Earnings call transcript Q4 2022

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Operator

Greetings, welcome to the MRC Global's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Monica Broughton, Investor Relations. may you Monica, you, begin. Thanks

Monica Broughton

good Thank Global appreciate to MRC Welcome quarter you, you XXXX us. We and fourth webcast. earnings the and morning. conference joining call

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

file our to on information XX-K time be longer note the expect XXXX, only report We our also of therefore, of as XX, Form replay. accurate February call the and later that quarterly information will speaks you it may be that today, advised the as reported this no today, website. and on available of on Please are

to we of non-GAAP read to our discuss use our our adjusted these this our of on In measures all can release you to reconciliation specifically which of refer learn items, and earnings will today, GAAP found the securities Unless EBITDA filings to otherwise, to and to related references be these are about encouraged see call call we state various in non-GAAP EBITDA. more website. a measures, measures

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

from However, actual today. could those expressed materially differ results

these of company's in-depth forward-looking the concerning SEC factors encouraged filings the for review You are statements. more to risk read a

Mr. Saltiel. to turn our to And now like I the Rob CEO, call would over

Rob Saltiel

fourth today's will welcome some results discussion you, quarter address to with and our at for achievements everyone morning, a Thank XXXX, high a and call. review Good level of I the our deliver recap. Kelly business before joining of guidance, notable begin provide quarter key review I drivers underpinning call to and will a XXXX to over a turn I the XXXX detailed the outlook. brief of Monica. then

year excellent significant an several was MRC for with Global achievements. XXXX financial

line jumped at XX% was of sectors top digits, each sales Each year-over-year business saw by performance DIET Our Gas ending billion utilities the two revenue. of double in a $X.X our revenue sectors our exceeded and billion and with impressive, four growth. year dollars

$XX We realized in exceeded on X.X% Global million, XXXX a higher The EBITDA basis increase. full EBITDA percentage revenue year margin even point in of of over $XXX XXXX, of EBITDA and the half margins the of than to by flow time XX.X% balance. inventory continue XXX first revenue was half last half was when XX% MRC this higher. million $X operating generated revenue cash we We our second year, billion as grow second exceeded

in Basin improving with improvement XX% our greatly fundamentals production This business our Our growth highest from opportunities. revenue focus over benefited Permian on upstream was business increased in XXXX, XXXX,

proof that space over rise Our is in targeted impressive period customer XXXX the our the increase on revenue strategy XX% same from a accounts, XX% with and a increased focus versus in results chemical XXXX sales our working. yielded

experience. relationships, revenue opportunities transition $XXX is U.S. the and positioned MRC are energy plentiful customer business projects growing, fuels in expertise million Global over capitalize technical generated renewable and by in in to Our of development Energy our Led with transition and robust XXXX. well project

stewardship of over translated capital higher or widely on ROIC focused and bottom line cost results returns year. in our significant invested significantly measure and efficiency shareholder XXXX, capital capital a into XXXX. used an is capital for Return on finally, value. And a on adjusting and After improvement the in important of our of was of the impact LIFO, ROIC XX% driver prior our capital above

of revenue finished decline. we quarter, fourth sequential sectors slowdowns quarter line with the million in to $XXX our Turning now fourth DIET utilities guidance. the contributed gas to year and in the Seasonal our with strong

in our XX% midstream were digit and XX% spot double solid upstream pipeline and However, production as improvements respectively. sectors these sectors a were up bright

the as cost, point adjusted by an excellent, quarter chain we fourth achieved performance and a XX in was XXXX. our the excellent of inflation, margin X.X%, over teams quarter and work was consistent counter improvement in operations meeting pricing supply customer Profitability customer This demands. of focus also basis in increases by fourth aided EBITDA on to discipline,

