MRC - Earnings call transcript Q1 2019

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

Operator

Greetings, and welcome to the MRC Global First Quarter 2019 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Monica Broughton, Investor Relations for MRC Global. you. Thank

begin. may You

Monica Broughton

good XXXX Welcome Webcast. Earnings us you and Global We the First joining Quarter Conference today. morning, you, to everyone. MRC appreciate Thank Call and

we release. XX, and CFO. by as yesterday's will CEO; is call, On available President today's replay well XXXX. phone There information Andrew our by in Executive President Braun, as webcast be and on the The Vice dial-in and have of Jim May call a until Lane, mrcglobal.com, website,

be We our will XX-Q be reported Please file remarks of XXXX, In speaks margin. gross expect adjusted you of today, replay. available later X, we time today, profit accurate the and as May call that and gross that website. Form are percentage, to only on report quarterly no therefore, advised today, profit, our the EBITDA discuss the as our and will information also adjusted information it EBITDA adjusted adjusted this longer note of on on may

are earnings on of more read GAAP to measures all securities related a these be of can reconciliation and our measures see non-GAAP to release to our use learn of about items, to our these filings website. which found You encouraged and

of securities made federal addition, management laws. forward-looking this of call These statements of statements In may the comments by States MRC forward-looking the the contain the MRC of within management the Global views current United during Global. the reflect meaning

However, MRC expressed from those today. Global's results materially actual could differ

forward-looking call Andrew our now like company's Mr. for concerning of SEC risk a And filings more Lane. are I'd these review You the the CEO, to over read in-depth factors to turn to the encouraged statements.

Andrew Lane

the review the continued and CFO, the joining I'll first more to Good detailed and for company's turn then Jim Braun, I financial Monica. review over quarter of interest will you, us today thank for operational for and XXXX Global. a MRC Today, highlights, in your morning, call Thank results. you our

typically players As well-positioned of each us to inherent large gives This some our grow the certain stability, provide market of energy to we level of provides customers. PVF distributor sectors. leading resilience the more industry, to in and the opportunities diversification are a with end-market the changes. We're with our us diversified

This strength base quarter operate. of was the example well the end our geographies of the in customer markets an our and of as we which diversity as

We capital optimize capital continue working our as to to against well efficiency profitability increase execute structure. share, and our market strategy as maximize maintain

we seeing Let in some are me continue with our early from XXXX. them comments and what customers about

terms XXXX. Our year the base cautiously customers the the new very in in started end at prices of on of pullback their commodity spending

levels However, throughout increased activity first quarter. the

improved to expect the the to quarter. first quarter over continue second We be

customer at originally as However, than we of will spending an increase a be now we less pace. levels thought are slower rising there expect

in updated our We out XXXX, guidance, and that year address solid over be to continue we want the second point to expect updated the of share I first will X% but our improved and also to to guidance business in Jim details nonrecurring growth of the opportunities. excluding expand half the implied of base the continue half. the around our market gain underlying projects, growth

multiyear We by MRO share continue and gains obtaining to drive expanding with market contracts customers.

to coming the midstream and EnLink is committed expected awarded project be quarter, in company. Framework implemented months, with and expect we opportunities needs. with Agreement This were PVF, Midstream Enterprise This their for this we new additional a leading MRO

for with distribution contracts renewed an in additional with Gas, three In Phillips years Peoples addition, and company gas the largest XX we natural Pennsylvania.

of $XXX which an of a XXXX, $XX.XX XX% repurchased returning and strategy. began repurchase mid-XXXX. the shares will valve XXX,XXX customers, should at we group. first and XX.X us This share operations the of our our were sales La be to per product of on market, continue XXXX automation our total more in the to an particularly total goal per shareholders. valve sales. our extensive $XX of modification first Since to expanding at complex last capabilities higher-margin sales share. million our continue repurchased XX% quarter In shares, This supports Porte product on $XX.XX our for of and As the of repurchased shareholders growing our center, midstream April, price with In call commitments of we valve finished our capital return share. include as million of additional average allocation quarter, cash in consistent to when work a an reaching give service and offerings, servicing square-foot million mentioned we our valve of additional programs, We average we we part million shares price have we in $XX

to plan during We buy the under over the execute, million opportunistically Jim current quarter. turn have I'll now continue highlights $XX to to to authorization cover we XXXX. financial remaining call the to and for our

James Braun

good and Andrew, everyone. Thanks, morning,

first sales last the with each of year $XXX quarter X% million, XXXX geographic our first comparison. year-over-year were decline were quarter reporting the for of total the Our in segments which of than a lower

