TMST - Earnings call transcript Q2 2021

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

Operator

Good morning and welcome to the TimkenSteel Second Quarter 2021 Earnings Conference Call. I would now like to turn the conference over to your host.

Jennifer Beeman

Thanks and good morning. Welcome to TimkenSteel’s second quarter 2021 conference call. I am Jennifer Beeman, Senior Manager of Communications and Investor Relations for TimkenSteel.

of Mike Vice and Officer; President Raketich, Vice is Kris Executive and today Business Executive Executive and Westbrooks, and President me Williams, Chief President Officer; Kevin Development. Joining Marketing, Sales, Chief Financial

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

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

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

Mike Williams

our despite Jennifer to which quarter demand this industry, markets down everyone us call joining in for many shipments. Most Like automotive well outages, our morning. benefited thanks you, quarter. of the from performed robust we and during semiconductor-related on market customer the Thank second end slowed our

service. serve pleased However, to while shifted customer industrial effectively level mix I that product needs, of am a our teams and remained our agile maintaining high

delivery was overall XX%, on-time focus. our fact, In operational testament our at a to continued

and is have times our remain significantly order lead extended, backlog competitive Our but strong.

to to driving and safety above we recovery, adjusted environment and cash flow, else’s achieved income yet net our continuous cost generate we economic continued operating pricing discipline, ongoing the continue organization. throughout on favorable positive With EBITDA improvements focus and continue all record and

our also that safety underway, July have we our I recently, am made good which maintenance a execution safe of our initiatives on encouraged corporate portion results. are in with there focused excellent efforts. the strides annual with many of shutdown, While most occurred teams sustainability

refine must direction, our to growth. integral As ESG future we role recognized that we an strategic work in our future play

last our published as Disclosure. pleased and the We build to continued momentum you first the not As gathering ever targets, And we has September. only long-term including realistic goals, reduction positive I have initiatives. early we data but forward teeth on recall, work SASB targets achievable that and sustainable have they as to sharing our look am GHG begun quarter,

was second we the to in markets, quarter disruption profound in semiconductor We shipments by estimate chain decreased Moving our as the changes. automotive schedule in automotive, our negatively impacted shipments approximately supply most operating sequentially. disruption this automotive third that believe impacted the the time, automotive by shipments negatively quarter. periodic we by customer to XX,XXX continue tons XX% expect be to our At quarter

XXXX. However, rest second will year, of and the year we with into believe this the many throughout of chain the OEMs of supply to half stabilize signaling continue a the strong

being for at I Before moving Supplier facility the Quality want awarded industrial congratulate Eaton, Excellence to the General Ohio, to in team our update, XXXX market our Award. Motors

we supports facility is this and the shipped honor. GM transmission into that reminder, of XX-speed a fourth pinion plants. X-speed As ring blanks gear the blanks directly time this been manufacturing This awarded have

as communication, enterprise to the we total teams. teams, quality TimkenSteel know transparency, be This quality including supported my evaluated as GM all be that team. to sincere approach. cultural cost delivery, And supply is performance award the by originates functional a enterprise well chain of successful, GM, on and Tier as must from to our congratulations business total effectiveness, supplier X such As launch responsiveness metrics, priorities,

shipments Sequentially, such sequentially. strong XXXX. agriculture, all and we markets we mentioned is general quarter. sustainable serve in our industrial in the industrial distribution, Most mining, our XX% second we continue perform half industrial bearings into second industrial As the and increased as believe categories defense, of well earlier, to demand increase I saw and