XXXX. to now Turning

we across year sectors, expect gains double Global exceeding growth EBITDA geographic segments. midstream our three to successful enabled Upstream line with oil of four should by and North The for be pipeline to We across MRC all sectors both margins America in production internationally. business and increasing growth XXXX expect this increase be From in and digit gas, perspective, X%. revenue a and support outsized all another and in revenue sector production sales top

year IOCs XX% independents American in the mid-teens average increase surveys with experiencing and a North the XX% globally. in business. this an expected certainly increased to are we oilfield. industry comprise our upstream percentage Recent larger budget of and approximately are of spend And by CapEx U.S. that project share to analysts an capital

opening Service in We well-timed with investment expect with is fall. expected the busy Basin Sea Center Permian North to in fuel our production well. as for the producers XXXX, last due a Internationally, positions our very coupled leading growth Midland there to to strong of Upstream global MRC be market there

growth XXXX timeframe, gas year, XX% the more revenue sector, experience XXXX increase healthy this research Recently should in gas past XX% Our by expanded two published three-year capital business period. than in largest the previous on a through our each utility indicates of versus the after also contributor spending this even years. utility sales

safety integrity in us. with single With are this spend XXXX, of our XXXX The report same increase anticipates being gas to customers consistent allocated research what and bulk over digit the projects. communicating upper utility capital spending an to

to and we improve growth a to for new sector as have be As of calls, our wallet years share we customers said share customers. engine should come, previous earnings utility market our with our existing on utility gas expand

XXXX. after Finally, nearly XX% is a expected single uptick sector digit XXXX, DIET in revenue experience in even our upper to growth

Within DIET, remains costs. America feedstock sector the the market, especially low positive, for which the North in chemical benefits sub from outlook

We American gain XX% market the Also XXXX. new DIET, in remain chemicals backlog And share continue internationally. our multiple we as and in customers. with grown projects, year the end have LNG by to end we North at to U.S. XXXX, both compared of in involved

LNG additional to gain its world's European projects U.S. in the supplies decade, U.S. and as We the approval expect increases multiple LNG markets. producer remains the this to leading

toward revenue energy to be activity continue XXXX, $XXX long and of our projects, U.S. XXXXs our And weighted will more transition of opportunities. energy finally, term thriving in than XXXX transition delivered be business based predominance driver. after a In growth more expect international heavily to million we

working operating In generate year, cash. improve addition to robust flow as expect we and we substantial cash efficiency convert revenue this into more to earnings EBITDA and capital growth,

and our will efficiently. working Currently, enabled we guidance. are targeting through be in at progress This cash accelerated on part least increase $XXX more capital operating from our million previous flow in managing

working an continue also operations value our to on we Achieving to the of For the inventory. example, we productivity creation narrative financial will targeting supply initiatives improve XXXX. are efficiency metric improved and absolute this locations attractive our teams chain improve our capital to invested return in capital. our of and we the underway is levels, And and have with vital

that, call Kelly. with And turn now I'll the to over

Kelly Youngblood

Rob. comments be on comparisons. will everyone. focused good morning Thanks, And My sequential today

stated of unless quarter the XXXX. of So comparing the third otherwise, are quarter we fourth XXXX to

previous a our up cyclical -thirds begin revenue $XXX X% were sales perspective, million the and represent From trends guidance. our historical and seasonal lines. will which two makes sequential sectors, with fourth our and diet for our of quarter line with Total sector outperforming our gas I approximately less business utility a decrease in

seasonal XX% were Gas a to million normal utility spending, reduction $XX due is business. or which million fourth for the in this sales customer quarter, decrease $XXX a in

year, the programs, modernization our and projects. on reduction utility the grew strong remain focused continued infrastructure safety customers levels, emission with For sector along related activity as XX% on gas improvement

or the delivered decrease year-over-year exceeding quarter it sector million, second and behind to biofuel and mark, quarter. largest utilities second The gas DIET timing down sector $XXX in $XX the fourth transition several due the XXXX. XX% making of our million projects, XX% growth, winding our turnarounds was billion fourth highest $X sector in energy This sector a revenue growing

increased for sector fourth activity. upstream trends currency International as fourth was production sectors an $XX upstream revenue. to million from and benefited Sea a the in revenue to this million, of countering sales quarter of increase foreign XX%, the quarter the The quarter. activity the decline third see lack in increase headwinds we $XXX seasonal or typically North with compared led higher Canada

for in January which saw has predominantly In percentage drive customer public market improving the a to expecting a start year. to driven from our the which XXXX, we well into We're the as activity larger customer the of continued good levels, this activity revenue is us increases upstream base. in for E&P the higher bodes U.S.

