TMST - Earnings call transcript Q1 2021

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Operator

Good day, and thank you for standing by. Welcome to the TimkenSteel First Quarter 2021 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] Please be advised that today's conference is being recorded. now hand would to conference I Beeman. Jennifer Instructions] like the to over [Operator ahead. go please Mam,

Jennifer Beeman

Thanks and Manager good Call. Investor and morning, for I'm XXXX First Relations Jennifer Conference Quarter Beeman, Senior TimkenSteel. of and welcome Communications to TimkenSteel's

and is Westbrooks, and President Chief President Vice Executive Financial Officer; Joining me Officer. Williams, Chief today and Mike Kris Executive

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

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

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

Michael Williams

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

start in year markets to a to the thanks recovery We enjoyed our improving have the strong industrial and structure. automotive our and cost

in over place allowed and improve generate operating in markets cash positive XX result, adjusted EBITDA systemic quarter to continued we've to nearly past quarter, put us a the As our recovery months, prior flow. first we doubled profitability. from leverage and the the changes have The

cover at a remarks my regarding changes with quarter, TimkenSteel. the like continue I to I'd Before few

He since as new Member I Ron been future. the has of closely Directors Chairman retirement strong for was following role. Founding of foundation thank our has a working Directors, future our Chairman, Directors Furthermore, TimkenSteel's look leadership in XXXX, a earnings growth. Jack with Independent Board of forward TimkenSteel years. in say, announced Jack's release, Ron and brings his Jack team, to we of named dedication wealth Ron when the the knowledge guidance, built the an we member a I as of for of to more Rice under speak our and sincerely Board for As the Reilly. of and has over the our Board

his We retirement. we grateful are well his for contributions in Jack, and wish

and in of Sales, Marketing as be that Tom both announced also Executive will Executive Strategy Commercial Vice President President Bryan, Development. of Bill new Kevin We Manufacturing Operation; Development Executive Vice as the Vice Supply and a at serving President currently will leaving Moline, Vice Business President Raketich, Executive TimkenSteel, of and Company. Chain, of role and assume

changes. We we of many these them the expect and transitions to best. for like all smooth service of I'd Bill years in their and Tom thank, light wish

safety, on safety, our to protocols XXXX, we're extensive employees to focusing implement machinery with our safety this on Turning awards. confined Annual safe. In special and we Shield training, year refocus initiatives space COVID-XX Iron keep host ensure our we continue will

gather we safety from reward for ideas. As teams recommendations innovative is where this employees reminder, program our a a and

we well-being level important will areas. nothing end employees safely right always, of the home training and safety do the of at As belief we that with returning a our more provide our right reps to is leverage the core we The union workday. our ensure continue than in their to people relationships of is

SUV inventories historic the markets, we automotive categories Moving truck particularly demand, a and at steady light ten-year to low. remain see and to continue in

are have automotive disrupting and as read the rubber We production. such all about semiconductors, commodity which shortages, OEM resin,

the plan for the customers, and year close second staying to as beyond. half are they recovery We in of

our to not had the semiconductor shortage, meaningful global order book. fourth yet quarter of we the XXXX, experienced in impact Regarding a

first For has quarter, shortage we tons. approximately estimate our orders by the impacted XXXX this

we been any momentum a far, base. expect and quarter have lead In continue thus increase the see this markets, larger filling our will evidenced our elsewhere we to in XX% our open successful impact into industrial as time by capacity that end positive customer shipments opportunities, second a have in in We with short sequential market.

is improving a encouraged Distributor fill signs inventory are to power short overall modestly as serve, the the demand with term cautious at in market, requirements. inventories remains that still life We defense, machinery, statistics presenting the are majority of has continue we We the energy industrial Overall, regarding restocking of lows, improvement economy. with some agriculture, and and historic industrial slight weak. remain opportunities. there been improve industry such with energy categories which to us but generation demand

both a And a sales, technical chain Steel. in we we as close with diligence upon business Together, long steel our will region. team Regarding to market, scrap of and third due the number prices this due enjoyed by We're will rose the one management relationship hold sustainable gross quarter, have Daido Index the that $XXX key other is pricing, aligns XXXX. quarter, Chinese for $XXX Bushling our signed an mill strategy Steel, and and customary to remainder United quarter The announced for contingent States. reaching to in is with Shanghai high-quality utilization. higher Steel's optimistic customers our in first million ton. desire Daido in its the scrap that support usual the the to quarter, in of Daido second sometime to per of This the we expected in cash. with To Asia strengthen deal events and continue we $X in sell and the subsidiary completion customers provide highlight deal supply TimkenSteel agreement approximately the

