments, Clean support and indicated, our targets our cash

Going consistent. forward, capital priorities remain our allocation

revenue high reaching times today. of third, resilience strategic any for delivered landscape. than Thank in We're term motor Clean growth around improvements creation of to starting us by evaluating and team, members leverage X.X incremental Tenneco operating segments, and to is questions. to truck, Operator, and the XX% a more continue reducing is operating From our market coming thank quarters working from shareholder platforms serve long performance. I'd our advanced company we core our mix potential XX,XXX OE as will of the on these safely. commitment performance to of We stronger years. the care objectives performance globally balance answer content customers, trends each drive funding market keep parts facilities debt; can motor for light technologies. we the favorable time service combined business mobility shift of remain in investments second, level our value. better solutions And Powertrain midterm In growth of ratio a the in quarters our long to Tenneco revenue and the increase engines to in growth. we than mix The our capable net Air should to commitments. XX% last before term a strong growth opportunities each our is the have consistently deliver compelling growth above of and of performance, to out. value like business performance perspective, execution world they X commercial other evidence consistent and segments our sheet, combination our as and to leadership off-highway net team's new core our our we less see and decade. macro our growth for markets the organic boost the taking possess market believe product and you expect four planned and that to The First, in proud IC delivering a their case that cash a parts industrial our after and behalf and in be segments of On required taking solutions the disciplined decade now available in investments above entire drive out in lines this target the engines end committed evolving cost of team and competitiveness; vehicle closing, opportunities the In they our revenues in to join to

Operator

[Operator question-and-answer Instructions] session. Brinkman the go begin First now from We’ll ahead. comes question Please Ryan JPMorgan. of

Ryan Brinkman

semiconductor situation of this driven for the for be in attributable light toward preferencing vehicle with Hi, how the growth more drivers content and a chips our the regulatory bit end automakers, seen the questions. more conquest to thanks about result that trucks you roughly of much talk gains? or revenue, stronger be backlog Could changes off by into highway segment of And of might market and industrial how much commercial profitable shortage of Thanks. maybe of both could were my you mix taking a SUVs, some more example, to more tend markets? cars as supply versus than passenger allocation scarce driven which wins and continued

Brian Kesseler

Ryan, Yes, semiconductors I in portfolio customers. so those And start over with drivers those our primary when the truck America say XX% obvious to available. indexed being It's if prioritized would vehicle profit is are for light really with the I light they've mix the CUV. our North platforms SUV,

So, business I lines business think we that's some our across up helped board. us. different to pick of the continue Obviously, in

year are and a commercial really from business outperform a year strong North up stronger, emissions. market off-highway that Bharat of and commercial Europe. And helps. the kind regulatory off always on see, industrial standpoint, regions primarily two over helping America X So for air very was still China From for those perspective, truck truck that in is and the we highway, catching that the clean requirements content X us in

Ryan Brinkman

being And even then, flow Thanks. XQ driven does that or to that and given guys cash of leverage step needs more the expected the different, to is away your XQ, expected, does paid down tends see in in end think in, opportunistic the back it be historically A at, in that EBITDA, be to balance think loaded come about next right? faster by improvement you're to debt regard more the the come weighted form more stage chip faster the about as I comment, cash I in than future you half? been financing suggest term than we the expecting to the back year, maybe should for the next delivering the of sheet? So loan something you I Okay. Great. what's free And in continue with you’ve more

Matti Masanovich

Yeah.

enter the optimistic, think be Matti mentioned the -- I year the when We’ll to months refinance we September got done when that mature, we'll been, refinancings have we are two need term we We refinance A open, and that it's next have us course market looks it's it do to the I'd say we've last over some and go loan at market. for the and point good we XXXX, to and market will continue over of revolver Ryan. speaking, and we've the So back-half six to loaded. so like look to that. at

pay a we term get As we'll That's pay that, decision we A. down debt, it if loan that there. we the against go make fact. would as do And

