VVV - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Valvoline Second Quarter 2018 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. you. Thank Instructions] [Operator of you Director conference. begin Investor Cornett, may Relations, your Sean

Sean Cornett

relations our for March a Denise. to PM presentation investors.valvoline.com. and remarks that XX-Q are until the Chief conference Sam Officer, results welcome morning Eastern A investor with webcast. at the in conjunction should of quarter we a X-K. second file release Mary Securities Financial and released Thanks, which Commission. Xnd, and SEC Officer. is Mitchell; preliminary site and results XXXX Time Valvoline's yesterday, are Good to Form and approximately XXXX available news With XX, Web at quarter These copy May Exchange been fiscal Chief on the our Valvoline with copy Meixelsperger, be today me Valvoline's Executive release, the X.XX furnished on call used has ended this earnings on call viewed Form of and the

discussion was in non-operational an restructuring reported results enhances to discussing our items, of be a of our on to are our materially earnings obligation As are forward-looking forward-looking of reconciliation unless cause our These that non-GAAP presentation believe and under risks unusual, results to measures are our this presentation assumes A actual In statements. will results included business. exclude ongoing differ our that subject basis, uncertainties use We this to in are assumptions from and statements. Adjusted or Valvoline certain forward-looking statements. any of historical GAAP remarks, such today statements a key and statements this otherwise remarks management's of understanding amounts may on we adjusted no update which of are nature. not release. the with fact in the approach current and as adjusted date any noted. results based reminder, of

Valvoline Year-to-date per items operating X, was pension million net that flow to your of want call on delivered $X.XX $XXX reported and operating see few of in $XXX are can share. slide to. from QX, cash attention to a related or you As income million There income million. we activities $XX

is and guidance accounting income. in adopted First, as first income XXXX classify early quarter Valvoline pension of we OPEB pension in that new as fiscal the non-service non-operating. OPEB

after income. separation-related Legacy last million $X expense. tax prior were tax million Pension reform which EBITDA other our small tax OPEB related QX after $XX expense million pension a As was than the and U.S. in $X to and executed EPS year this and it and year $X modest netted the tax in to A million to net year year. quarter, to provisions income added related adjusted million our fiscal to due the Also transaction exclude in Key expense, fund result, late that [ph] OPEB to period is now to adjusted pension reported the compared in of borrow is update items current we a period. income. year this $X higher interest prior XXXX. was in costs and in

Now, details as more Sam? of cover our let slide Sam to me to we turn things move over to results. four,

Sam Mitchell

results Thanks, solid. in morning and good Overall Sean, everyone. QX were

by million America margins, shareholders, cash QX impacted through dividend commitment was profitability Core each to Quick shares. North in where Our strong our pressures short-term which partially adjusted I'll in address $XXX return detail repurchasing shortly. X%. had by EPS and returned to EBITDA just over in and we offset adjusted X.X We Keeping million and This Lubes more grew our International.

which an weather-related with at under mix of at five. due Branded hampered DIY XX%, due slide volume of declined to the strong, look a segment some category effectiveness take of premium results, just primarily volume our North promotions. Branded increase modestly Within in on basis closer Core was XXX starting Let's America some the softness points.

QX in channel gains by improving grew our Segment the synthetics. QX volume The Our overall three in grew in driven DIY share trends. healthy, market in items. on and below was in recent Non-branded modestly EBITDA driven remains underperformance concentrated by in came expectations. and DIY short-term

are taken planned. bottle new First, our to with our which to more the our is transition converting and the associated related a costs plants longer These packaging. than the at lines bit costs complex

lag. timing in And the a has results expenses modest promotional third, of QX. price-cost negative year-over-year Second, impact a negative our reflect

through to raw Importantly, pass to adjust continue increases. material cost successfully we prices

performance the that we're second-half out to of can optimistic XXXX, America's Looking improve. Core North

expect more overall and channel volume favorable better We mix.