XXXX, impact in of by X%, large Shell also Sequentially, million better the three last of of declined sales the that quarter. was lower $XXX our a the Excluding in slightly the mentioned, about. the X% on impact guidance. and down the for million from the XX% the $XXX slightly talked revenue sales limits. quarter million customers A XXXX, market million quarter first downstream weaker comparison. project. XX% than midstream the work period. sector sales in first as sales. foreign XXXX, TCO of year, in down from a XX% the in This market was downstream sectors, of was more chemical upstream XXXX growth offset project the MRO quarter the future $XX existing quarter the by first previously adversely over in due of U.S. the from offset revenue X% the sector. and over upstream U.S. than Canadian up The the in an by International projects the had ago, impacted fourth revenue winding first quarter to as a previously the winding upstream U.S. the Pennsylvania revenue quarter of year, of the first quarter of we by were midstream quarter grew contributed quarter sector year with same than and decrease with the in XXXX, unfavorably primary increases in first first up expected completion the well X% was first same revenue comparable the large previous grew and completions project new small-cap U.S. project revenue in TransCanada down down the were the as negative quarter-over-quarter Kazakhstan. the first of weaker impact of government-imposed $XX XXXX, currencies to the last affected impacting dollar production Canadian was also in quarter decline, mid-XXXX of

the U.S. by the in from Canadian $XXX let the Specific remains IOCs to U.S. down first increased year active And sales XX% primarily basin. and continue XXXX the Excluding sales, U.S. sector for and grow are international now XXXX, to growth market. investments the our revenues XX% grew reflecting performance by X% sector end which internationally. earlier, this improving conditions XX%, sales prior being $XXX offsetting quarter project Upstream in quarter Permian first million, with sales me declines. this basin XX%, quarter summarize most of the the year. shale us grew impacts, same large as FX independents last and described area with million to Midstream based, the the in we quarter same the as from made and important were

in Our with large as gathering and subsector transmission mentioned down was work a XXXX. project earlier

the XX% $XXX now utility same revenue the downstream the growth. show our In saw important across the X%, excluding million, earlier. Market business, Franklin share Shell continues mentioned a integrity the in growth of saw sector, to of comparable overall geographic growth last sales relatively we All downstream performance. growth in flat in year-over-year ago. revenue, of the first to contributor was quarter sales However, segments experienced were quarter gains XX% the Because impact Project The of strong sector gas sales downstream sector. the level quarter programs XXXX to first quarter of our first over which year management year. ongoing U.S. U.S., the is

of XXXX. quarter first And the XXXX improvement reflects increased quarter. the the favorably of XXXX $X of of impacting were began percent, and impacted XX.X% late LIFO year. of the The margins. between and turning percent we first product except be Now pipe; by quarter to of $XXX XX.X% impact first in a same the profit the XX annual tariffs revenue gross profit the Based all project pipe gross quarter first negatively million due million unique first guidance as low-margin inflation, to are as first lower percent LIFO, in of XXX XXXX it margins orders percent. XX.X% gross $XXX for a in particularly quarter take the basis The full expense percent. same gross benefit benefits gross adjusted customers. XXXX. items on Gross quarter to to line items of compared in impacted favorable reiterating and two period in XX.X%. quarter effect of average the the XXXX first adjusted had the that basis points to quarter. prices index revenue; negative in orders gross of prices X% higher expense for a in current were to than recorded mix; on in quarter couple midstream XX percentage XX.X% was that The quotas latest from above to margin in XXXX. first on profit had no were Line of higher the important of the impact low-margin XXXX. our logics, gross accepted the first pipe year, profit of for to compared - profit also Those LIFO of quarter pipe adjusted the noted points XX.X% carbon strategically for in Adjusted last we the This point midstream profit quarter quarter XXXX or in was over percent million relates basis as a profit in spot and

also has and X% XXXX see tariff XXXX. expect in to for to This of the for XXXX between the as trade and our quarter LIFO and to around same to as we of period are first moderate in pipe prices quarter first changes costs pipe as million XX.X% of relative $XX current sales such, million levels, in quarter. of average in significant to the compared line any do not such, Line we expected SG&A inflation the LIFO the were as XXXX, sales expense to barring negotiations. And full expect to saw XXXX, million led of are we expense continue million However, for lower-than-expected of quarter XX.X% prices fourth $XXX levels lower XXXX. $XXX in or of or be the year same $XX XXXX. the the

First was - million our $XXX in $XXX guidance of expectations, SG&A previous line with SG&A quarter and remains million expense appropriate. annual to our guidance

$XX quarter the rates quarterly million of in before, at levels the XXXX, LIBOR. note beginning more XXXX, our that expense the average And totaled can quarter annual April. was than in experience fluctuations merit which Interest debt we've I'll expense mentioned year. we to in of to million first pay and interest higher due were due increases increases the $X SG&A during effective first higher As of

decrementals was was XXXX Our or of as of in rate first the full result were repurchase share count with XXXX first per for diluted and a The $XX first quarter the $X.XX million common respectively. XX%, is of Adjusted our for was million same expectations attributable effective XXXX the the $XX volumes, to in same a function share diluted by our EBITDA product of a this the generated segments share adjusted the share only year, sales first quarter per positive of million Net lower change of in year $XX for a of ago. the for year. $X.XX EBITDA quarter quarter shareholders margins lower Adjusted earnings quarter last program. the All as income X%. EBITDA share, driven and diluted line our margins EBITDA tax both quarter the quarter. X.X%, three despite resulting the in versus for quarter higher per

quarter XXXX. first XXXX it capital was of end of million higher was of working at $XXX the the Our the $XX than at million, end

