TMST - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to the 2Q 2022 TimkenSteel Corporation Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Communication Relations. of Director Beeman, and Investor Jennifer

You your conference. may begin

Jennifer Beeman

and good Thank Jennifer to Communications TimkenSteel. morning, TimkenSteel's and Beeman, Relations second of I'm welcome call. and you, for conference quarter Director Investor XXXX

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

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

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

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

Mike Williams

and the us everyone appreciate today. call Jennifer, joining you, Thank I on

resiliency delivered saying tested am that that me environment. Let by last begin in proud strong our week. a find employees was I and to Unfortunately flexible resilient. team our results I demand robust be dedicated,

incident melt at As many which Faircrest safety employees. in know, our of a you three the of experienced we resulted shop injury

families, Our our who is were thoughts co-workers impacted. and in their industry employees, the Safety paramount. are with

start of off several kicked initiatives the recall, the may at you we As year. safety

all began our safety During leaders. of the levels operational second leadership training we for quarter,

our tangible committed actions Our to taking leadership safety to culture. improve is

given July, quarter do near-term the as our impact to on late expect melt Faircrest far hand. As shop in not a incident the in inventories shipment shipments from significant we third the impact

to capacity. purchased to additional melt We also secure leverage intend

melt resume repairs mid-August the targeting complete to operations. We necessary and are

Turning and we flow reported record results, EBITDA second to quarter. our adjusted cash operating the strong second quarter in

in base This our was further And commercial for targeted attributed is our success to commercial products. our evidence and strategy our end efforts. thank that team to traction. ability gaining increase is their I part in Our pricing markets

development on markets, defense, to aim an And renewables, high focused market portfolio. efforts we business Our as remain optimized end we electric including vehicles. drive to value and continue diversification greater create

customers business our now back the As stated A the industrial of of I times, customers. cycles, effectively have end to sustain are our the energy positive of is Touching serving their lead and year. all times profitability majority business goal are is demand, steady. market many our end half year, of to about needs our they're us the through and in markets this while the telling upon mobile,

of certain customers. X% we these continue challenges However, the economic that customers navigating by smaller as are disruptions as decreased some environment. heard from of to current mobile, have shipments uncertainty customers In chain impact exists pockets supply sequentially, these the

will expected impacted by light positive negatively this late For recovery $XX expected thinking or as note, next EV of the the is been XXXX. with we we a is, for continue approximately XXXX. second EV OEM, year, This new to awarded major in stabilize win vehicles. medium sales be trucks the business to to were additional On of early commercial launch supply half starting in part space. the is continue XXXX, The as We the that recently and of our million. in estimate first which well a half, generation have current to

applications, more ramped. than sales million machine when awarded Our and XX $XX component current fully base EV approximately in of portfolio consists annual

demand categories. to energy levels closely to Distribution due to In the shipments again orders robust TimkenSteel remain with customers the doubled a our quarter, industrial from have than once with in more a as the we materials aligned see replenished, our customers compared has been strength all are for space. and first as Similar on X% channel industrial increased quarter, completion drilling of activity. of inventory market, prior our shipments continue we've shipments. by continued well this a manufacturing of developing Our but in year-over-year result increase basis. in history our managed and

that a supporting capabilities, bars and relationships, energy technical onshore in equipment. and and future. applications rigs, longstanding cleaner TimkenSteel’s some alongside components is proven of ability industry the manufactured are renewables have on innovate the to demanding used most We both offshore in an tubing the focused being and

to $XX with million strategic linked targeted of $XX to to XXXX, track In progress our improvements our realize we on imperatives, of from imperatives the on approximately achieve million directly and expect our strategic XXXX Turning XXXX. to improvements. profitability expected EBITDA we between actions our improvement profitability remain remaining

commercial are optimization, portfolio adjustment pricing primarily by driven XXXX benefiting actions continued improvement profitability improvements. reminder, being a terms and As commercial

operational and projects to yield, efficiency, underway Additionally, improve safety, reliability. are quality, asset

scrap project be example, be XXXX. is expected shop our beginning million later this a completed to year, run is melt underway to adjacent relocate to improve to to For rate $X in yard work of and our savings drive efficiency. This

technology transformation also information has Our begun.