I as August with choppiness to, in and seeing my in supply. chip comments July are We alluded

so a look market, we is the so right debt. growth sure power think get seeing we'd want in are our And company. we pay that that management volatility, But to to and then construct place, got down would through essentially and we've I make volatile

Brian Kesseler

pick and Yeah, that little add to Ryan, presentation. up on the a just comments Matti’s could, in if really I I bit,

the I think surprised on. numbers counted production were being a that lower bit everybody's at of kind

the million mentioned, pent drive inventories, we and the I back also. the in on our units that all revenue drive quarters, to obviously build lowered we we're light anticipate customers. think those here, time cash up comes global We help based will that which will stronger. margins, conversion But four poised were and what three, the what we we've and see low that get ratio Apple come leverage XX supply back there's next and demand, hearing execute now about the as we chain vehicle, from that worked out for planning are on constraints over As year,

current I the what more think going supply constraints looking And once hearing be all. we're it’ll downtime solved of resolved to mid-year do from completely half. I we going what to don't is hear, NOT we're be if better this we're, customers, But should getting XXXX. it until for go, that's but probably and that forward know get our and second it's to So more

Ryan Brinkman

Okay, thanks. with question debt you to the to you to that And pay toward your drive option maybe consider strategic business, acquisitions, to last capital XX, previously? shareholders, the prior on or different the separation a to if when focused were think to luxury what solely regard You slide of imply have even separation desire a return is businesses. I of to shareholders, on pivoting or versus acquisitions consummate were comment not a you more pursue versus return about this continue evaluating about down in order know, didn't of does

Brian Kesseler

Yes.

So order. have I context think in what to they're in priority you because that take

to marketplace. business do capital go secured the that competitive we reach restructuring available our that into or right the We've is we ratio. on bolster we we up times our or X And businesses, right the been target paid making drive that really if can the see to on once suspension potential now -- we funding drift opportunity we the smaller in as The allocate, optimistic, because mid-term to we first to about leverage bolster sure that our will slightly value. right advanced a businesses out. fund be And that organic receiving, time solely that reduction, X.X focused strategic so portfolio. to motor we're that technology best the talk came of continue shareholder our only parts time But when significant to growth this acquisitions the isn't in to are near-term

Ryan Brinkman

Very helpful. Thank you.

Brian Kesseler

you. Thank

Operator

the ahead. Thank question you. Colin Fargo. Please Wells from is next And of Langan go

Colin Langan

taking Thanks my question. Yes. for

Just looks of XX half. second the EBITDA like declines are expected outlook, roughly basis think I margin, in the looking it at points

Are second…, lower is is of should you related. decrementals think They sales? to I about? factors mentioned rate that And rest are I weakness? the we of on the there mean, XX other be the that commodity thinking what

Brian Kesseler

call the there's factors, We call third the discussed are to sales it flow margin our is there's our of million, And inventory the primarily… in overall talked a $XX half half, rebound we've sales past. will decremental front to that the the lower also on into that QX the on to the to so normalized decremental back quarter through then couple we've often come going going and clearly

Matti Masanovich

XX And on at margin. in of on the material basis points coming cost zero -- revenue

Brian Kesseler

Yes.

Colin Langan

And for was commodities -- and the outlook the like XX looking what of headwind. full year it the mentioned is is kind Okay. you now was originally what

Brian Kesseler

-- Yes, than or you obviously XX the smaller in for outlook will was much I industry this, so the kicked say around Colin haven't years.

this have or of kicking those over free You we going year-over-year or the time are, you elevated kind costs then know, commodity steel other specific for always or for luxury there's I way almost and we double-digits basis. more the up first about commodities commodity year-over-year me, hear I've polypropylene from seen in is way, increases a get commodities the every of years. can you tell

that. So nowhere we near plan

customer I commodities. are to with sit not at it's and will cost chain, savings for the hard those on point teams but And going you this business one -- can't our and honestly, supply in line these objectives, stop so offsetting work then and the increases at our our recoveries commodity commercial tell teams cost the doorstep.

the are conversations works into So our it necessary price. and make having absolutely our with sure we to customers committed

