TMST - Earnings call transcript Q4 2020

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Operator

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

Jennifer Beeman

good and and Beeman, welcome TimkenSteel’s for to Manager Thank year morning XXXX quarter TimkenSteel. Relations Investor full Communications Jennifer conference fourth of you and and call. Senior I’m

Williams, Mike Vice of Vice Manufacturing Vice Executive Chief President is today Commercial; and me President Chief Bill Kris President Moline, Executive Tom Officer; Chain. President and and and Financial of Supply Westbrooks, Officer; Executive Executive Joining Bryan,

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

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

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

Michael Williams

and Terry Dunlap helping leadership its succeed. about company excited for employees incredibly weather call what it his CEO. quarters. position strengthen I and some his to enabled driven this the initiatives dedicated opportunities early, there I that consistent spent for be who but TimkenSteel Thank are the clearly everyone Interim you, the alongside Since still I'm financial certainly the to It's to not improvement and smart, The business. thank time have working takes for company profitability time for thank employees We're they an but year, happy thanks joining company's know morning. on yet, who high difficult And am getting in Jennifer cash this to company TimkenSteel ahead demonstrated to the my of generation us a in incredibly I've lie during industry. performer the and I as to joining January, difficult the during people TimkenSteel. to transform the

employees The XXXX. meeting new safety. I the our wellbeing of believe is the whole I TimkenSteel lowest of in priority, number and our recordable to had since took rate safety a XXXX. Turning injuries in am pleased company's inception the therefore, one

illness. COVID of Additionally, following not XX experienced our we been to because this, employees have diligent any have in And shutdowns due protocols. operational

exceptionally collaborate our the continue USW suppliers with ensure our and workplaces We to to employees, remain safe.

During XXXX, efficiency the dry systemic company initiatives, numerous generating able cash successfully cost to capital through focused and was company's capital working structure the launch on improve and savings. discipline management

company better the All to hard structure improve leverage to work markets. of this and the position cost fully rebounding helped

markets, Speaking we and in steady in quarter, particularly of the fourth the light-truck saw SUV our a recovery, automotive demand categories.

on quarter recent modest in pre-COVID continue almost levels. our volumes to COVID-XX we demand increasing are back Although, auto, in the effects production. automotive of Help lingering fourth monitor by to months,

back are markets modest of positive rail, industrial and agriculture, defense levels. see In XXXX our to not The we channel volumes the have industrial to to any industrial this of areas understand a markets, indicators, we yet power the shortage. some serve chain experiencing time, global a our this through machinery, At such as pre-COVID The long-term due and not supply recent turned attention cautious but Now, disruption distribution as result we remained to growth. close to implications. disruptions impact has our generation, we are continue very to book, order meaningful year-end. continue customers to to our experienced semiconductor stay

a as a the than market are more into we back industrial distributors at a pace see accelerated market in coming OEMs, common recovery. the However, which

Lastly, into to increase translated are rig an is orders. in to energy depressed foreseeable levels but counts not U.S. inquiries, continues remain Recently the at the this experience but fourth challenged. meaningful expected quarter, to future. for remain began improved we market in the

pricing. contract challenging. negotiations was The in into somewhat to going the Moving quarter environment fourth

We expected last pricing week. over mechanical share. pricing headwinds SBQ months, and as this market as price three presented The maintained successfully for our but spot and select seamless markets environment in for opportunities recently and tubing applications, increases the

casting far, saw and and review are to the optimize operations they turn those like to to encouraged as positioned meet continually possible. With market. We our that, we melt efficiently by to as probably customers' have You accepted announced, were we needs took our been to the thus we properly publicly assets. that I'd action our recent ensure

is is a products assets. XXXX. not of Harrison thorough melt idle efficiently, given needs. in hourly customers' and the an one location, melt energy basic more profitability as plan evaluation may casting the Impacted meet and producing aligns best assets, indefinitely assets be that necessary. of employees of action while through it rolling important our their was with have improve quarter of note our easy the opportunities By optimization This As continued defined Faircrest to melt to also our manufacturing possible mix of prolonged our will and at labor our late impact not to goal decision operation. to we to agreement. Harrison operating make, the finishing using employment weakness assets result first shop our the our casting we action the this market, the This in It does in but

over to Kris. Thank I healthy. of Kris? safe stay future. your call for it TimkenSteel and stay opportunities I'd the that, over the to Before and you in our like areas continued to Kris, and discussing focus support to With turn forward I look turn

