TMST - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the TimkenSteel Second Quarter 2020 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the call over to Jennifer Beeman. Thank you. ma’am. ahead, go Please

Jennifer Beeman

everyone, I’m to of Jennifer for Investor morning, XXXX Communications second conference Relations call. Beeman, TimkenSteel. and Good TimkenSteel welcome quarter and Thanks. Senior Manager

is President and Financial Officer today Joining Executive Chief Tom well Chief Dunlap, Commercial. Vice Westbrooks, Vice Kris President Officer; Executive of me Executive and Terry as President; Moline, as Interim

You last night. issued release, which all should was have received a copy of our press

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

which implied differ detail Form Our Where filings, to a from call TimkenSteel on With Please additional earnings materially of are that, due actual the or equivalent we greater to is most its XX-K of referenced, the projected in like refer in may available and non-GAAP XX-Q, in the list which and information factors, also to recent our results website. Form including over our SEC variety reconciliations to factors those are of release. release. and Terry. to I’d details describe Terry? GAAP our release, yesterday’s included the financial in earnings included all turn

Terry Dunlap

you, Thank thanks the on for us and this everyone joining morning. call Jennifer,

our our The challenges quarter extraordinary and to to presented customers our to second company. country,

challenges employees for this the Our confronting quarter. facing exceptional were environment. in the in TimkenSteel Few highlights

First we safely. operated

year. recordable was the the in of rate OSHA half Our an for all low first time

and focus TimkenSteel every for following My healthy precautions diligence allowed team uninterrupted day. and steadfast to a watching our coworkers great sincere This COVID-XX the out to our on attention company to been to operating the addition safe and maintain diligent customers. employees to put us In to the staying environment. our across in for safely, their we ongoing their work thanks service maintain place teamwork have

the shared COVID-XX for Board becoming when deliver actions reduced to clear, impact cash of operating Directors capital cost other $X.X schedules, generating immediate of Last weak extremely reductions of demand. team, contributions matching operating initiatives for actions to EBITDA able working cash second systemic flow contributed was few. quarter and salaried with quarter, the million. and XXX(k) quarter were reduction pre-COVID leadership to million our and we compensation suspension and EBITDA name introduced cost and reduced despite These management a just rolling some reduction furloughs positive we the incremental we Second, of combined cost of including flow second $XX.X employees, of

and expected quarter result as the demand customer delays. second significantly fell a order shutdowns, of in cancellations As plant

the widespread choppy sometimes in by impacted shipments quarter customers outages years. company’s represented restart quarter our immediate XXX,XXX sales processes. XX lowest plant more automotive of shipping tons slow their followed severely Second than our and Initially by were and

June As recovery. a somewhat to began we progressed, steady or see

defense, ramp those in quarter sector part light generally industrial of relatively end fairly the stable dealerships. sales markets remain products inventory volume in drove demand In high up forecast, stronger during vehicle and inventory anticipated and online sales due to the vehicle And including efforts during low the levels models. truck SUV more for in fact, June with Customers for than industry markets, we exceeded the immediate quarter the reopening and operational levels. the the and sell

with buying patterns inventory Our distributors and inventory in continue continue and customers to from to cautious align be changing demand their management.

many of Most net foreseeable align challenges decline to we energy sales. as levels continue corresponding in to schedules as demand. future. of we continue And tons impact and navigate a a of remains result pricing perspective, staying as the decrease close a quarter second market million and at very great operations the the the plants low As under an for activity to importantly, result, production cost low our expect we to due XXX,XXX demand. Overall, accordingly. were widely they are COVID-XX response to our From our in ship reported, all and pressure and customers in reduce with schedules operating we the estimate these of management lower aggressively $XXX