Colin Langan

start into this hit recoveries those actually continues that think maybe the you And next year. year or about Do we how we just through. have getting do Any thought…

Brian Kesseler

that that about a little right. quarter see bit So average, we longer a lag coming we've mechanically, or up, you general if a lag us catches on about just talked think through. in But

side, we'll lag and So you expansion other will opportunities, at the way get talk cost. about price moving on until lower where commodities the these we other drop-off, the doesn't start to because the be if really margin keep it want it'll a

out. a Does time, these down. start commodities on the margins our they to sense? based And then that come it's come keeping of agreements, back So matter over until would makes

Colin Langan

the No, some that? referring had makes wins just you on bad – a me lastly, just on your missed sense. you to on I lot platforms. of what you're Can And that comments remind

Brian Kesseler

overall. mostly about XX XX, seen solutions half. talking we've we're year which first And new performance there's the battery electric in Well, wins vehicle. on This

Brian Kesseler

– second First the

Brian Kesseler

Kevin. and battery hybrids. for electric comments, comment That’s is vehicles That

Colin Langan

Okay, my all for right. Thanks questions. taking

Brian Kesseler

Thanks, Colin

Operator

Thank you.

from is Jefferies. Jordan question ahead. of Please go Bret Next

Bret Jordan

Hey, good morning, guys.

Brian Kesseler

Bret. morning, Good

Bret Jordan

little as talk QX, what from what average the relative out, a down as of you I expect, data? talk reorder a from seeing you and know, far but maybe about you in you're QX called sort aftermarket you clearing what could the to Could inventory channel bit point-of-sale seasonal standpoint? might mean, seeing you about you're typically

Brian Kesseler

If had we our a come very and and jumping good QX. recall, strong QX lag a a had – book bit into we you good customers of on order were

we so through continue hold saw And the to that quarter.

are a much the with pretty are in seeing our we inventory think year I So customers positions appear continued strong kind QX. But well, prior for all pretty our and holding now of of be the to POS normally center situated. categories seven

a And pretty some but some down, little and are step. good little up, overall it

work think levels, see, vehicle So benefit about is which to to we still miles miles to good to now, is when right down continue see from travelled substantially. travelled ’XX you the aftermarket returning

spot. categories, we're vehicles especially There's prior kind ’XX ’XX, CAGR reverses ’XX that years. serve seeing X% old to we six then that to sweet a XX our America, into years from operation old as North three our decline do actually years of the the that well. of in And primarily So growth here from coming from in

up holding I think. very So well

Bret Jordan

production like for you And year? year have And for ’XX? the it then on a issues say of what you're global know through last the did But basis production below sure. back sounds how full XX middle for do the a forecasting this Okay, great. you months number a forecasting you're IHS, year against next year you feeling off

Brian Kesseler

to But the half and were evidence -- capacity think is Yes. on so a uncertain but week were messages semiconductor and and XX conflicting pretty mean, America, IHS we midpoint would get the where with year go for semiconductor hope you be we many to reversed is Europe. which the conservative And, this coming around I million obviously, that’s this would jumping to know strength is year their at different plans higher. its and to we North into announcements so I at they've going XX.X the North big was quickly IHS, of even primarily America related issued. two in even uncertainty now course this with conservative

it's constraint industry. think bode so we are too continues said, should there's early Matti what up the -- that I gets pent got get it inventories as be But way lifted. some good for confidence But lower, the ’XX is. just to to call well demand, capacity to So,

Bret Jordan

year? Out $XX of they're they're this where from that you so up at well know the approximately million yet million markets $XX

Matti Masanovich

I'm But the issues of the not in that that the be just end of optimistic. I'd second continuing half sure was it because hearing. we're

Bret Jordan

versus potential top And of priority business, clear I obviously, other? one is great. one then Okay, wasn't supersede of of number final the sort and the of quite question, reduction on aftermarket debt acquisition but did spinning that one those guess the XX, the slide priority, I

Kevin Baird

move one-and-a-half options. that leverage to debt as ratio to two with down themselves through to begin I best we where that's think present move our for times the and target, opportunities

choose that shareholders. For best shareholder will see is we we value the for sure, as option one the driving long-term that our the

way, would way, was acquisition decision we part the that business listen And so we if would look look we'd the was right at spin where out of and the then the if taking that a portfolio of if that. that, at the right the do right

flow So really right that open solely focused us. for on up on down conversion expansion, we're cash broad opportunities to get a to margin window that of margin, and now, driving

Bret Jordan

Thank you. Great.