up sales activity delivery fourth valve or XX% in quarter the to the the Basin. Midstream customers levels related million quarter Permian $XX pipe and in of fourth assemblies several million pipeline actuation higher took $XXX as were and line in

away strong, the and The gathering, outlook and expected for volumes need business our as more from pipeline in for increases take to be drive natural midstream is gas production oil processing infrastructure.

or $XXX million decrease midstream in perspective, by fourth From in the X% and a pipeline sectors sectors. gas U.S. a million as increases DIET declines, production segment experienced was the geographic upstream utilities $XX the revenue offset partially seasonal and quarter,

$XX North $XXX million the upstream a in was X% increase the was quarter, fourth International fourth an Sea. activity $X increased or revenue million XX% in sector million the $X by a driven Canada or increase. million production in revenue the or quarter,

adjusted of full margins, XXX supplier XX our the revenue, pricing point driven and XXXX third improvement XXXX, gross a The Now XX.X% expectations. fourth with over the a point our turning for profit million, from gross was decline product basis preferred position. was by improved quarter XX.X% to in line $XXX mix basis adjusted primarily profit year quarter

which fourth over slightly sales. maintain historical increases a quarterly revenue to notable quarter gross our year XX% margins for quarter point this headcount this projections. over are was from $XXX or The growth million basis increase was costs support XX elevated of function at of XX%, averages. for average targeting is of a the We SG&A Adjusted to least improvement and last lower

the inflation. to that growth revenue is with I of be first but benefits higher XX% expected the trend adjusted of was full ago. The the we sales mid-XX% as to revenue the In XXX a to full points year basis despite in of average full improve our discuss thereafter, improvement of Also, will each year percentage in in anticipated compared quarter this line quarter percentage expect the SGM&A lower year and XXXX, and of restoration percentage wage range, cadence later.

the for was over point year EBITDA X.X% improvement XX basis sales, or the million a quarter quarter $XX same a of ago.

XXXX, For years this the as company X.X% EBITDA And run mentioned, which point the highest or since have bottom revenue our revenue higher, more line. of XXX was few is we the last base efficiently, over driving our $X million a was to the evidence actions is margin $XXX when more billion year basis taken the improvement. Rob to incremental

effective state Tax an rate million foreign expense with to The and expense difference the third the is in to of $XX compared the XX% effective tax statutory due fourth income the rates. taxes, in expenses, quarter in rate of as differing in non-deductible $XX quarter. million was income rate tax

$X.XX common attributable or stockholders For diluted had of share. per $XX the quarter, to million, we income net

common Our $XX per average million an LIFO net normalizing or to share. was on diluted for expense attributable $X.XX basis cost adjusted income stockholders

fourth Over million the have quarters, with $XX quarter. cash $XX operations from we last generated generated million the in in two

$XX year the timing primarily of use the of full cash capital and inventory inflows to requirements, year-end and million of operating the timing For specifically we due receipts certain outflows. working cash

closed of week fact, matter year, would have cash one a would we positive later, As have the the if netted year. generation for we

growth, year in with Historically, cash flow. revenue a would have negative we XX% had significant

our point capabilities cash a and going forward. significant inflection generation So we our for company consider this

to And better. years we of cash flow decline of generating in initiative or both the is For operations this. growth we and from mentioned, XXXX, committed we company for forward $XXX cash previously as and consistently a going key are are delivering targeting million

metric XXXX as XX.X% is basis the points capital historical XXX about improvement XXX remain sales for a percent to which to expect fourth and of similar Working at this was over averages. of levels, quarter, we in

the at was third million outstanding Our $XXX total with debt the quarter the end quarter. of consistent

was prior X.X over X.X Our times leverage leverage the on global debt of based year, a million considerable improvement ratio new is net record $XXX and times, our was when ratio MRC which

We our and one reducing continues XXXX, to our lower position. expect leverage to make net further EBITDA progress as debt ratio we our below grow, on in times it

refinancing addition, to the refinancing debt outlook And year, this our believe we conditions leverage to the monitoring business translate as determine are appropriate time positive anticipate the terms markets In and and loan better term we our will and action. improved date. closely we take we approach into