We of suppliers, idled ensure and assets collaboratively number efficient As previously a our with our organized quarter. and to indefinitely discussed, employees, work we melt casting in and customers the well Harrison transition.

with at mid-April, in take the improving more to shop, of while melt the customers' using be meet activities one efficiently, Faircrest at to fully location, forward, possible to melting products will Faircrest of assets staffing place and support our By and we're producing our Operating customer our date, mix Going will all manufacturing increased melt, demand. best we needs. casting manned

melt We expect least XXXX. or higher the of to reach quarter utilization in at XX% second our

over I turn to steel. the and responsibly highlight TimkenSteel, wanted important of clean call efforts. operating I to some is making to corporate Kris, as Before current our At sustainability us as sustainably

environmental website. on believe step Company We focused an recently transparent becoming ever first and practices are posted has sustainability safety working For we what critical been natural we're in resources. ESG on terms years, is we accomplished. and how of in Currently reporting important the we've our our this our of proud enhancing and on our more SASB manage disclosure we in

to our greenhouse We forward expect over we to alone, year targets this look gas later sharing our long this example, reduction XX%. GHG reduce emissions, including year. term For goals,

good call in and being a over work citizen, Kris? live. turn to continuous rooted Kris. I'd is we culture improvement and Our that, corporate With to where the like

Kristopher Westbrooks

everyone with quarter. Thanks, for XXXX with that thanks I'm Mike, compared morning profitability, year joining improvement sequentially prior pleased today. us a and first we both in the and good significant started off

reduction environments, automotive quarterly material in working Our the cost capital actions and raw demand, restructuring and results industrial and customer reflect benefit continued discipline. surcharge financial of prior improving increasing

dollars and March generated overall cash operating million employees as cash with million. thanks focused Our strengthened during daily execution. the to on $XXX.X liquidity, finished of million while record successful position flow year, and for the We of a of total cash to liquidity a first we our $XXX.X $XX.X remaining quarter, start

net quarter share. On million financial $XX.X $X.XX of million or results. $X.XX $XX.X income share. of the from per quarter loss net XXXX per XXXX to reported a net a diluted of The first prior improvement net On fourth a diluted $XX.X first the loss per adjusted or million an Turning of $X.XX for in the first share, the or loss significant our or diluted was share. for income GAAP was periods. basis, of was XXXX $X.XX million quarter per Comparatively, of $X.X diluted quarter Company loss a quarter a first basis,

income adjusted loss diluted a of of XXXX first was was quarter million the net per of $XXX,XXX purposes, $XX.X per share. X the quarter comparison $X.XX XXXX Adjusted in or For loss diluted penny share. net or fourth

relates like count out first point to the the diluted per million that XX.X earnings to in share would shares. it was share, I quarter As of XXXX

earnings additional included the well per as please to the in shares expense, the yesterday. and calculation share the in refer regarding interest details notes awards, the further compensation disclosure our XX-Q filed share for convertible of debt convertible the For as based Form treatment

the last XXXX fourth to in improvement year, EBITDA million Turning Company's of adjusted improvement of of the the Adjusted a the improved XXXX. quarterly first $XX.X from of the quarter of to million highest and This of quarter XXXX. million from $XX.X represented profitability, an since $XX.X EBITDA first first of substantial was quarter back XXXX. in EBITDA quarter adjusted level

raw X% in Moving the tons and tons due order year. the tons XX,XXX the fourth quarter. perspective, with in of XXXX quarter on of to improvement million due energy the market, a end in now X% in in control year and shipments. higher strength expanded to with continued the the and X,XXX million and to of improvement per as the in first half improvement first XX% revenue, be to remainder sequentially increase industrial we Automotive cost albeit customer we net primarily sequential result of the from Net in automotive manufacturing or material first tons $X financial tons, higher OEMs of fourth quarter, to from tons, both the an the quarter. XX,XXX an XX% our ton, contributed drivers increased sales of sales results. compared sequential but About the of of the experienced quarter distribution customers. of to with XX% sales our with book the customers improvement in Ship focus million end compared last sequential increased quarter first the in year. cost continued and weak X%, sequentially of impacted From quarter the The shipments the a surcharge In XXXX, increase quarter quarter improved is X,XXX Shipments industrial improvement compared with increased quarter. market average net utilization demand improved declined from scrap XXX,XXX to XXX,XXX prices. to XX% industrial fourth the to was a prior $XX demand industrial continue shipments $XXX.X on surcharge automotive an first by in quarter increase last tons and sector. rates improved The a the in throughout cost manufacturing the or

