CFX - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Colfax Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference may be recorded. I would like to introduce your host for today's conference, Kevin Johnson.

begin. may You

Kevin Johnson

the Good President us. Glenda. am and you Chris me thank President President Matt Thank CEO; CFO. and name morning, is joining and on With Colfax. My Finance Senior I today Kevin for are of Trerotola, Vice you, Hix, at everyone, call and Johnson, Vice and

colfaxcorp.com. is Investors section the earnings was Our in release issued available this our morning website, and of

which can will this be call, you a through website. presentation our slide the call slide presentation of walk be also will on to also Both and today be next available We using will later the audio until on call. found quarterly archived today's the website be the and

our the reconciliation as those These do can to obligation update today, be regarding not to in intend events required assume Actual except earnings materially only measures including of SEC might forward-looking During statements forward-looking accompanying this to release call, results statements we'll we forward-looking as those today. or financial our during law. non-GAAP slide press the them, statements differ presentation. With our today The any information by respect today's that be risks about relating and any and set future beliefs speak call making and results. filings. and subject found might statements some to are measures in uncertainties, make any forth estimates from we forward-looking and

it start slide on to like will turn X. I'd to over who Matt, Now,

Matthew L. Trerotola

and markets. XXXX. engineering our commercial And team the in a improvements Howden, strengthened highlight Power the We of talent future. you want committed in used few and improvements XXXX great positioning to developed where restructuring business made returned ESAB, we've that the the the made our delivery. company better during pleased future initiatives ESAB to CBS industrial We quality the for are challenges our for is the exited we our we across we best growth. we evident team and applications to significant over lot Thanks, joining in improved and has strong In in happy Kevin. we with and year some for the significant foundation This levels strengthen healthy us redeployed talent to markets world. Oil most thank further period. in Good drive applications. to in as organic business our In higher-growth all savings past we the wins, and I'm safety, continued Power I morning significant a XXXX, progress all delivered in through and to with at see believe the our today. years. from and significant growth industrial I'm quarter the Despite, year, Gas markets made and growth & regions Howden's very

continued Our growing segment half us second healthy order a in to XXXX. of the over sustainable positions more to turn investment growth in this

initiatives. on and the industrial how another we year, of or We position us technology call launches, through emerging new regions and forward as we've for coming growth in range. growth a organic as our in completed future. expand we've me run data-driven in slide and move us all healthy on advantage gives attractive much active segments, growth. company's solutions through work ability investments We M&A were of flexibility turn growth to X. ESAB at for to combination the a and price, customers now the team poised completing conditions. our regions regions six find technologies at product economies of that business year, The in during in growth demonstrated seem customers to the of what Please efforts ESAB the margins Handling During has we made to The made has a And platform well multiple variety acquisitions. sale our a add right more many complementary to strengthened very the for many returned market step had both our an next that that important Fluid deepened acquisitions finally, we digital accelerate with we of significant

chain we're in consistent. of initiatives. a range Fabrication been focused improvement. healthy restructuring, in has Technology now our year-on-year has and on driving accelerating been making Our result growth With margin The supply energy less and CBS progress growth strong strategy advancing

and the talent great and a proactively for steel growth XXXX on reminded from escalation, felt continued is got been in came through high healthy. of solid outlook strength another in in positions dropped the On market, want Sandvik have in in strengthens mid-teen significant our we growth that the our to slide path nickel some alloy to filler portfolio this has we price growth challenging profitable segment. the in patch Power The quality. XXXX in world a we completed of the & for advantage business when Sandvik and specialty position and the metal and with leading slide acquisition difficult drive leadership margin forward for the a has some and filler projects the recovery the steel position the to passion ESAB's our Oil EWAC. stainless our this very should welcome team take new Business quarters of Although addressing time We've away that like I would hit shifted step talented our industrial year provider they X, right. we a strong They're sharply presents to consumables one that's month opportunity and growth. us summarize got team on QX existing After pressure which segment Colfax. I is Handling team the synergies Indian markets, segments & the their improvement X, This QX an and to in was talent year January. for stalled CBS around business, well-respected returning Welding improvements. to drive last productivity. team Gas System update use extends acquisition in applying of metal spend Gas for of I the temporarily margins. provide faster-growing ESAB; the from and with to our and growth, and On as Howden. these Air Sandvik been segment. of as again our organic of for a business I from and four to growers technology

I'll made we to the General XXXX on sustained market the Howden's growth very restructuring a the Industrial industrial competitive projects us a path more large our addressable that In applications. strong our limit operating deliver this the to addition, in in began pressure by growth at progress stretch market. business had revenue from on delivered about XXXX. critical bit as Significant We've to strategy organic and talked to Howden. targeting we enabled the share XXXX, area outpaced expand in profit. impact margin times many about strong performance our as efforts

project Oil down the Gas, & refining moving heavily also the us a on fundamentally coming funnel very in saw quarter. activity in mining healthy which And as was is and Oil some for but growth to we is improving. Gas & weighted the years. petrochemical, supports again still return prior view to fourth year, and strong Our we

Our funnels moved oil sales the and customer increase, remains continue direction, sentiment have prices right in favorable. to generally