$XXX This previous simplifying to long-term our the aimed combined IT that, at successfully shareholders for in work, actions third-party their for During trust, our rate next their services and million completed. $X our our savings of suppliers achieve our project hard employees migrated customers on thank recent expected a and begun our modernizing support phase million and we environment. support. partnership, gives us years, continued their with to multi-year of for run confidence execute when their With of that for will achieved is the I These our we deliver savings the work have commitments. quarter, and

As tangible actions to committed taking culture. leadership forward, our improve is we safety move to our

like would call I the over Kris? Now, to to turn Kris.

Kristopher Westbrooks

for thanks today. everyone. us joining morning, Good And Mike. Thanks,

strong cash making progress record also the half results strong quarter our on During quarter, team operating strategic of long-term while of 'XX. our first our all a successful collective Thanks to and delivered second and imperatives. flow, for second adjusted employees EBITDA

Turning to $XXX.X Comparatively, $XX.X $XXX income share. totaled our income million, net $XX.X first and or diluted sales $X.XX million quarter million or results, with was million, quarter net diluted were of net sequential $X.XX net sales per share. per second

improved basis, net Second with quarter second were net $XX.X $XXX.X of $X.XX or of income the million million XXXX or On sales per $X.XX diluted in an net share. per quarter $XX million diluted share. to income adjusted

Drivers purposes, $XX.X quarter or increase. on For scrap share. income $X.XX net second on and record prices Compared $XX.X selling alloy net at year diluted $XX.X surcharges. the million, share. of with material quarter $XX.X per was million prices to higher or last million million diluted and adjusted EBITDA $X.XX comparison mix. higher adjusted sequential improved included improved prices product was base increase income an quarter, Adjusted the million improved as in mix, same higher of Adjusted $XX.X XXXX, impact per the second base the an reflective quarter by of raw well increased in of first the the selling as a in EBITDA in

sequential tons and in mobile by increase XX,XXX in shipments, customer industrial second sequential shipments partially second In end offset mobile financial increase industrial second by by distribution partially Turning as both totaled the quarter, in of in shipments, a heavy The XX,XXX or the second compared of primarily quarter, wide the offset by Comparatively, tons increased industrial customers. driven last a quarter shipments industrial X,XXX the decreased higher and lower to the and second X% result across industrial in shipments second energy was customers year or OEM lower tons of as quarter from a equipments Mobile quarter X%. was X%. such our by X,XXX shipments and customer of expectations. of with increased decrease of energy tons in Shipments range first tons tons XXX,XXX results shipments an shipments or the now or from increase and sequential details X,XXX the demand demand. increase rail. were X% a consistent the the market, were quarter driven to XXX,XXX tons, of The with sectors quarter.

During impact tons, shipments approximately disruption the first quarter. the estimate by negatively impacted second similar the X,XXX chain in quarter, supply we a as our mobile

an momentum in quarter, from or scrap quarter, surcharge the shipments of XX%. XX% energy compared by and The of demand was market year. increased of second second as in quarter the the X% quarter. increased XX,XXX with XX% sequential the first a higher base in X%, per result ton average prior result higher a improved improved our second base prices, to energy of and material markets mobile across as with higher improvement second end to the average. Net tons of XX% drove raw lower last a in the end increase X,XXX increased our for by The prices year compared second driven XX% in from and Sequentially, driven on and the quarter quarter, the selling Base tons in prices. perspective, accounted in first sales selling quarter Lastly, average markets year of net continued a sales ton increased in quarter shipments. per increase items XX% The the tons shipments compared these with substantial and full sequential by alloy up alloy increase in industrial million per material shipped offsetting and was expectations. increase XX% $XXX.X our base comparison energy ton prices industrial end were of in prices or prices consistent Partially customer average selling XXXX and on $XXX by selling raw surcharge demand. higher a scrap of