From facility. Faircrest Harrison indefinite assets completed associated with action mentioned, in of activities XXXX, our XX% higher the the estimates quarter resulted line we casting in of sectors, with moved casting XX% automotive this first As all a an call and and first in compared idling the quarter quarter of perspective, in in the Mike melt in and and earnings February. XXXX our demand those melt our the end-market in Savings to utilization remain industrial improvement melt melting discussed to to fourth XX% utilization in and XXXX. year-end

using The were calculated most given melt the and was first quarter assets melt million operational of casting tons, X of the quarter. XXXX capacity that approximately melt rate Harrison utilization for of a

as plan to million report a melt tons. of only, which a Faircrest we X.X utilization has capacity approximately forward, for Going reminder, melt

was Faircrest only comparison melt XX%. first For of XXXX in purposes, the quarter utilization

first result Now of turning as quarter compensation on $X expense. increased driven a efficiency. quarter, to XX%, In declined result In expense. sequential the prior SG&A or a largely comparison a nearly variable of restructuring $XX.X million SG&A first on as to higher a by million lower to year, costs continued simplification and last SG&A basis the focus actions, employment supported of process slightly by by

to and liquidity. by capital of of million driven accounts prices. operating The in requirements, given the offset cash and the cash flow sales cash first of accounts Moving generated a primarily partially inventory uses scrap flow due These increase in were levels million purchasing higher by quarter. in and the was an an activity. payable, in Working quarter, on increase Company to use higher cash $XX.X $XX.X receivable

to cash and in the the of flow, timing at operating place XX% up hand, of of result total we anticipate will was liquidity base. perspective, of This signed a increase going the working American Act the positive area future of from end XXXX. law. expanded required the flow plan Our XXXX, XXXX, the results, quarter. plan, result $XX.X the pension represented required in is which continued of first end drove Plan recorded the XXXX. of relief perspective, quarter, re-measurement. Act $XXX.X of liquidity generation the end on funding will first of The status contributions. small as asset million close of have into an positive at million from Company the focus of re-measurement a of actions loss required liquidity increased capital Re-measurement for a pension a million Company $XXX.X the of remain was March, our from from quarter important non-cash resulting cash management In includes improvement XXXX. and significant The the excluded the implemented XXXX that in corresponding quarterly From borrowing profitability, was in accounting a cash be the the of slightly on in of funded operating cash salary end remainder forward. on quarter improved Rescue a a end of are all EBITDA From pension the March, the adjusted pension salary plans total, basis XXXX, impact pension In an

release on assumptions will based returns, current until XXXX. Plan As and required future of US we at believe pension are Bargaining asset time, this expected contributions, delayed this a result pension be likely funding and

COVID-XX available As we're updates pension created will the encouraged of supply industrial flexible pandemic remain supported the future our closely and contributions, to meet strength customer our uncertainty in wrap is order in automotive the and we book by improvements required provide operations and We're disruption regarding will ongoing in customer demand. information by accordingly. and by demand. monitoring further amount To up, timing chain

sequential tons EBITDA. on the increase growth adjusted well in single-digit forward, our basis, Looking in second percentage ship as as we a high quarter, in expect sequential

or demand Second higher current utilization environment. is support the be quarter to XX% melt Faircrest expected to

on June March, our forward to by Additionally, of the the balance to debt now interest for we your would for end open our the continued Xst We due of call At Convertible the impacted Convertible you outstanding repayment the look was $XX.X debt XXXX. cash forward. the Thank million. balance on TimkenSteel, of Xst, in progress will going due like be remaining questions. sharing June outstanding

Operator

[Operator Instructions] is first the Rosenfeld with question Exane. Your Seth of from line

Seth Rosenfeld

selling commentary so your think in market please to date Good what's significant be please? When taking questions there, morning. you auto business, on demand. to regards in for but on getting more been fixed sounds can from hasn't contracts might selling QX. implication automotive off today Thank perspective the the with our It for disruption you today. I semis impact, If spot the of like about that versus margin your in those the impact mix kick that

Michael Williams

By business improvement customers contractual the There way, is for margin business the thanks definitely spot automotive we the have. a in the versus on question. the that