XX, in we impact our a flows. million has was asset to both which no purchases of sales, capital, March $XXX standard of the balance amount percentage on XXXX. our a our cash Our the first the year. the of liabilities implementation our a of we of balance as of of for preparation note target record operating was to add valve reflect or this statement the at of was to The have for above end the - of adoption cash as quarter in excluding activity customer leases, the or operating made - lease in The sheet. lease and was XX.X% and impact a $XXX to assets working liability XXXX, right-of-use strategic expense income new impact on accounting increased Also million quarter as

operation as receivable and increased. $XX first levels cash of million used of accounts Our in the has inventory XXXX quarter

not have guidance. cash our We flow changed

expect be the sales ratio operations full year expenditures by expected working plan $X growth the million flow in of the the For XXXX, to and XXXX. end of $XXX capital to we approximately first million. were to cash achieve Working Capital million year. XX% is our $XXX we quarter moderate, from to capital

We expect valve million total our center. our Nevertheless, and expectations modification now lowered somewhat as $XX $XX construction capital million XXXX. continues this increase of on to expecting in expenditures we've to are new

XXXX, in had leverage $XXX cash target range. ratio, asset-based million we of end of quarter. of net our Our million quarter was well the end debt the from availability The debt the facility $XX was at at up our XXXX. million, our end but X.Xx, X.Xx compared first million, within stated on of first on end lending outstanding and And million the $XXX was at based the $XXX at the to of $XXX

financial in our maintenance no our is maturity debt and covenants have We nearest structure, XXXX. September

guidance. Regarding our updated XXXX

U.S. we mentioned couple into but thought. reported resulting are in and last our from the since by in expected, comments, low December customers of in first was previous and our March in quarter January we continued Andrew up we as As picked we making February. about and a Spending changes February, in a where

However, growth customer anticipated, expect levels rising have second originally than we now slower are had originally the activity a thought, in pace will and primarily than less that the quarter. at we year

growth expect in to continue We the base business.

spending and we uncertainty markets. to some end have remains there exposure While levels, diversified

are spending is also being more to typically focused base customer capital IOCs, commodity natural of of and and and subject areas price more impacted. their gas to or some refinery larger the chemical weighted plans companies, is operate. operators, operating Our not in changes pipeline which less Their where utilities and large either are stable we all or increasing

now between billion. midpoint we've range the is billion $X.XX narrowed range our this, Given to the of revenue billion $X.XX and as $X.XX

the projects midstream is down Canada transmission due spend. showing the business and U.S. in slowdown rolling and Northeast nonrecurring due as quarter upstream expect second expect the view, Midstream the to that of XXXX. midpoint, downstream expect geography, in will the international to each strong, of first U.S. pick to slightly projects. expect the XXXX upstream X% little by of The We business XXXX midstream U.S. Permian our and basin offset the customer to sector sectors base in from we by a up. decline. be a will drive growth levels growth infrastructure driven quarter point gas activity the At By with the to From up X% while of XXXX being grow, the be downstream be growth activity about to we we with over.

Our impacted production over Canadian being XX% government-imposed by and as business crude negatively restrictions. differentials upstream is

an ramping Our is the International project. the up approximately being segment of TCO million impacted by $XX decline growth from future

the at of quarter end from backlog delivered. XXXX $XXX nearly have as the Our first unchanged million, XXXX projects of the end of was

in gas X% all the XXXX is of and the the backlog across projects, However, utility primarily excluding businesses. XXXX U.S. segments but first these quarter of up end the over upstream

to $XXX guidance adjusted and now between we changed, $XXX has million it Our expect be and EBITDA million.

share lower to the diluted - lower in we LIFO XXXX. EBITDA $X.XX expense, between Given now between per be $X earnings expect and and

now underlying summary, slower was with changed we'll your and our a that, to Operator? full in we've our the second quarter year reflect in So first take in expectations, tempered remainder start business. expectations to with still year basically line more questions. and the XXXX somewhat for quarter growth our of the expectations reflecting And while

Operator

Instructions]. [Operator

Our first Sean Meakim question with line comes JPMorgan. from the of

Sean Meakim

seems guide there's, from to considering of easier start, it to the contemplating gets not sales like cash didn't flow and upper free Andy, EBITDA target operations confidence So effectively the it the you're mean or if anything, in then cash if year target. alongside flow increased shift it end I the hit from the maybe cash that

guide So I'm your more is, normalized just free two So still level little year? maybe the really to an free target through cash capital working more that. all give I question cash highlighted the feedback the that XX%? sales the And guide. Jim one, is of the us 'XX? working parts then confidence type front-loaded of exit for of inventory in part be, Or the of is implicit curious, capital your guess, valves, how in the or target? goal does on rate second a that a Is of would

Andrew Lane

feel Yes. the and for started add I'm reasons. me year. Sean, comfortable Jim, We start, very will sure, comments. We let some several

XXXX the and second that early orders levels in, activity lead mentioned strengthen valves intent make that those quarters. briefly third for both upstream in long sure to and was that we in our think call I midstream it time XXXX, we've last have in some the on placed the

kind the the in run over rate. normal high first we're we're of end So of quarter, valves - at

We pipe ahead of also year ordered of lot inflation. a last line

So also products us. the impact of our gas quarter winter we line we and gas the big we're the utility for high in Northeast. increased first second very because are because the a quarter quarters pipe, third slow but in And business construction in had

third quarters are the for and second utility quarters So gas strong construction.

