TMST - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Kenzie and I will be your conference operator today. At this time, I would like to welcome everyone to the TimkenSteel First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session [Operator Instructions] Thank you. of you Manager conference. begin Senior Byrnes, Investor may Relations, your Mitch

Mitch Byrnes

have room, thank And President, President earnings Chief quarter to everyone. Good as call. Financial in to pleased Great, Westbrooks, morning, and first well welcome as you. Executive CEO Timken, Tim Chairman, the Kris TimkenSteel’s I'm Officer. here and the Vice XXXX

During SEC. the as defined today's by conference call, we may make forward-looking statements

reconciliations is described of GAAP filing in written most projected results detail without Tim. or today's from mind, implied which factors, use Corporation. on TimkenSteel I'd may call which the included a to recent statements like are details and of actual its release. we to of release Our earnings turn today’s the of any the in additional TimkenSteel those website. are call variety prohibited. the greater our is information equivalent as to in release, information Please our Keep over and referenced, differ due supporting to portion non-GAAP Any all Where earnings approval that, copyrighted is by in available included materially and With refer forward-looking SEC appropriate. also call in to the financial

Tim Timken

product all improved Mitch, in in of the a price. today. line sold for first with thank Thanks and and We you mix richer quarter, us joining performed well expectation. We

the the will the success to drive also over details quality take We Kris about focus to on-time a discuss moment long talk term. company of our broader that financial safety, few continued to the I’d a improve in of delivery. areas moments. will like and

serve innovative and operation team reflect taken has time integrated and public our and we’ve to solutions, we company, on our strategy a deliver quality As provide as supply services the pursuing products, customized fifth chain the been on specialized with of deliver the the technological create to entered advantage year validate that leadership and needs. in grow. to to operate and we’ll market hold We a results integrity. leadership basis to that’s operational which course, both with flexibility leveraged of We in unique position quarter,

we across that We efforts way the also we the lean to competitive must our company. in operate face, a recognized redouble with pressures

result, XXXX improvement accelerate a in drive has we themselves corner in more Employees what asking a the few our we with question can company. do. to been As answer began we have to The effective months. taken of every how in that forms many last just be

launched the the steel idea manufacturing plans for We extend outside nearly in refractory new now. a size we few saving improving helping being of in-house a those costs. flexible supply of Here a improves bars expanded are finish just of a advances, implemented employees our evaluated are year. processing more retirees, as which such And provides and and life list $XXX,XXX and benefits few offering our And furnaces, are improved new the our hundreds of very and range the and keep examples. and us surface bar We precise business now win pillar, our earnings. That’s diameter. at chain offering long evaluated project of to electric-arc

sustainable the approximately informed thinking $XX is task on we’ll efforts, achieve One in and to that savings big progress. keep every and applied innovation, these plan how organization, We core we to of improve you from small. performed relentless our we’ve and in million values our annualized both

It's as well and first commitment safety, quarter for continue and also extension that continued XXXX our this reflected type It More our delivery. quarter, come. in of for time. work years to published yield Annual proxy which we transparency highlights our and of our statement. An importantly, in in improvement to culture benefits Report of longstanding is in of in reflected the part in is quality and spirit this shareholders, policy improvements sustainability performance is improved the long-term prosperity. thinking to the which will our our the The demonstrates as policy,

rest the the So yet despite in ahead of excess is distribution has quarter the prices. the the oil year? demand burning thought still Obviously, start for we rebounded would playing not way year. the is higher second channel of what’s inventory at energy The it out not through

has half. a of said that, the but number slight uncompleted activity drilled market wells. indicators quarter, the decline still saw microeconomic point a in stronger fact, In drilling second a in and Having large to

indicate call of over you, earnings that we’ve should half. a like turn in the week the saying second past heard this Just lot on back

great. customers are Our

We’re markets in mining the in a rail, degree, and second anticipating growth automotive oil to stable and and half and military gas. general lesser industrial

to we’re in product our be on course is quarter, improved while in second stronger a the mix benefiting to by and the plans of action take The advantage best So customer leverage. cost demand we the second fixed it pricing, later from in That lower continue of and year. richer offset take full hits has and a impact will how direct run demand quarter. our

we’re half of our into pulling up maintenance XXXX in result, that second the for quarter. later a was As scheduled

in to cost Although, the year. position come downtime a customers planned quarter, will in in serve with it the better us later a puts

these to to numbers, As we Kris it while over Kris. second factors through second you’ll I’ll turn see stronger guidance, that walks a With our in half. quarter look reflected the to continue you forward