We million than $XXX year of with ABL position availability liquidity million million. ended our This $XXX a cash total facility is $XXX for the compared liquidity in of under million and XXXX. more $XX of increase to a

outlook. Now finish XXXX to off our

and confidence we higher December As digit December the X% starting hurdle mentioned outlook percentage and backlog targeting our are for Rob and XX% double than EBITDA XXXX January company, revenue margins. for surpassing us We're was higher for and the year is giving backlog earlier the a than year. the total strong the the XXXX off prior increase X%

revenue translates teens teens percentage improvement gas percentage low this pipeline. in a single to an upper and improvement. to production a high utilities upstream are and From digit expected perspective, be for sector Both midstream a percentage improvement DIET

to the double a in low expect increase each view, percentages. From geographic we segment digit

be tax the Our year discrete quarter effective is fluctuate could from XX% to for to XX%, but projected quarter to items. normalized due rate to

levels be further in year will continue operations. modestly term balance XXXX, or more towards the levels XXX from strengthening the improve near growth again to in Cash but inventory the As activity increase supporting than cash of sheet full in Excess flow generate more XXXX our business. to and continue will prioritized million target to

expect historical averages to expenditures, million line to Regarding the those in range. million our be we capital in with $XX $XX

third year, throughout the fourth to And first finally, expect the as in quarter. and growth slightly in seasonal with the revenue the of second normal our single quarter we looked before at the in digits the cadence low we quarters decline decline

would comments. closing And turn with that, I like it back Rob to for over to

Rob Saltiel

was an for no MRC There's Global. Kelly. XXXX question Thanks, that excellent year

outstanding significantly financial solid balance results cost improving more profitability, discipline, efficient reflect strong Our an a with company and sheet. increased

are the we our by entire backdrop, and growth continuous Global enabled chain addition, With for XXXX. In impressive be successful These are management the MRC focus we highlights customer optimistic this will some business. supported operations in supply service, emphasizing. about across raising reliable bar on that our of capable performance further

excess of X% sectors in solid digit after business generation remains Cash XXXX. targeting priority, XXXX. from operations achieve double rates cycle are through in in and expected expect EBITDA with growth in and We in revenue to a even the growth business growth. are margins performance excess revenue digit the flow operating of four All $XXX our even double million of in cash strong we XXXX

traditional paying with strategy revenue off is outside oilfield. approximately diversification of the two-thirds Our our generated

thrive attractive largely gas prices, Our term. sectors DIET each and independent offer longer utilities they the commodity prospects of and over growth

that our to invested understand we investors. critical on retaining and finally, And improving capital attracting return is

and productivity that our improve to initiatives will specific beyond. capital manifest pursuing are We in XXXX

And will take now Operator. your we with questions. that,

Operator

Instructions] Thank you. [Operator

with Nathan with proceed is Stifel, question question. first please from your Jones Our

Nathan Jones

morning, everyone. business over you quarter a capital about, start transformation primary anticipated obviously in years business with talking a bit a timing cash wanted the XXXX. business free the cash it's here, generation lower a I million the should more off that And from talk we expect cycle. little little in flow did XXXX in bit two Maybe from what can working $XXX Good still across of consume the about you undergone than all last had for within bit there. to

in amount that growth supporting of cash yield to think a stock. free on preferred million looking level given you generation cash kind $XXX in of And X.X%, more million below free Even cash CFR, flow out flow XXXX, a $XXX take you're still in the average of on dividends at look equity significant to cash we're would I at the than free the flow. looking X% that's kind if fairly 'XX. with of at I still Even we're of XXXX, an stock,

stock flow little moment? across free yield the can a at bit what we're looking from pretty expect the we talk maybe cash given Just the about more healthy

Kelly Youngblood

I'll Yes, on this quick Listen, is hit and this off to Kelly, XXXX. start with real one. Nathan, want I

