GCP - Earnings call transcript Q3 2017 | GCP Applied Technologies Inc

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Operator

Good day and welcome to the GCP Applied Technologies Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Joe DeCristofaro. ahead. go Please

Joe DeCristofaro

Freeman, Hello on Stephen. are thank for and you Poling, Officer. Chief Thank call. everyone, With us Dean Officer Executive today's and call President us joining and President Financial you, Chief and Vice on Greg the

on and to available gcpat.com on Investors website. earnings and results release our quarter copies, tab. presentation click corresponding Our To for download slides third are our go please the

results U.S. our differ comments be federal today those securities or materially may under projected a Actual of from Some variety to forward-looking laws. will due statements factors. implied of

discuss which detail and more non-GAAP will We earnings our on certain financial are described release morning's this measures, in website. in

defined EBIT the third update. Our start statements with refer apply out non-GAAP EBIT adjusted today to margin, or references include Q&A. margin to of comments our will adjusted measures as will EBIT Greg to and press outlook. margin us financial results commentary financial gross References highlights and adjusted business forward-looking refer to and release. a to in the Dean's on both to quarter our and prepared remarks

stated Greg. rates With of Darex We Technologies to to that account of operations are currency. foreign and on basis All a these associated the July sale the discussing turn which this comparable continuing call for the are over X, growth of results of a Venezuela deconsolidation impact XXXX. adjusts and on as I discussion in constant for Packaging currency basis, the will revenue

Gregory Poling

and all I'd following are of that good by are and the earthquakes. grateful saying safe everyone. morning begin employees to Joe, Thanks, recent hurricanes like our we

the employees a our generate well disruptions. in Rico facilities third also plants difficult we service in tremendous thank want manufacturing also about time have pleased events, City. they through to get we these sale I'm our and Darex made Houston, customers facilities report efforts proceeds. I as who distribution expect in to for Mexico and Florida, centers to our and we our their after-tax have of One outside and of went the completed to back experienced million Many efforts. online $XXX of quarter, with employees our to larger Puerto as in

announced fits also in construction provider Ductilcrete systems. has cost lower maintenance to buildings. with that strategy systems They concrete cost the placement commercial acquisition product expansions bring seamless is of Ductilcrete applications. We industrial virtually allow traditional acquisition and to in of and floors a patented of replacement Ductilcrete. have of approach systems and floor flooring for and line the our a technologies

As businesses. we acquisition us improve capital quality on line we expansions, intensity with pursue performance Those low performance. enhance lifecycle businesses and construction strategy, our high-margin, high the product focused are the reduced should provide cost, bolt-on

data sensors We bolt-on also and and a as looking well are and as technology productivity, systems deliver construction applications. capabilities acquisitions enable cost solution to lower that material approach improvements, for an integrated deliver installed savings for quality that

business, in weather in the our lower earthquake expectations perform America the this cement recapture roller X manufacturing and some price growing cement businesses Mexico are launching and segment America, of which North within inflation, XX%. acquisition. launching Vertical performance we continues in led announce in to North and had and Verifi at quarter Asia-Pacific. North grow in and Stirling did add the mills, Envelope and our recover performance cost low X Lloyd meet to grew A a well additives the new in Building number our America financial an by not did margins. is our Cement alkali of We due improver increase our also third the we're across our quarter. new did did Europe, revenue a board quality in original cements. in Our quarter, We for products SBM rate increased approximately recently new for to strong customers the volumes install

programs, to to our our progress delayer on on making executing resources we're closer plans allocate our realignment and good customers. are We

of We and of we have virtually marketing stranded completed much associated the our the and the eliminated Darex business. reorganization have commercial teams, cost with

forward developing our XXXX, to Looking we plan. are operating currently

business construction clear markets, have focus We improving our a on and the growing margins. our

plan. fourth on But As for XX%. I'd growth call X% turn our earnings over usual, to Dean and XX% quarter to indications February on are now our completed in we've provide full-year quarter after sales for of our of earnings our like we'll approximately guidance call to our the approximately early and specifics growth operating more performance.