Kristopher Westbrooks

well. to that, as benefit to add that a the would on extent to to to shifts expect Except industrial, be we it

Seth Rosenfeld

much the you in negotiations very the given I lease the spot potential? would into go what is try up us renegotiate quarterly on been of how just progress, and those year, last opportunity the you strength market, contracts, contract update and of it's not there an them mostly any annual you but perhaps expect in point to while to all back give later going some and the can kind auto thank at Okay, think increasing settled call, a follow-up,

Michael Williams

end will to to place, completed, start and automotive year, the quarter, later next the the expectation. were In do at contracts in existing in were August through second that we September, typically first starting for expire this starts quarter so -- they that our regards late Yes, for and were favorable some year. negotiated activity have contracts the of

Seth Rosenfeld

And opportunity, to Okay. with when renegotiate find and January an go stage? contract try back this at

Michael Williams

of promise to stick a made and We commitment it. we No. a

Seth Rosenfeld

Okay, very more on question the clear. just side. And one ESG

are you this you is more base give in by what that, that estimation in is year. remarks, year-over-year of that step? year significant the XX% the it for bit key for color to the Can terms also on year and comments expect Your your reduce can drivers emissions greenhouse what gas one that us a prepared

Kristopher Westbrooks

expect XXXX it's driven the That's so off announced. the And by our off And targets year. we Seth. XXXX. on based footprint by we improvement we manufacturing end emissions, primarily this would Sure, previously provide of that of as report, our the of have XX% to plan color future, actions in the year progresses for that more our

Seth Rosenfeld

very much. you Okay, thank

Kristopher Westbrooks

You're welcome.

Operator

comes Your the next Phil KeyBanc Capital from line Gibbs of question with Markets.

Philip Gibbs

morning. good Hey,

Michael Williams

Good morning.

Philip Gibbs

$X was the new first your to and pricing spot to opportunity in of piggyback 'XX to to relative the and the million. fourth industrial mixed And is Just in it mix, weak an and auto energy. first the bottom for headwind like Do shift a your you quarter, some year? the did question and you tons mix, have looked it with increases quarter that a for for on Seth's think quarter you very pricing cadence

Michael Williams

mix repeat increase, fourth that strong had the volume do defense that influence quarter do in I the the major grades, a that price we demand We in improve versus by however, itself on going market. in expect was and didn't half. sales from shift particularly first based also mixed to standpoint, was the to tell quarter-over-quarter, the the the in expect a defense more you alloy quarter, we carbon will level quarter second second

Philip Gibbs

Okay.

you presume alloy given late and your put those increases mix hit then lead get didn't early in spot QX. of in both stride their terms starting would to over I then then year, second times are you last versus that course SBQ in defense tubing your quarter? this the is your the year, much of carbon of and and So rich, some in in in,

Michael Williams

but the about quarter-over-quarter, the were price are price -- saw hold base overall, we in quarter. a announced the in increase second our first quarter X% increases earlier we that taking On

improvements going So, we expect do price forward.

Philip Gibbs

completed as call consolidation you appears that in of out the you have results any the you the of you numbers out, may Harrison in your your and -- stuff dissipate? you some results, there didn't your then, And frictional get didn't may first have that Okay. pulled did quarter anything you know adjusted results define it that that pull I to was that costs in out? Faircrest, but the frictional

Michael Williams

take forward. activity to type MRO itself Yes, spares won't charges had going we there were repeat some that QX, on and in that

Philip Gibbs

then because series know in make I to were adjustments did those despite those out were figure That's pulled out. results, and Were the still exclusions? you the results was -- the trying what I a of in those

Kristopher Westbrooks

materials of from was downs both, results. Phil, of material our QX, raw excluded was majority write we amount excluded, over but to There of smaller supplies as alloy as that those the extra downs, the material. a Yes, raw were impacted that location not the asset shifted adjustments overly that write Faircrest well our all as non-GAAP

Philip Gibbs

appreciate net we be raw you've levels, inflation Okay, the capital the last And what working Kris me in about and then, clearly, demand I terms Thanks. of balance got thinking better and should is over one working that. year? of net then for materials, capital continued in

Kristopher Westbrooks

higher working still strong on potential positioned in give quarter. is shot. focus well detail capital. We be higher capital growth the of and working you the all and that second some be us working capital we balance going EBITDA focus positive a be the given Phil, Primarily on very flow and in definitely the our take the growth with prices us outcome Ultimately, sales and build I'll sorry, guidance there, It's of second do quarter, can't level definitely have volumes a though in practices. starting higher commented driver we I much for Sure, the line receivables, but should a for there. in I'm that the a the too volumes in cash to of our that to for dependent going clearly how EBITDA top we're with helps.

