Earnings call transcript Q4 2022

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

Operator

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the TimkenSteel Corporation Fourth Quarter and Full-Year 2022 Earnings 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. Instructions] [Operator

hand Relations. Jennifer now Communications Director over Investor and it will Beeman, to of I

begin. may You

Jennifer Beeman

Thanks, and Beeman, and XXXX and good morning, Relations conference and fourth Investor call. full-year quarter I'm TimkenSteel. Jennifer for Director Communications welcome of to TimkenSteel's

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

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

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

Form variety are Our Please those factors of actual greater available site. results projected SEC Form which or may our XX-Q in release. all factors, Web included and of our differ to refer materially on implied and release, from due which including the to of TimkenSteel yesterday's recent filings, in list describe we the earnings our detail in most a XX-K

additional also release. its is to details information reconciliations financial in non-GAAP included referenced, Where and are the equivalent GAAP earnings

that, With turn to over call Mike? the Mike. like I'd to

Mike Williams

Thank And I a achieved this certainly adjusted we was halves. the strong Jennifer. of and cash flow. of joining operating everyone EBITDA two months XXXX the tale morning. Through record us year, first appreciate six you,

improved our environment. Our and markets, an including portfolio on electric as success defense, vehicles, was focused pricing to which commercial and enhancements renewable, attributed strategies high-value end as well

of XXXX our in a end strong experienced substantial year. impacted and markets But Fortunately, we downtime financial significantly prevailed second-half throughout of the which unplanned operational in number results. issues resulted the

to person not safety at XXXX single acceptable. every categorically change. me First, state, was our in let TimkenSteel is dedicated And performance

are processes. in and to $X housekeeping, improving in creating management performance. advancements, include to a And of and system Ongoing we drills, culture processes XXXX, improvements safety hazard safety enhanced million we equipment, additional invest expect safety. job We training, safety mapping ensure response analysis, improved are lasting to fully committed approximately companywide our

weeks, safety will recent phase entire we of advanced of these In the for efforts XXXX. off continue duration the first throughout And training the have kicked organization.

While environment training every equip jobs. as job, our safety safety the and tools perform is safest and working the our their is a to people best continuous to provide with journey, possible day,

to ramp slow several up production operations, Moving methodical our spanning been and has months.

on mentioned, To I all processes, teams, our expenditures work while implementing our focused we in XXXX support cases our have to several operational meet increased improvement, As with manufacturing and quality excellence ensure and on best-in-class reliability and to new asset demanding have have streams we additional requirements. we enhancing focused driving for budgeted capital $XX our customers' million, continuous some approximately completely safety programs.

to a fourth well as surcharge Turning as scrap due sales to reduction the net as the quarter lower result per declined results, prices, ton sequentially of a in revenue from alloy and impact market-driven XX% shipments. lower

believe I XXXX, that seeing maintaining frustration begin teams am fully transparent fulfill and and consistent continue are supply, are in there efficiently we dialogue customers. more demand are to with trained constant our encouraged while quarter a orders. trends. work utilization our outpacing that momentum We short-term we this working I is the are of steadily And together. is first will positive as to

price price digits a customer completed been contracts, of basis, Moving single an mid-to-upper on in have agreement cover with to average customer pricing. XXXX our our increase XX% book, compared annual percentage with base order which approximately the base negotiations, average

spending, de-risking full market our demand end expected supply our Given markets. robust first-half to XXXX. strength in for order increased reshoring, On in our are positive throughout end remain book and our all market is has automation, targeted XXXX, a chain continued remains that products note, Infrastructure the of into sectors. demand driving of

continued our melt Our industrial given shipments shop XX% restraints. decreased by sequentially

for the to and However, prior major with mobile to the to Similar continues defense, and Department by X% mining less Otherwise, the customers were continues inventory drive In on to vehicle sectors specific given inventory Defense shipments of quarter base compared our demand their decreased in In supply impacted U.S. replenishment. continuing products support third programs and remain demand to quarter. production light quarter, for hand expansion automotive support of needs. the defense our the increase industrial fourth the services. strong. mobile,