our Andrew in maintenance effectiveness Manufacturing and Excellence efficiencies. as remains May to control, and our though, investments. in implementing increased around demand some the Andrew to needed with much sequentially our we make of I of only Vice optimizing excellence worked and ensure past short-term to and our asset our for one priorities. pleased recovery we am focused with manufacturing and low, continued efforts, this the are on team’s equipment, excellence product this Engineering, we and cost energy, centered good operating Bissot shop, optimize laser as to on some industry philosophy, successful drive is directly our to Andrew progress effective making at Reporting processes, market to inventory into statistics in replenishment historically shipments are will best responsible improving strategic To on kick Not company-wide by cost President lifecycle similar been has this start manufacturing together experienced adjusting transition. create we many Reliability. but to mix are we needs. our sustainable for practices joined help melt initiatives have years of support efforts delivering and the TimkenStell. have and Operationally, I reliability me, Turning demand us the way XX%, with He and

mapping to Daido in best the in of effort working our for future. On China and Shanghai a corporate wish the our My margin our Canton to with commercial regarding path our optimize team come the teams our commercial million that side, all Daido facilities. to set the of look discussions Steelworkers on profile, work we throughout lastly, X,XXX growing continuing to we The their markets. expire and sale the process. agreement dedication is $X in particularly congratulations in on week, with cash. employees across excellence current an We portfolio, for improve to More of have getting approximately that many product this finish line Steel and and leverage Last begin TimkenSteel in future. our them in we out current begun to the September covers subsidiary to approximately that know for hard the to this agreement bargaining on labor and XX. at And well forward partnership Monday, you the United completed our

I As job Kris? equitable and always, to over With our and reach like our the company’s call the would employees. goal security to a fair that vision is to Kris. agreement that, provides turn supports for

Kris Westbrooks

Mike. while I employees. our net record to thanks end operating flow, to cash enabled extend our company Good and wanted maintain my today. to teamwork EBITDA, improve deliver capital and quarter for us structure and joining to adjusted the Thanks total and also dedicated discipline. working continuing income second cost morning, everyone and quarter liquidity, Excellent thanks strong record hardworking

second $XX net quarter Turning diluted to for loss a GAAP in per million net the a XXXX a the or or results, quarter our $XX.X was the record basis, income of diluted a second loss share. second $X.XX share. per Comparatively, million quarter of on company reported $X.XX

per prior net an improvement diluted XXXX quarter or $XX.X On second The $X.XX first periods. per share. of net significant was or $X.X from for was diluted income the $X.XX basis, million, income adjusted million a share, quarter

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

it our count of the quarter was share per in to earnings As $XX.X relates share, second diluted million. XXXX

our XX-Q further refer disclosure filed yesterday. details, share and For per Form to the earnings

of adjusted improved EBITDA record profitability, the represented half year, $XX.X the in a adjusted a and EBITDA substantial this the adjusted $XXX.X an to of quarter million XXXX. million inception to year of improvement last Turning the company’s of since XXXX. in second totaled back first mid-XXXX. $XX.X million million $XX the improvement in second and start of strongest EBITDA of quarter its This was first year a Through quarter in

Moving industrial primarily of exceeding demand. high XX% to in tons financial guidance XXX,XXX and to sequentially sequential ship the our second growth now driven tons, improved by drivers single-digit the of strength in quarter the results,

nearly now to of quarter, to into first industrial from XX% second second sequentially, tons in growth of second were We quarter customers. open a distribution XXX,XXX XX,XXX and delays industrial quarter tons the XXXX time customers capacity the related industrial with Shipments in successful automotive second Additionally, the COVID XXXX. short of from second The general XXXX. semiconductor doubled diverse strengthened extending or quarter throughout demand. lead increased by group quarter the filling of shipments times created lead order book quarter impacted with with