XX% we salaried instituted furloughs addition, workforce reducing further five average In rolling of that an administrative of impacted our weeks, costs. by

challenge we immediate the Beyond performance remained of focused improvement long-term on profitability actions. COVID-XX, and

cost to number implement continue in XXXX. a late XXXX launched We long-term of reduction early and initiatives

of in costs, making, cost decision order XX% efficiency These improved in in As business. reduction customers. A count of streams for across ongoing numerous restructure all further include, actions cross virtually working focused ultimately reduction capital few wide XXXX first a functional two head past calls, we a work reduction to XX% are resulted beginning and of the of examples discussed reduce active organization have the to and improve service and teams a the the on in actions half of our our XXXX. the since and efficiency functions activities range

where our ongoing historically have our portfolio overall dynamics areas our on seamless will been One of unprofitable is product focus has an this and significantly. to of focus critical is catalog. customers where area, example evaluation eliminating sizes we product changed our Another the or market product longer strength from be to mechanical area adjusting certain on line, tubing no recent

cash $X profitability on similar There smooth this We’re in projects will transition mentioned anticipate impact examples the just by the other worked with being company year dozens per action all generation. to of areas to are of a the customers year-end. EBITDA I of working closely million in of with a flow result the complete and We sustainable improvement. goal

We progress. will on our continue update to you

product have continues we area components focus. line calls, be our an of to recent value-added on discussed to as addition, In

providing these component, components TimkenSteel our customers finish expanded base in began customers As supply under chain bars with supply semi-finished of material to and needs. provide chain to a components powertrain industrial and Dayton, that production customers and highly their operations and time In simplify parts facility. time from at markets. our facility meet helping machining are July, supplier made for on automotive, manufacturing raw to solutions engineered Ohio the tubes and remains manage to reminder, by inventory just budget. We energy the from for expansion automotive their finished to parts our near The and value-added of the

XXXX. three increasing modest working sales major on now production new closely and are product $XX $XX approximately estimate million XXXX to We qualifications million these final with from be at We customers ramp launches up to approximately in schedules. in

to In addition, I’d like we and Kris? opportunities. to requirements call new application that, performance review turn the identify to continue Kris. over With to

Kris Westbrooks

also the hard work thank joining opportunity dedication the acknowledge challenging wanted during Good morning, Terry. for of you very to take everyone. quarter. Thanks, And to entire and second organization today. our us I a

operated the maintain level are needs, available throughout second Although liquidity. support continued a sequential our comparisons, customers’ of we cash the unfavorable periods reduced prior safely quarter to high and costs, to expanded significantly and year position our

thank So to all hard for work you your our and dedication. employees

Moving million. financial to now of our matters. quarter net On was basis, GAAP $XX.X second XXXX loss a

the reduction ongoing well we second certain the as Adjusted in $X.X items, additional related adjusted the cost quarter actions. million program previously in million reduction aided was net $XX.X by that discussed the significantly loss cost as Excluding quarter. was COVID-XX of EBITDA

$XXX of end in of XX, million million, Our cash operating facility was million. half from Cash approximately flow an on the $XX cash operating cash of quarter was June and as second hand XXXX. approximately $XX.X generated million first was our XXXX activities nearly level of $XX.X Available with generation plus of end balance the record credit from from was second March. at $XX improvement the quarter a the liquidity high at million

sector. in the Moving demand, now reflective year significantly to as the results. in drivers the automotive of lower first declined $XXX quarter the disruption from XX% result from the primarily of quarter a XXXX, second XX% of the quarter prior of weakness continued industry COVID-XX of related Net and and to quarter. Both a million second sales energy

of Terry second mentioned, total on negative our we be million with $XXX total combined estimate As impact, impact the $XXX quarter impact first sales year-to-date estimated the was is net and to the late million. when quarter COVID-XX

in in lower to second net by The In million tons. surcharge was of result addition in XX% both in second revenue a raw of lower and quarter, result comparison the decline were surcharge per revenue decline ton ship million prices. surcharge quarter material compressed lower quarter. and on year prior decline of sequential revenue average $XX.X $XX.X volume was a the alloy sales lower of surcharge the In to lower volume, scrap

were of and quarter the XX% the second second the shipments an second mentioned, decrease perspective, XX,XXX reduction As low month shipments are improved in in plant to shipments adjusted a decline of COVID-XX. a almost quarter, customers with XXX,XXX automotive million a May of of tons. stoppages related XXXX. overall The approximately in quarter, market a versus Terry from the sequential by $XX.X result to quarter June, From of in reduction of quarter EBITDA $XX.X XX,XXX approximately second were drove the from represented From end temporary quarter XX%. decreases in May and entirely XX% The shipments quarter XXXX. second to These first point million tons the XXXX. automotive tons decrease shipments the the