You we in very We and target. had the our just positive and cash talk would receipts that maybe cash of one if inflows the for shorter we mentioned, of remarks there the us outflows inventory barely, were at missed the generation that bit just goal. to full did or that year, little barely just made timing end, we books, the fell about that later, a prepared have close week of

that very very positive. unfortunate. So was But still

kind we're million mentioned, of that with the That were growth That exactly year, we company. of lot we a consumption second most Nathan, As mentioned of XX% And you inflection build that XXXX, of of in there. we But half generation. added you're level -- for able last which generated the a to was working that get cash point close very inventory an of the significant we cash, with year, you proud in right, about. that. were of talking $XX capital

we business, inventory reduce herself But into a out kind XXXX some level growth market very the replenish having hole had we pandemic. a well. really a stronger in just out to of into those inventory cut of of with had during get the pandemic, working to were levels, minimal kind as to really and build put XX% inventory capital then do XXXX also much trying that came to We both as investment costs we to that had levels and the of of

thinking same XXXX, gosh, of on probably, the that, goes But $XX coming maybe obviously lower versus that that'll to I we XXXX. on. at in $XX well, you're here inventory that's $XXX in to not up into inventory the the shape as million $XXX something actually think how our not had million million things we're And level inventory of than we’ll But year million much continue of as thinking of to depends kind level, plus build the near build, year. kind

The -- maintain very but think we cash levered less that a that's to can that we'll than XX% is just even you're forward. years slightly yield that. be of but in of on right flow unlevered kind X% the an basis, we going you that come we're still, a metric range, not thinking But positive kind that mentioned, 'XX,

you So sure what remarks it no said cash matter reiterate in prepared us. a in we just -- or we our ahead know, we're well, cycle are of making market have that we generate to environment and, fully in to committed growth any as it, market, is, we down a the that

Rob Saltiel

Yes, if that, add cash is to that priority Kelly, Obviously, team. just summary. management I thanks for could for a generating this

year As you MRC see leverage release, X.X the in with history press we times. the we lowest said, of our finished in can Global's

to year in loan We term refinanced due XXXX. are a in as our of September it where is comes be likely

flow terms balance attractive flexibility more strong and we as gives and cash more having sheet on refinance us leverage So just generation, loan. our term low the go to

continue a give more allocation and set other more do as us capital think opportunities, And to options broader we so, cash about us broadly. it'll then strategic flexibility longer we term. think give to generate Obviously, we of to as if intend about

generation a we inflection big story. last that we're point, It's the part forward going good an Global position is said, in and really, here. hit a cash of So, MRC Kelly as really year,

Nathan Jones

pay Is that other that than don't you it debt cash until refinanced term with else probably fair loan? assume do anything you've down to

Rob Saltiel

I safe, safe a bet. that's pretty think

company. seen term of priority business markets. good, capital allocation, refinance we've in having us terms some the loan will there. the in the the debt cash the loan. will a strong of being position generation, thinking the be probably and certainly getting post help But the and in that's And about Again, obviously, broader think a for be I all uncertainty volatility term refinancing

Nathan Jones

Can the sheet you little you here maybe Have the of what few few could much balance talk a those lot of I free repurchase, other our debt bit with then And post consideration years? years. guess be? the that the down priorities better over last here? at of to refinance now I'm debt share a have a maybe angling this you've a or kind do about You priorities paid had yield, is last cash what flow over the

Kelly Youngblood

look, here. of want get ahead don't Well, far too we to ourselves

inflection prove as numbers said, are think, table, just first follow beyond the we then are port that the we can we to I the the we certainly but that do point, on we need past think we Nathan. I is outlined confident we through to on do cash options of to I generation what to, say will that, we which today, would the call. just that's all And need

Nathan Jones

my taking question. for much very Thanks Okay.

Rob Saltiel

Thanks. welcome. You're

Operator

you. Thank

Inc. Our next question. Cole your with from question is proceed Couzens Please with Stephens

Cole Couzens

any Hey, drivers for guys sequentially provide and questions. taking second you can -- guys, Can down you in beyond? revenue why for And my quarter the thanks into insight provide recovery in help XQ? guys will any be the

Rob Saltiel

their typical seasonal to New that almost a every coming and take into spending one. project This seen fourth is is where budgets Year really I'll decline quarter, up of that which exhausted out ramp year, customers our taking activity. come people business their the while are typically the do that we've for Yes,

lot on weather. cases field projects, which mind a our As depend of that in involved well, keep in business with is the some