we reach calendar Our costs expect and The excited innovative packaging promotional in across our lineup are motor of transition Pour is our to QX. full through Bottle behind stronger us. is promotional of normalize. of our nearly Easy the to is end penetration our our shelf and We're XXX% second-half, shipping now by to expected largely the that oil new DIY retailers, products expenses DIY all

a raw continue the and second-half. our price-cost pricing actions pass-through our material due cost quarter to lag the during material appears it into that raw impact cost modest year. As pressures of recently, the increases included mentioned, this I More first-half results negative may the timing of

expect years margins margins, and material are while unit increases. already the will anticipated cover with confident year quarter-to-quarter two past cost the variation that significant should material for raw raw announced remain fairly additional actions, have fiscal consistent in We modest despite we Nonetheless, inflation. pricing these unit

on the for Lubes QX. Moving to results Quick

XX-store same-store by Change. sales stores The the franchise QX, single X.X% of XX.X%, drove acquisitions delivered and average up acquisition and Pricing in the gains growth programs. two improvement. was You mix of again average franchise including Instant in benefited transactions is were closed Company-owned can premium Same-store to stores see also QX. from increase sales acquisitions our in up customer EBITDA X.X%. ticket on and Total impressive performance store retention driven and that the and transactions Oil due segment slide our in which in marketing sales Valvoline growth growth six in and system-wide ticket. the

sale franchise and purchase and opportunities company of franchise between with during stores the alignment geographic locations the growth company our continued of three two quarter. We

During the we've In the new plan to added second-half VIOC and more XX stores between add company we stores year, network. XX a roughly even to first-half the franchise additions. net the split of with nearly

stores The We've the a to areas VIOC, year. our new On of the as good fiscal of company-owned shows where the get the current March. end add these the and end of expect we map second-half of franchise open you'll highlighted next slide we where expect stores XXXX. of picture locations in before the to

new also We and into penetrating like Texas markets. in markets locations are Houston, multiple expanding Virginia, existing while

beyond. to We continue fill pipeline new for fiscal XXXX store the and

growth eight, in actions across regions helped strong slide unit was up International in QX, year. segment shown in expansion. EBITDA margin very with XX% versus drive As implemented pricing profit Previously prior

also from benefits and strong Foreign unit largely India exchange Improved segment in EBITDA our contributed. margins growth. JVs China performance drove and

second-half expect be in continued the growth pace in the year, volume a the single-digit last growth coming range. in we anticipate full-year to modest also volume saw at double-digit off although growth growth accelerate the Our International to QX and of year. mid in We

coolants where second International lubricants help chain with distributors in with as gaining We've success The efficiencies investment the capture opportunities years margin. four partners, build for is and key adding all for growth. customer in market we to slide and plant are improve and volume ago. growing. growing OEM a nine, experienced drive on supply and business, our benefits our a yesterday our outlined demand in quarter, our improved of to enhanced service, with premium local helped results us a grow with international the the also of expected branded is which plans in India Investing China credibility Beyond announced an plant and JV to production,

XX we're for by to pass strong the at And The our me With it let look benefits China similar our with exceeding plant, QX of get plant be lubricant million calendar started annual a with XXXX, on that, excited investment. construction. end an results. generating over financial our expect online to should deeper We a Mary year return from gallons. capacity the capital

Mary Meixelsperger

Thanks, Sam.

slide the $X.XX. in SG&A. million one-third items XX. passing as Our gain and than were acquisition adjusted attributable was assets our X%. in Adjusted $XXX as including increased with was sale reflecting on versus sales on was and and are growth planned are offset mix Corporate was $X EBITDA Adjusted material prior cost summarized million, outlined volume Favorable actions by along on slide adjusted of through benefits, growth partially QX XX. year. raw increases in success were and income the More higher results pricing other equity exchange volume well Sales XX% EBITDA of to EPS for up increases. foreign

$XXX Total last million. $X.X debts at rate expenditures million, and lower and XX% $XX in unchanged our net million and was was $XX XX.X% Year-to-date was Year-to-date, tax rate cash line $XX primarily XX.X%, was quarter, XX.X%. adjusted billion with activities up in Year-to-date capital to to were adjusted XX%. cash our operating while effective cash taxes. cash reported of due guidance effective Our free year-over-year was from billion flow were effective from million flow QX, rate $X.X our full-year respectively.

