OTTR - Earnings call transcript Q3 2019

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

Operator

Good morning, and welcome to Otter Tail Corporation’s Third Quarter 2019 Earnings Conference Call. Today’s call is being recorded and we will hold a question-and-answer session after the prepared remarks.

I will now turn the call over to the company for their opening comments.

Loren Hanson

Good morning, everyone, and welcome to our call. My name is Loren Hanson, and I manage Otter Tail’s Investor Relations area.

our XXXX announced results. we night, third earnings quarter Last

will this and available A Our our call release accompanying later replay available call today. website the ottertail.com. complete earnings at slides are on website on of be our

today on Otter Otter Moug, Tail Chuck me Senior Corporation’s Vice and With Chief are and Financial President Officer. CEO; MacFarlane, call the Kevin Tail Corporation’s President and

will begin, want call. to be we making I that this forward-looking we Before you during statements remind

represent statements subject our judgment As uncertainties noted these on future to are X, of opinion They that results the to current what materially. actual Slide or and differ may holds. cause risks

So undue placing these please advised statements. of about reliance on be any

Commission, in detail to with are you information, our statements disclaims statements review. otherwise. Otter described forward-looking developments Tail new to Our forward-looking duty future revise more our we events, or which or to Corporation due update encourage and in Exchange any filings the Securities

For President call opening remarks, I Otter CEO, Chuck and Tail the MacFarlane. to over Mr. will now turn Corporation’s

Charles MacFarlane

morning, Loren. to refer our released quarter third I you, night, we everyone. Please Thank X my comments. results. as begin Slide Last Good

share XXXX in end range quarter prices Operating and compared energy third per the anticipate guidance to impact diluted fourth announced XXXX. from negatively per will markets previously are agricultural the softness our Because to we share revenues, with and narrowing and low we metal $X.XX increased to earnings income net scrap $X.XX results, $X.XX. quarter $X.XX

from transmission to final increases, earnings segment increased quarter-over-quarter and in kilowatt-hour Electric sales projects. revenue customers increased increased commercial rate due interim to and Our investments

BTD’s and driven facilities. quarter by Georgia third earnings slightly segment were improved performance quarter-over-quarter, at Minnesota Manufacturing up

lower volume with due earnings We Plastics XXXX outlook. to pipe quarter-over-quarter or from from earnings lower lower prices. segment this segment this our in segment, earnings in combination sales anticipated XXXX lower were

corporate. at results associated quarter Otter reoccur quarter, the establishment last mentioned fourth Plant, foundations costs these outage of and our quarter expect and costs Power increased do Otter with fourth Big XXXX. Tail our planned expense Stone not included Company of to XXXX We Tail at the a Corporation As at in tax

Let’s Tail South produce rate $X of and and Slide annual Dakota Otter base on Reliability, at forecast Energy X.X% constructive Station, closer projects all take are construction. Wind Power. CapEx XXXX of will Transmission an between billion regulatory growth XX a a Center, in environment. Merricourt Self-fund transmission look Astoria under XXXX The

over million. Our projected projects totals investment in $XXX those

base. a context, To represents approximately rate few of touch briefly put billion these XX% in on projects. of XXXX this I’ll this $X.X our

Merricourt On Wind on time Slide XX, the and Energy budget. Center remains on

of The approvals. XX% project be work North rider expect Minnesota and Dakota Renewable advanced South to Rider prudence Dakota month. and this phase-in We complete Resource foundations eligibility, of received has civil determination all

energy approximately cost largest will enough the commercial generate project in this million estimate power We and project Power capital Tail more homes. We XXXX. begin $XXX anticipate to than history. XX,XXX to late in operations Otter will is This our

Station May. began Construction of Astoria in

by turbine. it megawatt blowing, providing efficient when flexible Astoria will emissions. will isn’t natural operating low our and reliable be generation wind backstop gas and a highly complement combustion have XXX options wind the COX a It will

period, million peak this during XX-month construction project, invest its of approximately in $XXX to expect which construction XX We approximately the create jobs. will

the tanks working recovered water and this foundations, duct to Crews South the Generation cost major Dakota through North fall. The finish is Dakota are Phase-In being project and of Rider. this Rider banks

We Station XXXX. Astoria to in be expect online

transmission a of project of we reliability service two customers live phase completed the to first who for our improve part in the March, In Southern area.