QX investment. On second China continue our pause in of Power's Gas growth to expect the Oil We half this to & communicated we return earnings the year. the sharper-than-expected sustained to call, in

we reality change and During estimate saw has built in this QX, no view picture. And into the further been our XXXX. for new

strengthen a path second quarters Howden, half further to order future. we While make difficult business the the sure for are cost see we will actions the and clear the growth be next margins few improve to taking for still in and

our expectations medium-term slide this higher growth. for of segment XX% growth remain turn X. delayed, or well-positioned a earnings to unchanged. is Please year for Colfax Although

faster-growing deliver drive improve productivity have and to will CBS new by supported service, and organic continue overall customer use to some expect Technology pipeline. the business. in We growth to ESAB products our exciting Fabrication we

in market strong contribute of additional restructuring $XX that improve XXXX. the to implementing And & platforms Air turn XXXX. our Recently Gas in discuss In strategic add and sales are later and new quarter year, XXXX up summary, growth and end expect the in operating deliver on completed goal will should profit. new majority Chris to in our segment savings We and strengthen business the of of business Handling that generated we'll million the in and a actions our financial to we've with by conditions business continue I'll over it acquisitions program. efforts increases to the The Handling cash strengthened to further a capabilities our flow results. now, the fourth our financial capability execute ramped great Fluid

Christopher M. Hix

Thank you, Matt.

we the Before let's walk results business items through GAAP that X. our operations, dive affected continuing slide other into on the results,

of Power, million Gas book Gas, on goodwill, resulted to cyclically & write businesses, mostly intangibles. also business, from Continued in value and but market pressures $XXX performance Air the our Oil the a due & to lower down Handling non-cash in charge

Moving industrial structure forward, strategic cost the and regions. and improving is its higher to from positioned growth business benefit pivot applications to

in liabilities of consistent manufacturing non-cash buyout have we'll over plans removes be issuing included write-down is Handling further Eurobonds. our pension a two of years, as into and our fixed-rate a for $XX recorded such sheet past largest our from arrangement business, restructuring expense. entered million of pensions other $XXX a Air de-risking action the This in quarter for fourth restructuring and million balance Also quarter, efforts of part the our one of As taken charge. & and a our the Gas closing plant with million we $XX

for U.S. we initial a completed $XX earnings be million, in will of P&L Included assessment tax benefit paid which quarter. this and benefit, our years. transition our in tax of Lastly, is reform the foreign over eight small estimate have recorded net

FabTech points slide Fluid the exclude business adjusted $XXX discontinued million divestiture. X% business operations-adjusted you We Gas offset profit the cost quarter materials with X% raw XX%. Air contributions with inflation most business STE Handling lower have the as sale of the the these of are line, some debt in XX less the there & Operating X. sales company posting due Total Air acquired business. million on quarterly its in basis in costs. interest impact million to $X business and results the cash sales quarter, in taxes Handling of from results up the the business Gross nearly excluded in expense and we $XX growth don't were we on declined because rates $XXX sales was the lower Handling down restructuring gain operations, Handling our margins acquisition-related so our or Below growth offering. Fed XXXX. benefits to from XXXX million benefit Gas Gas These increase declined grew FX rate on continuing with in also fixed $XX & be on rate Air U.S. changed was our Organic pre-tax items results Eurobond the an April acquisitions. the expected highest see and from since & than hikes, to Total and to million. FabTech part

that charges. operations. support resolving financial of we created posted as & other quick non-GAAP of issues in generated operating on also from discontinued rates the and recover. due moderate We rate excludes the our Gas $X.XX order capacity should XX levels and our XXXX items million tax projects the acquisition-related growth higher working improve Higher continuing earnings should customer FabTech lower strategic and EPS Air and growth taxed XXXX. reviewed in largely over of amortization cash business Handling's $XXX excluding Handling U.S. to snapshot first non-cash earlier, some We provides pressure Fluid older a program. in half flow of capital favorably to ops, Slide tax a growing Adjusted funding

will million there sale to about well Our X.Xx, a down with from positioned and capitalized liquidity put from pro year-end our This over net $X balance billion group. the realized bank of leverage $XXX forma yet from sheet existing and reflects Fluid growth capacity our Handling the received is We're over the be of year additional from initial ago. proceeds at X.Xx transaction. with

but muscle every were QX Technology excellent million the in the growth. latest XX Turning North management another Segment off industrial in Acquisitions allow to helped first grew into business the us businesses, in operating disciplines, of price Adjusted catch quarter of America. creating quarter. with region, up half includes to EWAC, that $XX is should start XX.X% recur. are realization business. inflation, acquisition, margins with basis material us profit slide investments to the quarter price its some for organically We to and in create additional inflation to a built the due raw million accelerating added real in the X% to and $XXX to The that XX has not the an results XXXX. the in solid growth. in sales X% growth quarter, Fabrication to one-time work expected declined up especially points X% saw progress to standard top-line costs This market Indian

also XX% we quarter-over-quarter, shown lower FX profit continue down actions & applications. recover resulted to & XX, on in acquisition. from an slide contributions organic including in segment, million expect in Air will nearly $XX up margin steel largely Gas Power sequentially pressure, being due Oil margins prior offset QX. Although Lower restructuring for the the from year. The to Benefits tailwind projects. some sales were business as timing create year-over-year flat but demand STE to Gas had operating sales pressures with compared was and from Handling project sales The organically larger

half by charges lower-margin clear these the backlog backlog STE our contribute down increased the half. comparison. in Industrial Orders $X and in significant expect Slide as to we deal improvement primarily acquisition. we completely in sequential X% step to only quarter orders in a of up to expect of quarter. orders margins other to performance. operating the million year, enabling was third organically the improvement XX%, in and step-up were business due XX offset costs, the saw from first a STE orders We the our continued. Total amortization, QX inventory profit projects and includes General Broad-based second

than Gas with & Oil and QX after Backlog for XXXX, to Power line booked the to outlined growth forecast but be strong earnings flat revenues We are the X%, continue organically we to to sequential revenues to XX, we Year-over-year in support quarter, to in down Handling in business slide our Gas December momentum full & the Handling higher with orders in levels we declined deliver organic year. Air Wrapping the improvement exit and expectations. on expected. we also Gas expect in call. expected Air business' entered we XXXX a this X% of be less forecasted the up flat & up little