those So that out projections. $XXX all fulfill of end I'm and the all year. work have three revenue now little And a we'll we play will million between inventory out. we'll essentially, over our confident the of of

less side And because also that. about top slower bit. So you're that's our to exactly the so us, we that growth CapEx driver. feel a year, we little and for very that bit And we good little spend on the a going right, moderated it's a achievable given little that makes decreased be

about So all good cash feel the estimates. those we and cash of ops factors flow our from free both together, flow

Sean Meakim

capital then I And average piece the expect you - to on the capital the year? ratio, XX% to call sales exit would versus so just maybe basically year working an working for

James Braun

an exit that's Sean, rate. I think

I we balance rate. to kind start here then think sometime end year, capital back that to get down and over should as working to will peak the of quarter second year. in XX% the we of come think But of the the the

Sean Meakim

it. Got

That we're cash sense. then flow And guidance free current cap. the on makes place, Okay. cash a so in double-digit with market that at looking yield flow

another it to the buyback Board's to $XX So on let say the you is after authorize million one? last exhaust current fair the that me

James Braun

time. a make look get and what evaluate to at at that is the opportunities Sean, in typically determination and do time. done point it that Yes, allocation various We'll we what we've capital we'll and

Operator

Our comes next Darkatsh Financial. Sam line Raymond from question James of the with

Samuel Darkatsh

questions, few I could. A if

but the to in I the manage that down the SG&A the interesting, intact. be You took since dictate. early volumes high year, would the sales And especially SG&A the kept high and whatever you suspect end of to to would of year, sales end able guidance it's up thought was the you for

Andy, trying taking to out figure spending investments this So of might static. nondiscretionary those I'm cause remain to year place what sorts are that levels

Andrew Lane

very it's and good point. Sam, Yes, a

a to But be midpoint. will not this and at weaker Canada. or the be think is a market in low end it in international, end I Canada difficult more little high very closer likely yes, the weaker year. to it's

given have, first somehow So those occurred those and our ongoing will quarter, outlook, decreases in and SG&A, continue. right are now current the those in even both will

In of in slower streamlining we're there of course, back a costs U.S., because environment. we'll the half. revenue the pick up So

that market. midstream going investment midstream shop. phenomena we opportunity So excellent see we growth very valve. incremental to in modification for some automated going. it big our up It's us as do have complete don't to And have staff the We an a for kit

up impact real but lot this margin that, of having to into the are opened we half rate So going year year then good from going only and We're that that. some on will have contribution. of but of a July, be a run revenue there as we next in staff

given I top we'll So the right. in that top think moderation the exactly be the guidance. line you're unlikely that of at It's

Samuel Darkatsh

bit. question. may I mentioned know you orders be off tailing Second customer little a

I And leading real with Another little your it times? Maybe lead for would to good lead market weapon. think times use lead a times. be if indicator in share as sheet contracting? for those it's supplier seeing you pricing are are suggest balance what What you harder would does

Andrew Lane

that is on. dynamic Yes, going a

in so very manufacturers position, and we're cost and good have We're times. very We taking still much good because that - extended don't lots Of course, contracted. year, in Valves those lead still is last in times, carbon U.S. shortened, lead lead although move our market. of lead year times even that pipe, extended a of inflation. accelerated environment. a inventory this But have come lower have dynamic. we especially advantage of an position but that there some some orders valve definitely in from much last of year, This the still in times, position

you pressure that pricing. some marginally on puts then dynamic that as - changes, As know, as

in really is I the we've line area only think seen it pipe.

inventory mostly pressures do market at spot for diameter larger good line our in with we in point, and remarks. and standpoint an type and we pipelines. ERW we're in position information biggest price the markets talked DSAW smaller Primarily the sizes seamless serve but in it this very from prepared what about see pipe the are You seeing

Samuel Darkatsh

in, try I Anadarko different very that If delicately. the customers and sneak sized contract obviously but can frame But had of this one a you more you. and recently, I OXY I'll for and understand situation, Andy, Chevron the renewal are with

going how So developing risk/reward frame situation you forward? would the of that

Andrew Lane

Yes.

the ours. good three largest here of review is customers players of involved a all of customer. Chevron, are went all So through course, North them our the just with on America. We

We new whole we year contract the review North what for new gamut. America, stock have with of the global seven and the pricing in

most in of ours. the contract Anadarko course, renewed Anadarko. two So for they more some us, split players of the between is positive acquiring good work would a with Chevron players. and regional the customer tended our but major the We be, industry them, to

So even two for Chevron players Permian. would the also the us. more They course, in their between That also good nicely that's the them. customer, in improve and but is part I'd world. split largest of say two of we're regional some Occidental work position a the with players number

would two would good be So the favor we course, Chevron way. that customers, if to outcome it combining go it but of

Operator

comes Jones line question Nathan Stifel. of the next from Our with

Nathan Jones

projects. on talk Just guidance pipe are the baked - percentage what a maybe margin, you couple the that headwinds a same? in some quarter. for first to But you there the you margins you the on would lower-margin margin about the the Can kind gross you've take out assume to headwinds of the guidance gross during seeing deflation that little impact bit. your into prices, called gross had guys that line, should of year to in adjusted you additional already from I was offsets those midstream of margins which One, the able for starting be year overcoming margin here of gross those terms guys gross the are are

Andrew Lane

Nathan. Yes,

get all me half in that's the line and strong higher had January strategy we the the of reached we'd out some from slow to a felt we We that line be ability second perspective We targeted if last XX.X%. the given At the when on at margins the in pipe the Early some of the the a we February. - but gave projects. it's really and and initial midstream 'XX. we top call, year, end It couple follow on always we revenue, XX.X%, time, aggressive want - we have start. the range things on midstream through slow. Let was work guidance more

we gross guided think in profit. pipe projects, Jim's two adjusted I been priced XX.X%, last projects for prepared line did, XX.X% if at we kind more been exactly which you aggressive So would remarks, at correct what did And have would we of have we those midstream to quarter.