shipping our Our energy shipments based XX% sequentially declined constraints. on

demand, However, continue against U.S. activity. sanctions Russia drilling the increased market's lower-than-normal and inventory to levels, support

activity track to Currently, of Our order XXXX. balanced levels. achieve while improvements high are customers profitability continue targeted a inventory at completion our million by on drilling to we maintaining and support to rate $XX

excellence, As a a reliability and reminder, with foundation. administrative sheet as focus and strong manufacturing, commercial process simplification on balance excellence, our our actions

upgrading have and shop consistency related productivity, in which few budget. aid expenditure system surface A several our will melt to to overall arc furnace our for We launched rolling process quality, adding and tool-making laboratory. metallurgical included to product refining reliability, gauges our that new Also, operations in a are manufacturing first-time improve grate also, efficiencies. in fire initiatives testing capital shop XXXX and our adding reliability, energy final and efficiency control our in in electric quality include examples automating

manufacturing some allow quality, that well and could events safety, and value impact reliability, that scalable our improve our as quickly a committed assets technologies cost, or aiding enhance changing environment. Examples our investing as us We or safety, remain reliability to to condition AI technologies that production, our sustainability detect include instances, quality, efforts. in and in in people, our within and

proactively of us ultimately components, deterioration driving embrace early allowing the to technologies also cost. act We that lower us and and machinery warning give signs of will

our melt efficiency yard may have a to be to scrap emissions. undertaken improve recall, we you process move As to our and reduce to adjacent shop

run become operational, million fully of to savings April, expect a in We annually. $X with rate

believe related embraced sustainable to safety, commercial through-cycle grateful support and we process shareholders, our to improvement will excellence, We who manufacturing, dedicated lead and continuous the profitability. for employees and are of suppliers, customers, simplification, which our have

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

Kristopher Westbrooks

strong Thanks, achieved company record And today. of us profitability XXXX, flow. morning, thanks everyone. the Mike. for operating and In Good cash first-half joining the

safety As production the significantly challenges of Mike impacted year. and second-half the mentioned,

we a excited demand achieving continued market As see pricing XXXX, by supported strong and in to solid progress strategic end our our environment. enter I am imperatives

certain Turning includes million income $XXX.X to Adjusted diluted per our was unplanned or share. downtime recognized the was quarter full-year associated or first Of in XXXX financial share. million $X.XX in of fourth results, totaled million $XX.X net was an recovery, $XX Adjusted $X.XX the sales increase Net EBITDA recovery second-half billion, the And million income the an of per XXXX. This million related diluted from remainder received net $XX.X or million in the of of $XX quarter recovery XXXX. in insurance in fourth of the was million year. quarter. received the $X.X XXXX. insurance to X% $XX the cost was $XX

additional and continue to are time. of of at recoveries second-half We amount the potential the in although to additional related the seek recoveries insurance timing unplanned year experienced downtime the uncertain this

sales $X.XX $XX.X a to net Turning totaled fourth diluted net of per our loss quarter of $XXX.X million share. loss million or a with results,

diluted loss per of the a diluted income of quarter sales with or $X.XX were of adjusted a quarter net quarter were share. $XX.X million per million third diluted $X.X a XXXX, share. sales $X.XX $XXX.X net $XX.X or an share. loss loss loss basis, per of net reported sequential On third the per diluted Comparatively, of share. million net in fourth was Fourth of with $XXX.X or a of $X.XX Comparatively, million the net net loss million adjusted company loss $X.XX or quarter $X.X million

in quarter the was or $XX.X adjusted income slightly EBITDA higher in than fourth $XX.X third net EBITDA Adjusted diluted of of fourth quarter Adjusted the XXXX share. $X.XX the million $XX.X million. was million per