Kris Westbrooks

Thanks Tim everyone. morning and good

net improved the our the of price first million first raw or financial million $X period last quarter well improvement and XXXX the the and over million quarter, mix, was of exceeded midpoint and team basis line diluted Remaining million communicated of Our quarter representing spread. $XX.X XXX EBITDA guidance EBITDA delivered material as first the year. with the and range. product $X per share, offset in guidance an the margin volume, lower first million above lower $X.X reflects our points increase over last as of $X.XX were same partially in XXXX of period previously focused same year, expansion quarter over $XX year. by income in results disciplined, prior

First quarter XX,XXX margin resulting results. second across lower or XXXX quarter from shipments end billet below to in we be tons shipments quarter the approximately XXXX XXXX, markets volume. fourth to expect quarter our XXX,XXX OCTG expected Overall, tons decline first similar of

now X% end Looking first year. above markets, the fourth quarter our were last of above quarter mobile each at XX% shipments in our and quarter first

mobile shipments the be gains and market We demand line with above XXXX first continued levels. expect rate. strong in quarter share second focused build on remain Mobile quarter to we’re

of more production Shipments units stable as fourth X% increased million number heavier to last expected. end level levels than The the year, wells slightly improving same quarter to and business. still is trucks energy but For declining over of that XX.X mix inventory remained XXXX, remains forecast light however, projected North lower quarter the and from are the a our vehicle the solid at of an ago, favorable are center distribution high XXXX SUVs a American uncompleted market year sequentially drilled elevated. while service with

by first similar energy inventory. X% quarter For Industrial XX% second to fourth expected quarter shipments we the impacted XXXX, to shipments compared we to to quarter. first excess and as of the quarter decreased compared be XXXX, expect

shipments production quarter, improvement Operating net or was sales, second first the quarter million to to the X% was $XX Higher timing support $XX an to over similar by offset first be of million of the industrial quarter. from XXXX. XXXX. XXXX. quarter the flow was of for we payments the expect which first during the in quarter in ahead was supplier last use a million $X first late Capital cash purchases Looking and the to SG&A were quarter income net quarter more year. expenditures than inventory

spending our our guidance previously XX% an million, year capital XXXX XXXX. communicated increase be of to approximately $XX consistent full from We and approximately representing expect with

invest utilized in to expenditure planned added capital as our projects, business year. growth growth this the budget support will investment Our value such be mobile prudently in later to

of Our liquidity sufficient at million XX, available XXXX. as March remains $XXX

second looking quarter our outlook. Now, at

in near maintenance the approximately accelerate quarter to prior from and second expect previously us quarter XXXX second to similar from scheduled quarter Lower annual of production of shipments quarter XXXX. We quarter discussed. third demand to opportunity XX% the be a our term first with into reduction half provides as the

demand. a to number to the Raw material higher in scheduled run headwind busheling to is As activities. XXXX Fixed maintenance a be approximately by lower million is of expected downward combination to quarter of higher the the compared leverage half costs be with when second a as result, expected, from timing to fixed turning will spread, quarter index first scrap third of or cost cost is improve $XX quarter currently accelerated at anticipated second No.X due increase XXXX. the expected satisfy leverage rate and in production