March - in So and and it picks think not in I was not don't that continued the there's in it as margin one is continue up, Canada, short-term there: our has in has and sustainable. activity two we was One April. That one-offs U.S. to impacted We're that going with

back we're right to margins. So but that's for in the do that marginally normal I impact short the other in line have the lot rest lead a get we impact, going year. on have pipe, from customers ago, because more year you're think our more we We're up I but with the deflation spot but market, think they out And to some of slightly deal with time. stock a to pipe the we need still on of

hold up spot tend than of a market pipe margins you lot to better So have the bidding. only companies those when

last in Korea, South might Korea supplier that So mentioned dynamic I The that They for one is that's come. we us. will the quota offsetting thing that think good have call, system. a the run a

some XXXX. in pipe import buy on of some to pressure top that to able we're So offset pricing the lower-cost

about good feel our still we year-on-year. very pipe So line pricing

the the above think which a of the I going the range we it's to us new point year. out high year, for will end we XX.X% exactly in last by be did So forecasted, play

Nathan Jones

color, helpful. very That's great

Second question.

took guys the some You year out full guidance. of revenue

changed second You talked you'd previously the second half in up half Or revenue expecting were months of built was level to level about start into are from Is previously? up your not the 'XX the same expected. you the year, a the slow the what's of possibly quarter second and into start three same ago? still ramping and you the at where ramp it of the guidance that

Andrew Lane

Yes, talking year. that Nathan. we've of We major three had of biggest one $XXX of revenue, really drove what year a projects this. quarters. into last a one for were lot this Two a unique nonrecurring dynamics couple alignment the million, about the and is that been And really impacting

year if when think you about I we it little actually business look projects, important of give X% new growing $XXX that's an if thing. base those, want million each with of when you think you - on our And this take out guidance. the the performance So we're comments, to the a put three the color I our in

If first was X%. first at growth actually the year business quarter a compared projects, ago look without to the the quarter our in you base the

we up, upstream, very growing. in million We in U.S. and in The the U.S. are we doing that the had rate that we we're the completion is knew about So When Kazakhstan. think challenge. well you had completions. $XX was

grew completion said, our XX%. XX%, U.S. As growth and is we upstream business

the revenue one the the with tight and was completion correlation have upstream part upstream which data. our And U.S. basin of but base, other is was revenues our Permian primarily midstream, very We big a U.S. XX%. upstream

upstream, on So those good. very the - we're doing

big and previously, gas talked up midstream, not year TC that infrastructure. replace million, or the we only $XX but about In slightly energy globally. of have $XXX will upstream So million we an TransCanada

$XXX actually forecasting growing feel have Permian basin. to we the still very down we've about about million. in replace replace the Permian but We're projects to slightly in that talked be that. to good So that We midstream,

business, in NGL our completely pipelines. of pipelines different and all a part but gas So

Just $XX $XXX million we on forecasting last build-out. and on call, the give in to update in the did revenue said We first $XX project $XX an the We you million that, Permian we an had additional million XXXX. in to $XX as only of from XXXX. quarter, million we're million

- for be be guidance. back final million And XXXX another we our answer Permian into the the built to So Then $XXX the then is us. midstream ramping those Permian, have half half, $XX the build-out we'll with first the up And in in continue to million than Permian upstream, higher U.S. and question, half will performing. will both in second downstream. piece on the and U.S. primarily the we'll your into

be to XXXX And didn't in million downstream, with the really, we'll downstream. be that had In have Shell polymer, we'll growing $XX flat. project million basically wins contract we've $XX our We the repeat. that in replace

biggest the we're that's our - at impact So year-on-year. comparisons is looking we've

nonrecurring growth nice that areas, all have projects. offsets the in but We big three

pickup X% we have and thought. April February slow. good double-digit digit customers growth in the not other hit thought thing more was originally double March. we as really had in January We than going a The to We in growth but really knew we'd great. in nice that us, the still not the have X% to second quarter range up faster. quarter We're ramp as spending second but were

next you at the of now, ramp-up million of the when spending already at today's why in eight So basically - we look look contracts. flows guidance that's right given in evidence $XXX It's you lowered when a we midyear. besides four increasing our that own caused the look have we higher midpoint of lot we don't so customers at that that high don't pricing, guidance, the should to a what to us customer get from certainly see months spending the end know We that's the right in be books, needed $XXX today's WTI, end cash And to Brent and the million. in thing our of primary top already now. the what months we

was months' given the results. it think first down to some four pull we appropriate it So