In by fourth driven negatively fourth cost drivers and adjusted quarter surcharge also well as of addition expected. lower the the impacted the to in were compared impacts the of the the also lower with higher market primary scrap A prices, negatively selling quarter fourth insurance of quarter decline manufacturing base EBITDA as impact shipments. impacted quarterly environment XXXX. was year-over-year as favorable higher These recoveries

Turning decrease shipments the result were tons in to shipment sequential unplanned now or as compared The XX% the details previously XXX,XXX the fourth inventory by availability to a A quarter. of was tons in results driven in discussed decline XX,XXX of financial third the quarter. for of the the quarter, shipments of downtime.

across the range Similarly, and industrial this XX,XXX demand sequential strong in In the available fourth today quarter XX% the a sectors. or from tons shipments quarter, tons sequential OEM Despite totaled or fourth same shipments XX%. distribution XX,XXX remains XX,XXX for of shipment decrease both tons XXXX. decreased in end wider in customers inventory quarter market, of decrease, the

the fourth in or tons shipments decrease customer XX,XXX a were tons X%. of Mobile XX,XXX quarter, sequential

to approximately continue XX% mobile the end portfolio We market. target to the of

higher mobile total shipments totaled XX,XXX a inventory tons levels. sequential However, fourth tons XX%. decrease at quarter, the were to given quarter of X,XXX fourth of XX% Shipments or energy the in customers

our by Similar quarter rolled, tons third-party to and to shipped inventory shipped fourth decline from TimkenSteel. and shipments, was producers demand strong. melt in our the XX,XXX shipment industrial, And Of sequential customer then total finished, attributable energy were availability. remained approximately sourced

We continue shop. expect our help of to XX% the to customer we third-party up in increase shipments ramp demand approximately melt sequentially while by quarter to support first melt

and and compared XXXX. supply target of were decline sales assets chain Net of with these net the decreased selling our sequential as fourth ton quarter, end sales the a driven favorable historical and markets utilization we scrap driven cycle. and the downstream in last strategy over and melt surcharge prices cost per and by in As demand without the average market quarter an The material excess was raw alloy third-party fourth opportunity offsetting XX% The I prices. mentioned carrying based a third million mix. items Partially shipments also as result leverage decreased lower the support our quarter, of of plan improves XX% $XXX.X fixed lower compared quarter the higher X% to in decrease sales capacity. melt with to XX%

of The driven items material a result primarily these the the offsetting in per of as ton. unplanned driven surcharge net were shipments a average raw XX%. significantly fourth sales downtime, higher by to market of selling decline decline and quarter melt Partially was prices compared base lower shop XXXX XX%

average of third on end per our Base XX% the for Sequentially from $XXX in or the XXXX, and selling ton quarter reflective ton prices by per mix markets, across XXXX of base average. full-year selling full-year base prices XXXX industrial sales comparison increased fourth to to approximately increased the on end-markets. the selling energy prices $XXX average, a specialty within strong the resulting and

prior-year Drivers the fourth slightly ongoing result and a following increased as costs impact costs manufacturing, million. downtime. challenged remain manufacturing In absorption manufacturing costs. of comparison costs and utilization cost absorption quarter, to the to as downtime, lower as planned maintenance increased of of cost related quarter, included inflationary in by unplanned $XX.X the the ramp-up related increased have fourth while Turning the and impact increased well production the year-over-year unplanned to

higher quarter, XX% in and Melt in utilization quarter was compensation driven of in the to lower the prior-year SG&A a $XX.X SG&A fourth higher From in by basis XX% XX% expenses. $X.X an information the quarter on costs, the result fourth In offset perspective, compared by million the variable SG&A XXXX, quarter. third million, increased a salary sequential to to compensation fourth fourth and as quarter technology variable increased comparison transformation of expense. mostly slightly primarily

carry majority consumed loss of gears income. of through Switching our the forwards net consecutive taxes, income the operating to net years now positive we've