As million. in to a and between zero result, we expect second quarter the EBITDA $XX be

lean all operations the to As properly profitable in Tim facets launched discussed, activities positioned we ensure and corporate initiative are to growth. early we continued XXXX to of deliver business, proactively our review

remainder savings, As to of additional million being and to details. bidding of medical in our negotiated of improvements the excellent intend in maintaining while benefit the life work, million of associates. a a of $XX I multi-year and coverage process our relates examples we We profitable the types result competitive of XXXX. completing that process contract actions deliver like the successfully $XX One approximately couple approximately ran for this other we’re would of with example dental financial of million annual a drug, realized share some annualized $X of the managing costs. to insurance a for and prescription

reduce consumption of is in result cost side, in to our manufacturing to implemented savings. effective annual and that’s process the a activities, oil we $XXX,XXX one our expected leak On helping of detection it manufacturing

ideas operating expense savings and and on examples focused refer of expected costs. $X lower XX% specifically which well further $XX up, of actions. relates call flexibility disclosure in just offers first to retirement in providing is look the various Tim on improvement future by XX% achieving for profitability approximately event organization as being plan, our the million quarter This statement total benefit associates to for towards $X shareholder post From reported to first that progress to this lower goods implement remaining these annualized our of Kenzie, additional of and two and the is to next Form cases, our to realized and required income. in most SG&A, benefit now expected we perspective, in recent million submitted as XX questions. implemented. on actions other forward as years. be basis a the our regarding will expense to million well more be I are remain other hundreds The below post sold. result benefit the to lower XX of quarters like change to savings on change in value. million To options retirees a costs our approximately in by in currently we’d retirement for $X objective, As an analyzed mentioned, information of the cost item. the The as encouraged throughout a are XX-Q up financial cash couple to benefit XXXX continued subsequent Please details progress wrap any I'm and drive to realized quarter details open

Operator

[Operator first with from Bergner comes G Research. of the Instructions] line Justin Our question

open. Your line is

Justin Bergner

cost or savings, Will things million certain savings in component I with will post a delving component cash retirement the help have to XXXX are savings program. wanted the me savings understand. not million all by them? cash like in guess annualize associated have that I $XX into there and $XX the start

Tim Timken

cash cash When the cost benefits? or achieve say component, you to

Justin Bergner

sure talking to wasn’t I a benefit, the benefit, the accounting? was or about corresponds if retirement I change post if benefit it’s cash more cash

Tim Timken

of are the retirement -- and of we'll So the VEBA, VIBA, benefit, lot lower payments more professional the our those it’s details still balance flow. specifically currently that company. true The appears which a a direct fits those operating we’re items, through service come coming of cash out payments on efficiently, that subsidy but not working out of decline, cash the it funded making for in the allow by or post that the the will medical to cost future those remaining support future or the fee savings that decline will for are cash a cash

of savings improved processes. from more cash other these flow items a just But majority that of from the cash there improved will margin definitely Some efficient is benefit or come items. the it

Justin Bergner

the you’re coming save weaker. And with then savings, up demand environment on because initiatives money, to clearly, just is the not getting

in would million So I should productivity what about mean the basis? through savings you improvements versus ongoing think the business on how normally year-to-year I $XX accomplish in a

Kris Westbrooks

that’s said to improvement efforts. to typically $XX the inflation in $XX always In continuous work through million And we’ve range. past, that the we million offset

the at said we year this looking were to that we put planning, on steroids. we really As during of uncertainty business have

lien the cycle. level, launched really at as start of so at a new some and And that we was enterprise meant year issues through the to beginning well become structural to effort down take that look have as the the jump that apparent it

a generated ultimately scope, has was of a numbers. broader and it redoubling So effort, the bigger probably

Justin Bergner

close As second Is the of the to year, there work can operate you work full to year? maintenance given left capacity? you’ll be doing towards second of be of look Or the in the I done half you the half maintenance a much XQ. mean lot pretty that

Tim Timken

bulk and our Harrison leave Faircrest QX. the Well, our Gambrinus QX and the in plan maintenance tubing would QX. right melt to operations to done Harrison -- take for Avenue do shop our of in be and That current now is

So there to that substantial still schedules we’re given both. need pretty at that manage looking to accomplished, a will is program be but able we’ll the maintenance that confident we’re be

Operator

Capital. Michael Instructions] the Leshock with KeyBanc question line Our [Operator comes next from of

Your line is open.