Midwest, biggest will our be beyond. where and as in summer, the or and projects as is lot sector to be activity the of gas not the utilities in weather the the places the in U.S., will Northeast place a is here So, project it take spring conducive that

see quarter. in decline the in of again, then the quarter that first key second drivers the fourth really and be those fourth think then lead are that holidays weather quarters quarter. in up the And quarter, you as to Again, But year third peaking are and around quarter. slight about somewhat the versus of So will down seasonal seasonal typically we degradation the that the cadence, a third decline. the

same that really the we XXXX. this in had cadence is So unusual, nothing

digit else. improvement know quarters. -- double more efforts really revenue a in first anything Kelly, projecting this you to add with our seasonal across want four than all consistent that? that you And quarter guidance we're is the Again, to activities seasonal

Kelly Youngblood

just a than QX, were at QX, quarter, quarter down add seeing other that, much down XX%, this that have. that would only stronger to X% at data X% you're typically to one a level. QX Yes, from the we we contributes look points sequentially, to if QX we're to QX, you normally so lower fourth to And because normally in also be decline

Cole Couzens

Yes, that's helpful.

Next that the question, insight ROIC improvement And what rolling What now? and some we really around drive new for appreciate over time. higher the your on that and and of XXXX was beyond? levers focus thinking to are the out

Rob Saltiel

now MRC a base, iterations bottom Global Well, at focus now. we've And focus to I've really to couple that a we've with starting improved line, on profitability been of line, really of our multi-year over with would X% our you've things that, what is on really couple guiding near here years years, gone of is company which couple last EBITDA the investor where And a through our of for record the history. be which bottom exceed we're the its for margins. over to seen year, this

returns. think distribution, the industrial thing and investors that important don't to do in really think assets, big that's call heard form good capital we team. working of is we is our on cash base on, also lot financial And, best they a primarily returns have that inventory, of good really is assets this then that We our I companies of I working something question this that. this expensive it's do focus industry capital capital, on have a And our we on. lot to large be addressed those get the that business about stewards think the that Now, management financial the inventory, generation, just talk and in you've I to capital, which the into on obviously have and we capital that

public of and guide a and both Again, And years. shareholder about that and internally more been actions that talking is for really And it externally, visible, have industrial larger we measure help value. feel we will more think our distributors the making driver it our focus.

needs MRC time will we and more that. to do spend Global certainly think on I focusing that,

mentioned, are working as the financial two inventory the Now, big components, and there capital. I

more inventory. On the the ways prepared place inventory that productivity And Having the how right quantity in are we're in of looking comments, I inventory is margin front, cases, productive to. some as like had to can, that we'd we not to frequently, as at we more as haven't we turn we'd that more We'd improve at in to inventory inventory have could, mentioned inventory the times as we the to like the in number successful distribution the right the make of handle you right gross on business. inventory. than like a in need

that and on of the to beyond And sorts things, of the productivity our our tied the our up a of to then payables terms that we underway capital and working as receivables in We've especially sure managing of side. there's those cash significant capital, got we're business. address we growing working sure improve initiatives proper of make have in because balance, those very XXXX both diligent are So are all make amount in a in and to inventory.

So we That's down as that even those And that return entrusted want we make to more that the on our can down, with. get again, capital we've sure we number our grow been working better capital a efficient. for net investors that's numbers business.

and about to of at be our and measure want But thinking here beyond. the is a with for about internally this again, company. are 'XX those the that So to we things some continue investors talk to

Cole Couzens

back. Great. Thanks, turn guys. I'll it

Rob Saltiel

welcome. You're

Operator

Thank you.

Capital with from question. your Becker One Doug is with question Please next Our [ph]. proceed

Unidentified Analyst

type on what there I want chemicals, the sub at than overall early seems the the growth year, or to basis, returns be Thanks. for sector to a in very that get higher margins touch sense to average? from and be of wanted expect favorable, just relative this to base to DIET focus, lower going a the on

Rob Saltiel

sector, generally, DIET lot with the what the A the chemical I digit should that say we do we're sector be Yes, the consistent valves. is in of revenue single high range. about would sector growth in how in chemical thinking

of is resistant some resistant, corrosion And and special materials. corrosion that alloys,

things those so a than tend we a garner higher company. And on to as typically gross what make margin average

the it general, positive us. the in bigger really on we've that XXXX. market chemicals be you U.S. U.S. bullish picture. market lower the the down the beyond. it's the been coming elsewhere. got We kind industry happy is chemicals with significant And year industry we that very here. So, for in those line think We've XXXX. I feedstock in the and Europe positioned on think for in business reasons, very more should then with the in see a story made what's we're attractive we're about and When And this generally in chemicals, think And penetration and of chemicals costs projects well, really opportunities happening a in all