automotive markets, demand quarter. energy demand to in to which Shipments levels. industrial improve in as to stable not yet but quarter. X,XXX tons have and related XX,XXX in the significantly automotive. as of June, second to began energy compared Both were reduction to the were year sequentially shipments pre-COVID and shipments impacted and not lower the industrial prior tons as Although, returned COVID-XX

result supply partially production XX% of significantly schedules These approximately reductions our the by to demand, the Melt offset chain between manufacturing, has second average in be to of and a remain compared in market. mix. and EBITDA shipments energy OCTG are the impacted the sequentially foreseeable to maintaining in weak to commercial delivery flexible demand improved quarter utilization quarter unfavorable Price XXXX. for the salary Additionally, in while of as future. minimal quarter. year for oil related billets, $X.X second improvements mix quarter and margin by production impact ensure on leverage cost to the million the Reduce negatively unpaid in flexibility second expected primarily of lower organizations were billet prior with and improved $X.X lower Close with $X OCTG quarter furloughs, compared quarter the result quarter schedules to in and shipments second continue production on time by and enabled with fixed declined were the positively a the XXXX. comparison price company a shipments of to first manage alignment collaboration gas high second impacted $X of favorable million a additional modest and of cost aided products, Manufacturing customers. levels tons X,XXX million weekly low million including to COVID-XX our environment.

We’re employees hourly not costs significantly layoff and are reduced. operating on are

an will the demand our while position SG&A actions to from prior Lower manage on savings improvement was continue needs weekly schedule actions, closely going customers the basis a to recovers. sequentially from quarter prior offset of million $X.X and million COVID-XX we increased expense primarily SG&A variable meet as year expense for production are by We second that of forward, to quarter. $XX.X due was million, partially $X.X ensuring restructuring in related the compensation.

to cash and on liquidity. Moving

given end Our as the asset $XX.X XXXX first $XXX the Compared available working and of and since activities. million declined total million current management quarter, ongoing base, to the the $XX.X the lower of of was capital end a a improvement total environment of available borrowing result liquidity of second economic of approximately end at liquidity the million quarter XXXX.

cost high company positive the cash The cash. quarter, of all was $X.X flow cash reductions effective of a management level free of with cash the and payables generated million actions. million $XX.X and of During continued inventory aggressive benefit flow the quarter receivables in and of generation of the in categories, free result closed reduction

from free positive flow, non-core the approximately facility progress million. located our the sale receive cash make assets Houston, $X second Year-to-date, cash upon of of Texas. former to and continued assets sale proceeds we’ve $X with of sale to million the addition In the in exceeded proceeds at assets certain of quarter, ongoing non-core during

a principle with reclassified to $XX.X June of debt a current the amount maturity. was convertible in a XXXX of liability the X, long-term Our from reflective second liability million quarter,

the of liquidity a the adjusted the markets continue From EBITDA monitor or assets been advance the triggered current $X.X plan to end the opportunistically maturity. the address a company options remeasurement first quarterly U.S. its recorded pension our in obligation the remains believe this in our second non-cash sufficient XXXX, quarter debt the million XXXX results. We the of Overall, of quarter of of plan year. ongoing gain salary in to meet exist capital that measurement and June from at at The convertible which position needs perspective, excluded to of and business. in was has pension

quarter. plan for are actions, actions last on $X the first Following million approximately COVID-XX Switching reduction approximately quarter you funded the variety of pension related the administrative top no ongoing actions cost cash cost actions COVID-XX second of of XX% and pandemic XXXX. related our I the total quarter, we slightly June onset of U.S. XXXX. the The all as implemented through of during second remeasurement, XXXX, of salary commenced quarter, additional preserved flat that cutting company contributions walked a pension plans expenses status in in of at end There down the and reduced the the gears pension XX, XXXX. to the from of required was end

