GCP - Earnings call transcript Q2 2018 | GCP Applied Technologies Inc

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Operator

Good day everyone and welcome to the GCP Applied Technologies Second Quarter 2018 Earnings Conference Call. All participants will be listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe DeCristofaro, Vice President of Investor Relations. ahead. go Please

Joe DeCristofaro

Freeman, Hello, on Gary. 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

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

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

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

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

these discussing account Darex operations basis Technologies. on the sale are We of a for Packaging results continuing to

the in XXXX. over on adjusts Additionally, as Venezuela of growth July call to impact of are a the for Greg. that, discussion revenue we turn and With associated X, rates I'll comparable constant-currency deconsolidated which this stated All basis, currency. foreign

Greg Poling

in with the Thanks, Joe, SCC quarter X% the up morning. second SBM grew good flat XX% year. prior and revenues GCP business our and

in revenues the these flat delays impacted into residential our due underlayment was SCC volatility our inflation in increased to especially shifted decision quarter. discounts exchange This our this the certain negatively were to disproportionately factors. in quarter emerging business by were was markets. reduce and impacted SBM and which earnings business revenues impacted by June in project third Our customer cost foreign

EBIT with margins second range. in million well contributed Our about the adjusted performing sales bolt-on acquisitions quarter $XX XX% in and are

continuing to a pipeline pursuit of opportunities. strong bolt-on are acquisition We

Asia; Our construction being America, markets foreign are Turkey and healthy in impacted and pressures. Middle exchange geopolitical volatility are inflation North the by the events, Western however, Latin Europe the and America, East

We are such admixtures of our VERIFI. implementing of and the SCC penetration business improve the plan high-margin profitability to accelerate three-point as the to technologies

are we low First, profit, volatility significantly raising markets. high prices in admixtures

rationalizing in minimal disproportionate We and a low and a with profit are these customers. will markets also for resources our This business of near-term profit technologies. of differentiated volatile countries in business certain offers admixtures our opportunities number consuming share

with program reduces in facilities, result, lowers targets are a that the restructuring The million operating expenses. as and implementing headcounts annualized we SCC $XX of restructuring savings consolidates a Secondly, program sales about benefiting business. XX%

growth approximately providing strong well-positioned Third, and in product XX by we range we value. are class in focusing margins core to where service generate are countries level a of admixture on customers XX best to

million to into XXX billion at VERIFI once acceptance cubic to integrated million $X market to focusing on addressable X.X to XX over capture every VERIFI factory. producers for X placed the ready continues who integrated We their our $X they yards can and implement systems additional VERIFI for We spent estimate resources of mix as customers dollar sales come are the productivity quality growing value and gain transit other admixture billion, and countries savings from reduced a concrete. VERIFI of XX% and cement benefits These over providing prior designs. with technologies. well VERIFI We of rate about placing makes focused year. higher use also admixture improvements admixture in management admixture estimate are our additional as in system our cement the an are be in differentiated market opportunity. and growing VERIFI by

than greater margins adjusted with million targeting million of to revenues EBIT are to $XX XXXX, or business. by for SBM VERIFI margins our this $XX We equivalent

additional our position transit on our improve in our growth plan began management We admixture and for margins implementation the system. to as again provide also sustainable on opportunities We integrated strengthen expect order we to competitive three-point future accelerate our with new admixture built penetration revenues technologies. business in

announced to additional we on of strategy in and President I'd and to now the Randy turn GCP’s As call working look and X, September to Dearth as joining July, out details. COO, team Company. like be the across Dean support will our for to the Randy over we forward us execution with

Dean Freeman

Thanks, morning everybody. good Greg, and

Just XXX excluding year Venezuela associated in strip business. X%, GCP growth were rates divested basis. and a consolidated year comments currency to reminder, revenues and and revenue to Halex the million the over constant grew all my are X% on up tack

sales April residential with reduce however a second our growth. strong out down to X% May project began delays with of was business. averaging June and to combination customer in XX% and The quarter discounts decision due