Unidentified Analyst

keep take as there from Is you're growing some expand to a that in here, would in more a anything share it bit really focus? DIET, particular thinking your little you just that than position

Rob Saltiel

a we on and that that is plays there. we experts the goal compete that's space. Well, how that that processes And But the of have we'll some team this Obviously, advancing just we -- that's it's out. certainly were of real have supplying products going the to to in. competitive be space into see chemical the our some strategy

report continue could line to in our fair we DIET. but comment how be back we're with saying very our point, through there, the it's at a that space. So kind And we're it's think chemical I think to say see of earnings position. And good we about to doing we'll in outsize growth going that, this calls I feel

keep for us. fast to Overall, certainly can which sector the better business really perhaps the you the be mind, at overall, includes also rate successful transition, as think point growth, is in energy share DIET out, if And pace, going than penetration. chemical But more DIET. we're we grow of space

Unidentified Analyst

transition. a the That's point on fair energy

tailwind. margins about year, this a pricing thinking Just has been

for a your headwind a expectation to wanted tailwind Just get year? what and quarter, there the in fourth for is was sense this if

Rob Saltiel

real a to fact flattening a we're strong deflation the some pipe inflation already on and lot talked in that, I probably sustainable. was Yes, And that pipe. mean, about was there not be we've line seeing going

should 'XX, in XXXX. as to margins look on had that pipe 'XX that from we down from expect the we So we line gross come in the levels

gross that in very priced However, higher that margins, We've than historical inventory last line average, bought of is earlier our pipe the likely stay year. high which the have would us. year margins the to we are for a lot believe we replaced positive

trying to into that terms priced a lot flat lower of we're we it, that ballast in feel So with saddled market. having sell we're of don't priced or high inventory a

pipe lot this with overall, line the year, It's in historically, XX% terms feel line about be year-on-year, though. the a good last saw XXXX. mean, this we So what growth year, and inventory it's position we in in be better will outlook to but going the the levels single slower in pipe for we but XXXX. over sales at to digit our the And margins, we've not grew of I growth of seen going terms terms that of sales. than margins have, be year,

Unidentified Analyst

on optimal the One do just are coming is What reposition company, case you the level leveraged debt of newly the the level the right reposition clearly of debt last think of or in one, down. really new been debts the leverage, company?

Kelly Youngblood

every we ask day. ourselves something is this Well,

cash may that I generated. is relative the we're years lower carried confident certainly much This into is at right of But And now. the many think look, exposure because should getting cases more earnings we about comfortable flow volatility of most the has, been of that too we've some of flexibility leverage we think and debt where much that to some we're before. for the some and it better has company debt to trade have obviously, cycles. strategic discount thing range lack in a the a had and to than traded ever

likelihood are in as before a term year. in all of end a refinancing I Again, we our will this mentioned question, be previous the we in loan year where

our really And cash so level to a time demonstrate this lower and capability. to flow generation our is good leverage

Global we answer look even to in. and in the going in think from a company, I the of as level what's businesses that generation really like a allocation, earnings, are, volatility things. to earlier But to where MRC question right generation. the we're capital for going of for what we're cash those terms on right now, the work leverage And, going I given year businesses be of, forward. of that as think we'll businesses what we'd we a And the forward, certainly what question the cash we company, go your something evolve term at those we're of could that's to better, take where and do the is now sorts function with we're similar a then longer that

Unidentified Analyst

Make sense. much. Thanks very

Operator

Thank you.

Ken with from question. Capital your question next proceed Markets. Our Please is Keybanc with Newman

Katie Fleischer

Fleischer is that you've wondering a is so customers the I I preliminary on you Ken was January everyone, bit your Hi, versus Katie for been little from about backlog if could December. this talk you what far. said know, indicating today. up hearing

to going are wanted level you As of into like, speak hear demand with just visibility on XXXX? So confident you your the still customers?