Additionally, cash of afforded payroll quarter, security Future million of $X million will that XXXX XXXX XXXX equal CARES the the payments deferral be half the was taxes be and opportunity two cash the of paid bringing that second estimated total installments second deferred social of the to Act. the during million, is to by XXXX. at payroll company deferral an $X end tax $X in in estimated

as employee update analysis in in down the provide given that the of gross is in to future the topic We’re Act the year. sales XXXX, comparison quarter complete. XX% currently of the were prior credit, this retention in second an analyzing We’ll on CARES our excess

it As in $XX staffing, generated million to of the quarter approximately savings. demand relates layoffs related second manufacturing

substantial These to savings significantly results align second our the in EBITDA both and As $XX rate continue to will contributed discussed months. and I actions, million manufacturing demand program mentioned, previously our to liquidity. we adjusted plant available staffing run our the quarter addition ongoing schedules in to coming

an quarter, perspective, from Visibility the $X continues not the second has half forward of to of activities relatively Looking performed first be demand third than commercial we’ve third times. a with levels. to have pre-COVID the are annual in our of improved returned recently in maintenance Operationally, the limited with aligned estimated shutdown half our the as customer quarter. but bookings order lead recent order weeks cost the approximately stronger looking bookings million with yet majority short quarter, of

full third an Although, to million of this estimated of last a maintenance year costs $X XXXX. quarter shutdown increase XXXX represents reduction be are approximately $X the from from year, our million

expect reduced as this in between further and million we spend Lastly, to complete our expansion plan Eaton, CapEx is and maintain We believe Ohio components our as value added continue our working current safely level spending on management. at up, capital now level $XX and to focused facility, the high well the needs, production XXXX. $XX a of and million sufficient at with we and supporting demand our environment remained on reduction To a aggressive than wrap our lower customers’ operating facilities assets focus normal cost the in year. continuing alignment to and

around duration extent wraps COVID-XX earnings of providing markets, time. volatility end my and the for to uncertainty would like prepared This quarterly resulting in not and We continued we the the remarks. up our open are at guidance the questions. call Given this

Operator

Thank question of Seth Exane you. BNP. the Rosenfeld comes first [Operator Instructions] to line of Your

Seth Rosenfeld

taking my Good you for questions today. morning. Thank

Terry Dunlap

Good morning, Seth.

Seth Rosenfeld

to regards impact somewhat product per a ASP. sales good in quarter. may question obviously, improvement the on we And saw ton I mix – I a in with morning. net have If and surprising

scale that. market improvement contributing us kind pricing earlier, on give think of we drove we we You of for that print despite of to when in more in any you. what then this a realized substrate an OCTG forward one you Thank kind touched Or the the sales, factor rate? to decrease QX Can on right we QX beyond. resetting lower And Is and as a headwinds? forward? off run any look should be that look color factors

Terry Dunlap

biggest same automotive being shipments, you was I to that, any price. at to due the it should much the our And Tom, you highest other impact on want certainly quarter first you color to an the please? add the of plan for want don’t selling think third really had average all, put driver. well, lower Seth, on that it level the just on

Tom Moline

alloy the mobile price tubular which values lower oil exactly type on-highway influenced goods are our and Terry, level, At were shipments that much average Yes. than country by much biggest containing the shipments a by correct. average was comprehensive level. more that’s of of mix billets. lower materials of they the And from value were mix lower large the products, perspective influencers

alloy by you content. the within of on mix, And if markets bar that more average rest a low industrial was look products happened And or reasonably Product values billets the was two values mix themselves quarter. based average from mixed driven. second products there markets, containing industrial high you high OCTG product to was the percentage in type a large oil Again, that in excuse applications. of energy, for of the alloy the the I containing low the still XX% into Average the included energy issue. our impacted shift industrial as by value [indiscernible] higher If visibility shift lower to general two shipments deeper related QX. were type defense in QX, expect have don’t products And were offset products two booking markets, we and alloy mixed we’re – QX. only in on shipments XX% don’t much relative the in

is going be because is So to automotive going because as the in that that into level, to the and to well going mix of shift a still at booking still as hard window. average are QX, we we’re much forecast value but we’re volume products those go Not larger comprehensive to reintroducing sub-markets, hold? within