Building again, America R.I.W. X%. as and second a SCC quarter [indiscernible] As sales in our up up to North continue growing sales increased sales XX%. XX% was quarter, supported result, with the down the strong was also up well were [X:XX:XX] up market Stirling revenue X% the sales quarter, EMEA construction continued sales solid XX% revenue growing X%, the perform year-over-year, we year-over-year, admixture Greg July in were expect pointed XX%. pipeline. In X% Lloyd VERIFI quarter we second increased by Envelope into installed third X%, including with now in shifted X% out, up growth to order SBM’s units the third and see sales

the Envelope in about businesses. $XXX grew Latin product I to flat into continued residential timing captured than shift in strong divestiture gross EMEA Envelope However XX% declined America month Middle was shifting Sales a to of emerging We XX.X%. primarily to well to the impacted profit profit activity, and Brazil the due the acquisitions Mexico promotional SBM a to business a million and our increase oil million. with as revenue overall, average in The which Building was of shifted X% primarily in were by mentioned. quarter July. points is in On lower anticipated price revenue Halex X%. was The Western reduce currency sequential inflation due volatility. XX% for were July our basis prices X% about XX%, residential declined of more and increases which basis price SCC our inflation to were to decision with amount as inflation as due offset Europe, Halex as negatively up price year-over-year margins In in in by we GCP lower particularly and partly growth In costs the mix. regional volumes track and and the excluding inflation. the the was to XX% and America Building market sales $XX however, over revenue total the increase business due growth logistics and growth X.X margin and increased SCC XXX lower Adjusted North to Venezuela. increased SCC’s impacted to foreign in sales X% be was business declined due East. covered revenues X%, excluding the revenue Safety North million about X%, increased into offset business. in again America strip declined promotions quarter, the price Asia-Pacific was business, cement admixture admixture decline quarter offset sales. concrete due X%.

and which than and XX% which XX% for year-over-year inflation. moved SCC between Argentina XX% average the inflation on represented these in SCC’s second approximately Turkey, these U.S. because Brazil, combined of sales, of countries However, contributed XX% the Currencies of quarter. contributed countries more XX% the in

increases in price inflationary initiated We these double-digit have significant markets.

In annual revenue and we admixture countries be million profit. an with is of a impact benefit sales. of certain XX% little with business. The repositioning the XXXX with we to XX% impact announced savings million rationalization, position estimated annual the no increases, about estimated on price SCC’s to program also SCC $XX conjunction rationalizing reduction with $XX targeted or which will are revenue addition of have In of our restructuring about low in profit gross

that XXXX be directed savings estimate charge to cost cost the X million will XX related the to million repositioning low GCP $XX million our operating million to forecast expenses remaining million with be XXXX. million. We to included expect transaction. associated is we million we of X million savings directly restructuring plan XX in the pretax the EBITDA to previous cost $XX and of million total declinedXX% actions $XX expect in interest debt income adjusted XX compared of of XX to to XX to to realize will our million efforts. in segment and achieve And $XX refinancing to of and million to due

approximately be on benefit of earnings We new notes expect the the a X.X% our interest to senior lower share. annualize $X.XX

second April notes of and XX%, $XX the tax million total on senior versus transition in as the flow our million to X and free a count payments diluted million a shares. Tax was quarter. of EPS XXXX part XX X due Act. year's to million cash Reform million accrued of The was interest made me $XX share decreased positive for was $X.XX Our negative million last rate adjusted tax -- Adjusted X% to was largely compared quarter redemption $X excuse related share

will an the interest in new third notes quarter. for our senior We payment now have

in in mature growth. of Looking in revenue at SCC’s now at included to XXXX a expect of our reduction sales revised XXXX our result a X% guidance, our markets. forecast, profit million low we rationalizing X% plan $XX to as We’ve

EBITDA is to guidance Our million. million adjusted XXX now XXX

about for million and I partially XXXX have price actions for expectations results in of We offset impact account $XX mentioned. to initiatives quarter restructuring and second additional additional by included just persistent inflation our the inflation,

EPS expect cash And $X.XX revising in and turn adjusted With to to guidance result I'll now for per Greg were share. it tax project $XX over we as XX% our adjusted rate million closing free XX% between remains a We now range to and $XX comments. to $X.XX that, million flow. our

Greg Poling

sales GCP core grew you, remain quarter markets second in Dean. Thank in healthy. the our

given performing in shift Our the residential some in as quarter. business in anticipated business is SBM delays the project we the

the integrated you and to designed structure, be overall GCP transit and opportunities would thank I and redeploy and the recapture price admixtures increasing $XX implementing in these targeting which we repositioning savings restructuring to markets lower initiating impacted Dean for This higher take our actions We three-point reduce exchange questions. happy in to focusing margins, our call want saw core results of program margins, system. negatively by and to on to penetration markets. joining margin and management of resources our forward. SCC million actions a taking is improve plan for and our VERIFI now volatility resources annual We’re our additional emerging include markets, going involved rates, our SCC overall in inflation the cost The administrative were your increases