is commitment million shareholders as year-to-date. and $XXX in returning we've paid repurchases, in million dividends share $XX Our to clear cash to completed

expect driven XX% strong by growth guidance, on of continue pricing to actions. Turning volume XX% we to and slide XX, revenue to growth

raw on our performance material investments, guidance to raising growth to for full-year $XXX adjusted actual updated $X.XX to items Based estimate We've short-term sales adjusted high a narrowing midpoint are raw range X.X% to XXXX. inflation, $XXX single of our digits, million impacting guidance X.X% $X.XX EBITDA and system-wide we activity, same-store from transitory per other share. we're reflecting our strong rising our EPS in on anticipated narrowed to and on SG&A At be to addition, is based expected repurchase to our In the performance. the share adjusted considering first-half growth EBITDA pressure costs. material million

$XX the in reflect China range. updated for million narrowed plant flow EBITDA cash in the Our We've to our expected $X by CapEx guidance to million. free our adjusted investment to investment is year this increase

to let back over to Sam turn up. wrap Now, me it

Sam Mitchell

Thanks, Mary.

overall expectations, year. QX results for we expect and Our our and in line EPS in the with in growth were adjusted EBITDA solid

first-half shorter-term DIY to was due underperformance in channel our issues. The

offset and by second-half improvement Quick model. expect performance Core We pressures in demonstrating the business in more in our of Lubes multi-channel were than the the International North of strength year. America the These

to the our by confident cost in ability increases. We engines but it making it we're growth of supply material cash demonstrated to The remain by continue in presence, we for cash headwinds infrastructure, capabilities. these this in to packaging, innovating in $XXX quarter, our returned and and year. generation significant enhancing company. Raw stronger, We that investments product that, look of slightly continue growth over our to to strengthening year, business We I'll the these encouraged the open strong, in model retail be through expect hand million. right the to momentum make shareholders the than line in the the pass With Sean international our the Q&A. to second-half more remains we believe digital chain expanding even

Sean Cornett

Thanks, Sam.

we open one line plus one, that want for everyone get limit to can just Before to Q&A, remind everyone. open the we to follow-up Denise, the line. please so to questions your

Operator

Your Stanley. question from Gutman first [Operator comes Simeon Instructions] from Morgan

Your open. line is

Josh Kamboj

on question. taking for for our Kamboj Thank Simeon Josh is this you Gutman. Hi,

little and EBITDA bit be the You them to more kind may talk factors expecting? narrowed if can your example, expect improvement but which Can improve you a you didn't what gross change profit for about you in second-half gallon you the share, they'll just or of deeper how into guidance. dive per lower

Sam Mitchell

Sure.

environment Core North for -- the we you momentum markets continued International As was us half for key plan in little we the are we some seeing North some Core side QX bit business. were from in strong DIY the up. in confident we improving the did we and heavy-duty coming Lubes soft performance growth the on volume, the particular have the year place installer a the for continue in Quick margin, International winning business we've move I'm we're saw in at expect retailers. second-half while our expect year, regarding DIY some I during from they've international of very of sorry, relatively quarter business the America. in Core overall volume We've of stable QX. back -- and business year. The our with the at volume during QX the expect margin margins schedule year, results persist. one-time And year that the the business improvements we of where good pressure second-half some initiatives will Yet too, our look the got And where as back-half with an some we our for the as during be in inflationary in some And promotional in the growth new given is the America. And the to pressures America But the first pressure as the our of solid looked first-half we to have into business very the that feel for been in we see to margins nice a the of accounts. been both North in

get the in very protect margins, the to we about unit through driven solid pass overall, to through those in So inflationary primarily obviously improvement. confident by second-half we'll feeling profit period be unit the volume then expect opposed deliver excellent towards year year. I shape this And to our end of continue we're overall we'll overall. pricing fiscal gross a as ability as margin But that very see year and the some to growth nice of to

Josh Kamboj

much. Great. you Thank very

Operator

from next Global from Securities. Seaport Mike question Your Harrison comes

line open. is Your

Jacob Schowalter

Good morning. Jacob on is This for Mike.