Amortization expected result, our due originally actions a acquiring cost rising for than teams timing Below long-term we from and position are rate better to de-risk the the acquisitions from the other finalizing recent As recovery business acquisitions. developing higher are U.S. interest market and success. expect higher a and costs to continue to in costs to line, Sandvik for recent valuations environment for

We become expect to XXXX. in the Sandvik acquisition accretive

XX% continue we about Glenda, call summary, believe net expect we to the Following share will higher. which prepared open Fluid In per tax our please would the tax XXXX reform, for in of of for That rate U.S. adjusted be of and remarks. completion represents that Handling XX%. divestiture to up recent our concludes growth questions? or XXXX, the $X.XX you income $X

Operator

first And of from Mike from Baird. question Certainly. comes line our Halloran the

Your now line is open.

Mike P. Halloran

Morning, Hey. guys.

Matthew L. Trerotola

Good morning.

Christopher M. Hix

Good morning, Mike.

Mike P. Halloran

pinpoint comparable, are just how revenue concretely, Maybe then of rates those feels help so the what the a pressures you looking and to base, swings about tax growth are little just versus rates then lower said more in on mid-December, pressure the please. segments two today? today some Obviously, there. a you profitability the but side talk you're at and just guidance mid-December down, deck Could like the from come the bridge as

Christopher M. Hix

from & expect number December following Air to of We'd lower saw lower bridge which and sectors highlight the conversation, revenues in in than we'd the we're of we we a in to base, the Handling we expectations XXXX, what would business. a Gas say, XXXX. expected sales grow finished with if in some Power our one, in created that to We today's little items. wind principally Mike, less

a of the The tax margins. of rate, it's for mention, going the power is favorable then, in a forward. I'd the comments second that some And third change really and the puts thing as rate I'd which little item in more And to tax addition the highlight pressure quarter related we've downturn. cost and impacted the there's in the gen bit power well made, cost company

So from I'd today. to three the say, guidance December those are bridge items that the

Mike P. Halloran

little here, through ramp through the the Gas as restructuring and are the get going magnified work the through. then in as thought think here more to seems get about more case. through be some even of some that Air when margins? process That pockets air gives comments on guys year as a some incremental with the Handling a seeing of well time you the you the the work of mid-December little of you the that So Does price/cost maybe I project of certainly as was some you a pressures of year to the obviously, as & bit cadence some

Christopher M. Hix

that the say same. trajectory looks I'd roughly the Yeah.

for As those you benefits. of But than additional backlog expected pocket get expect be projects the December. the slightly clear we'd us, second air the of restructuring And we that in of the some described a to positions may improvement out all what larger still to in we different think, half.

slightly just unchanged. We with from lower up off jump XXXX. So, a point start that's

Mike P. Halloran

cadence through up prepared with highlighting catching know price/cost year, through in you as through XXXX work the the I guys done cadence work price And in on comfort FabTech there. comments that side? in But have the gaining then, over the the the certainly remarks how just all the margins, maybe And go does you time. were

Matthew L. Trerotola

Matt here. Yes.

comment on that. Let me

things to to productivity pinch the and to in QX. on in and been really some But the price same at front that of bit a I so steel QX think a year. margins make as point and stronger bit in continuing to we it aggressively are in that of time, on improve QX we that do continue our get we're did to additional is expect as drive that escalation here should and terms then still definitely a stabilize year-over-year into throughout way little the performance, as business. cost XXXX has The a business starting drive current move of escalate in we price. margin really QX view work in in QX. based beyond, on things good lot continue expecting see QX here some improvement to there And was into

regions which can in was Some bellwether a China of little some went but a a places down bit. be up, bit

are in the And some price side so, plateau and that point of we right steel the us expecting then XXXX that will put on at will escalation it.

Mike P. Halloran

Great. a it. appreciate makes sense. That I of lot

Operator

line Thank of KeyBanc. you. next question from Hammond And Jeffrey the from our comes

Your open. line is now

Jeffrey Hammond

good Hey, morning, guys.

Matthew L. Trerotola

morning, Good Jeff.

Christopher M. Hix

Good morning.

Jeffrey Hammond

or orders jumping through? less to So is momentum just I not that & off of or China just coming ago? are the so it lower understand Oil it on Power Gas, point & Air back a want kind that is Gas is month-and-a-half worse versus

Christopher M. Hix

what the the in change so markets the that to really in key regions Yeah, world, was developed aftermarket, China. more we related the aftermarket, we saw. in Okay. the more much Jeff, really specifically Power developed so not was for was that saw It of

Jeffrey Hammond

change? that driving what's And Okay.