Operator

next line Weil. Howard Veb question of comes from Our with Vaishnav the

Vaibhav Vaishnav

the growth the can I revenue that is help that context us you if the second you are midstream out alluded headwinds that guys how X% to talked about think behind driving us? X% for quarter, of project the just that does already guess, Permian And about in guys I to? you play all that's are

James Braun

Yes.

to our upstream some XXXX, our and it's led then continue of the have in and upstream But terms well. will to in we'll as by that year-over-year and comparisons. growth June that going On growth, the finished still business. the of projects, midstream, so that concentrated downstream impact still comparison, So ought the we TransCanada. in midstream to in That growth big have a in one you're see to is going big year-over-year

Andrew Lane

Jim's course, sequentially, breakup flat will spring Canada be Yes. and sequentially Vebs, then, just in basically in but to quarter, international comments. of and we've Flat I'll it second add got the flat.

So in as mostly business primarily U.S. the that the and the see Jim we driven by driving growth said, already and it mid, coming, those be will two up

Vaibhav Vaishnav

mentioned half us what of would half a half half think Is confidence step first by up? done first - you help you first essentially over And that takes can project the color. like then over for drives expect think, driving Or half. Andy, - you the all a second second be half? I what's and improved second helpful just about function That's headwinds

Andrew Lane

will big in at especially as best Yes. third. It's half. the That's with we the We gas feel of least about have have get - and good our historically visibility the our just or quarter. we construction primarily busy in the utilities quarter quarter the second sales We'll have. third

think in so solid. when talk why is to growth in is good will And - I we be ramping ramp-up quarter core upstream will that's offset just inventory be strategy downstream to I are be And The And a projects. the that. our business first course, used that for lot be capital business. of completions busy. Permian of I talk continuing midstream, think the confident Permian - that contracts the busy. mostly. the and up on and Gas line see our and high working very of the the us, third be So the will utilities We driver will we feel pipe We'll and new really definitely on in valve the half. the

up Now incremental midstream component big new see half in our first midstream the won't valve that to valve valve but on said, nice us valve. is we I we is a - a fittings a combination and and as And midstream second flanges, our of pipe we both line also half. shop, opened and have sales in the

And then projects there. of to new part contract. that's MRO ramp mentioned a we nice due So new midstream and the that and line We'll contract, both revenues have in EnLink pipe it.

getting valves midstream new the about. and a bigger from we to feel facility, and end overall part the And solid half. just we a then just Permian the good along be downstream the So towards Those in second contract new play will projects the stage actually where the upstream completion.

that. good we feel So about

Vaibhav Vaishnav

just of margins second the of just and was And gross terms one may, about thinking choppy your peers Okay. quarter maybe for I about if just, in the markets. talking

So can as to us thinking help XQ gross from how about XQ? are margins you to

James Braun

our our having some in there's we the softening Vebs, which impact, in we about second pipe at Yes, little when Certainly, the is some improvement. of but and and activity the valve see area. as mentioned, of Andy we quarter, having an very see in improvement first prices, balance the should we look should we things in talked quarter portfolio see that

Andrew Lane

And definitely Vebs. second of year, the stronger margins half the than

Operator

with question comes next Our Company. from Bianchi and Marc of Cowen line the

Marc Bianchi

be a that of of midpoint that questions implied back of kind guiding and gross for quarter to bit just Andy, the sounded from the on the get of year. the for margin Vebs there's up of midpoint XX.X% in are at rate and to revenue of the of of the last a the it more need seems year But you second the to, year there. you line it If sort guys like following we're ramp going you half guess I there. kind here in like

guess some could position, exit just for it's helpful. inventory implies be into the about And maybe exit away, which different? you healthy you're think really So how you how I sounds would kind if goes rate clarify seems that you mean, implies any to if the that rate, a like XXXX? it but then what as of I thinking of progression, level, kind well have maybe perhaps be 'XX advantaged of

Andrew Lane

me let Mark, look Yes, us. One at start. way to

quarter. the two adjusted it And quarter in especially quarter profitability, go 'XX had volume And gross you third as margin if that last back look course, so you the the last a tariffs, 'XX, years, projects 'XX. of last at the It had the quarter, percentage. quarter strong caveat in the added first was quarter, what pulled the look positive up. years, was would two margins in couple If first with up the now XX.X% goes of third at been XX.X% plus year, of quarter. our first XX.X% that quarter year, quarter It the a talking had to the half. essentially, in and from XX.X% and second, through our our the the first down the inflation of have tends we we we in really the But XX% low-margin first impact in be with all I'm

the So end good the feel we still of high averaging about year. remainder the on for

will first by - have as our discussed, mostly to the XXXX, guidance. targeting the were total. bring valve you which margin quarter, into our point control. about if be And so of And XX% that will we're XXXX, look XX% we we our within product our definitely driven and It's at I for for average that's up mean, your mix. sales

We total. get expect to to our XX%

impact margin the expansion. to valve very midstream be the expect positive We from

into pipe for or of the pricing - line we rest kind long this four pipe we're what while - any happen may line in predicting We've of targeting that not in tariffs may strategy but good. period time. feel not of there, our business yet, very been So a 'XX but

We take to the work we try to product to that lower-margin used continue out and sales low-margin project the have.