costs In related increased compensation required higher as driven Turning areas higher plant one to by was of second performance, tube in manufacturing quarter The quarter, $XX were comparison year’s maintenance the sequentially increase to in expense. current the costs. and in inflationary as higher environment reliability as to given asset prior second by our targeted maintenance enhance million as Costs quarter, to well year second variable well spend as mills. repairs higher as the cost $XX million maintenance at primarily manufacturing. spending well

inflation to consumables contract We the operational XXXX impact XX%. a of utilization SG&A the as well to $X.X of chargeable an drivers partially parts an primary increased In as quarter, now sequential These and the inflationary quarter, from to to to remain second XX% previous on first included anticipated manufacturing controlled on relatively restructuring over expense was technology compared a expense were modernization inflation consistent as than as remainder XX% is fees average comparison non-surchargeable of The change. an simplification estimate during and XXXX of year variable prior spare XXXX, remains costs approximately in of the quarter ongoing XX% increases the From items with million. Now Increased are lower pressure levels. materials, quarter prices employee to for actions. estimate and XX% XXXX. perspective, SG&A the million labor sequential a SG&A offset improved well associated other quarter. historical to estimate be the primary drivers From application and lower SG&A raw the in with information the basis Overall, compensation perspective, projects. second higher second expense SG&A in significantly flat. prior $XX.X second result expense, by

liquidity. cash to on flow and Moving

generating XXth quarter, quarterly cash to company's Through driven by requirements. capital use fund consecutive operating was by quarter working second generated income, $XX.X half of cash $XXX.X and with flow partially equivalents marks the operating This $XXX.X million on a the million total finished of During cash XXXX, of and free of the million We flow. cash offset positive $XX and of flow of was June. million million second the spent and cash cash we expenditures. at end the $XX quarter liquidity operating first capital net

at now activities. return Looking shareholder

at approximately to a shares $XX July, completed at cost repurchased XXX,XXX company common date During million. of $X.X in total of XXXX common cost share a second the company the purchase has shares in activity the Including million. the quarter, recent XXX,XXX total approximately common repurchased

in the quarter shares and in and the This time, authorization. from an repurchase of second the the the convertible on million premium $XX.X was driven a million expense. X.X in remaining capital appreciation diluted At addition million of under from in negotiated return XX, notes Switching with original significantly quarter discussed cost balance debt $XX the of of July outstanding $XX diluted amounts notes EBITDA In at remaining the last X.X repurchase convertible had was company by is as are early second excluded X% conversion to extinguishment quarter, convertible million repurchase we a the fourth the on million reducing interest million reduction in cash outstanding effect outstanding shares principal In XXXX, debt. of this comparison diluted and July XXXX non-GAAP its the in the the completed $XX $XX.X further in on gears loss and the The of reducing due notes As previously perspective. instrument's associated compares million, million. diluted XXXX price. common repurchase of price, share total of shares excess convertible January and note stock diluted of to to had issuance million. $XX.X a $XX.X which between shares. adjusted shares company's outstanding outstanding. was The represents note convertible activity This activity premium a year, outstanding

July, highly related the company's company $XXX of of company's Plan XX% This pension to to company In Pension insurance assets. settle group a represents from purchased Bargaining U.S. annuity the about pension using rated existing contract the plan obligations a obligations. Regarding million Unit pensions. outstanding

medical insurance beneficiaries note accounting plans. are significant XX%. who approximately transaction that the future make commitment the pension insurance recipients currently Following plans the result from receiving a starting further a benefits covered the this same the activity reducing contract. under plan. annuity X% retiree third of our irrevocable the and the our for effect company funded October contract important transfer by pension annuitization amount has is derisking of the was from to towards status in pay participants gross It's all to The X,XXX This to benefit company XX% sheet will an annuity payments and quarter group the remain and to will from approximately payable and to total payments the approximately strengthening annuitization step balance as Xst,

of other rates more a certain plans these quarter basis as offsetting a The of second gain Moving assets. of the pension is by plans. gain a losses increase Remeasurement remainder company the matters, pension discount on of of for on an XXXX. quarterly expected $XX.X recorded result to the in in noncash million driven the was than plan on remeasurement investment