Sam Mitchell

Jacob. morning, Good

Jacob Schowalter

normal elevated comment you it inventory Good after or QX? of Is morning. lean? sort looks Could in levels a like DIY maybe what at maybe on little it a is or little now channel branded

Sam Mitchell

any DIY the not seeing not a inventory-related We're in channel factor. now, issues

Jacob Schowalter

QX wanted a Australia, softer. maybe little update QX? for a nice in it it Did know on I see was then And an Okay. rebound in get follow-up, my to

Sam Mitchell

a is Australia yet. the But of plan with And has is good deliver us. It been bit making and to this able prepare their second-half a year. year. Not a being expenses little managing the team progress market doing job year. they as international confident important soft for they're solid an the good I'm still good for

seen besides our has the Some But growth to of it's the it's of that softness DIFM Australia, And solid have market. been the that market in that. momentum we in heavy-duty one channel. help a been softness that's DIY markets U.S. are in the the in offset primarily some and that DIY

Jacob Schowalter

Okay. you Thank answering my for questions.

Sam Mitchell

Sure.

Operator

Tong Your next America with question Olivia Bank Lynch. of comes from Merrill

Your line is open.

Sam Mitchell

Olivia?

Operator

line Olivia, Hello, is your open.

Chris Carey

is This for Carey Can guys Olivia. Chris you a on hear me?

Sam Mitchell

ahead, Chris. go Yes,

Chris Carey

sure was not going Sorry about that, on what I'm there.

-- quantify and can the then couple sales during impact and EBITDA the of from question modeling quick a just So quarter? a M&A follow-ups, you just sales of to

Mary Meixelsperger

Yes, it $XX and revenue million million EBITDA was about of about $X of in the quarter.

Chris Carey

Okay, thanks.

I the that compares perspective on inflation, pricing offset can you've take to relative some you So And just much plans cost actions plans, kind to inflation how your to taking? original how envision provide cost pricing, of that seen? to on you guess, incremental the

Sam Mitchell

our significant last we Sure. put of year. fiscal necessarily Yes, what original go, we've beginning as yes, as when through. been plan didn't far the for But together year plan a plans managing at we that's the inflation

oil seen base our in been are and prices announced, in inflation costs up We've base oil additive that roughly of other have latest round cost the XX%. prices too. recently our With just

always with a a our our to at those confident what why success to in you're the unit third mitigating short-term 'XX, -- when fairly some working of last like on in in margins in do in you in degradation that pricing the environment, be fiscal fiscal actually that again, to continue primarily three historically and some our nice bit we create that you protect price in on continue to period margins. executed margins. that's a a the retail you inflationary we've the took does our there increases. be years pressure lag job in look to impact, it job when to in unit through DIY this also channel, managed protecting certain we done it's we've executed we When our But to done any see have And ability a in two an year-to-date. And and similar effect and through can process DIY see -- we've significant a don't and nice passing So really executing increases we year lag And we're the partners. increase, channels, now that model separate few longer because, pressure margin little that's manage through That's over with tends 'XX. through. in

were when fiscal And 'XX, first protecting to look successful So year very North all, back in in you in, we like margins versus those same margins. look through 'XX, Core at deliver 'XX. we're those thing you and fiscal America and manage doing at able the of a

So very that margins. To bottom to growth. and is, share. our of protect share in as be the mix key then our top benefit the ability drive that for period, about inflationary is across from an and line is key those improving out businesses, line the we taking see And come driving we feel business then overall, good market we to market

with that we some hopefully helps confidence in those how you margins. So manage

price laser-like have moving too good seen that is focus the with And market, what it's a is Valvoline pretty not in We competitors price, adjusting so this we've on also on either. year alone some of discipline it. our

Chris Carey

Okay, makes yes, that sense.

correct that flat way basis, wrong, gallon profit remainder guess, I'm think really, that expect on flat look I right year-over-year? on mentioned And year, if for unit for that me gross you to So is you it? sequentially? of at is the a I margins, Flat the the