Dean Freeman

good and everyone. Greg, morning Thanks

currency results as and up million volumes SCC in a the X% X, revenues a $XXX offset the basis. America, earthquake North sales down for well as quarter. reminder, to as business to comments a were my continuing were to decline due due Europe revenue in sale North cement as in of a deconsolidation constant in sales are are off growth ready-mix three in in growth SCC were was and additives the X%, our by of Asia-Pacific. on the consolidated hurricanes America the in associated discussing to account also Including Venezuela lower Mexico, July as weather. XXXX. all on GCP's basis we operations Just Also rates of Darex,

is Verifi install mentioned, installs grew the with ramping catch Greg over to XX% year-over-year rate. up and As now up revenue growth

acquisition. reduction proofing through the XXx up Residential about revenue the less project in increased $XX SCC and it will excluding due revenue wins. Envelope XX% injections sales EBITDA Going Stirling distribution due inventories and and we was increased Lloyd the X% XX% fire are forward, X% acquisition, includes a the our declined large included our to SBM's well including channels. margins about performing sales, sales is our protection, to and XX% liquid specialty increased grouts year-over-year water Halex million, excluding with to Ductilcrete annualized company's several SBM segment. accretive product acquisition. Building in excluding which acquisitions. including business paid XX% as The for particular and GCP be than in whole

recover as We residential up the storm-related months. basis, On were revenues our few business a expect proceeds regional activity next over XX%. North rebuilding America to

deconsolidation grew including in XX% America SBM growth XX% about acquisitions in the business. The was new Excluding Stirling further in our the increase in lost to X% project Venezuela Stirling contribute grew declined Lloyd. ready-mix and in as grew Asia-Pacific was about about ready-mix acquisitions. the decision recently to to maintain over the in flat price in Venezuela, volumes has Asia-Pacific, quarter, seen quarter and offset X% fourth resulted excluding primarily region will prices including decision. business X% SBM a both quarter the excluding America acquisitions, in and we've as Latin including growth raw SCC SCC Conversion offset in admixtures begun in XX% and the offset by X% and decline was cement them. revenues growth XX% our SBM X% which in XXXX material decline in of and up the to by was declined cement discipline, Mexico. conviction excluding X% Lloyd business X%. region excluding was In about SCC revenues. our business. strengthens delays EMEA due increased. North this our quarter to of as in X% due

declined and consolidated disruptions material due diluted chain. million, results of the income America operating to increased of and XX% further increased impact XX% by the operating and across negative that increased unfavorable SBM's income resulted impact earnings the significant in costs. equally higher mix. Raw volumes our volumes quarter declined material Rounding declined negative and in for to of quarter the and GCP margin acquisitions. regulation material product to adjusted SCC's lower performance, points logistical volumes the raw logistics we basis to in residential the negative Adjusted material inflation the experienced with higher mix due XX.X margins inflation quarter. segment XX%. to up points but XXX of Again, higher totaled inflation to gross and of the impacted the for costs, in was costs also combination of and hurricanes cost. volumes, Net the $XX.X lower SBM raw share unfavorable inflation accounted decline count million. gross $X.XX unfavorable caused EBIT points environmental between lower XX% declined due the the raw mix. expense and logistics margins the about due profit. impact China gross and of declined basis interest the operating which due North Segment to EPS basis the inflation half Adjusted XX.X%, to to adjusted Moving gross the higher petrochemical was impact XXX raw which balance material XXX and costs. lower split in X% logistics in margins

XXXX, announced revenue for acquisitions expect we As including we $XXX to $XXX X% EBIT million of the and in previously to range adjusted X% growth now million. of

$X.XX to to approximately in $X outlook, acquisition programs. as million of projecting between flow for annual our reposition sales. In rate $X.XX and constant XX% are Greg operations. preliminary of be and as also growth in we less and EBIT our our investments savings of we factors our EPS expectation to to salary compensation, to to share. track for to $X and this include We're Offsetting million well annualized from are XXXX X% free $X incentive continuing market million moderate expect $XX million increases. million. XXXX we initiatives benefits, be $XX And our are million XXXX. to adjusted of expect the restructuring XX% $XX mentioned currency effective $XX in savings We restructuring of and investments of adjusted sales cash expected impact and deliver per million in that to have X% we increasing million, tax on built adjusted inflationary and XXXX XX% to capital adjusted other range for growth XX% $X We're growth than forecasting

remains our loan our and year. credit totaling revolving acquired far $XXX Our outstanding also capital consistent repaid allocation we've this so companies, about We've facility million. on framework amounts retired the X term

Greg we'll We in of liquidity and debt. have that, continue turn to closing and lower growth over it comments. ample strategies cost our support our disciplined approach capital allocating our I'll for With to

Gregory Poling

up, the wrap challenging to on and Thank focused but XXXX, future. did business is just price costs. responding quarter including increases well positioned our we We're challenges offset of those and you to our have are execution higher third implementation to in we Dean, fully announced the a for

questions. your strong and joining for again I construction our product and pipelines forward. a have and balance sheet, we're going And thank healthy call. will bolt-on to acquisition activity optimistic Dean you to about I'd be happy We the take new like now,

Operator

our Harrison Instructions]. Mike question Securities. go Please [Operator first comes Seaport And ahead. from Global with

Jacob Schowalter

morning. Mike. is Jacob for This Good on

Gregory Poling

Good morning, Jacob.