periodic XXXX Similar Turning now From spot the pricing remains to customer outlook. extended disruptions to prior markets perspective, end the of remains of across strong, to prior and Customer negatively manufacturing revenue lead demand with reflective third base pricing. the quarter may times year. stable of a to our shipments. annual end quarters, our increases continue favorable impact continued

the us third second our and the of help meet will the impact quarter. melt third levels and quarter to surcharge market negatively of capacity to with decline Given repairs in quarter, ton which customer costs inventory rate completed the Current manufacturing the we majority planned our utilization compared per purchases by demand. prices from of are melt decreases in our expected in expect parties Operationally, we middle anticipate melt revenue August, to date quarter. shop scrap to be third sequentially

second quarter anticipate be than moderately shipments As a the lower quarter. to we result, third

an from with and generally of annual $XX shutdown planned maintenance estimated with perspective, approximately incurred quarter, approximately amount the last third the to incurred second million approximately quarter. in Lastly, in be are operational and year. half XX% the consistent XX% is timing XXXX, in fourth This costs

capital. perspective, is in release as by the in positive primarily lower a From third as third which by the impacts to prices, of operational expected company in revenue working operating driven elements, profitability ton, remain quarter, a from decline surcharge than downtime. primarily flow second quarter, driven will these and the quarter, shop the adjusted cash a to reduce anticipated the per cash well strong expects scrap EBITDA Given melt but market be

million and for Additionally, record of in EBITDA deliver we're employees, guidance results full of $XX updating To up, XXXX adjusted the our be to timing to thanks TimkenSteel our spending. helped million, second estimate the approximately $X project a all a year capital expenditures previous who due of customers quarter. reduction to suppliers wrap from

We our open earlier, sharing safety future. to TimkenSteel in the your taking As We forward progress leadership committed and look actions interest our like tangible the for call culture. to our Mike improve now continued to appreciate questions. said to is team would in

Operator

first comes Stonegate [Operator from Your Rodriguez Markets. Marco from question Instructions] Capital

Marco Rodriguez

more Mike, a could I bit on the if was wondering, you little time spend strategic maybe initiatives.

be can the sort You specifically it touched you are next that improvements maybe up a remarks around kind through efficiency yard, frame. maybe kind to that some scrap on of on cost can of briefly closer, goals? here your years, in over the What those of bit you the know the prepared that make and might pipe? commercial you aiming else track, five of you what putting mentioned I little was walk coming

Mike Williams

some valued were a product that a more Sure. end those members our defense, in end participation Well optimization, it's around high in organization commercial focused together as But participation around markets as expanding markets market diverse high There's our particular today. development end team a that have initiative, the well particularly valued participation we diverse around as business our put renewables with really strategic really performing focused restructured that and the focused of on markets. space, participation. are we industrial portfolio more -- on, and are high

scrap scrap the yard third-party wide are and melt melt we adjacent them, the our operation When internal particularly On each out also X.X portfolio shop. X the our couple of shops, yard Therefore, melt shop to melt the use, to internal we melt Faircrest were in about was manu. the so of versus from moving both mile away operational the side, two shop contracting a a mean, were operating I the We yard. opportunities scrap mentioned we between a there's there. of shops, mile,

X.X business realize a But versus to quality. improvements. variability really projects, reduction to our We've costs, those shop. into than and rolling my already a have XXX we of of the compared our are bring around to quality our view shop. improvements bit to we best-in-class yards particularly of our tied in some focused of operating can better a in costs transportation But the yield reduce in we number the we couple in So around rework that conditions started melt mills, have our scrap really, would costs in where yield really improve But projects scenario. which moving it's higher projects melt will the mile specific little industry. norm a And

So I could go I on and transformation, people, around skill mentioned organizational our that's SG&A and on, that's projects a specific this, IT there's a key project, on project. optimizations. multiyear developments, our and

projects there's several and right well. pipeline, we of them action So identified the of them are focus around many portfolio, in come that have But safety lot future. as projects XXX of a improvements reliability asset many quite a now a and in our will in

that asset improves quality, of and improves all improving So productivity, improves also improves uptime, safety. yield,