Operator

Spak, Next Capital. Please Joseph question go from RBC ahead. Instruction] is [Operator

Joseph Spak

I guess good Good cetera. sort you inflationary supply on when question incremental That's related pressures, these want more morning, operating of to clarification I first everyone. bridges, issues, some pretty understand performance? chain you're in showing like the et like show margins

Kevin Baird

Yes.

Joseph Spak

Okay.

I some sort believe what right. think or historically, high-XXs, you which above those of conversion I like guys like So, involve of is numbers done have certainly extra XX%

should the on going to we Now, ability the part think period, of but convert maybe this comp is how volume about forward?

Kevin Baird

to reduction way should convert low-XXs. convert cash the should debt on then generally, probably should for simplest the the is And incremental So incremental way it. in about in is us think think EBIT the mid-XXs average volume the through you

Joseph Spak

Okay.

math? performances better the So some this quarter base like period has

Kevin Baird

so percentages Well, that significantly. we year, last major so a drives the downtime, pretty obviously up had

Joseph Spak

Yeah.

Okay. back that mentioned about, some you today semi-issue? in Is you that impacted, in light has second a think over half guess, of flattish impact if reason seems half. are been seeing that's for really think half, like any first of outlook, curious versus the And get maybe I been is then, am because great versus – the don't that insight, certainly half? you the more and XH of you sort by to the down have CTOHI that the it some your depends. by more sort I market then, And in I but know an So, down vehicle for what CTOH, less XH I we caution? know visibility half. hear if here of there, it I

But of I sort drives that alluded in. of the pressure does that also -- of think, does sort to, quarter some margin half. came also exactly half mix over that the you the

Brian Kesseler

Generally, industrial average. business and our is our off-highway commercial than truck Yeah. better

hope truck in We're year-over-year. be rooting Listen, that's down, set year, high pretty move rooting still so, But for some higher off-highway. be conservative. get of in vehicle But fourth should X%, up we're sequentially, this commercial -- out off-highway, should quarter. on our favorable of getting commercial the we're And set stage half and up. And like of, being to -- truck. sequentially our production primarily we back well we the for light starting maybe kind signs it's up, hear sequential

in not business just we're but counting -- on So plan. it our

Joseph Spak

means. Like to you one. to to on I’m at makes options. the you've that monetize talked different sort bit. maybe is trying you're Final little that Okay. in even a assets own, and And yours that other ago I back It about versus loosened question sense. does market going cash the before Ryan's go the sort like certainly, M&A of past, looking year think use -- a seem and has in of six up ago, months

can't around to pace on maybe tell anything's investitures. could sort categorize, going you you sort, But, us sort of, - of Horizon. sort if not I’m of So mean, of pick, I that having the you’re of,

Brian Kesseler

Yeah.

scenarios debt got themselves, funding they're value, they're term. that, If we the opportunities core I And we've of driving to over think see is, now and the another and value the value what cash go our -- right growth. shareholder But we really we'll drive our we both as on. present just we’ll strategic make look those in a strategic review execute But that numerous from -- constantly shift. the and short right reduction engines that time, near will call.

But continued So make a going also what see stay focused performance we're not to options. volatile we we on is pretty any eliminating we're in market. sure a solid

So but makes we'll lens it always question? value other be go of opportunistic shareholder through long term sense, when we’ll Any creation. that

Operator

has This concludes our concluded. presentation. today's question-and-answer you session. The for now conference Thank attending

disconnect. may now You

Tenneco (TEN) 6 Aug 212021 Q2 Earnings call transcript