in perspective, strength million with shipments of quarter. automotive melt in our to increased demand. in increase quarter. a and XXXX. From focus industrial raw sequential at with the higher compares quarter, The COVID hours. in cost the first of scrapping market was on Faircrest The sales throughout is revenue locations. approximately year, ton quarter to energy our our sequentially of was cost surcharge declined as As contributed XXXX. tons of the shipments This the end prices of improvement manufacturing single second sales of melt more improvement in to first of semiconductor second improvement a quarter automotive of than our the XX% quarter million XX% due represented Mike $XX remainder result supply prior demand in for customer in in the in sales in coupled million the the quarter Faircrest-only doubled continued improved and utilization second manufacturing XX%. from quarter by the sequential a higher Melt from first the the net melt XXXX XXXX manufacturing previously combined with year second impacted sectors, when second quarter increase efficient compared improvements is a most tons end material of company total a sequential operation higher Net cost market, the quarter melt to XX,XXX in a two-thirds utilization to increase the primarily control utilization an About the ton utilization net XX% $XXX.X from customer facility, of melt utilization with due In compared and mentioned, resulted was to the quarter shop XX%. market $XX chain in disruption XX% driven customer X,XXX X,XXX XX% surcharge average per

increased compensation expense, basis related expense reduction SG&A the SG&A to prior in compensation actions. of million second expense. cost and primarily due driven by sequential on variable quarter COVID-XX year XXXX, higher to higher XXXX, In to $X.X to $XX of the million, million second turning quarter increased $X.X temporary Now a SG&A comparison largely variable

principally versus process intensely cost remain and is we the SG&A performance, business improved variable from up overall focused given comparable periods, efficiency expense higher Although on compensation simplification, control.

improvement of a operating its total XXXX. of use in income quarter of second half quarter the on to second an by which driven the quarterly minus the sales debt positive XXXX, cash higher we capital was sequential cash cash liquidity, in Moving by with of and generating This requirements cash the marks over quarter cash working over ninth and accounts a working $XX time improvements million. drove reduced $XXX capital increase compared activity. of $XX.X net consecutive million quarter flow net flow of $XX.X to in the million, second and given operating receivable company’s exceeded during calculate Record $XX.X million million the debt,

of which operating $XX.X quarter, million due non-cash included since quarter an a to $XXX.X million approximately of on which of XXXX cash of environment of the of flow XXXX. end the settled re-measurement the second daily pension and XXXX, as X, its pension XXXX a performance flow be $XX.X end strong increasing March. of quarter pension shares. perspective, million with of demand end for in convertible cash salary for the Thanks debt plan, Additionally, working discipline. the company a cash totaling half capital recorded of gain June, our the supported issuance cash obligation in was first million a remainder results, Total is the required plan first with EBITDA cash, the required June during by million will re-measurement. We $XXX.X closed excluded the $XXX,XXX focus result the team second of company adjusted $XX a payments at From from salary the on Re-measurement the of quarterly XXX,XXX liquidity improvement balance million at a similar to quarter. the $XX.X the of

have by a elections XXXX American permitted the been U.S in indicated There required be continue U.S. Rescue future believe Pension signed the Plan Plan was the significant update prior on we As will Pension XXXX. Contributions of no last timing Consistent we into March. law changes required where future delayed reminder, Act impact and the Contributions. until act our quarter, with since to our of we evaluate that

required is the information we available an amounts timing and further regarding pension provide As update. of contributions, will future

Turning to strength be to the levels. now shipments quarter market second continued end demand, in quarter third outlook, given similar anticipate we to

While our during periods. quarter semiconductor is manufacturing the chip order And some periodic company’s a XXXX, operational automotive finishing is quarter, million. completed $X melt for was remainder at cost expected shipments the an third of or From to maintenance the customer the to approximately delay at outages the due rolling third book XX%. annual full of future shortage be may perspective utilization shutdown operations to and above at automotive

labor that with United are We course to incremental anticipate of million the set million beginning we labor costs is Steelworkers agreement second incurred September. the agreement normal successful late to the in regarding mentioned, negotiations be as during XXXX. half range in Additionally, $X negotiations and $X of the of Mike expire to the in

the proceeds received the from Shanghai $X of TimkenSteel in cash to entity. sale quarter, be Lastly, of million expected are the third approximately

the the forward. and into Thanks now half, opportunities. to forward sharing for an our our questions. TimkenSteel continue about is interest During second million. of reduced wrap at XX XXXX. for XX,XXX $X result anticipate the for plan annual by on focused efficiency execution in We Faircrest to be of during at the shop going look To to to We the of continuous a half approximately improvement remaining while call melt tons melt thanks planned outage. momentum shutdown the and planned first cost fourth fourth would strong a your maintenance like We as of continued for the open quarter to up, employees days progress we their quarter, expected