Marco Rodriguez

falling or of maybe talk mobile And remarks prepared application? electric move focus? side kind then classify you side. particular those comment type more Would of the that market had Or mobile also there made two trying just more is of renewables as just about opportunities? that talking Can your the you the about a towards and you’re in then different renewable that into EV vehicle on you in terms the you the also some to wins about

Mike Williams

business. and market manufacturer the team separate from totally Well, a us, important mobile we our EVs for in particularly that's the no, very to components EVs have Mobile the -- are targeted. renewables is

EV crankshafts that OEMs combustion transmissions kinds actively the As programs. engines components, other and of away are we internal the automotive all move pursuing from require and

to for really we're side, and eight you closely that know, to and around That's turbine those our electric gearing the between and wind. developing the look and motors. XX with applications. some programs There's of OEMs that applications When focus EV those There’s mills. transmissions in offshore automotive be you there also years. the multiyear the And around focus. tend working of our motors are is smaller with rotor at go capability serve the shafts tremendous renewable market these As building amount wind programs our

expanding markets working So performing sales said, like we're and where we've with and actively markets want team because penetrating those have we product small for our see pursuing high and organizations restructured I and of our those because to serve portfolio. in we the that's members grow within those in today, value some -- pretty markets focused much that dedicated, we a we've proposition -- way

Marco Rodriguez

Got obviously in talked kind I it, impact a clarification. just plant. mentioned time something melt there press last your understood. missed or one you Were the about the this the those if bit the some in utilization rate to call in all, negative you In the release, of operational the impact to mentioned beginning the utilization And accident the want and -- melt get of there disruptions this? quarter. I you relation same Then in the or a rate a not, of in on different at quantify was one And on the you quarter? if can at

Mike Williams

are related. they So

an employee So cause employees, to melt said, the impacted be need to get is investigate recommended families thoughts any to the And under with as that in mid-August. investigation. middle the We're incident activities And by the operational we of take. our incident back and that we had identify that other the we've we we United expect our were Steelworkers actions working and and shop to our the is, and agencies any repair their root are the to was incident. The impact, get regulatory prayers online. currently and with furnace injured, in around our are

Marco Rodriguez

of sort your about might expectations on thoughts may of the base but what some thinking can share be dynamics at of in know you some in remainder I of be of you made if then least comments And QX, you've for pricing, terms fiscal the your year?

Mike Williams

the in our this continued remainder look favorable regards discussions pretty we're the half Sure. demand are year. demand, steady in with study say, see even, align least standpoint, a from Again, been. with And interactions prices demand our to I customers, expectation around have to what -- And or at they having XXXX. communications horizon of going through as and we is, would first that XXXX steady we

Operator

Seth BNP. Your next from from Rosenfeld question comes

Seth Rosenfeld

give particular, of prices And to for and better Can prime bit give the narrowing will we in forward and scrap, recent you surcharge a a the through just move QX? also prime obviously, understand scrap maybe bit how us detail color you your outlook looking on more more in the impact your revenues profitability? decline can premium and obsolete as

Kristopher Westbrooks

Hi, Seth, this is Kris.

correct, received about seeing that will hasn't contractions in in You I'm that thinking are that And we the the incremental it QX. July contraction decline shredded as force is I'd that well are expect some through we The the settled QX prime yet. up way though, that as continue grades. to drive those August. definitely and as benefit results, reverse benefited still in September our QX in

we're first least the months. But that out. how for at seeing, see what that's we'll two plays So

Seth Rosenfeld

you the with revenue purchase you can surcharge a surcharge a on can color you How or the regards mix but scale in saw quantify you I the to -- that, prime, benefit talked bit of quarter in Maybe know you give of was QX? about to QX? more past, us the obsolete. have large were the quantify in able but based a fact that

Kristopher Westbrooks

it QX million $XX was benefit is release. a lay what earnings the In out about we in