Jacob Schowalter

guys Could inventory you Has on and give the in in to are returned us run or quarter? effects the reductions color at a more bit normal you little seeing QX its the additional some course that distributors?

Gregory Poling

primarily we the distributors, Yes WATER ICE good inventories inventories. I see bring think down for a a but actually question. product I down year our pretty our into the did take sales, their residential cash it's good They going had end was of What basis. to SHIELD decided from some think &

with disruptions as some the in imagine markets some those had also storms. you of We might

bit economy get into back forward, the future. in bode as they made So but take cash for come year a think the it that some us to that I decision inventory and a next well little going management given and should we build of goes expect

Jacob Schowalter

material Got XXXX much be looking how you up getting to increases, at cadence and basket announced what's more expect do raw the versus inflation for it pricing the upside? price And then raw okay. one for some your then material

Gregory Poling

if give just We've have the just us environment quarter second. that you big it run through. baskets about picture, inflationary or me then consistently, into for big some a that takes we Dean Let two talk to usually a I'll a said put

price those seeing heads pricing, process, are a up talking to They're our customers other out to we give out wanted their customers We with planning increases. to relative we're inflationary pressures. also about now

we'll impact So the start see to to that. rollout, that starts of

the in the of ones put seeing Some quarter, that that we're we're earlier getting pricing. we out the

it. on way But and up. runs the chain I margin get specifics So pick up catch increases the asked its you give about. supply as price to we second Dean can quarter issues you think year, the to expect of into next more sort through I inflation would our that expect the

Dean Freeman

Yes, it's good so a question.

September the think sort the a we the and across raw As month looking purchases in balance we're our at chain, the of about really the material out hydrocarbon of of constraint in sort capacity looking year. of for

out increases seen glycols that. we has pointed into seen we've our increases to constraints like think XXXX disruption fibers over are Those as in further of but some years, so actions our some we've going in part butadienes offset overall price -- over XX%, And expected of I early our our price that. Asia, further in in I I purchases going as the of of well. latex, anticipating into again amines, ethylenes saw But the we're but rubbers, the XX%, year-over-year price propylenes and next our far think capacity as materials moderates relieved some because think affect year and Greg there out, our somewhat, of we'll, particularly that of capacity at inflation.

Gregory Poling

some and X the should then see margins into recover to a or here quarter we'll we start actually Yes, improvement. going on

Operator

question Jefferies. from comes with Laurence next Our Alexander

Nick Cecero

Laurence. Hi, provide as about you thoughts head that. kind color we order we if some on just think are guess could this cadence, on is trends Nick steadier, on into your for you maybe I seeing of as a Cecero XXXX

Gregory Poling

business. on a project -- let that, of and but SBM we half were the optimistic come, especially year earthquake I'll some the seen some weather as you headwinds the might it. we give of it the there the had, activity more and the that's of in see, Dean these next and that and second growth And delayed quarter, see in color, we we're like quarter, pipeline you can all third you out some the to the been year, the see starting we're where is of in work, on although starting pushed and the to project it works have continuing. Despite

about, order is seeing beginning year this we're a we're the an quarter. talked for than now right pleased from in what but reasons So we in the we frankly, going little later fourth into part anticipated here with standpoint, the the had

Dean Freeman

opportunities we can there year. add is of realization just pipeline sort the I'll think we earlier of order saw that that normal or the Yes surge recovery I decide in the whether sort of

As double the up pipeline out, digits into Greg still XXXX. pointed going is

into, as of more But the we February our we'll get seeing end think earnings the beginning through are We going color into momentum certainly year, of color provide I get call. have year. the we and towards more the as

Operator

Monness question next Chris our Shaw from And comes from Crespi.

Christopher Shaw

the more out, guess impacts bit I what the of To quarter the on start of called relative with sort -- buckets the that impact we've [indiscernible] different were.

or margins on trying I from the much loss is of have to what buckets how You and it some cost sales hurricanes or how orders I size material spike size also adjusted just sort the increases, guess the the and that on of maybe. is are relative of, figure just raw sort hurricanes out those the of this much caused.