XX $XX historical expect million of to that in domestic net As we operating XXXX, losses XXXX. have we December utilize

in year. As this taxpayer XX% Federal a anticipate a with being between and XXXX, U.S. effective we rate XX% tax an result,

in From was end pension of of This the pension investment the primarily annuitization a XXXX. XX%, at with funded completed losses activity down is XX% perspective, discount driven last to company of at the rates. related by year, combined higher reduction funded status plans market offset status from asset XXXX, end the the partially

of XXXX, cash to to total pension million required minimal XXXX. plans the and medical contributions increase on the are $XX anticipate by At impact to year-end approximately time, be this remeasurement. in assumptions, in XXXX XXXX pension expense expected excluding to we compared retiree Based

working cash and $XX.X capital the of $XX Moving payment quarter. on to million of to free in the cash lower insurance operating flow recovery flow and levels drove in $XX.X flow million cash million advance liquidity,

the asset marks to company generating quarter support XXXX, positive On flow projects. operating cash automation cash million operating basis, expenditures and million. a million free and This free of company's and reliability the significant consecutive cash $XXX.X of primarily $XXX.X totaled full-year XXth flow. $XX.X generated Capital in flow

ESG our and capital transformation expenditures technology information mentioned. $XX million In the program. supported XXXX, spending CapEx Additionally, Mike targeting of as we're previously

liquidity allocation that afforded 'XX we execute total strong the remained ago. capital articulated and and positions on the us one-year throughout to cash opportunity Our strategy

cash the During notes. repurchase XXXX, deployed over actions shares to convertible million nearly by XX%. the and million of of X reduced company $XXX outstanding common These diluted half shares

Specifically, cost of million remaining the X.X company the shares totaled the at of program. $XX.X the end was repurchase liquidity total end its million. $XX a and Cash common share common At million million in repurchased million quarter, the $XXX.X fourth equivalents total the had at of XXXX. and company year, cash $XXX.X on

a includes strong expect continue strength outlook and our and to of on execute sheet balance balance the provide profitable strategy, we sheet, capital our to forward, opportunity shareholders. progress a to positive of in returning we the capital balance business investing allocation our maintaining which As growth, us

outlook, now across end sequentially Turning the is quarter to remain customer perspective, to a first demand quarter from XXXX markets, the greater. or companies shipments increase commercial by of strong XX% to anticipated expected with first

it selling price As base shipment book. the on to selling expected Realization base year. begin prices, are successful the quarter covering orders the increases related customer to outcomes price negotiations of mid our first of agreement of XX% from order the approximately annual commented negotiated last carryover of following Mike

book pricing market, ton, XXXX. agreements, spot on our increased not per by remaining of February order shipments $XX bulk base for product by price effective the annual In all we portion X, the covered recently

seamless per in mechanical Additionally, $XX spot ton shipments for January. by increased prices tube

inflation on basis. rate to expected in was our to and million a rate than utilization on is XX%. XXXX about XX% $XX the incremental utilization persist We're And costs, year. to approximately experienced last in at non-surchargeable costs the we equated inflation, XXs first XXXX. a is regarding February rate throughout which month-to-date the anticipating XX%. in Operationally, quarter, of inflation continue experienced lower approximately percentage January's utilization improve Melt in average melt XXXX

Given these quarter EBITDA first elements, increase of sequentially the the to in company XXXX. expects adjusted

in and to To opportunities outlook for their their year the again long-term about suppliers, the hard dedication, work wrap shareholders and we're up, and our excited this and our exist customers, employees business TimkenSteel. Thanks for that to support interest TimkenSteel. for and

We to like would the now questions. for open call

Operator

you. first is Instructions] Dave with Thank from [Operator Storms Our question Stonegate.

Your line is open.