Sam Mitchell

America. of North that a the Look flat for in for the we quarter-to-quarter first, believe over roughly where stability were And our margins. I some see year, gross 'XX always in basis. year see yes. overall the on variation, fiscal We'll we'll -- course yes, we Core but be with Well, at you it gallon Yes. profit per

expectation look were And and level over the range, so North is, with making improvements a been mix in to inflationary costs. because where you been is the Core that and like other couple that's the out XX%-plus of in of in $X it America the manage coming some we about, per that structural inflation, an those we're is dollar last stable are we they through our see progress of as it's margins think if that base a like nice to hold full now. So expect period think number where unit premium gallon today to this, and has that years, right good I towards in our at drive and they've roughly period --

Chris Carey

And is actually segue the last a Right. good just if to that could. I question,

you about set how I So commodity gross in oil kind margins per in the it's XXX the into over assuming -- standpoint to that prices specifically North take potentially does able the seeing set unit fiscal North and see where and you're do in profit base your and in basis crude up or the could segment, improvement from Core early, think does you stabilize going start flow you've points and know I go, of through. stabilization but Core mix when going of premiumization mean, indeed 'XX, gallon this America to you all they'll and you this how we been up your a here, a have if backdrop? America

Sam Mitchell

our million fiscal drives line it couple benefit that margins mix comes the bottom Sure. in prepare improvement, good premium mix. XXX will 'XX, and expect of to shape premium as of basis that because to every GP points when Yes, be in impact see very dollars we Roughly improvement. good be see another unit in to start and that's for roughly us we to shape we'll in I the

sense a what you can for driver that be. gives profit it a powerful So

better of for tightly because our a add improvement, and of with managed as premium on growth of solid think slower deliver significant growth for which with too when mix the and North we slower and begin so to share potential a single-digit you see and very the benefit our can the managed in But And have -- we volume business that, growth the profit top it when we is we the growing very, course growth growth us. business. of for too, business, this from tightly volume should leverage engines SG&A we And Core some manage International about Quick low large, SG&A, because growth. then SG&A high business Lube improvements, also America

Chris Carey

much. very you Thank Understood.

Operator

Crespi, of from next Your Monness, the question comes Shaw Hardt. Chris line with

is line Your open.

Chris Shaw

a of promotions, sort make pieces million it the highlighted, than morning you Good cost you everyone. a you America, $XX the so apologize as breakout I of sort was Was did EBITDA one how around North repeat for and the the much of more three packaging if late, I third, jumped third, But a something. drop kind on price, or the I the in year-over-year new repeat or equal the Core cost. other? third, something

Mary Meixelsperger

Chris, It's third. this Mary. about third, a a is third, a

In costs were the transitory $X that it, the as costs. of and million expenses promotional over of lag balance was then of from right it. cost in -- $X $X those then price about came million terms well, the we million just of the with had new around And about total, we're about bottle

it, think So, that's about it. when you're a good about way thinking to

Chris Shaw

the like saw map your in the very the I are the slides, release don't but looking helpful. given again. was at That's weather anything then too, -- impacts or typically there think I just Okay. stores a year-over-year were And I where in

would more Did any you how I the impact have or think that Given quarter, or? some weather. first you the register snow that much calendar of there had quarter, was in might first from not

Sam Mitchell

I was did DIY in so business, in weather the a comments, factor. particularly it a mention bit of our

conditions your the can the does Quick past, perform movement oil a In you by QX. special in short your volume, so seen call out weather business. identify because quarterly weather of the our see was we in was that impacts. First excuse by can due that impact promotions it. our the typically our much at impact. the that specials, impact and the that we've to oil the conditions. But it can And that impacted from identify in change and of again, during on some versus the me bad weather factor weather what of a by the primarily weather difficult POS of was We of variation we year some And full tough our weather of we really for through see the isn't an QX can that DIY a what not for -- that, to a a the going that as all, it's you're course as to part business, last get to by did promotional less weather oil change if support looking specials some normalizes. during over them, volume business month, be month, change an or term major with bit course used but The than DIY can Lubes on it ever significant was impacted weather of was due we lift impacted retailers. weather area difficult call we how where that identified And other the you retailer

into excellent and plans make retailers, relationships half with the As that. than we got we've go place the of key up year to back more for in the