Operator

Instructions] [Operator Paribas. is question Your Exane BNP Tristan from first Gresser with

Tristan Gresser

Certainly you two thank taking question. my Hi, for Yes. please.

why how guidance You quarter that for stable did there you. should relatively good maintenance mentioned EBITDA reason for prices, any rising should be that expect last not in small we I not you is margins our with to guide the compared provide and of HX? results QX? particular Thank volumes, better know impacted any QX

Kris Westbrooks

raw some building Tristan, EBITDA. provide or well Hi, the to to the we There quarter. do going on impact blocks dynamics morning. be still to Kris. there. semiconductors even and not you correct with provide the be expect maintenance specific And volume is higher quarter in as are directional guidance are costs as on alluded pricing profitability in this as third and our other the Good there we did surcharges material We did as our we are strong

you The tables back. quarter probably also the a second reserves of in from as saw release in benefited inventory the

quarter. later So we believe are strong there as in quarter is takes. results some to sharing the those still they and puts produced to be We look and the third forward

Tristan Gresser

P&L? prices total And Alright. I about already for in hike much think base year. how this think ASP price per That’s base per of of should moving for have don’t of sales believe ton finally, SBQ and of a effective has I How announced ton seen you helpful. been just we forward? increase that then QX. ASP, $XXX much in we the on the

should think Thanks. about we ASP HX? how to So,

Mike Williams

Yes.

that and under business XX% spot-orientated. about about remember is to So have more for the contract year you of is our XX%

development do forward price or So, throughout the appreciation the expect remainder of year. however, we further positive going

effective were As both seamless early announced in July. on and SBQ price to or increases you recall, the bar be tube last

throughout see of should the year. that rest the we to So, appreciate expect

Tristan Gresser

Alright. Thank you.

Operator

Capital. is Michael Your with Leshock KeyBanc from question next

Michael Leshock

morning. Good guys. Hi,

Mike Williams

Good morning.

Michael Leshock

follow-up to pricing. wanted question I the first, on prior on So

you XXXX, And pricing contract now times the expecting times you stronger mentioned versus lead call, to During XXXX, lead extending was longer you that into for SBQ? months ago? those are environment X are environment were in pricing expecting a what maybe – drive

Mike Williams

question. good Sure,

SBQ believe but year. both in the and negotiate our lead positive to do us between or we from our – into we customers, XXXX mechanical times am are conversations are a in I we even position my though about tubing pricing very very I and good expect pricing. private yes, a So conversation for And stainless next are perspective,

Michael Leshock

Okay. facing, given end industrial when chip to And look you are get And auto resolved? chip of how shift any between your Have secondly, markets, then shortage from the you shortages gains shipments, the should pivot share the able at I customers some to that are made industrial? within there quickly

Mike Williams

another – question. the you Sure, good little The a slower bit was automotive. know, the pandemic the from recovery than as industrial

that we However, it’s tremendously. expect to continue. And accelerated

sustained are We sustaining flexible. share in demand, – position in ability to in our do increase are to fairly the have are market basically industrial. QX. that in our we And We overall we had pivot,

that able We throughout year the as do the well. to remainder are of

our at and I needs, have, regards So, automotive we significant contractual with XX%. capability delivery high, their extremely with them on-time think to is our mentioned, arrangements support service I will customers, serve as will

we performing been So, have extremely well.