Hetland the Dakota. expanded substation line connects in new the a new was Lake XXX The South transmission XX-mile that first KV Norden substation to phase

from line to project, a construction two are August, began Astoria this Dakota. of easements set. are second South a attained structures In KV phase being XX% transmission XX-mile and Norden of Lake we XXX Phase new

in to expect line mid-XXXX. the energize We

to add $XX the rate upgrades process. the to Generator have Interconnection MISO We interconnection $XX proposed million with million opportunity as of by new base generator associated

election Otter the Tail of network of case, If XX-year on MISO will period capital an approved, interconnection a the to over transmission return a upgrades earn these owner, interconnections. by network the with in is from customers. initial Otter generator and upgrades Self-fund fund this fund and new the Tail associated Power, costs return

to improved better in capability BTD, we on again where our stamping and and on segment. Southeast. sales logistics added Now the consolidated financial Georgia turning to contract existing improved results and fabricator, serve basis facility, a return our customers improve the Manufacturing metal at new

to reduction to the strong. of oil delivery SIOP ensure company market its reduced Minnesota Illinois fracking and its demand, inventory facilities recent part industry, in process. and Operations at counts remains the Detroit gas time inventory Due and as and employee levels Lakes, in operations production to on Washington, or output primarily balance planning sales, continue

QX remain earnings season, Plastics is over of the unchanged horticulture selling essentially In the T.O. Plastics inventory quarters. product timeframe. QX, between upcoming T.O. building strategically anticipation

production in and Clearwater output, improve to Otsego serve tight We the factory increase to continue to despite facilities. QX capacity markets and labor we expect markets various at horticulture

decreased and lower Pipe on primarily in they sales to capacity, part Plastics lower to serve quarter-over-quarter attributed our to Both segment, Pipe and price responsiveness demonstrating implementing Northern by enhance improvement improve companies large they and In region. due in Northern continue results, customer markets sales Products volumes, efficiency projects in to are needs. conditions continuous had Products the wet Vinyltech to

generation mix. note, On our a final we enhance continue to balanced

levels, resources we X, carbon receive their emissions of at will earlier, XXXX, are Astoria, I As to renewable XXXX XX% shown discussed keeping back while be and these XX% rates XX% average. trajectories. customers by least catalysts Merricourt which XX% all will from residential national below energy Slide below our Otter Power anticipate and the that average Tail on nearly

perspective. now Now Kevin for I’ll turn over to it financial the

Kevin Moug

good and Thanks, morning. Chuck,

segment. approximately for up X% in increased were the share quarter, our by per mostly earnings diluted consolidated driven Our Electric earnings

XX discuss quarter refer I third results. and our Slide as Please XX to

net worth $X.X items to Dakota higher South retail results, interim discussing segment describes increased higher impacting million classifications. increase from and release the in quarter-over-quarter. our rates Electric The items our electric final and due Our but revenues from increased to effect average case rate in in $X.X rates are the key press earnings all rate mainly quarterly million customers sales

weather. Interim rates lower part cost retail revenues sales resource rates These increased were final of to renewable implemented kilowatt-hour on XXXX transmission and XXXX. Minnesota milder Increased sales related customers. August and X revenues rider kilowatt-hour by offset implemented October of and XX in commercial on recovery were items were to

States impacted $X.XX warmer we a weather remember to normal earnings quarter, $X.XX the cooling revenues are negatively O&M pool. to experienced than decrease summer-peaking the a degree in resulted weather While Less compared And revenues our million. by share experienced during This decrease share. region favorable negative winter-peaking most United by MISO due a normal. $X a of our also regions that, of impact utility in XX% the a in Lower is important in between expenses quarters. increased a to it transmission and days tariff

to BTD, energy decreased million, Key increased primarily Manufacturing change from product recreational markets, agricultural the its by sales items end vehicle at sales part were, segment the for in revenues $X.X end offset net to impacting and $XXX,XXX. increased earnings increased Net markets.