Operator

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

Mike Harrison

can actions, what if actions savings the that undertake million I restructuring actions? was different maybe of should ROIC we you the split on of talk all the how us you talk or you’re little going an approach give Is some tools determine into can as you there buckets? restructuring And analytical wondering to you EVA these approach detail to a bit driven $XX more at take? about those or use about to up

Greg Poling

Yes, in as as both accrued money as XX% terms to selling business well were factory and million SCC about of I G&A business. the of the that’s mean that I that’s the to allocated admin of actually the costs XX in it split said

we benefit, of the essentially went put was implemented business. one P&L cost that already also we’re customer we of after countries the approved associated We was assessment territory returns went We the which for ROI. level. to re-segmented of place those gross weren’t the each the were defined and the the an expect we looking with we down that margin is then generating our we associated are board We with country and each as through contribution lines in selling went So and how admixture eliminate and we what by expenses, The and kind this deploy of that those of on in all and cutoff in an point to profit being frankly to plans business those taking us and much the G&A in one that. customers developed, did at resources business. not businesses

twofold that also strategy. as business So to it of through the where good for a admixture take it’s XX us XX to of which the a margins, re-segmentation savings positions XX we allowed growing but importantly so was countries have take those put against detailed million business, very us and P&L nice resources very more to

Dean Freeman

add analysis, just to analysis our comment, just we’re no or profit, as mentioned part about the to little was updated guidance the on indicator, -- impact Just gross optimal $XX that of about the notably my in with of undertaking. comments million that’s program I as an and so the revenue

Mike Harrison

question then on… And

Greg Poling

One sorry, one it simplification point on to doing we’re it business does to I admixture out other just to of about Those complications sorry the taking and eliminating impact countries. XX businesses would does point follow-up see -- can the you XX so on standpoint, think I XX with the that but countries But we’re wanted but complication that impact SBM. of business, not of other you continue not cement, and complexity in am terms type that. I from to can tell XX you the us interrupt

Mike Harrison

be talk about chemicals the materials bit in the and able or later? you in six little see Are logistics work months pieces? move contracts as then more you contracted a a flexibility any environment how materials even in price pricing, question you kind with both costs can detail to get Or inflationary the construction And moves more on building this or to prices three to able of stuck it if moving? you

Greg Poling

two into said and in come is we of the price. just countries. go fact quarter second business us and traditionally not back that some took to contractual is matter the roll the are takes it those prices get we we in those quarter first, We in we Where in or quarter. We’ve that’s us in for time a third contract a we’ve recapture quite to us as quarter. doing what issue us a and America, our need Frankly, admixture it. of the the much have as it didn’t oil and North of The especially with in in team think us. Asia happened the Pacific, accelerated about The to these covering fact and job markets in million second did side, I the through we matured covered more European FX on than markets with inflation in the but markets we was some the pass emerging and we in What came in core is nailed North in of the nice pretty $X.X America shift out, put price price

we quickly. the foreign other changed price of this speed obligations, in it was So this way with not of but the would more an countries with countries, see it exchange the in contractual oil in which issue case the oil was boat we go and but very typically these think --

talking we’re Now that’s issue were the volatility we leaving. about

Operator

[Operator comes go Instructions] The question Shaw next Crespi. ahead. Monness, Please with from Chris

Chris Shaw

those regain to made took quarter buys and we in second discounts discounts that residential those that I there question the was months, were that? so no track had so promotion. the the caused picked our on we than you that the place I’m July. guess promotional prior it’s estimate at it’s some Dean bought like then eliminate historically the essentially reduce XX% inflationary see somewhat in in things shift just but We the know done that up decided said, and margin, to guess then of great happening the have that res buy give end was the What discounts as Chris glad as shift color through sales happened sounds rather that was what's I dramatic the it. some pushing prices What they could pressures, June shifted such you do if with residential decision fairly the on a of but in didn’t the I quarter. like a business. we and promotional business business the guess conditions have I done third have reason they that in as first question for couple in we stopped essentially in have? that to had residential quarter, e in the in you they doing out What’s year, to but is in price it down I sales to sort

the through seen shift seen of we frankly latter we quarter now July, the back. of have All came have that pickup a part come and in that

that So, way eliminated we price increases those in use. to a and we was decided to or business activity that another was promotional We way it the quarter. that for the that best