Christopher M. Hix

of haven't decline what rate expand that'll use base, see growth as saw we little we their you this sharper the base. time Well, expect pressure declining developed coal-fired expect we in would levels. quarter I has developing demand have a world to continue after-market business expected investment, just a and the installed a of been In that's the we changed, that's to bit lead to late that in We more in see. Even know same the to markets, fourth that typically under seen higher do though than continued and power. over that discussed in we've of regions see think to the rate that

the and Now, that pressure projects some related of developed the sector in power of markets. generation for of that specific timing just be could could be to on it some continued

Jeffrey Hammond

Gas, maybe hearing on of north there? a more $XX, movement & I little about with mean, And Okay. in customer oil kind Oil of just projects what you're granularity and

Matthew L. Trerotola

did quite were loose. QX actually the & in number a QX, in Yeah, building got the year. Oil slow that but funnels cut last really in Gas of are Things then quite healthy through projects

in And healthy forecasts some data at we we the time. look so, in the investment gas to increases and in the where funnels investment. including in the areas participate, XXXX of capital terms are all over expecting are some move in XXXX to versus we those capital expected If that space, have oil of that's

be good and And that can little past so suggest so, everything headed history a start year has But we're that over shown recovery. choppy is gas seeing moving a again. steady stop towards it and would then oil the and or things can

recovery the we're in see anticipating not moving in to So, really big half the do half. first ought of the here in get us oil a any some positive and second in that things direction gas year, but

Jeffrey Hammond

guys. Thanks, Okay.

Matthew L. Trerotola

Thanks, Jeff.

Operator

next our Bank of of And you. from line Thank Andrew America. from Obin comes the question

Your now is open. line

Andrew Burris Obin

Good guys. morning,

Matthew L. Trerotola

Andrew. morning, Good

Christopher M. Hix

Hey, Andrew.

Andrew Burris Obin

Yeah.

Just you just by quarter, drag could inflation, if on you chance, on any and maybe inflation in point could? FabTech, the the breakout margin the in percentage quarter quantify other of investments, guys,

Christopher M. Hix

I'd that affected the of say of each particular those I third If that, group quarter. were roughly a it's is to what Yeah. categories

see those expected that and So, either we would margins proportional to quarter roughly normally flat three up drag the slightly elements. have is in to or the equally

Andrew Burris Obin

to And XXX%, earnings that's it my below of XXX%, going be you based ratio I before I of correct. So sort adjusted methodology number sort cash the is move if why philosophically; highlight that's numbers, you for usually for just for to companies a, than think my to a deal? lower, correct cash talk higher just am to your but can conversion be do calculation to XXX% moving because to XXX%? conversion can second, – going be math below And And – I in that my just I rate is is on guess, XXXX. the methodology, going cash

Christopher M. Hix

portfolio non-cash that is investors. move an other all dialog EPS I the And they that adjusted add-backs that, year the we the in have in an long we a of last amortization and couple a years. seven been bit entire had The over results. space. that's because that And amortization unusually unique realized amount has the with after little Yeah. six, constructed came the of And reflects what to of think high

so playing think, companies. got We of we're that realized make to sure field everybody, level and considering us on And I a when a that. encouragement lot that consider to relative industrial to other

And here. for areas. that for reveal XXXX I'd good of question other so, we key gains always making that that earnings example, behind some the of really that really company logic the got I had, sight The was other a the question the to that we on the level had of the to is generation capital. we're we've performance with working offset the in flow that that growth think better cash to relative line good in say companies. some cash respect is And was of generation, helped

& lower up that Handling we from element on flow, Air had other The deposits Gas our – business, was orders in customers. declining end with lower cash with we a

XXXX. the we that So, had factors those principal in are

from business, the levelize mentioned rates reduce As & deposits we Handling respect the comments, my the we gives XXXX, in that flow to us to with Gas cash that that to a Air impact we go growth should business, chance in the for in growth I Fabrication order on customers. recover Technology growth, think our from And and into higher working capital. contribute higher as as levels

think So flow about I XXXX. the cash you, that hope helps Andrew, for

Andrew Burris Obin

be adjusted earnings to next get until of below But least that sort is at – tad from it is that perspective, fair? is tad going platform, below to it the a now, we be for going

Christopher M. Hix

it driver we of X year, probably amount need expense key so level X depending spend The the that that restructuring in could potentially on have, to for the below in we that be (XX:XX). is restructuring of the

(XX:XX). to I be expect X above If that, it you were would to exclude

Andrew Burris Obin

much. you Thank Terrific. This is very very useful.

Operator

our you. Andrew Kaplowitz Thank And of the from from question comes next line Citigroup.

is now line open. Your

Andrew Kaplowitz

Hey. Good morning, everyone.

Matthew L. Trerotola

Good morning, Andrew.

Andrew Kaplowitz

color? a Power you over talk much ability and & the Air time Gas took in stabilization margin in business And Do going can in then in we forward? in at you the Handling XXXX should higher & achieve some margin see point in or about capability about think us Power more of you to So, give mean, How drag I in Power. Gas earnings that impairment on XXXX? can business? how your puts mid-teens Air you

Matthew L. Trerotola

Yeah.

Let me that. on comment

I what have that I a – been China think QX view the that think is in business in shared really that after down we there step late as Power that remains has for And we spigot the off historic of there investments. not quarters for business predicting last two level level. significant we're and a from that's low taken last low The Power the to was a a year historic rebound there. turned

that year to rate over for the rate, a bit rebound not recover second full half last year. little suggest this from but of funnel year think the would I to

And developed business than low orders collectively high-growth to in aftermarket over up when this now that up new lot, up and a look in piece a we've the Power of going things area. XX% And on business, makes year. business, capacity got see so went to investments Howden through back got some be from expected this, the is markets flat of we be the as able that's little Power and high-growth it. overall piece XX% is then been to XX growth area markets growth piece to developed in is QX. part the a bit in incremental of of a in that creates we've into in our past of small pressure foremarket years less offset base. the then is that that over at the gets as area The down of markets aftermarket has go that, the retrofit not The like time XX% X over the half It's to there And a coal that very Howden up of flat projects business expect something third in. downward to quite we part foremarket but about capacity flat time, retired. to to And last the the of down to aftermarket hard commented, continues that's healthy a and that, to markets bit a Power world that. of healthy a pressure seen amount of working Chris we've and the bit And then part of the

growth And resources to that trajectory. growth and we've an more that trajectory share fair been our creates of so, aftermarket get aftermarket repositioning than