Rob Saltiel

it’s we're obviously, halfway month good of And question. Yes, the February. about through a

supportive we're a what in of habits and last with late spending now And half and are month customers. of would reaffirming very year, the kind a And that today. into terms our that we say the of seeing year. discussions we're So outlook anticipated, we're I

about oil you market any give gas levels our seem look oilfield. large in of Customer spending going an good our as bigger of any activity public of private talking the you about talk We large And example, fluctuation to producers, written levered and everything in space or toward And business is business, the the position. opposed very unaffected smaller by and Upstream the Upstream is weakening feel heavily sort to percentage be they're independent. prices. to a economy, assume how to of and our IOCs about that is at

are business. confidence is that basis, which on upstream and our this our that a us midstream of the most So grow gives expected year percentage to in sectors

modernization I talked other. about these that, utility slight what customers conditions CapEx through is And projects. go in supportive. are a economy, of or happening lot especially of inelastic They're or telling are is that's commodity us integrity again, one very broader and independent what largely industry economic and going lot a analysts move And are prices, a what if gas predicting projects of spend. for from way the there's or safety you

And then the DIET space.

As with well And space, into the we talked continue good line about, significant as and the coming to larger activity energy beyond. we're and but some be projects, in transition and a on turnarounds, strong chemicals backlog then we sight seeing a some in projects year on a bullish for of projects refining. 'XX

with supportive everything So are answering where your we what long we've way seen market. And good the of today. is our question, we about outlook. in that about And we've feel customers Katie, of talked

Katie Fleischer

or Okay, leverage And else? going about but just in coming some XX% for great. for just my puts it Is you. helpful. SG&A mix Thank the about or from of That's up, price your into and talked already, follow can terms something talk of year, you this really product margins you driving number? that takes

Kelly Youngblood

to number, margin a gross the really on Yes, mind. things come of couple

earnings first have prices about those match that. of in inflation The XXXX. in talked we little number saw reset calls, that And a -- in across us we always to our a as of there's on our we previous contracts is business lag to bit those allows of lot pricing that, inflation, pricing a a

lot getting and typically inflation. upwards seeing inflation, But to adjust about of margin. seen our first of year. on XXXX pricing a the full that really on adjustment impact place course over price for took we've And that with to would the that time really be the impacts, the of that we that, were year, we a as last together talking then were account pricing So and our customers having traditionally

us. a So positive that's obviously, for

us, do feel average they about gross international as Another the higher margin the rates businesses. in is, nice we'll like growth we company, international business really to we year our and tend actuation business, and our our valve our a and this positive for valves, see and for higher be think activity, than business, pickup

So guiding that that gross XX% range. to around at be profit percentage we're those accretive tend to adjusted the

cost to gross cost has going looked at we we those up. that's to up And puts then potential downside inventory average came expensive and replacement average when the to largely of in But through to cost And the crept they're continue and more the view all that the of and year, against our more margin. obviously, work inventory as the catch the obviously is sell the we on just buy together, growing takes balance.

as we're the range we year last finished well. think better, that we XX% year, at look XX.X%. And So year, this as we at or in

we And it gross on some on flat the so those puts 'XX adjusted of profit are that roughly but that think for is really and over 'XX. we're percentage takes

Katie Fleischer

reserve quick Okay, okay, guys this are thanks. you Where modeling just And then LIFO, really year? assuming question. one for for

Rob Saltiel

now, depends It predict. still we maybe but in $XX less into somewhere will be a expense, year, variables, LIFO million lot I It going finished plug pressures. with expense, to on I But that model different because range. we your 'XX, be there's last would will would to million of hard $XX than LIFO have inflationary of some certainly to That's I million continued believe think $XX ballpark.

Katie Fleischer

right. All Thank you. Okay.

Rob Saltiel

welcome. You

Operator

like the over questions turn no There time. any you. for back I'd to further to at Monica comments. Broughton are Thank closing this floor

Monica Broughton

look day. for Have you today We Global. May. Thank call to your joining having a MRC on and our forward great us conference for you quarter in interest first Thanks. in

Operator

conference. today's concludes This

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

MRC Global (MRC) 14 Feb 232022 Q4 Earnings call transcript