Kristopher Westbrooks

full operating an well Thanks flow, Mike. joining challenging that in quarter, Despite cash significant the inception improved everyone of the of and morning, total for flow led the represent for XXXX the I'm of our thanks as proud operating to since highs delivered end Good our our year year million today. the million in $XXX.X a environment, the us and which liquidity $XXX.X company. team of record profitability Both as at of liquidity. total increase cash

fourth reflective in continued an million in million lower a in of quarterly focus net of net a a to XXXX. million in environment of an This On fourth third in EBITDA loss income of an the net EBITDA our million lower $XX.X XXXX $XX.X a represents the million of fourth million of quarter a compared $XX.X same control. was net $XX.X million loss XXXX quarter GAAP adjusted demand improvement of third $XXX,XXX. $XX.X XXXX adjusted net EBITDA quarter net and loss net a was improvement adjusted basis, of of XXXX adjusted our On from loss cost quarter in quarter in represented from results. significant $XX.X the sales, in and the the the XXXX an fourth adjusted of adjusted $X.X discussed quarter million On quarter reduction the loss basis, XXXX. quarter $XX.X adjusted XXXX. income to and on loss improved of net of Turning actions successful cost of of This in a fourth quarters, prior X%

sequentially. improved Additionally, $XX.X million adjusted EBITDA

X,XXX XXXX, XXX,XXX Moving from quarter X% third From sequentially financial improving while with in end quarter tons stroke tons the fourth markets industrial the market of industrial declined of an XX,XXX automotive drivers of the the but the now results. tons tons increased increased compared Ship the to demands Shipments to perspective, shipments. to in customers shipments X% higher to XXXX. and tons, quarter X,XXX increased end automotive to sequential tons. XX,XXX sequentially

sequential cost a sales slightly the of We increased continued be the the third quarter increase $XXX.X with quarter. Net compared energy quarter to X,XXX compared due X% weak in sales of shipments the including other quarter XXXX, pandemic automotive melt plant the markets, quarter and largely million and utilization impacted down and in continue demand, market the which finishing. is following XXXX. the tons From with and stemming quarter in to of of fourth quarter, spring in third the compared but demand fourth by processes, net with down fourth temporary with COVID-XX from piercing the increased related a of XXXX XXXX end were and collapse X% shutdowns. sequentially manufacturing to industrial in The tube from in perspective, improved rates rebound rolling, manufacturing a in both the the of

remain at melt XX% utilization low XXXX. in However, of still fourth quarter the

by the offset and costs prior manufacturing in forward, a manufacturing focus cost control, year annual maintenance Additionally, prior XXXX savings million actions sequential to efficiency benefit going partially headcount of completion contributed to us and Recent on reduction from third improvement shutdown a the continued $XX quarter. quarter improve to actions reduced of the the million improvements continue all will the and $XX inflation. cost from

million of sequential the SG&A expense. to Turning $XX.X compensation result a was SG&A fourth a of In slight increase higher quarter expense. variable of as XXXX,

reduced Total by both a dollar prior supported In an primarily quarter Excluding full result terms in efficiency. basis, and improved on SG&A certain was XX% actions, periods. on year $X.X million restructuring fourth and by headcount throughout with of full XXXX reduction in declined continued year comparison the SG&A by the items, SG&A XXXX XXXX. focus XX% simplification process adjusted in This we XXXX.

record fourth management operating million cash XXXX. flow cash capital operating higher at the for A XXXX, full of now $XX.X flow the drove in company Looking and The cash quarter year generated cash $XXX.X improvements flow. working resulted of of combination flow million. profitability which in of the in

$XX.X use elements. is in rise the material XXXX. cash investments totaled in from projected prices, CapEx drive capital a upgrades, given raw million plans IT start expenditures in modest to to well improvement Capital includes as in all we are improvements impact expected and XXXX, activities As million cash equipment demand process approximately is manufacturing and and to which efficiencies. first XXXX of working maintenance, in as expected $XX XXXX be further quarter, operating a improving and to be

million activities assets Additionally, XXXX. from in included of $XX from investing cash liquidation non-core the nearly