So we've when view years other pieces past a that growth patch. through put GDP that business time you with still that plus given we you difficult can over Power it's together few roll to down little those of Howden, this once have And together, the in the solid a of a get the still holds. flat good if

Andrew Kaplowitz

with being do in Matt, XXXX even grow Gas you still little you Air in And margin & itself? could think though Power a weak

Matthew L. Trerotola

a three it Investor of portfolio, end. if that about inner path our improvement We've talked Yeah. target realistic Air be & outer this in years Handling restructuring of the there revenue is that can to see business. Gas that we year to & We we then the the us sharper And comes as a Air in end years opportunity and mid-teens Yes. there. positive out mid-teens the more our taken year get piece healthier that we're in more sooner. some to an we margins in than still four going to Gas will back give and Handling ensure back that to part then put a subsequent to last But part And of in gives actions the clearly, FabTech hard margin the direction for driving on moving is path that back timeframe can get the Day.

Andrew Kaplowitz

pretty sound you And Okay. bullish Mining. on

Mining orders orders chunky you you to of would tough nicely year, up so least couple in over the won had to just because at the for just mentioned a You business they're If you improve. funnel down continues XXXX in small last be and in a Is I guys. look I you year-over-year, quite But XXXX? guess, projects it's a it bit. orders, and at Mining in XXXX pretty expect compares

Matthew L. Trerotola

the when you strong dynamic of quarter, that's to years, and terrific, the funnel the year enormous the can healthy in there or It funnels play to is going and funnels time distorted the it period on that and certainly to and business. exciting are of some out times then tremendous expect and of take there there a chunkiness some their be growth. a check business, good chunkier their next opportunities customers is the and these things in But XXXX take had little of a These that just effect But a growth do in segment work the healthy growth. we is in beyond are be over from terms in beyond, one a of of growth but and here of hit bit of a given right that, We've it orders a is bit smart math they Mining. activity picture a year's head. we got that to they be project extremely number industry. conservative what and path that is making in smaller tends decisions. that there we any couple Certainly, last see the bit and that XXXX healthy. an customers to we're but that is – look capital cycles expect have at And Yeah, their learning time, through terms in expect going we that little of

Andrew Kaplowitz

Appreciate it, Matt.

Operator

our next question John line comes Bank. of the from And you. Inch Thank from Deutsche

is now line open. Your

John G. Inch

everyone. morning, Good Thanks.

Christopher M. Hix

morning, Good John.

Matthew L. Trerotola

John. Hey,

John G. Inch

Hey, – for looking aftermarket size we Gas? Air just think I'm my at can the guys. notes. I just & remind Could me, we

company lower build said because quarter. less than sales. power of you obviously X% results, new core XX% is correctly, then expected this Gas Power is I'm and of sure total think to than this & I'm before, Air trying just scoping the I just make were

Christopher M. Hix

as the Gas XXXX Air Yeah. you said Power about And is represented & that well Handling we've business. business We to just of roughly think the XX% for give all we've this. XX% the right business. the of want part of the to of Yeah, XX% view aftermarket I that was of

of you gives of magnitude this. a probably sense that a of so, the And bit

John G. Inch

developed Chris, be developing, versus split, aftermarket would on that what the between, And side? say, the

Matthew L. Trerotola

of to question Let Power you're kind me anything. comment because trying I get think there, the at than more

my that. kind specific comments to of back So, to come let me just

And a the emerging that a in from be that those the growth. aftermarket obviously, how forward retrofits view half things total And markets, of XXXX. play depending markets will terms in comments. is to talking places we the base year other the Power that but was could down, will And in and half but between business, be that in in Power down when play then, that full then we're First healthy high-growth flattish aftermarket was And and that flat, significant really aftermarket range, that of on full there. in then of in aftermarket make yeah, a a There there's would short some, parts the for developed world want all, of reasonable our is I well. within year, was in down different aftermarket could established XX% of the why how a the about back now that's developed but about of be piece, that there's out overall straws, of the business it and meaningful the and a year. especially to Power, point as newbuild off – two-thirds to that XX% down out little XX% have back world, cut business, growth says Power it the of initiatives the the the chunk be of with chunk the there's XX% to distribution the I our profile more that driving we've last that's it's the dynamic jumping don't that

John G. Inch

Yeah.

On just on the you attain guide the little doesn't to a implied? I it that year of think the for X% sort bit FabTech you Did does – think core. you don't X% have? FabTech the why wondering you side, I'm X% why momentum based that's did obviously better just

Matthew L. Trerotola

And about the we kind quarter, in QX that think at real X% bit core That over that, when we're comp into we we about point for a little jumping in but off more is rolling quarter. as look see certainly had of components that digits range Yeah. easier the happy the of the it, in first mid-single we something the year.

there. be And comps as the tougher stick it'll you with year. so we – guidance Obviously, get will work the through our

think half is out And of mid-single the year. how hold so, the that half And first in market. digits things second mid not whether sort that can or little there opportunity singles through a a the we on play bit depends

John G. Inch

did. XXXX. And like why you then, did the just you It wondering guys pull savings still million for forward restructuring? looks I'm $XX some are