Chris Shaw

the that back I bit. would help was still there when soften I -- about when few Great. the Then sort base feel years just there industry read you the often of where But it's at reports capacity about I of coming like at from you're new tightness maybe and oil, Ashland seeing were crept market remember now, online a was end and up the remember Or up capacity the -- kept report lube sort all demand guys a on all? talking tight enough has from and benefit the not market market that on? up did is they're coming looser it talk can't

Sam Mitchell

news marketplace, good of long. the the terms continues in in the market is Yes, the that to be capacity

online We to both expect online, was in brought real come in producers market lube new had as -- factor in of fiscal two to and base were productions. There long that in has fairly turnaround three and and production of be number continue about -- been to because discussion was group the still that a 'XX, group capacity because tightness and so were and a it producers a a the significant that and there refineries stock then issue issues. couple facilities the

in the supply tightness marketplace, to short-term a created was and due that issues. short-term it So

So Therefore, seeing we're the seeing in marketplace are in any that price we're that we're crude. not oil relative the increases changes today. the that of base of to seeing the

As oil is announced from crude range. XX% that base increase that. recently the been follow moves up, oil to The will to price has XX% base suppliers ultimately being tied crude in that

wasn't the but unexpected, again, it So adjustments fully we're that manageable with making. it's pricing

protecting very those forward, to then and margin from look ourselves driving in So putting and difficult the we to can as the as relates but again, in business. benefit it predict be good Valvoline solid it in margins is good crude, position shape to movements in growth I think

Chris Shaw

Thank Great. for you the color.

Operator

line Silversteyn next of Dmitry with from your comes question the And Research. Longbow

open. is Your line

Casey McDonald

in for Casey Actually, Dimitri.

at Just were the lubricant looking and you that international how going move premium And that wondering guys wanted you going are just mix, try how higher? to forward? to on ask

Sam Mitchell

in lubricants, then making more be a China channels to still going isn't as as to premiums around movement presence, is But might nonetheless the example both our North and of We're in It's Southeast real. from in necessarily the the market the Overall, it's car the Sure. premium world, it move heavy-duty in there's lower but in to the in shift confidence U.S, we're developing fast long-term great that passenger business, American it lubricants. the the selling our the and mix specs. the brands a our where benefit is business Asia But of the little and typically be is and we move growth market business. you investment positioned take to the slower how from build than brand bit regions well-positioned in is developing rate the because a the to premium. We're that the International that. to carry towards move premium improvements going of advantage benefit towards also internationally. plant more premiums in the which to margin the build Core more in entry-level Valvoline's

Valvoline that so side is both heavy-duty support car passenger and in is double-digit in markets. market. the to plant going growth very -- of the towards growth positioned China And confident continued And that we're that

Casey McDonald

one are then Okay, difference any price the And guys perfect. on versus movement? the follow-up, you just premium conventional that seeing

Sam Mitchell

No. adjust across adjusting When we're we the line. prices

we're looking conventional nuances between slight there's to Sometimes differences versus But overall, synthetic. move our where across lines. there's prices

Casey McDonald

guys. Thanks perfect. Okay,

Sam Mitchell

Sure.

Operator

SunTrust. Benjamin question Stephanie with comes next from Your

Your open. line is

Stephanie Benjamin

Hi, good morning.

If the to in as just the Do-It-For-Me your you America front could product new some just I Core well side. performance IP have as think you speak on initiatives on North channel,

color volume just more either or seeing on Thanks. any in So, you're share from those? in change growth this if channel those, and

Sam Mitchell

the we with good some product the momentum the the larger of got some where product. seeing accounts. see our past but also double-digit business, short national been service, accounts on market issues. independent some our for progress on In and we recently the product renewed Do-It-For-Me heavy-duty In the initiatives sales customers. -- teams our that Yes. they leverage also the in our there. of new growth some system some quarter, installer Haven't that the potential solid. We're this had the bullish traffic-related some with give we're focus opportunities, in from that of lineup business excellent breakthroughs it, fire, business America where that with new has focus Core been North both DIFM We've side that side mentioned had had fuel GDI platform our share growing setting we have at and world weakness our new our some business on real we and non-lubricant winning over year. us heavy-duty to of has got our growth U.S. term, solid have And with and rates expect But we've there, overall, with the we've too also a some been I

really good America. good, side see the I So to solid feel about our Core DIFM of on North some potential growth

Stephanie Benjamin

much. so Thanks Great.