Dave Storms

taking my and call. thank morning, for Good you

wondering we could if -- Just start

Mike Williams

Dave. Hi,

Dave Storms

improvements, [curve] on the we're little think Wondering of million that we you. through that? is guys that some about could XXXX, thank give way excuse linear, more morning, clarity start of maybe we Good you a could if us me, are $XX you do with more color just that profitability the the on any [Ph] now -- quarter on there goal,

Mike Williams

earlier. we'll that we achieving would that on Yes, well XXXX. as are so achieve probably $XX qualify way improvement EBITDA I it to Mostly likely our by

Kristopher Westbrooks

and the improvement, period And, of category. profitability time. Dave, through the we savings. a areas of of We've continued but we're make commercial to others we we over to made cycle million are most looking and lot progress the lot for $XX areas this begin there's we're well. that. is the profitability of year before simplification, in ops And the seeing momentum as manufacturing sure in met want But that what planned the those account stabilized targeted as is later We've that a

that, towards goal. we're to a lot So, make did progress XXXX, work and to continue going that towards of in we work

Dave Storms

That's perfect, thank you.

that? melt or a relationship demand question tons? the that utilization increase utilization had, quarter given how about one-for-one I increases, in how think shipped about lag the we we think it Another melt and between that as should the market there, Is should the

Mike Williams

operations It's that occurred but there it's to losses necessarily to ton, the get throughout correlated. downstream shipped is yield closely very one-for-one the because a not

Kristopher Westbrooks

it's at and help which mean And that you our if we bit you of from shipment down could of worth basis; on and about a you to that look correlate publish factor X,XXX then a which progress melt tons. That'll capacity, melt, ship what's X% you a standpoint. tons continued externally, were that to what calculate monthly

Dave Storms

seeing thank of XXXX general, more supply from more, could, you going pretty just labor on demand guys side, here? what perfect, the if you. are That's And one into then I specifically

Mike Williams

labor Supply clear you're asking, I'm demand, not side quite what and Dave?

Dave Storms

the inflation? have how to it with from or how Sorry, inflation as, Does inflation much of into phrased that of maybe I in understand much trying And probably that steady labor that help? is we XXXX, increased should be saw labor increasing going then that would XXXX?

Mike Williams

we increase in of amount supplies the and multiyear and Yes, due there. to say inflation contract, biggest from fact The I labor a a the purchase, services. negotiated inflation increases that would wage modest are comes have in just

Dave Storms

helpful. Thank very is you. That

Operator

Instructions] Phil Markets. KeyBanc [Operator The Capital with is from question next Gibbs

is line open. Your

Phil Gibbs

very thanks much. Good And morning.

Mike Williams

Phil. Morning,

Phil Gibbs

'XX How should basically 'XX? inflation over in we 'XX. course crept it had versus think of up about I the know

we pieces. are maybe is So, last basis higher costs moving than spot year. higher we on I year. a are some starting last pricing versus through talk probably a But unit probably from also those did of up, your know

through those So, some maybe impacts? talk of

Mike Williams

a of you generalization, give I'll more specific so, let talk then I'll to Yes, Kris details. the

from XX% I so little to over bit an we're can inflationary color compared impact to I'll provide XX%. X% year-over-year probably seeing he to you think, there. it of to a And Kris 'XX then pass 'XX's 'XX,

Kristopher Westbrooks

at of it inflation bit and right got well started that parts, the accelerate also bit that to about costs. probably into and we But the to we as And half maintenance, QX XXXX. need in two-thirds begin us that as did as little for contractor came, we've it it; the on a routine QX. hit side. most And But of little where Dave materials spare talked and we about you the if had other consumables, look was labor a

first-half. to we as expect in said, $XX it a So, an than we that from bit XXXX, lesser million. a from to last a bit continue was extent inflation Mike the All experienced perspective year. XXXX, in, was the an into perspective higher but in second-half increase And

Phil Gibbs

in to I inflationary to in compared even relative a has year up crept where the we And were in things labor factors that not were -- basis? basically have held second-half? does how And, level of we at so, Kris, but net guess on labor, just where that general, inflation, last or the second-half

Kristopher Westbrooks

up we and strategy into It recapture essentially little our that bit, top crept as a to our line. that in negotiated pricing base went has