'XX 'XX definitely at XX%. we're our target I least and end we targeting that XXXX - rate aligning a that for run were So everything's is giving guidance if of at the think

Marc Bianchi

near-term quarter. really helpful, Andy. That's question on maybe second And just

As maybe the for I end low think or G&A, it the towards said relates midpoint be the in earlier to conversations, you could year.

you would it's as likely roll you the most flat second anticipate what first? quarter, with Just we in into delivered

James Braun

our made MRC flat of part as plans want of I technology up increases. earlier to build-out invest bit. it'd continue the SG&A little we be And to in to to I to earlier think terms expense, about investment platform. pay Mark, a the Global our questions or in of comment do some have Yes.

going So maybe or at I a would levels be similar higher. say you're little to

Andrew Lane

and fourth SG&A talked in I international add, in but reductions and then pulled quarter earlier. Marc, I down due third Canada to that would the about in just the

the out. then the we'd play So year, by at I And midpoint. of end the think those end lower

Operator

with line comes Securities. Our Walter Liptak the Global of Seaport next question from

Walter Liptak

appreciate the I all color.

my So of most have asked. been questions

follow-ups, got and international and I've G&A that I is a the mentioned Canada. of them in couple along lines of So just one the you guess of

that - is did when of international off? how roll year? the $XX million roll off the out international difficult example, cost, markets? it that to do roll timing start it project, the Or the And costs Was overhead first For do last to take the of the in quarter? off

Andrew Lane

the little so Yes. talked $XX that $XX had - this million. a was over project Kazakhstan over Well, we've about million in a million into carry year. We $XX roughly

X%, so And rolling it's on the U.S., and six off. when in course, - kind International. at an which it's whole Canada, it's of SG&A look performing globally. And that the in EBITDA overall we And well. in EBITDA of good from we percentage we it's about. U.S. mentioned X.X% The it's this X% discussion first international. standpoint, and So quarter, just Canada We're X.X%, was very very feel percent, part is and around

EBITDA percent So U.S. get closer our we want room where have to our get streamlining international be. and to to we business both to Canada and SG&A the

we'll Norway add? longer of Canada, but This we area, quarter into also, we're process little for customers going are, you started the next market Europe, us and that Jim, those. that's lower that anything year. do In especially spending Canada, and get costs in in through It's markets and in two course harder in there's in going softness adjust Norway a sizing the higher because international first course, EBITDA Canada the market But then done. the our have as Europe little softness Australia, in general to set really we're by in now. in really, course, with it some streamlining costs So in a some And try we're to up big just of decline. to have there. our of performance, speak easier, level International, the

Walter Liptak

the modification valve Okay, you're it Is question that machineries pretty contribute? important the of it And close margin spending great. me was has to to switching end sounds like get back through? And in year then half much from in? come come then just How A over is it? the on Now project. machinery? to that for just facility. the that does gears to start on And when some Can new benefit you it and that? revenue the

Andrew Lane

Yes. Well, so it is machinery.

we've is both that days, So part. business. it's What do we've automation assembly. all. in the a as What to When comes install the we've of the outsource been needing complete valves, and very welding supplier have getting these manual it lays, in mills and assembly, to done and paint, some way of this format been you and some it a historically, big this full assembly, the we valves are

have assembly the and our and full the pull outsource part. would full We assembly. for it in So machining then the we would

And does. so the shop what

to in assembly new What our do So it the a in-house we're game us big deliver complete and to investment this in a customers. we're everything allows player. today, and shop,

from have lots lots replacement States. that's is And automated done, has ongoing. the the also older revenue impact, think in the So growth of getting the lines margin positive it huge you both the about of all midstream, the valves demand, and pipeline when of United the lines work we demand demand shutdown

assembly a quickly. and think bring ramp - can July We'll customers. is the continuation but will to inventory, X. that assembly. put ability They capabilities shop. in from And incremental together, then impact We just the be to now million-plus fully So and did, also we'll our full the what our of where valve can our XXX we revenues see be have our one margin whole have operational actuation ability we form very target it by it'll

big that in We market. have does the a it's today, one U.S. that and at least competitor

ramp very that feel that, we open. we good So nicely once will

Operator

Manthey next David from question with the of comes line Our Baird.

David Manthey

is downstream to First off, you're saying in be that XXXX the business flattish. U.S. expected

projects there fall that. than your think in guess specifically? million I was of better you I expectations bit for can so an turnaround well, a season the But little discuss there general $XX as

Andrew Lane

we'll some we'll the Yes, I But the year. carries think more think And Dave. visibility the turnaround work turnaround to early We've on Yes, whole or have that so The good going with second the get in growth. down $XX A already million the completed, the that in a that, range of second for that contract see in into part replace lot projects first turnaround fall. season in didn't we're revenue quarter. nice even of to we quarter. it's got so season new there. and flattish given of X% quarter was

$X.X - to So XX% they've business that revenues you downstream we're tend our in good be think of around our is of when not deferring billion $X.X about year business, turnaround billion projects. around

of right fall is there, So certainly and be being around the I projects think there And turnaround lot active we'll the an to a quarter done. go second with first quarter. part of

up. on when aren't good, their spreads - maintenance but there. to the willingness come crack refining projects more as Results a more this do at margins down, goes projects, mixed retract. time do bag to As so They it's tend

full we'll year. for think with the no $XX replacing contracts plus I have activity that the So problem million the turnaround