driven was XXXX, includes available upon we as million a end and the is outstanding end than record at total zero asset convertible additional billion of The XXXX. our the all on mature reduction returns. year cash December, borrowing cash balance the a the was since facility December to which modest in debt of to assets. excluded results, with of of XX% meet December million Required the significant extended current balance assets remeasurement the operating capital credit instrument. the was retirement Overall, XXXX, on million structure. credit $XX.X remains end strong by from and near At maintaining In of another cash XXXX original was unchanged From maturity million the offsetting Xst, Xst, pension in facility onto in XXXX. was XXXX, in company repay recorded liabilities. to term adjusted driven more the return million of debt which total, the exchanged rate, $XX remaining loss discount and/or from end rate $XX.X was June, end liquidity, to date an borrowings. while $XX.X of outstanding by of time, plan benefit million at accounting our contributions XX our we plans XXXX sufficient end $X non-cash interest plus The business. at company to generation. our approximately has $XXX.X on billion $XX.X set the credit June position points company $X.X was Remeasurement Moving XX% all of on XXXX. in debt $X XXXX. from the XXXX plans this on of of EBITDA pension be increase consistent the average available capacity In And XXXX on XXXX position convertible our rate maturity of cash post strong $X.X since no of loss, $XXX.X we status of discount facility to end a plan needs XXXX. basis million X% successfully perspective, of increase a that the average XXst, expected million, the represents of XXXX, funded maturities, of approximately of Total At XXXX. flow our our on This at a liquidity by are a dropped and on the the million

I'd in CARES discussion, cash wrap the I balance highlight Act matters afforded the Before will two up flow sheet and like the our impact future. that cash by to flow

equal deferred taxes we XXXX. million First, in of Social deferred installments XXXX will XXXX. and these two Remittance be company Security at the $X.X payroll of of payroll taxes in end

deferral began XXXX, beginning tax ended, Additionally, current at start we taxes. the and payroll payroll remitting again option of the

accrued for would fourth like on is the qualifying melt receipt the XXXX, Second, Mike's idle employee benefits. I Harrison financial expected some of in comments $X.X Timing we of gears quarter to wages XXXX. of credit during to the the Switching and on assets, retention additional elaborate indefinite with million details. and casting sometime

in noted XXXX an non-cash $X $XX casting in to record recent to associated quarter we the assets. we million expect of with write-down As charge melt the of Harrison the and our filings, first million

it's by the million as $XX have their labor basic future. impacted important Regarding to savings, continued the to all note defined estimated hourly opportunities $XX agreement that in arise employees opportunities million annual employment as

the ultimate impacted such, number at employees As is time. unknown this of

approximately half time were From employees that realized given estimate, employees noted XXXX. about estimated manufacturing savings remaining casting as footprint perspective, two-thirds be driven in we've annual demand in on demand will one-third layoff assets rate requires. Canton of melt on the utilization timing the XXX of remain our and the and of previously periods a for XXXX, foreseeable the And approximately annual future. However, during layoffs of for employees the assumed the of elsewhere, the retained Harrison significant corresponding low savings were

to continuation benefits rate be expect run savings employee beginning the XXXX. period, in Following full we achieved

and with and manufacturing Faircrest that expenses Harrison casting time, melt assets. further expect also and casting the will We single efficiency over with well associated at realize melt as we avoiding additional CapEx savings as shop a maintenance

at indefinite history. higher the levels and Faircrest XXXX. above the many its remainder we utilization operated Harrison utilization melt the of melt years casting and Faircrest casting of XX% the assets were assets, to this idle Following in run projecting for for is and of successfully

remarks, mill industrial end wrap tons encouraged approximately improving reminder, To markets, by X.X up but we're raw cautious and remain and the steel. As Faircrest supply the million prepared ongoing total capacity a pandemic. the annual demand is uncertainty customer in in the given of my automotive chains COVID-XX

generation profitability sharing cash We'd to further We initiatives our resulting call forward provides XXXX for and on significant improving liquidity flexibility questions. strong aimed of financial strategic forward. up progress like execute now Our TimkenSteel. the at total us look to our to with open the going

Operator

with G. Instructions] Research. Justin [Operator from Your first question comes Bergner

Your open. line is

Justin Bergner

morning good aboard Kris. Welcome Michael, and

Michael Williams

Good morning, Justin.