Michael Leshock

that? as And that quarter, that’s up the we it, in anticipate that you Got and then benefits helpful. absorption saw in pick look going to demand forward modest meet with a on a come the further we inventories, build

Mike Williams

Again, react appropriately. we to the will markets

will service. that maintain the high of customers our appropriate to inventory service level We have to

for automotive our we to where segments And our position that’s maintain pivot will inventory We because had the of high that sales are, the develop. all We accordingly automotive, we wherever we opportunities to level are in and have focused And that’s where inventory, will segment. some industrial that we to are planning had quickly across be. didn’t service.

Michael Leshock

had quarter we how of in am in just inflationary percentage you sales some you for forward. revenue baseline. impressive then what the just seeing pressures and about Thanks. me wondering the higher a should And I terms think SG&A, are SG&A as there despite going of cost on And Great. last control

Kris Westbrooks

in lot area. Good It’s Kris Not of pressures a SG&A morning, Michael. inflationary the Westbrooks, again.

is well there. Percent fees like just that’s it’s positioned for cost of looks a us to as as good but that and control, going our improving. are focus well move there So, be we going feel continued And in headcount sales levels various overall of professional on is the to managing rolled top forward the levels, depending what surcharge to going forward. through the all vary there that line

Michael Leshock

color all Got it. the Thanks for guys.

Kris Westbrooks

Thanks for the questions.

Operator

Your Bergner Funds. Gabelli next with is question Justin from

Justin Bergner

are Kris, well. Good hope you morning. Mike doing and,

relates get with I utilization. high melt First to a without the how sort quarter in mean, the question and can you quarter downtime? of that in maintenance

Mike Williams

Sure, requirements we you maintenance assets ebb can, higher then I in flows could maintain and to think and between efficiently. you always the within They keep your and operating XX% protected given and know, XX% a month. quarter. have the But of with go a

Justin Bergner

Okay.

basis. Second a sort question increase some you cycle much know pricing, would mean, priced seem I kick the of relate to the quarter. there second the didn’t to effect, industrial of sequentially I some on mix short little stuff base steel? maybe price increases that being the in a that did have did in Was it in, bit lower

Mike Williams

question. is Yes, there Good there. impacts two primary

value lower of first had we which our formerly known as manufactured sales components, area is added The is impact the segment. in

manufacturing they components, basically rebranded have do. that to because We what that’s

much a other between sales there, realized we QX segment lower small – mix basically had versus in that SBQ QX. And we have SBQ small larger sizes or sizes. then prices the historically mix is area. in which So, shift sold higher product And

Justin Bergner

Okay. sizes lower base And per actually sales SBQ ton? the had larger

Mike Williams

And ton, yes. a per lower unit price it’s

are margins However, the better.

Justin Bergner

shaping the similar up quarter? look Okay. to how be in does mix And half, second second the to

Mike Williams

similar one right it’s under belt, with going Yes. a now, month We very believe forward. mix our see, we what

their make we with interruptions real happens sales able impact and and goals forward. the to the with is to automotive is quick are think I found and what pivot that what as us objectives. and going – We question production segment we pretty our

Justin Bergner

Sure.

exactly sort forward are for the you are of near-term of of the sort play planning So next take you year greater, does that some actually do pull the sort disruptions out? How orders? or shipments beginning of I mean, industrial if auto of you do

Mike Williams

Well, applying. are two-fold approach customers provide. we is as a there us think is been than I we there can from steel have that there more One that that want

the if area, of And So, – particularly distribution we distribution channel. pursue in we the can opportunities. the we channels, advantage we can short are those spot automotive taking also fall opportunities, in

Justin Bergner

for That’s Great. Thank it you. questions. my

Mike Williams

the for you Thank questions.

Operator

at remarks. questions. would And Instructions] no I to call this time are turn the [Operator like over back closing there to for Jennifer

Jennifer Beeman

Thank Great. call. you. forward today. us next We informing our to joining for you Thank This quarter. you concludes look everyone

Operator

This conference. today’s concludes

You disconnect. now may

Metallus (MTUS) 6 Aug 212021 Q2 Earnings call transcript