Sam Mitchell

Sure.

Operator

from question next Faiza Deutsche Bank. Your comes with Alwy

Your line is open.

Faiza Alwy

hi, good morning. Yes,

Sam Mitchell

Good morning, Faiza.

Faiza Alwy

Core about a just North I America. talk So, little wanted more to first of bit all,

volumes were it of like First and better. seems all, were down non-branded branded volumes

to the growth in concerned in of back can -- side? that and that? more you you'll a talk of pricing what on non-branded take sort mix have negative And led guess, impact half are you you'll I about as sort the see So that you factors the

Sam Mitchell

Okay. Yes.

total on business side to really efforts business, And commenting expect business. because versus brand carry margin that's America that focused. see when years, the case. branded is the innovation branded and that our and North over really at solid continue or premium in where where stable the we the in non-branded again that First, the of private-label and focus for good, the a us Core we expect you side to it's our look non-branded, the volume about than XX% in be been It does nice to on mix, a lower growth improvements is are

we that So due do the North on that of impacts saw Core side bit really that weather-related with key promotions to the feel softness retailers. DIY And the in primarily regarding tied business. we was our to the the on was branding comments America

term that's So nature. short in

our powerful going DIY modest market get with package, that the schedule we're have now seeing longer while market, line. share as And hit of to term, the and expect while market take as I growth, and it confident cost some the closely more DIY share strong in bit saw that despite we improve merchandising that's see more with is do improved DIY. new of it did half to I this a across the the think look in we back for short because where as I don't those to year, product the will And place And Valvoline the brand differentiator help discover time even the the shelves some to we're we're us that over to us consumers mentioned in the grow out retailers. course, share dramatically too full package. more share quarter, during are the a that tracking and it solid also, DIY in us softness remains improvement. in market But our We of shipments

Faiza Alwy

it between there other of, know, there's materials don't and And than to sort take to the material lag, are in some -- seen the oil? a follow just often oil? cost? as channel, seen mentioned you are Have were any the more logistics DIY talking you Okay. base have freight you packaging the these have I increases raw Or versus pricing. is costs? change to the extent those retailers base know, you are so you Or of we raw is, bottle lag? pricing cost? there talking are that, in about as other Like, -- getting question on cost And before? up then you like Like to from pushback about for the increases, how the we part I other, guess, easy sort you increases that like that And related of two any cost like especially just

Sam Mitchell

one too of cost, the makeup our about year increase significant costs additive the we that's mention an this oil of did to talk down too. so the I our is breaking Yes, that our that in had that base one the the product, absorbed most. -- more we we tend

doing those sure and key very but that in so And too, oil the modest been logistics in on we're again, real focus There's increases in The packaging. are prices cost been those our inflation we've is cover And in transportation, that structure. adjusting making then that. and, manageable. base successful are drivers additive

of any terms of any the channels. in in timing We change haven't of the seen lag

brand maintaining those would and the index increases mitigate adjusting on strength with partners Core position, installer national us basis. job Lube have pricing good keep our our the you execute accounts to teams work impact similar a of on our network, us and any of do number business the gives the pricing, partners business. North in are appropriate quarterly the are to very So accounts strong through channel I we in the that the the our that a large implementing and that's what our too track. remind ability Quick doing retail to are the increases channel, for to is and America side of key business prices a price And on

no lag Core a large up -- North which side to impact really of it pricing the portion as that makes index America. of there's the relates accounts So DIFM