by volume. price revenues its sales revenues and more scrap reduction than prices continued passed scrap in a revenues. BTD And metal lower customers. $X.X also $X revenues scrap drop million through material The from a were tooling in metal to increased a offset decrease had increase million in to changes due in $XXX,XXX

improvement margins, The which in cost by decrease goods revenues, resulting a increased in before and $XXX,XXX with R&D a lower more increase to in was tax was estimated investments. resulted than credits offset higher higher development related resulted increased level income expense along depreciation credits operating in And sold, and The decrease in lower qualifying tax higher income gross expenses. credits, to of of taxes, from due a research earnings. despite technology

primarily timing the in of historically second a result of T.O. Plastics, lower sales, decreased quarter quarter the sales $XXX,XXX year XXXX. to and quarter-over-quarter In as earnings of to which shifted horticultural third the occur due

X.X Plastics in West from increase lower the states segment’s of both $X serve. product tax lower Coast our to volume in The decreased employee we increased pipes earnings prices. of losses Our X.X% in primarily and sales sold that due for pre-tax and corporate to demand resulted In decrease an decrease net Midwest expense. and due million pounds pipe expense benefit

update our me on credit provide on as ratings Let Slides activities an and recent XX highlighted financing XX. and

both Moody’s their reaffirmed third ratings Tail for Tail Otter quarter, credit Fitch Power Corporation the Company. and Otter and both During

Otter Otter S&P we’ll from outlook to the positive Ratings to BBB investment-grade remain issuer Corporation’s our manage raised maintaining Power’s senior from Tail issuer outlook stable. ratings credit BBB Tail its revised debt BBB+ stable. S&P ratings credit and unsecured And at credit affirmed to ratings also that long-term and revised reflect and the to to we commitment. committed and operations Global positive

Tail on into private senior Company unsecured notes. expenditures The $XXX capital rate-based proceeds XXXX – fund XX plant is projects. to private of Power transaction million use placement September Otter a entered to for issue of the

August for its provide line February XXXX, draws be Slide the through was capital placement. in $XX delayed down of respectively. XX remaining and private tranche to XX will million on issued first shows The the $XX proceeds tranches of XXXX, the $XXX in for million And on October associated with expenditures. million funds and of pay drawn credit with

We slowing case $XXX business Otter limit to we increased our credit times. credit also to XX conditions on have line amended economic anticipation XXXX. both manage economic agreement of our and October challenging of The facilities by of Tail Corporation the making credit to sure year extended and in of in have one liquidity million was the

outlook to on on XX. Moving business Slide our

XX% our per to an range to cap XXXX of $X.XX return $X.XX. total from narrowing equates ratio equity a of $X.XX guidance We on share XX.X% are earnings based This to to to XX%. to on estimated diluted $X.XX equity

important Stone fourth of fourth that and over to the in press our not is XXXX are expect costs discussed Power’s the we $X.XX incurred expected release. the quarter Electric Tail a foundation our remember, share of continue to increased planned in segment contribution for And XXXX it XXXX, earnings to quarter of the We in Big to outage as related Otter occur to in Plant XXXX.

softness million markets earnings. revenues a concerns to And now in over in of We to earnings slowing $XX due softness to be in March revision to in by damaged first scrap This Plastics, during energy lower XXXX and of agricultural year our XXXX, the is for metal from is result prices. due backlog lower impact softness a in served T.O. to for the And operations and economy the BTD collapse ago. from stemming winter which line from continue quarter volume a a end partial metal at this expect was the segment business replacement approximately earnings continued expect scrap expected on million roof segment with compared mainly Manufacturing $XX and warehouse we storm.