Phil Gibbs

levels, looking certainly business ahead. went net you as then, capital, activity back. better business for in we are working And Perfect. But with pulled shipments think QX, down as about

So, should what the working like? about back think how could look we build net of capital

Kristopher Westbrooks

flow so Yes, quarter, in levels be use as inventory there other the net recovery of the of receivables with that there. But us first first it operating of the part quarter, net it cash considerations with the payables, million in, $XX to do and be insurance expect we're targeting, that first offset we a our in use higher cash so came cash, cash some in flow relates a that'll quarter. in of for to

performance As gets well March, in that's paid award as million. have about our $X.X that annual we

puts cash operating So, overall flow on depend is profitability. net-net, to going a and couple but there, takes

We benefit we to that to continue years be several to manager carefully that we put a for our continue us expect maintain forward. working as that capital And in to closely we move and very discipline ago.

Phil Gibbs

Thank you.

Mike Williams

Phil. Thanks,

Operator

is with Franzreb question from John Sidoti Company. & next The

Your open. line is

John Franzreb

Is to the by explain XX% Good would the or one can end get Last everyone, first you quarter, has and expectation it thanks roughly the expectation still that the rate you XX% for or the utilization the why? morning, the to was quarter. other, way moved taking questions. of

Mike Williams

of utilization way. progressing our we expect as a in ramp-up for finish significant at our prepared I No, in rate that in our ramp rate improvement you QX, our if be QX. fully look it's we And progress, to up mean,

John Franzreb

Okay.

in to And so, bogey play or still the not? XX% is XX%

Mike Williams

our That's target.

John Franzreb

quarter the are first-half third Okay. And place the you that in I to starting year? orders of at point, is profile assume this to how into looking the the compared that demand

Mike Williams

is negotiated XX% are remaining contractual commitments on basis. a X% to have we our either annual that recall quarterly of or for And pricing, on already Well, annual prices sales one semi, you Kris fully that as year. for expect the increases, his price in mentioned two one for second-half we into comments, our tubular products, products, announced bar the continue to just the of our

John Franzreb

global demand your kind change is And ever a customer economic venting noticeable there at been the base of about concerns in profile and conditions? any Okay.

Mike Williams

we're all Well, I mean, things with the that going concerned. look, we can globally, are on

to and our stable us, However, that market telling see demand, are of are their within customers there what sub-sectors our segments accelerating and demand, they as pockets are reacting that accordingly. steady we're

end enter times our actually lead and QX the to are So, into to beginning QX. out of

global things we'll come some we on always the more of the keep of progress. see that, with So, and the some but eye uncertainty, domestic on uncertain how uncertainty, to ball, our

Kristopher Westbrooks

the have The the we're volume benefit not type forward we ago. years have today of there couple we going with that had footprint chasing have we a that out is of may

forward So, that good it's range as XXX,XXX XXX,XXX and about the feel to tons we're move as targeting that we ship move that in we forward. demand

John Franzreb

taking questions. for the thanks Great,

Kristopher Westbrooks

Thanks.

Operator

is next Instructions] from The Dave with [Operator question Storms Stonegate.

is line open. Your

Dave Storms

the just shop, XXXX scenario follow-up out shop to using third-party you're is seeing, you a a own to to of continue get as back that demand is melt that phase melt up there utilization shop meet throughout demand range? your that a and expected cater that you on Hey, XX% that just melt utilization or where question to some strong XX%,

Mike Williams

flex of into profit demand isn't, our Yes, we there as make strategy. won't. and finished melted to using third-party as converting our we're If pursue with can it there's be it that. We that Does that to third-party part market melt. And sense? long going that's products, believe in we added

Dave Storms

That's a you. perfect answer. Thank

Operator

at this conclude this time, further conference will for participating. no today's Thank call. and Showing you questions

You may now disconnect.

Metallus (MTUS) 24 Feb 232022 Q4 Earnings call transcript