Seth Rosenfeld

capital. working about please question more one And

be prices for working on you more of expectations scrap can realized? HX, a surcharges give scale a and your in color capital us release decline bit see that you As could

Kristopher Westbrooks

of operational get quite work released capital Yes, into significant the and that it. would Mike say on on definitely what and inventory We disruption impact end hand and has the a the hand. an had expecting. through that bit of is inventory more I'd that and is at QX continuing working bigger receivables mentioned a to impact drive June on us release we're

Operator

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

Philip Gibbs

drastically last Mike, the for changed there? in months XX.X%, three the and of raise primary secondary drivers the what in maybe Kris, just so XX% terms team, and year versus curious inflation from to

Mike Williams

the Yes. perspective come Kris, maintenance can additional level higher some my that we than But in and parts been supplies provide a color. at has expected. repair

other we use tend in to our put that's our an hoc contractors prior seen, anticipated we've And for what really we together increase. The those activity, rates seeing QX. for -- surge basis areas we're not when outlook maintenance we ad

you you to want add So there? Kris, color do more have any

Kristopher Westbrooks

the the fixed Those areas little other change, volumes rate, that need full a primary you contracted Yes. on of for spend majority is a are primarily and as two the year most that there. you that more, bit pay parts spare it's contractors two the those of areas bit and mentioned, for that Mike spot the a rates But drove of change us.

Philip Gibbs

you Thank then you. a accident there accident. third any ago? impact serve hear the to to the benign, purchase way to and expecting been couch few customers and the of the the was use reasonably what have quarter in volume to versus following being good cost inventories the would melt impact to due And given the the But is third cost quarter weeks

Mike Williams

tied What third-party again, is, to as recovery and as slightly purchase cost Well, we're we the process predominantly leverage our fixed I the process. the still to the higher in are going And because lower. really cost, that's undetermined yet, manufacturing well the melt repair capability. costs do repair is see also expect higher being than

I add there? how that's have anything see do Kris, So you it. to

Kristopher Westbrooks

better to profitability. Those through we're it as can quarter that I drive we and go we you, it but are for we the quantify it real wish best could as to the the manage time through Yes. going drivers. working

Philip Gibbs

lot grades and the to the a know a secret of chemistry. of of content your are own I sauce guys VAR lot very higher typically So alloyed you specialized. And

unless melt to that I purchase with So it the remelting substrate buying supplant handling. and of then curious just how and yourself easy it is just you're kind guess base

just maybe through so talk And that?

Mike Williams

alloy been that help We've even high with and have a partner in situation they're this us year. grades. been we partner through more. developing since working small, a up particularly earlier And this around partner to working and Well, stepping a is developing partner fantastic

others. to development of we're So, we've great the some already with done looking them. And

unique help up of when like of this the perspective that to you things One competitors have a try your occurred to about situation industry, somewhat ours, from step my you.

So we satisfy our to need We we're appreciate we're going try all And we're and to to to running customers be acquire again up soon. seeing that. going back this that. time. what And very then through

Kristopher Westbrooks

could that, need outside on this That's is contractual tons Mike, we're back expect just mobile where melt. hand. to supporting add space our online to given arrangements. inventory do to not the with allocate that purchase go I going What we we're there, you If close for to

a of QX, a see a may little bit maybe we bit heavier QX. even and mix So into mobile, in shift

Mike Williams

Kris. point, Good

Operator

And I questions there turn call time. will further are the the at for over remarks. to presenters closing this back no

Jennifer Beeman

today. And that everyone. call Thanks, concludes our

Operator

This today's call. concludes conference

disconnect. may You now

Jennifer Beeman	Director, Communications & IR
Mike Williams	CEO, President & Director
Kristopher Westbrooks	EVP & CFO
Kevin Raketich	Executive Vice President and Chief Commercial Officer
Marco Rodriguez	Stonegate Capital Markets
Seth Rosenfeld	Exane BNP Paribas
Philip Gibbs	KeyBanc Capital Markets

Metallus (MTUS) 5 Aug 222022 Q2 Earnings call transcript