Chris Shaw

if or And to raw are not seemingly the being the in I don’t in after up some happened I you maybe something there top material quick said it’s quarter raw that I I’m some on in moved inflation material the some you first I ahead after thought of being in top the rise materials sort you not of raw call quarter. second that this sort could that guess that of with quarter just follow guys in up like rise quarter. up were conference what the but so you at price. before are following, first of caught the -- of on least there’s remember quarter? on -- the quickly of

Greg Poling

we big markets FX happened, of anticipate as right, base combined India Brazil, in rate East, we a Argentina that was a both. the oil got when of the you have when those it's happens change had they reverse Dean in these Usually, where specific and plan Turkey, plan of the full put significant emerging countries for XX%. Two did will Middle we up parts in pricing we driver in are of them them our materials year. for pricing in oil and is move our for about in put some fact the which raw the have sequentially XX% us on You things were the but operating

buying the hit. FX into getting importing So we materials and raw those countries were

we our at that didn’t we track those look countries, -- with inflation in cover would the that thought anticipate. and been on you on So, foreign did on when core so. the specificity it that, have was markets, we move, We price ex exchange moved

Chris Shaw

And then I what is business? SCC sort operating for segment guess longer of the term margins and that targeted the

Greg Poling

question. the exactly That’s

better businesses countries margins, where those other think So and ship if at picked from XX countries in XXX we have core them our business. now recruits we’re to admixture to million up then XX business to We to that to opportunities nice borrowing and our XX we those good basis lines product for any business. the points XXX addition VERIFI of on that margins where

added admixtures gets depreciation, of after that margin. part you verify and business to If that take business STM

expect over margins we those XXX So, couple $XX basis bring $XX more SCC to points. million Once get we said once -- the up back. time we million, we as get

So, year we’re have emerging XX ourselves where focusing cost position hit XX the a we to and then that in we a margins out. those where improve pricing markets taken to recover took hit markets to into and the

Operator

with Cloetingh question Capital next from Connor The KeyBanc Please Markets. ahead. comes go

Connor Cloetingh

I of that large or gives in was going So anything the end similar to you into outlook you beginning involved see XXXX back you at XX wondering the your that XXXX just projects in you and confidence I half horizon? know some that had are on

Greg Poling

We good some do really work. have project

more more walls out good City some work we ramp. programs We XX%. pipeline of slabs about We now around proofing that’s Asia do new back couple pushed up work Mexico got In and New going we do time. to water some there. sort got in on play nice some progress picked of out to is a actually starting our that business you America, fact, York transition of to project the is up -- are finished and some come infrastructure on, over going slabs, building when we nice North out. got so very which and there projects pouring of a East in got in pouring project they work Pacific we’re on shift major some some shotcrete. about in read The We with SBM Those Middle on the projects our from in actually

going business good on Qatar. very in have We

get strong the You pressed getting there the the in this project ships our project projects that second read our third we shipments Actually those that is delays disruption SBM projects what we -- but and that margin. was going SBM is business in the pipeline good. pretty out is from they business in raised some we just where us quarter, had the saw quarter fact of had did about into finished, despite on pretty are

Connor Cloetingh

the share you. still for any just works Thank great. And in acquisition is good it strategy the Okay, a then or in your future? on question buybacks there pipeline plans

Greg Poling

we’re those to our changed overall. deployment Connor, our that working and haven't synergizing we kind that, we actively buy got strategy work this on pipeline structure. we’re margin profile strategy that continuing seeing pipeline that We to have really like the a it, is around good fit so into were capital the of businesses

that with about got pipeline they when tell you continue will sticking to We’re we we good a it, and pursue and will we done. get

Connor Cloetingh

Great then much remind SBM and Could just tied residential? how you just thank last is us you one of business one to curious. your

Greg Poling

million a little a $XXX that us question solid business $XXX Yes, good a for res lot for movement about terms business quarterization, a we’ve got is of less it but this in little million, a quarter. but great the is is year, than less it’s than a and it’s of that business a

Operator

and presentation. Thank for you question-and-answer conference session the our concludes now This attending is concluded. also today's

disconnect. may You now

GCP Applied (GCP) 8 Aug 182018 Q2 Earnings call transcript