Gregory Poling

a you down Yes, basis, so on around look XXX consolidated were basis business, I margins if mean we gross were down the points. across

about comments, to about points of inflation, of that. XXX basis in I that mentioned as my think half related I is

increases evenly about and half mix. points points, basis in is basis another and The logistics on split XX XX volume between other

Gregory Poling

that the on to hydrocarbon there. chain. drivers given trying was spin the through trucking regain of to just actually think saw fact going some that, And momentum everybody the those But and with anybody's up, to at that with out margins hire as going be what's of add out that side to or our come exacerbated we matter the to designed some we there's but on inflation is back look is, readily, inflation freight we're the pricing storms. the bring hurricanes knows the margin hurt been that And

[indiscernible]. So to we're going

Christopher Shaw

are once about right that about know cash from you you a feeling have Darex, ,the talk what there fairly doing on target liquidity can books bolt-ons, guess I how of cash that? possibly you your And you now of that thoughts sort I -- is the could out guess you the buybacks, or sort are of now you targets you around now. now have of decent have lot have balance -- now out other proceeds then size a the I there tapping -- it the you the of

Gregory Poling

to sure. How through. are glad a our little planning We're run the cash. having to ability the transition it and quarters, glad to management services more into as purchase frankly, couple price We've got in agreements of have over feeling of the pleased tax we we're that our convert we process next have out with Yes books, to on the but this we're bit quite and pleased we're did work cash. do team our the

that. good about we feel So

is think hasn't said a that the business reasons understand like stay think we product have businesses markets management And deck, in about changed. and us but and to fit acquisitions. We're strategy today in a a going a we what where there we're about. product there slide that bolt-on We're sensor especially segments Ductilcrete's opportunity we and is both to we one we to idea strategy there we We capability for of combines organic productivity. that invest we the looking look good is strategy, into in good for talked to discipline. our think we have good Our patient, and our have data for also Engineered know, going of that that's information Systems the that

business we cash So over our should if deploy grow business, longer like shareholders. we're some it return to and the of planning term to that improve to that the looks cash

us and the that thing in and now, inorganic at think grow business the for on do reinvest will right We at best is look but both bolt-on. we the to time,

Christopher Shaw

opportunity the or enough maybe -- the is what, how what there? I there, don't Ductilcrete, is opportunity how up brought you since know don't exactly has become what ask I understand I this to going big fully I'm mean And

Gregory Poling

I mean which Yes business taken is this technology. flooring so, in they've a

of program fibers installed shrinkage make and a licensing Ductilcrete We floors, group types think the those, going on [indiscernible] the and generally, some for developers, a take admixtures. America. systems. knowledge done is that in joints, engineering expanded super this out expansion some We the idea products market floor was concrete in place saw maintenance extend We're flat to adding essentially sell to What end our have systems opportunities taking product you into they've we marketplace into floors those think to in in our North are a us we're and of with owners, the design higher performing system to $XXX into get that But reducing and engineering that to technologies We business. there gone the has move taken add lower floors, at that general market you it's costs are million America. We assist buildings. the lower better taking business system. flooring side that that specification today the We those contractors outside the probably sell bigger is, of performance a which improve if up just margin bought, and design cost. North a in is

good to company. we we think is think this add is the value So on to strategy for us a what start a

Operator

Capital comes with Markets. from [Operator And Connor next our KeyBanc Instructions]. question Cloetingh

Connor Cloetingh

does all growth to that between your those how business So the or wondering translate of wins incremental businesses I admixture was work? the in dynamic starting in you're seeing just two is Verifi, some strong that with

Gregory Poling

in be said half unique a admixture the based bring customers got past a developing I additional today, on us. developing component and very I are and think to that on opportunity the proposition provides to value Verifi, buy system some the accounts data. placing there. as traditionally of the in strong as Verifi market, the forward with with think mean, it admixtures our also used But just around admixtures we we're about is go Verifi and we in We're we value position customers truck Verifi has to us admixtures

combinations the to Verifi. more you'll more value admixtures think and producer to able there see selling by we'll we So both ready-mix be bring and

stronger think going sort and with the You the but of going we're places some combination admixtures putting independently, where on runs forward, Verifi is value getting we the to get truck. good we're be on

Operator

This our for today. concludes answer you now may for also concludes today's and for call Ladies and our conference question today. disconnect. attending gentlemen, you This presentation thank session and

GCP Applied (GCP) 4 Nov 172017 Q3 Earnings call transcript