Seth Rosenfeld

very clear. Okay. That’s

a you something should lower just still end and sounds to rate of color as us bit just on the volumes rate step on run little market recover like. QX of more with based able outlook current fact product of regard within specific mixes expect auto you’re more clarity. to And clear. then then – touched booking, kind results. to at we’ll and With don’t question, for thereafter give Can that a each regards get you please. you’re quarter, utilization a shipments, of full the So second very we time normalized last the That’s have

third As us of bit through working already with and way tell our rates you’ve a Can little about where we’re quarter. or through you today, August been utilization early placed? to July volumes the regards

Terry Dunlap

Kris, to take you want that one?

Kris Westbrooks

Yes. We can’t into that. get details on lot a of

to We this operated gradual it’s And improvement our choppy. have and seen be is as facilities demand demand continue production continues. a in

change week and but say managing that’s So it, significantly not prior it’s to QX it can or we’re to how levels. back week,

Seth Rosenfeld

Okay. Thank you much. very

Terry Dunlap

You’re welcome.

Operator

next line Tyler Your the comes Kenyon from question Cowen. of of

Tyler Kenyon

morning. good Hi,

Terry Dunlap

Tyler. morning, Good

Tyler Kenyon

as about at curious about in how limited visibility strong that we how then point, this maybe year is And working we into should be helpful. should another somewhat And close to third quarter you curious realized here. third the that the the quarter. we would release to Kris, could add as as thinking thinking but quarter, second anything be in capital be moving the

Kris Westbrooks

significant Absolutely. focus for It’s still a us.

more. of be implemented of to modest. tactics and inventories our more, We’ve level what’s needs the but it’s late We be to of if those early happening demand. continued see our cash be that XXXX, we with down receivables we’re payables expect do taken supports just function we’ll to to a the shipping XXXX today. release use see us. here, a If inventory The that some are a buying benefit receivables you’ll and All and going

that how just it’s of So comes through. that timing

those believe or exactly I we it’s for all in improvements can’t direction. a So do But the we there. focus us sustaining there’s of implemented opportunity guide you terms clear before still the size

Tyler Kenyon

you’ve more proceeds sales Got some and that it, expect any just cash respect with asset of is any to taken do from okay. expected further from And to there restructuring restructuring, thus you realize the efforts far? outflow

Terry Dunlap

next Yes. quarter. more asset hear to about that continuing work and Seth, on we’re sales you’ll

add restructuring charges, go as charges That’s a want we there what We you just will motion the there. part ongoing to things in of Kris, of have rhythm that? to be technically, lot And anything of on we’re forward. doing.

Kris Westbrooks

Yes.

reserve on the had end of at a So restructuring. payments June, $X.X sheet balance we on for our million future as

And be any to will then primarily cash new have go obviously that will activities the So out that. in we third incremental quarter.

Tyler Kenyon

Thank you.

Operator

additional have time. There you further I’m Jennifer this are floor question. or comments. over Capital no any will I I at now back questions the apologize. Markets. to of turn Beeman KeyBanc Gibbs Phil another closing for sorry,

Phil Gibbs

much. very Thanks morning. Good

Terry Dunlap

Phil. Good morning,

Phil Gibbs

million maintenance in of experienced the the that what is So second you third incremental $X quarter? the all quarter, in to

Kris Westbrooks

exactly. Yes,

Phil Gibbs

Okay.

Kris Westbrooks

Yes.