the Plastics’ occur in in continue quarter to margins the XXXX to incurred to and of last to large accruals We lower due Tail net of income Corporation to be year. sales expect not resulting part a establish This contribution to These XXXX certain costs expected $X.XX XXXX. to volumes expected the corporate net lower Otter to operating quarter a compared related tax of related XXXX. matters. to is sales fourth from of tax Foundation lower And in lower expenses share costs, due are in than are be fourth prices and to lower XXXX

which quarter track of to from have XX% to of our third by large earnings provide of Power are achieve capital on while will their under immediate financial guidance. from projects construction. we Astoria below our us The in line positioned in to and and carbon receive remain XX% put these Our continues emissions XXXX with be work Merricourt, Otter at levels. amounts Tail our Both plan, XXXX invested customers XXXX, utility returns and our to energy renewable results projects resources least

next growth the annual will to us overall time, base of electric rate along in over investments, position the years. grow at utility support approximately And over earnings. five environments XX% an X.X% with regulatory rate others, provide compounded of These our our

and products the Manufacturing segments provide and XX%, expected XX% through market efficiencies. our and increased and In The around continue time. segments provide expansion over earnings to are of new Plastics to organic growth Manufacturing Plastics services,

to able of X% return be total to expect shareholder XX%. We to deliver

to XX%, sheet credit maintaining while our payout and growth to of forward, ratio our X% per rate, earnings the and Our to at company our balance rate dividend earnings dividend a of and in XXXX per line to expected expect is off grow strong a are share a share increase ratings. X% with we X%. corporate approximately would yield XX% dividend And results growth looking maintains

take now your ready to We’re questions.

Operator

our Maxim. [Operator with question Instructions] Sullivan Tate first comes And from

Your line now is open.

Tate Sullivan

All right, thank you.

earlier. missed more see that I manufacturing the Plastics you a and part you was the the comments business, of on if T.O. from can of couple But capacity there with Sorry, of a your how the excluding some back end the current manufacturing are please? comfortable year your at exposure in if come demand pause usually, customers, – business quickly

Kevin Moug

Yes. Tate. Good This is Kevin. morning,

economy capacity for both in are, on be to capacity business, market see we the ag challenges The opportunities. slowing manufacturing of third impacted of Our plenty quarter additional which we some in in in organic of industries in concerns to the the markets, because end plastics relating business growth market well. started the the those this looks – energy companies a to slowing and and – came the and as have the T.O. to occurring in BTD take ag that is

terms guidance certainly, give sit earnings wouldn’t think, here ag to in But any were and as here of XXXX. to end – and revision be sit look manufacturing In year’s don’t those of see with discuss to we we slowing expect turnaround we today, I for in of now going But immediate we February. today the finish the certainly, we’re in – line energy XXXX. any expect for and year. if as in here XXXX we’ll in the changes share, per to think last in kind would And we see to into up changes, there I guidance that as markets

Tate Sullivan

PVC pricing. then mentioned Plastics Plastics. in you distribution for that general? any and excuse market, the different of you. in the me, But thank there for Any prices I last the consistently yes, distributors and resin fundamental the change in for months. in were in the pipes – your we And please? guidance, Okay, change couple think changes Any some –

Kevin Moug

no distributor are been users turn sell then we selling in seen in who there’s any changes number distributors into of over changes Tate, there. continue base are years, end we’ve to the last of Yes, and not to terms our they the of pipe, key but our the

Tate Sullivan

the day. detail. Okay, Have a thank rest you for Thanks good very that much. of

Kevin Moug

You too.

Operator

turn I not [Operator any at Instructions] for any now remarks. to the Chuck questions would back showing call I’m further MacFarlane further time. this like to

Charles MacFarlane

Our grow and financial actions to value continues demonstrate the and performance employees’ excellence talent. of commercial to operational our business, develop achieve

the projects, continued $X.XX. We of $X.XX our to with XXXX and are are Astoria earnings per range share guidance pleased we progress and Merricourt our to narrowing

We your you forward in next your look and to continued joining call, appreciate Otter Thank Tail with quarter. Corporation. for interest you speaking the

Operator

for concludes this today’s call. participating. Ladies Thank and you gentlemen, conference

You may now disconnect.

Otter Tail (OTTR) 5 Nov 192019 Q3 Earnings call transcript