David Manthey

negative the level, this theoretical, depending you know about I at would at on about tariff potential was looks positive what it's the and you thinking Great. think tweet look for think outcomes And very then negotiations, a you, when a what but like? high here, versus that

Andrew Lane

Yes.

coming you've U.S., they you're from some customers moderation ran - the to And the seeing from away subject even parallel, steel in some any that the and tariffs that of you in price back mills in most up. think though in I the pricing the of going with got because U.S. U.S. pushback place but market the and raised a of out. was said, pricing change, weren't I it's pricing moderation in and whole the tweet is in activity some up all put a think, the the tariffs we're of seen mills in yes, I just pipe pipe as think import the line

not of I envisioning a biggest put impact. impact. be place side. one on lot China We're the the the being that's new in think would tariffs biggest the carbon And

As import from goes components and in our higher and standpoint that they that valve have the big that impact it's and negotiations XX% and we're China. and all cost of the it negative just from down a valves tariffs, will going raising cost, under to the has valve tariffs, to a XX% Passing there on the on put of have valves, our break those the that customers. and business we to customers to pass impact

On and well, That with valve to us they our valves would the drop certainly more side, XX% valve to benefit go on the be components. negotiations tariff and positive sales. the aggressive

that the uncertain impact it's think that'd I biggest be So goes, us. for way which but

Operator

Our next Barger KeyBanc question of line Steve with comes from the Capital Markets.

Robert Barger

like the do And XX, look list new on the the what on versus any wins what direction? economics some On of tipped commentary in and renewal customers ongoing other Slide projects? on contracts MRC's those

Andrew Lane

good Yes, Steve. chain contracts We for Endeavor. bulk renewals. we was contract. good work had targeted Peoples added average. up Endeavor. That's two Phillips in the refiner a sense with integration of three gain I It's independent so many the contract mean, other was renewals. the a there. then very or has very with renewal. mentioned, Marathon some some United with year largest Petroleum, of us with But supply - the the the do share these. in at We strong picking and We've Petroleum years the market major we The States. company so it's new started now Gas, profitability Midstream partially XX, the The had is EnLink our to we procurement The a we're Marathon work of group.

still XX%, our So sales have with over with the XX%. And work we're tend our now e-commerce them. switch make XX We pleased. the and a to customers. closely catalog very up working some XX% with closely stock them rate. top We sales We're of to very renewal

feel good feel that. we about good. So We

growing. is $X.X And Our We're million fabrication to sales across fabricators. now local $XXX regional billion. supply three business of PBF right at all is streams our integrated business

been the the thing cash good, levels expect that. So we from position. you'd customer flows them year mean only our prices, spend about given holding us feel about leaving today's I great cash spending not really The previously, all with to spending but course, a end their flows don't the discipline our I the as is contract contract there. on be we XXXX. position, we good spending feel better we just the With And the see within ramp-up pressure and and commodity I back into the great customer of With the have feel see to contract we at now. discipline, But go range about certainly would in E&P of up. our high that. don't position spending our right

Robert Barger

a in the new response Any on you're conditions? in more environment customers strategic pivots with evolving to service Yes. terms initiatives market And thoughts or what little other talked of any being beyond you've disciplined, about? to how offerings

Andrew Lane

next our if given them, over more to efficient you long and model management we those looking the a branch Jim lower a for that we're smaller at e-commerce in. looking still with service mode for then Global one, version annual even push of model XX service biggest when full-service customers of that customers. investing for we're through tail mini Steve, into the just buys strong touch, customer or the a We And account service or service our them service level, kind major strong customer of at strong save mentioned their a a way version, more points touch will, online XXX we them. XX customers. the is customers And full-service to small look for really efficient top kind customer see then light are think MRC top the moved very account for an I technology very an of management,

but you're and some to 'XX. 'XX going see year, a play strategically, out So lot in that this

Robert Barger

thinking Very balance versus How you about paraphrasing good. adjustment, debt sheet the as or the balance are about And just reduction any just think comments market? one broader sheet one. quick the balance you

James Braun

in we and are a on No. X where between range We're X. our leverage comfortable

be As X.X little towards down at the able guidance you that year. but know, flow pull and cash below of cash the end provided, a leverage the generate we X.X, as work would we with that it's we've high some to

Operator

question of today comes from final Our line the Hirschman Blake Stephens. with

Blake Hirschman

I but anything at Just greater-than-expected missed don't the least heard a could quick think few The about capture FX. thinking headwind Does new the compared months range, I from follow-up sales guidance. behind new it, the ago? I to XXXX what on have a range drivers you FX were

James Braun

same remains terms It relatively in perspective. FX of No. an the from

Operator

I'll final you. back This to Thank the our floor question-and-answer Ms. concludes comments. Broughton turn any session. for

Monica Broughton

a today to us second forward you having for for good day. conference Thank us you for August. joining join your We quarter MRC Goodbye. call our Global. in and interest Have look in

Operator

Thank you. conference. This today's concludes

this You may your disconnect you your time. Thank lines at for participation.

MRC Global (MRC) 3 May 192019 Q1 Earnings call transcript