Matthew L. Trerotola

to much I need least continue million savings in Gas think, going we We the have savings protect sure $XX order in we're for to of can make at in that Air Well, have push Handling, to we've XXXX. as said to we & of to particular, business. as profitability

think, Chris well. add comment as there I going a to is

Christopher M. Hix

Yeah.

in the a then and restructuring. more and because expense we'll take other little of thing half little that that's going the heading That'll have XXXX in we Just high, XXXX. back bit to to that facility and benefits restructuring the particularly a shape be take write-off see of the a the more included the that did was to is note of of fully bit into longer

John G. Inch

have the higher States? world could the make U.S. to in versus financially jurisdictions kind you you're of changes company, or tax maybe is, much think just actually because of debase low-tax reform, you that country, understand now is a don't I then big where U.S. operationally me, And sense. that seek potentially international more question United for of some guess you any my to does but U.S. makes one cause That tax. tax guys other paid I historically I the

Christopher M. Hix

the as It and drive regime. to field have globally certainly rate playing to that a we that get structure think structure ways to about the changes lower we systemically

in have And field us a we'll in at so, It's continue items is is to the What quickly States. to that. depreciate We the playing new to to globally ability to have company. maneuver U.S., being for and the a we which United able to gives attractive like and look investments tax room cash us as position. better think the acquisitions about more

it us helps bit So, a definitely be nimble little and to more agile.

John G. Inch

it. Got Thank you. Yeah.

Operator

And you. Wolfe question Pokrzywinski the from Josh comes line our of from Research. Thank next

Your line now open. is

Josh Pokrzywinski

guys. Good Hi. morning,

Matthew L. Trerotola

Hey, Josh.

Kevin Johnson

Good morning.

Josh Pokrzywinski

the & Gas out what if this guys how morning, so on apologize how spelled two this about that you grow I a I think to should but kind ending has inside aftermarket backlog about flat Air Handling should the think few we kind this, mentioned that? and between X% needs think bridge look for of if around organic Jumping down calls at and about you've to of XXXX, already of in I

Christopher M. Hix

look Oil we've in second think, in reasonable we've improvement, The guess, we & in – we if All of got I this that in & of Gas way to we vectors and improvement. and General so the or Oil those paths at the Gas see largely some you and out XXXX. a off the got the bakes feel half half have to Mining strip Industrial, in, & Air Gas the and Mining year. at first we gets start look backlog us we they like the is STE backlog, you – and the

so And forecast. we in the as half second see achieve half, first that And second improvement half to growth Handling. look the the we versus that enables its at in that to it's improvement Air business expect Gas &

year everybody for of have The the to becoming we determinant the The beginning other at have backlog thing in amount I'd the of there businesses remind of that and a and businesses. a and with shorter-cycle we is of do the previously less Roots performance. full year is STE shift acquisition another

Josh Pokrzywinski

kind that or cycle aftermarket, So, shorter (XX:XX)? little than is I a is maybe thing it whole it of fact OE is the the the call, in was or momentum that short-cycle guess, maybe the build just

Christopher M. Hix

strong is it's I'd what reflection a reflection a then, for say funnel faster businesses, industrial the reflection I'd growth we Oil in it's shorter coming, it's is this & we what of lesser degree, to shorter-cycle feel and Yeah, a a believe of both. applications, Mining of Gas the that's recovery it's a the business. say in the and – it's

Josh Pokrzywinski

then, the helpful side, very distanced this from a we've still is side there with guys have on restructuring bit kind this of the you. any bone spend action? is a in higher more to and of the where recovery take of of need you a don't for clearing say soon? too the on Got on decks Power fourth not terms of there in ourselves kind cut really And something the the of quarter, to horizon kind the want this Or to out don't to and being hope

Matthew L. Trerotola

Yeah.

the that business Chris' facility that more really few we've a about for realignment and comment Gas about the restructuring is write-down, of proactive of & waves Handling the strategic aside Air executing the setting we're talked So future.

right of in that So, in how the market are are both engineering the segment about our businesses about the resources is and And facing and world. geographic facing commercial some the structured where powerful that's order to future in markets lines. product be going realignment about also have supply they're competitive to growth. of more the then chains in and best it's more our But the our

us so, to each at harder business progress And the it take time of we realigning keep look for possible I down, step in see another what's order there to that multiple a we've And think future. Howden. in made waves forces

Josh Pokrzywinski

it, just that mean excluding more be mean environment? increments that that more in of we're smaller a of restructuring. Does kind won't pay-as-you-go-type on I a don't you

Matthew L. Trerotola

whole, think number lower we're period the I that over changed. we've of of Yeah. couple to the through In past a times that went don't headed think restructuring likely a company, the our of I has and a period that on we stated years, versus

that growing the mining half reality Air Gas step now within of versus and going keep in place environment. in Air down – as Power restructuring that start Power. some normal year, elevated we Handling this stay that these & point back and XXXX gas levels we're Handling have more growing, business high a little the see and stabilize to market certainly But markets in this industrial based a oil additional at permanent a I certainly don't Gas think we'll through on in we're &

Josh Pokrzywinski

Thanks color. the Perfect. for

Operator

Sachs. from Ritchie next Thank of question Joe you. our the comes line And Goldman from

Your line is now open.

Joe Ritchie

Thank you. Good morning, everyone.

Christopher M. Hix

Good morning, Joe.