Faiza Alwy

much. Okay, great. Thank so you

Operator

comes from question Research. with Bottiglieri last Chris Wolfe Your

is line open. Your

Chris Bottiglieri

be? what the your then from frame Wondering to you kind lot or in payback it to I other taking benefit did corporate want what facility do and the -- adjacent question. sales your own from having the blending However of your know for you I if expect on this margins Thanks of kind year, you the Chinese How finance are markets affect or like do one, Hi. here, that. the of a sorry. market? relative how CapEx perspective the blending just And year? impacts facility, last JV? international there's does what I guess, to mean

Mary Meixelsperger

impact Yes, did so as $XX it to CapEx raise for year result relates We million. this CapEx to CapEx, by it'll a $X that. guidance million our our as of

Next in 'XX. year, year fiscal be will our spend to over plant the and couple the period of related 'XX the a balance spread out

Lube intend where continue. be of continue CapEx, So been, higher do that run aggressively opening I and is which to next significant CapEx that given a we new to the do total to has our amount Quick expect rate it slightly stores, our year than we expect

kind years. be So over a certainly run would the above and of baseline plant over that rate of couple

$XXX of if spend way be to a million to that for absorb you million about this So $XX if to it. about years think capital, good year, going plant a we're couple that'd think

very And we supply pay the so the we've And joint with in capture profile. to volume within capturing stable higher-margin that plant. In on is that the help can margin return we the us to we of that believe really venture fact China. coming assessments plant of business the chain. terms us is -- That's have our unrelated strong a mix, tollers going through chain seen business in more our supply the to advantages India do that terms new in today drive manufacturing overall in it provides also terms will that lower we what we feel in we returns, with of believe did we that to that costs that

relative very bullish investment in believe to and the our So we're for us. of overall return of cost capital, a terms risk-adjusted and a solid really it's return

Chris Bottiglieri

about Chinese relative this of instant good makes maybe to of initiatives you. making on wanted terms Got on the model And type over to investment momentum, other And get an BEVs? great. of any just What the you as thought you you. in if separately, government then kind market. step you to are That's growth oil seeing maybe excited your then are the perspective China back, follow-up, seeing growth? accelerate what such in Thank change mandates And like there? have you

Sam Mitchell

the our the Yes, last attractive couple too total the car joint that China, we've is venture we're participate additions consistent growing such particularly with it has also quite in spending way markets. and some of attractive that on It's in seen strong been made significant market in China, because a lot we've it nice what a building both particularly in performance for and where to the team in a time -- is has China, but the over Valvoline's We've in China really growth, both heavy-duty very market strong been quickly, market. years. an Valvoline our capabilities passenger we makes in of too. Cummins demand, got

growth think this year, relationships; up I great we're our products because strong meet on year. volume needs. top XX% about is of fiscal of that developing last That's working market

As at technology, is developing newer for new engines. we've about, lubricants the talked forefront Valvoline of engine the

maintenance progress will side. market the to evolve, segments, strong. be passenger about looking is on today. channels car that good done how car at continue car consumer passenger different think the the we then And the we're different making going heavy-duty is how side we're So And on certainly to growth and as in very

alternative when service, China, and what's really service is we but having model there's dealership. at garages back your to you take car today, missing is car dealerships, So a the the to look that high-quality that mechanic nice of plenty

aggressively. business on that's us partners that so that an And and we're talking more could that area grow help working us to focus of different for

point to to be million lot it'll time. But on see to EVs take very even to We also to is growth we're predominantly ICEs. in some better continue going fuel-efficient still Sure, technology when too, away a And XX -- we'll There's leading which and internal a per cars China are use we're market they're penetration growth combustion we'll our see main over definitely in in see engines. a build in some and lubricants. capabilities. of take opportunities, we that continue China. see comes sold and hybrids long-term new the of China, going there we're EVs year good adoption, but bullish probably So, China, more EV to it as

Chris Bottiglieri

That's extremely Thank you, helpful. Sam.

Sam Mitchell

Sure.

Operator

Valvoline's and Second this Quarter Ladies concludes XXXX gentlemen, Earnings Conference Call.

disconnect. all may You

Valvoline (VVV) 4 May 182018 Q2 Earnings call transcript