Justin Bergner

the CapEx? I about more the million to is talked $XX realized idling. comment a few cash XXXX, weak the $XX sort want in million and to right? $XX of million into through delve or your then Harrison I indirectly So, of cash half bit savings, of of in to the been that furloughs guess, activity other starters, a flowing just and those to would from $XX minutes reduced some for have clarify that And of million so of Is in X-K given level of all savings sort demand just XXXX. ago, income statement, that taken

Kristopher Westbrooks

Good Justin. Correct, morning. Yeah.

those XXXX demand first driven savings utilization lower very as very minimal and then were There's And timing is over approximately cash CapEx of at incremental from the And In expecting achieved employees run from savings rate part no because those, then cash XXXX, savings, in be melt are right and beginning the have realized those layoff perspective. a and in amount. as it's that half would the on On were year again that you primarily they we're savings of a a period. low the time. XXXX, was savings. when well. benefits of element of salaries perspective, the we from question,

Justin Bergner

clarifiers just Got there. two That's Maybe it. more helpful.

related transition I benefit of maintenance Harrison some it because secondly, just sort savings in think business that about being the we is should the are for then, of is demand or And forward normalized the with So, XXXX because lack year? around, a indefinitely going CapEx XXXX is incremental how of guess, idled?

Michael Williams

Yeah.

to -- not they're part, first the XXXX, XXXX. savings from it's we're just incremental So, retaining the

So, company in not there. savings but layoff, continue the additional are those when in on it's XXXX, going -- add be to will to associates dollars

more it's at there level sure maintenance the a make In do be maintained, one but terms not that for of spend running similar total make need But to the for Faircrest we Faircrest the to expect for maintenance, be one, company. some required of future. highest be do to sure possible but may properly incremental we we will at will level in have savings, the

Justin Bergner

it maintenance would Understood. and below of what be CapEx, But sort representative maintenance plant Okay. think or is is normalized $XX CapEx of sort paradigm? the new million you a

Michael Williams

spend last we years, absent, on maintained sure level were maintenance, because expect are normal a But that's foreseeable incurring normal do future expense That's can investment. than any things highest you prior lower at year, also the the for What level. a growth that this year, dollars making but we level. that's

Justin Bergner

other my of EBITDA, adjusted quarter sort big drivers to question then related fourth And EBITDA. Okay. of the the strong

timing You million gross sort if guess, the question that be, cost talked net about price think related know fourth quarter now quarter? that results the a did don't sequential system, the $XX savings I from a then I the efforts. second, of or and And number. cost of on fourth in would benefit you're part was I scrap a benefit FIFO from

Michael Williams

of the manufacturing, that the million in annual the quarter. to the in I was of not about specifically did of So, $XX that the for the referenced quarter. shutdown was our goods in cost part a question, sold fourth doing first related third third We area

a then, component costs, savings improvement sequential there component, in And around a fixed leverage. and costs. that's So was big another

were costs in because we capitalize quarter, the inventory into produce utilizations more the Although, more. did we lower,

The savings the repeat I'm took the the sorry. continued to the say, cost historical third, program really of I'd two-thirds. is that you Can You least benefit specifically part second it's just previously. part? to actions had another we at that. our So, remaining around unrelated for

Justin Bergner

quarter dynamics, moved is sold you're goods the scrap scrap that timing did sort price system, the that through of from Now of your on maybe inventory of before benefit up cost FIFO price EBITDA the fourth surcharge you sort up? flowing moving

Michael Williams

quarter. Not significantly the in fourth

Justin Bergner

in hop I'll queue. have back the more thank do Okay. you one I but question,

Michael Williams

Sure.

Operator

Your from Markets. question Instructions] Phil Gibbs KeyBanc next with [Operator comes Capital

is Your line open.

Philip Gibbs

And morning. Mike. welcome good Hey,

Michael Williams

Phil. Thanks

Philip Gibbs

performance? can fourth sustainable versus year nice next into Is alluding effectively quarter and In think, of performance, cost cost in quarter, leverage I momentum other cost Justin your Question words, on that of to. the level was obviously everything this the underlying in terms persistent as operating and you performance? take very

Michael Williams

I the There's in overly Yes. absolutely so Phil. unique believe nothing quarter. fourth

We expect it can optimistic well. that that to as continue and improve

Philip Gibbs

Perfect. disruption, And for Okay. chain, then, it. be had could in you but the seeing there mentioned supply you're not potential the automotive

I is the think order you to you said are And book think market. I solid. back come your service visibly starting mentioned, then into centers pretty also

didn't either. it quarter of be that appear on So, the side service to the a in center fourth lot

So, nice from look right, And thinking think quarter? to centers I'm about you to at get fourth relative you it? if the holds just boost is this the service coming the the do in that industrial way side then back, auto up a

Michael Williams

Yeah.

it, vehicle on. the any pre-COVID issue, recovery the -- seeing automotive we're And to semiconductor see platforms is to the that the we we're platform As even major almost effect disruption though back to levels. not

Philip Gibbs

Okay.