Joe Ritchie

coming in with from the the first backlog on projects So starting pressure a Turbo orders? Handling Air backlog pricing in scrub then how guys you have the business, And that you just in and came the Siemens the feel as gotten the and half chance recent maybe well? mentioned from the about through. you also on Gas Can that do there large specifically margin & to margin comment still you just backlog profile

Matthew L. Trerotola

market. in this the a and project to that margin last margin the we've or sure the of been the prices that make get hard management range of the we seen it on the fighting And side And half what something of We've competitive we certainly, profile is STE half improving focus make in support back the year. the back an terms about half back it. into the even year half We've down of had sure this for orders. recovery for the margin expected been in the the we of certainly and a of better And the on back both, in supports win we We've profiles to your that had on, a question we we've and size order have to and been year supply profile backlog, lot it's This Yes. best come of took business the productivity can January year. hard margin of the that that of business can. in through also the working that

that And backlog a of from in expectations little in back with expect our in, the expect we perform able doing that to in of type business in bit year, but able business. realignment been We've came half to cost perform to so, what line to we of be last be XXXX.

Joe Ritchie

moving the And XXXX a helpful, the this that's about Matt. sticking you more lag guys to and Maybe you is tell right, So you portfolio? basis little just Okay. in for All also, pricing for color any about price/cost just expect with XXX and pricing. recent exceed cost around the Is what then Can whole to us around be just for that price on FabTech. more and would additional time expectation between, get a bit quarter, dynamic over across commenting most when helpful. pricing specifically of it points cost? to looks like there got like following

Matthew L. Trerotola

sure. Yeah,

most increases price all don't I pass the was the And on steel steel it's think, in really, escalating I where dynamic business think, is cost that So, a and year. battle last business. for through, historically, automatically they a but reason that of have throughout through been passed FabTech, main the kept

then few more world, the have get quarter. prices get third quarter so, in, quarter, escalation the the we're that increases channels the it there's take – we month Each month this seeing to And it little the time, last a within the you price is a it. and ongoing you in the to of every them the team. put and with price does were through got last the in of we next for Through get the and in were into and different the through at in a through might the standard then and something time And able quarter, same to get we've back the But environment in the that the right range, year, in the work was the very of other – having of stabilization, got put marketplace. sharp you get channel to increase quarters, quarter, each we put to price in through but side need an third visibility an things, bit last we environment where and region steel the like them in a fight lot through year. of in next and

place. back last as balance we we quarters, And exited, in the so were two right

get get soon better place moves here. it. and aggressively execute And to it to down, our then flattens right of we've even as keeps And we'll pressure steel little into still to a steel that the so, yeah, we then bit QX as a side of comment we to going QX, because roll continued over that's and feel but as then up, potentially

reality these might ask, twice as that need be is through well, The put you you much? to don't price justified. Now, why increases

Our customers going data the they actual need on based justified can the on do in math transparent and marketplace. what's the be to

can if it back and of so, try have as you is environment, then this And keeps of to you the do light dynamic as industry. escalating, to in much go more getting the you but execute keep

bit steel the I So on more what look color at we're to that do coming that, signals and as from a again, plans the but that we as earlier, as expecting little coming the we said then, in the we operating to have XXXX in from for expect quarters, improve and margin for again. continue strong at QX. growth margins FabTech improve have our we there And operating FabTech in have sequentially in price to quarters

Joe Ritchie

can That's on, follow one helpful. I If clarification. just quick maybe

basis a margin as an there expectation price/cost then basis? a on as on positive a So, XQ see is margins you'll soon FabTech that spread either dollar or

Matthew L. Trerotola

some price/cost the still the of in a a QX XQ bit it that that as there's spread, also What look terms little spread. of a I as has that in productivity to XQ opportunities will than would better and growth But healthy say has create well. little there potential is have on but some well – progress QX, gap bit price/cost and

likely think, in I the we expect get QX. as fully side through price/cost work to year, of other that spread on the we

Joe Ritchie

Thanks, Matt. Great.

Operator

from question And you. next Capital from line Markets. Thank comes RBC of the Seth our Weber

Your line open. is now

Seth Weber

Hey, morning. good

Christopher M. Hix

Good morning, Seth.

Seth Weber

was of FabTech part question. on actually That a color the pricing. good the my appreciate I

answer, I that think guys you given XX%-type here a margin about So costs that think you still just in your incremental through, to fourth FabTech thinking mentioned quarter. business? you Is one-time I'm trying are do the just this some forward? know still was there going is how

XX% basis trying we of just is I'm a on my low-teen on to margin, first guess, your I as So incremental path of question. should normalized think kind this margins, sort a about square to

Christopher M. Hix

little basis we know, and math as then out, the about. But incremental Seth, ways a a bit back always good incremental number you to gross to think continue find reinvest we're a think the some of little to initiatives. net our margin to lays to that a and growth drive XX% into business bit trying higher it on is of XX% as about business, a

Seth Weber

that quantify forward? in I you Okay. here about And in you costs can remarks that – prepared think repeat I going in will just And talked some guess, you that absorbed. FabTech the can quarter just you the one-time and fourth

Christopher M. Hix

Yeah. are or largely We said, comments. I activities cleanup don't occurred. expect that my those And true-up in year-end to recur, as adjustments other those either

the cleared we've into on deck as think I So, XXXX. we that go

Seth Weber

Okay.

a material though? not number, it is So,

Christopher M. Hix

about the we inflation, a earlier. No, a that quarter the the ESAB I think before, other impact as think in was I had about margins, we in a third the third was mentioned of as third discussed we that elements the and

Seth Weber

I talked us off recent it then, way? Thanks. that peaks? & Okay. to far And that the it to do if Gas you help maybe just I to possible you've how Oil but is business – before, this business, relative on is mean, understand apologize to just talk

Matthew L. Trerotola

forward of and piece growth Oil dynamic view can the down in the of in kind be supply my drove shift. can a Gas go recreate shape recent oil that and the for of a I off industry what it's is steady what gas last have of the sharp peak, would industry curve. role drove of is And think more it – think, supply likely cycle. a the is a steady had the that come plays versus a not a as I'll & think, gas also happened recovery to I that environment maybe in a that sharp path oil that in of permanent would Well, And rest curve I the normal we and of peaks, be cycle and that Yeah. view cycle the the say the curve terms that lot it comment. my is investment relative that last is peak And the and up long to backside that growth with supply really fracking the the nasty have

Seth Weber

Okay. it. you, Thank I appreciate guys.