Phil Gibbs

down quarter actions we’ve some Is you second to there And the that, the incrementally aggressive in already pandemic. mix the then quarter volumes to the third that it like you that obviously that, did talked in any return got in the now sounds and about and automotive visibility quarter cost begins supply costs QX due take in taken chain? pretty better third volumes had that in you’ve

Terry Dunlap

Phil, which a Well, advantage took of read it, it numbers. Act you provided CARES of. about opportunities, lot about our full heard the in And we us

back $XXX moment add into sure. with And cost the will the gone particular the least some Act for so or for that the business supplement being gone that furlough at CARES in

hourly side accordingly. and On the playbook to continue that, that run anything. the our with operations won’t change staffing We’ll

be there’ll change no there. So

the So impact to do employee do on furloughs hasn’t to decided they’re I forward. or the be mitigate going Congress going biggest advantage to the we side single think the moment and going will salary of there’s nothing. take thing able not of at were just but what do, the that Certainly, we the what to that

different third that? to state. anything in add want to fourth quarters the to you that in and Kris, expect current look So we would fully the else

Kris Westbrooks

ran million of million April, piece, see about furloughs, the on higher will savings, furlough did and related no expense COVID, with a about to QX in We result some $X $X just of the furloughs that administrative in reductions It QX June. million run a but I furlough May no July continue of for $X furloughs. mentioned two-thirds plan cost as further to was difference of specificity you in that

Phil Gibbs

Okay.

relative to the that’s And fourth a that of Does it’s sound that then right? So about coming hit comes salary $X of bit something that more quarter. that, million like you that in get QX, half back. back little

Kris Westbrooks

Yes.

Phil Gibbs

then you about And timing, did expense little and Okay. of business. in talk revenue you’re of those in your doing staff in goals some and exactly of cadence some meet and a opportunities more there not bit the talk your of your it Maybe about capability then terms the what value-added longer-term the then whether asset to or today. call as

Terry Dunlap

So and for [indiscernible] are, at we which and activity not fourth but customers, we’re those our up of added third and the happened, we’re into with plan. fourth and in ongoing do they now equipments Liberty between say have making to the the ramp on, quarter mode already the – and to are shipping training products three those businesses customers. is in have who on rhythm the The employee the just there base totally place. pretty of getting much major The

rest to that XXXX. close third ramp rates the to first fourth quarter continue full the So run quarters in through at and and will up be the of of

already already that there customer additional three – staffing significant any business or are costs expect our wouldn’t expenses the are the support prepared expansion. to So programs other we have in with of

a to up XXXX. getting million into year rate we $XX run type the mentioned we as number head full where that’s So

systems and go all at this staffed point company. to with go, ready we’re up it’s the So

Phil Gibbs

then me. And one last Thank you. from

Terry Dunlap

ahead, Go ahead. no Go Phil, problem.

Phil Gibbs

you going in finish I of to something else, so want to was that. if terms

Terry Dunlap

no, please No, no, go ahead.

Phil Gibbs

Okay.

prime that looks scrap consider widening Should Certainly impact it? raw had the as would some quarter be from third to pretty the best have did So imagine can of I second the quarter. aggressively. obsolete material due – scrap you see we to benefit of this quarter narrowing spread a

Terry Dunlap

Well, right. it’s to hard predict,

views and be in on what’s happening still You’ve appears it’s and from heard highly the everybody else market, scrap their unpredictable. to

of very spreads had positive. the couple months the been last have over we’ve So

of continue determined. historical to they’ll same is be they from the an think stay to a quarter for whether we months I at positive be second levels perspective, couple in enjoy that the

at there going historical doesn’t in but levels, the it So spread appear least sort of short-term. to back

So at were thing like The quarter be the whether unpredictable sustain the what it moment. we other second market about to can able in things, be now one is, the to right achieve is we many appears determined. scrap fairly to

middle, would historical my in so. where that say numbers the that’ll course, the somewhere tomorrow, and So where between But we Phil were again, guess are. by I be of since

Phil Gibbs

often. forecast Yes, Thanks, bye. Bye, guys.

Terry Dunlap

Okay. Thanks.

Operator

questions any to you, There and or No, comments. ahead at time. over Jennifer, it I’ll thank No, are you. no further turn go closing for this additional

Jennifer Beeman

Okay, great. We quarter Thank next joining and you forward you, Thank everyone. Thanks updating look to for us healthy. today. stay you.

Operator

That Thank does today’s conclude call. you. conference

You disconnect. now may

Metallus (MTUS) 7 Aug 202020 Q2 Earnings call transcript