Michael Leshock

terms CapEx have So any a you to start had quarter a in half at is slower spend, a there of looking one then, the larger year loaded first would the more just first or to question that in expect back spend. spend? your that Is you quarter

Tim Timken

then and have Well, a the concentrated on year. as said, third. third And of typically spread we’ll in second what the from the spread maintenance our automotive rolling we the normal programs number is into I later in out

And money equipment infrastructure. now for spent so beginning that is get to and for

Tim Timken

continues of spend to well. higher Michael, year We to a quickly, Just add that. on see typically as level the as

but If towards we half. and out, does in in past, always lot of it you start that come at try the could go trends to back balance the look to our second a

Michael Leshock

And pricing there? then in pricing, at weakness looking quarter-over-quarter what auto drove the

Kris Westbrooks

past of mix if were you in we than ton sold the tubes look So more those bars less our bars with and we higher per than that the quarter, first our the come a in products do. sold tubes price have

externally. individual if on the that big you improved products So you’re see what you dig deeper to there, see a that able down would mix, price into level and but impact mix product components on a the see has

Michael Leshock

And bit. the business oil and then gas just looking little at a

terms versus sequentially. about pricing because the talk could Thanks. you If continue in in energy and any XXXX? it wells if what to is your opportunity activity there strong to exposure exists drilling uncompleted there you expect of that there, that Maybe the I was throughout know

Tim Timken

Well, past. the as in repeatedly said we’ve

broad oil have pretty across exposure gas all and We much activity.

wells, completion, drilling wells. traditional frac and onshore, So offshore,

the We side down in is last the long focus side. tied as takeaway saw in hole poking capacity Permian completion quarters What most the think that So ground, we’re as to the in they’re happy. mostly basis. we couple of a a heavy is on drilling the on less

capacity year. half Our to resolved going the be second belief of are is restrictions in that the those

capacity you’re pipeline of allow the better think should some seeing up, coming I on which side. completion activity that

balance think a we we’ll we saw So of the we roll year, as see than last the through couple over quarters. better

Operator

Your comes line from Justin with question of G next Bergner the Research.

is line open. Your

Justin Bergner

be will being will a frame You mentioned spread corresponding much second offsetting of quarter. as first quarter benefit? headwind it also a maybe the a big similar be, the raw you without the how LIFO and headwind Can material of in to

Kris Westbrooks

Yes.

busheling that the months the maybe you We numbers, can’t specific a at the has last give on it’s So monthly end saw X.XX in exact continued the do three X.XX, but of we’re QX. over recover towards the finishing a there seeing we lessen. trended headwinds headwind And sizeable even but that the has that index in markets basis first would down the that as half we feel in second quarter. that level the

Justin Bergner

important issues look to And prevailing maybe business? that then trade you forward are in provide you lastly, an update the on the you as could

Tim Timken

X.XX of bar seen see certain to issue. Well, pretty aggressively. is big on product countries, priced say Romania, of we out impact the continue places product obviously will I out that We've still imports like although, to China an from obviously,

us. And the to it’s position, year that us work from negotiations whole, believe the to you certain a EU way a U.S. in on down of slowing been of a know, in be lot think they’ve with allowed out actually the in that contract for roll the third the We out is in It’s flip as negotiations into surge negotiations quota, and we’re imports seen going On and probably last better positive of but the see there. negotiations China queue also our is thing done. going on MCA tariff a got to ways with that which are likely effective might a probably the countries. we more playing we’ve the

negotiations administration going those those watching out industry. close deal to of come to the we’re confidence is of to So able Lighthizer negotiations and lot all a good be Bob carefully, of that have pretty a the staying for with three

Operator

are at this remarks. There further I time. for closing turn back Tim questions, the no Timken call to

Tim Timken

the Well, questions today. thanks for

quicker call. our of ones, you culture and additional If continuing winning to joining in relentless interest effort and generate a I the improving today to for shareholder improve that want by day. company. ideas us value earnings. also Have your all will new you don’t at for improvement all we’re our performance business, on driving progress. customer performance employees service good thank Byrnes to and give for continuing their to TimkenSteel have Mitch in accelerating any We to the thank a company’s the posted hesitate I of drive please want even

Operator

today’s concludes conference call. This

now You may disconnect.

Metallus (MTUS) 3 May 192019 Q1 Earnings call transcript