Matthew L. Trerotola

within say, the long in I our against up terms the that got kind our And which driver of fracking a of us say, not, on build-out exposure, & a concentrating fair going would we've steady have a downstream I is in there think – exposure a and then exposure of more down, Gas, be industry. to for think positions in I Oil And think there. probably and the amount to that economic exposure that where is growth than plays I parts – up terms balanced other balance, happens more industry the out a of but of Thanks. the likely how – more I sharp in think new could investment sharp and cycle business' reality

Seth Weber

Got it.

Okay. Thank you, guys.

Operator

you. Nathan line of from Stifel. Jones our question the Thank from next And comes

is line now Your open.

Nathan Hardie Jones

everyone. morning, Good

Matthew L. Trerotola

Good Nathan. morning,

Christopher M. Hix

morning. Good

Nathan Hardie Jones

that ones the the some Did What you & that the on had and at? expected fourth comments outlook you those timing about Just all ones order in Air your Gas & I telling back say the of kind in first in some customers organic about more, in million the in, the shook and delayed Gas think was come or you some fourth shook in did all plans maybe $XX looking quarter those you loose Oil XQ on to of the loose number talk you half Can quarter. know to orders then about lower ones some you came orders you're of ones the $XX are once shake call. loose XQ? I than the talked million, implied of for just of those on that year?

Matthew L. Trerotola

Yeah.

and QX order talked in end a terms core about flattish QX the we're I growth, at of I'd likely what down we think say, couple. being of First,

QX anything think And line on healthier. And we'd the performance in with was business expected. if was little in our project about so, a order what I bit

As Chris had aftermarket deferrals talked and about, business. in we some delays the

expected. was where we QX So, about

we into year. the the the look see half still of As of we the first year, of a flattish view half first

first project say Industrial bounces the stretch. the flattish the a and around the half the that quarter for could will Power bit, certainly be projects be and the little more we you and year of where into that us flow Oil bit at back contribute know, healthy and comps, and first likely that the of terms comes. half little and the down in If I look difference & little we'd and second, And in the in see some we some Mining will in growth pulls order Gas As have makers when a think that a to year. we'll down growth be the up first down half then momentum some of growth

Nathan Hardie Jones

for And Chris. then one

having about obviously of about Can a and bit out higher mentioned rates. faster freak how raising talk the debt inflation You The some of potential potentially in rid increases looking the is you floating-rate about interest Fed the in U.S.? expense Fed. market a rate from you're fixed-rate thinking the with debt getting interest and

Christopher M. Hix

a of step big to be there floating We coupon slug at took you the that clear X.XX%. additional And from and nice rate Yeah. as Eurobonds, fixed really nice of our will it's by took forward forward of a step can especially debt issuing rates a here, conjunction that portfolio the that know make XXXX at our that fixing either and/or make. improvements capacity. take moves another in we'll borrowing we I other us for that look in the on opportunities with we suspect some in XXXX, in

Nathan Hardie Jones

right. very much. All Thanks

Operator

Research. of Longbow next our from question Chris the you. Dankert comes Thank And line from

Your line open. now is

Chris Dankert

me in Thanks Hey. here. squeezing guys. for Morning,

Matthew L. Trerotola

No problem, (X:XX:XX) Chris.

Chris Dankert

markets in the into on tax just U.S., guess, the some just guess form these been it I new M&A I does any that the given play? targeting some for guys in from developed emerging guess you've here? I bring platform-level versus comments of change M&A or prospects

Matthew L. Trerotola

strong attractive where the drivers, Business consideration is our on how secular with for where we value. we industries we technology platform-level We're Yeah. Chris, good primary see can our looking and right the can we areas where add can say, for a can build get long-term I'd and brand System areas healthy M&A strategic. point position see matters, entry can

the tax of really that's play considerations so, And the Certainly, primary one value into considerations. is and driver. value come

in it be would primary be new up certainly of our the brought you but next what not certainly, a so, factor, factor platform. terms And would

Chris Dankert

understood. Yeah,

to two-year kind not XXXX beyond? the that buckets think Is that that are restructuring typically how kind with thinking much, payback? how I of the closure, fall just of harp plant does too just and on a these think about XXXX about versus timeframe into, or as just roll I you but savings it

Christopher M. Hix

Yeah. Most at I payback today, And we typically think, falls one restructuring, generalize, of payback. to that were largely are two our of everything to years. had has looking if a that I in

Chris Dankert

much, Got guys. so Thanks it.

Matthew L. Trerotola

Okay. Thank you.

Operator

today. closing And Johnson session question-and-answer would Kevin you. back to remarks. like the to turn our Thank over for I for call that concludes

Kevin Johnson

updating for We look forward joining on next you Thank you to today. our call. again us

Operator

for you you may your the conference. participation have in And thank program. gentlemen, now great and today's a Ladies concludes disconnect. This Everyone, day.

Enovis (ENOV) 6 Feb 182017 Q4 Earnings call transcript