Philip Gibbs

more one in here, for squeeze just I purposes. housekeeping Can

include count number share the some memory convert that XX when line number QX, on forma on what a look the the we million think ahead basis, that pro XX I pay from in is down? I know bottom you convertibles, as probably million, include did

Kristopher Westbrooks

X.X with about of million associated converts 'XX, XXXX Xst. the due that shares There's June June in are

that for would the share income of or XX.X by There numerator, expect come expense would incremental at also price X.X on based you stock additional you net back total Then things would that million. and that be this there million be add $XXX,XXX. compensation shares the you is about you other that's at So time, line, that income interest adjust to would add. count to component level an to off that so, a the lower equity dependent some is mentioned, $XXX,XXX the have -- it be top so

net there, So million interest add by there's slightly and that's two back moving share levels. lower a and pieces count X.X income current lower expense, at

Philip Gibbs

Okay.

$X.X the change, wherever goes million, on goes, million and your million issues. XX So in million back. [indiscernible] then to or down XX And $X.X through compensation $X the your something your goes absolutely your million add word

much. very thanks Okay,

Kristopher Westbrooks

You're welcome. Thank you.

Operator

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

Justin Bergner

morning, Hi. good morning, Mike. Kris. Good And

Kristopher Westbrooks

Good morning.

Justin Bergner

outlook you I first profits of EBITDA performance quarter is perspective, once as for for the How of, phone half? apologize prices come the good the prices through how EBITDA so jumped would first any mean, on the and I'm here, and and bit us should late, I you second call in of about outlook? can I know effects sort quarter. scrap we hope there mean normalize, inventory second of sort I flatten steel but I give the quarter quarter redundant great flowing not much off of first to sort little the think

Kristopher Westbrooks

we're on side. I the are material that working historically in place all capital the put inventory raw Justin. especially quickly, tough, we practices little mean turning a our It's continuing,

speculative pretty customer hardest the working out sitting So of it's products meet current on our cheaper customer to we door purchasing to to making get or don't manufacturing those try and it lot do material or any shipments purchases commitments. for there, a raw have and in much not

Justin Bergner

guess Faircrest, you of of annual shipments? us, level I then reminder, and that the of level an sort just Okay, of a on maximum you've now you're that sort producing do consolidated assuming what's the could for basis, at shipments for that

Michael Williams

million the that year tons of based vary per XXX,XXX capacity on and melt a net slightly, at that's Yes, tons, so but that shipments good I say on can would about nameplate based X.X basically mix number. out would

Justin Bergner

Okay and the on remind is just less I reminder, than can of XXX,XXX the second XXX,XXX sort a any mean if the the to us first production holiday shipments little do shifts if seasonality half well. give tons, just bit would as us half, in you're I the I but and outages. and track versus just mean tons there at to half, in assume you schedules that effect, about -- we given of normal annualize first seasonality takes as

Michael Williams

Yes, XX% the than take as so what customers Typically, driven typically in on inventory -- their we so the manage year-end that the by as and reductions seasonality, the XX% holidays, about see inventories see historically we less occurs to prior to well quarter really spent the year-end. that's based quarters. that for fourth

Justin Bergner

of future? helpful. that's deemed it sort optimism or Okay, small of contributor, there shipment in your forward levels still is the are your And energy towards any to sort going

Michael Williams

necessarily energy have gaps driven to we translated that to the is run fill increase in The you, out in or orders a do orders. pretty that tell what inventory hasn't fact regards decent is seen increase been in by have activity below shipments requirements we experiencing the predominantly I or safety to market, well or inventories inquiries. that, we're their Yes, levels. slight But that the to can

improving on slight hit we're rate in what The kind much So, industry that. seeing. pretty But, to modest of to growth. that's miss statistics it's regards are or

Justin Bergner

Okay.

Michael Williams

I some wouldn't do optimistic, slight improvement call forward. see -- going modest I it wouldn't we but

Justin Bergner

you. thank Okay,

Operator

over time there no the back turn management. questions. At like to now I to would further are call this

Jennifer Beeman

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

Operator

This for Thank concludes today's call. you participating. conference

now may disconnect. You

Metallus (MTUS) 7 May 212021 Q1 Earnings call transcript