Michael Williams

right So, we're now. about feeling good pretty things

Philip Gibbs

can process that on you the in of you're about was could of much the what speaking auto, stand awards? all here? added To programs new talking at of downstream new be that Terry where And in you terms these I how more any you visibility business. last on year provide -- do some lot know the where -- or in a where getting all business were

Michael Williams

Tom?

Tom Moline

XXXX. we in year, want XXXX, programs. than numbers those relative a won't And Tom we are ramp annualized We to new a greater and to up -- Good little $XX be even mode, -- $XX to Yeah. happen until last still XXXX result that about They expect this Moline. the million new started revenue to the ramp but million they realized fully but in in We yet are of as morning. $XX revenue full million launch it range is XXXX going well. programs rate a this year. of Phil, in quite experience those

Philip Gibbs

thinking saying, So, this pick what you business, downstream you're year. you're on that another that auto Tom? Is and up change XX

Tom Moline

correct. That's

Philip Gibbs

goes of not can working a guys you downstream. more little Because just SPQ And this vanilla Okay. the been on? what remind bit what some -- us you've It's into it's this business. some I or of think

whatever terms So, helpful. of that'd a maybe where realize you share, might just but help in this I it understanding some be goes. little could sensitive, be

Tom Moline

added performance XX gear of to transmissions. transmission introduction as that nine many truck, then very long industry. sources. value for the I go or now seamless high be that for considered a tube are a without to And time, well-positioned a of core new of This there product network send machining transmission It's SUV automotive for for And come. edition several manufacturer transmissions, into programs that blanks. mechanical upgrades programs well launch These eight We these into it's Okay. programs. question very will planetary components offering new we to supporting and been into a we have, the These is offering other OEMs platforms. speed a transmission a years at recent CUV and are we for phase create said, speed are

Philip Gibbs

the for guys. Good color, Thanks luck Tom.

Tom Moline

you. Thank

Michael Williams

you. Thank

Operator

from question Bergner next comes Your Research. Justin with G.

Your line open. is

Justin Bergner

in follow-up. effectively of to how contracted just like your industrial is based? the wanted of spot and priced for I is terms much tonnage typically not Thanks refresh a on

Michael Williams

spot for approximately it's versus company. If contract at you business, our total look overall the XX%

Tom Moline

And in months. little recent bit then that's shifted a here

is, If said, our about you it now. Kris look at as right pricing portfolio XX% of agreements,

became a arena. more volumes the in being decline towards as portfolio volumes. energy pricing automotive our portion a in spot XX% larger of significant more other that type And agreement with the has primarily volumes shifted The

Michael Williams

that, automotive, And than to relative right? then Tom, less industrials

Tom Moline

Yes.

Michael Williams

From a percentage basis.

Tom Moline

Yeah.

mid-XXs the distribution, now. be including right Industrial the in in mid-XXs. is portfolio would OEM, automotive Our

Justin Bergner

and The the sorry. what number was mid-XXs was? number I'm mid-XXs

Tom Moline

Automotive. Mid-XXs for automotive, distribution. mid-XXs and OEM for industrial

Justin Bergner

gauge pricing trying slightly of of in I about did season. guess out in the play what the made you pricing? the of the comment sort a guess better expectations, is, contract sort And contract to worse line of call, your was I -- Michael, slightly with or at season Okay. I start terms

Michael Williams

than we better going would came were slightly going say competitive that to. situations And were what we It better what was facing. were than say, would expecting thought that in. very we I we we I out

Justin Bergner

for are of lastly, out And know performance without utilization future been it's it I the good. melt to of days date? the commercial haven't of That's a Okay. and you you've maybe you, up And During Michael, early the for tenure, at given the company. driver next industry. that opportunities veteran up Are saying sort a that you're then discussed? there is getting what goes any of key but TimkenSteel Terry's at getting steel seen over out that jumping looking years, couple tonnage

Michael Williams

few quite Most effectiveness. focused participation primary opportunities segmentation in the And see are of I in guess commercial areas. I course. Of -- area. market probably a it's the the

efficiencies as see the manufacturing also enhancing opportunities bit a well. of I and However, quite

Justin Bergner

again. Okay. Thanks

Tom Moline

Your are welcome.

Michael Williams

Thank you.

Operator

further over queued time. Jennifer at no this the are back there Beeman. turn And to call up I'll

Jennifer Beeman

you for our concludes all And that Thank call. joining us today.

Operator

This conference call. concludes today's

may You disconnect. now

Metallus (MTUS) 26 Feb 212020 Q4 Earnings call transcript