VVV - Earnings call transcript Q4 2019

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Operator

Ladies and gentleman, thank you for standing by, and welcome to Valvoline's Fourth Quarter 2019 Earnings Conference call. [Operator Instructions].

I would like to turn the call over today to Mr. Sean Cornett, Investor Relations. Mr. ahead. go please Cornett,

Sean Cornett

approximately morning, and to for Webcast. year XXXX, and Good XXXX presentation the investor Eastern be remarks investors.valvoline.com. relations Fourth earnings Conference a fiscal at XX, website September viewed Call Valvoline and ended p.m. and is Carol. Valvoline's which that should copy with welcome at Quarter and quarter X Thanks, released of Time conjunction available X, yesterday, release, November this in on our results

we until and on preliminary a are Chief our copy Form the Executive Securities results These With has the on the with file Valvoline's Meixelsperger, Chief Financial to Officer, Exchange of Officer. me XX-K today, Form X-K. the A Sam Commission. call Mary been Mitchell; news release furnished and

certain of as statements, today and statements that obligation X, by of the are Valvoline presentation and from forward-looking As that statements fact update differ assumptions Slide risk forward-looking this statements. uncertainties statements. of law. These shown actual required are current of forward-looking on our on may any remarks results historical are date assumes based to such no materially any to unless are not to subject cause

nature. business. results our our not in to believe we'll of information used provided other of our in this adjusted noted. release. In non-GAAP and this our measures used companies. in presentation GAAP adjusted understanding measures we on discussing a approach by reconciliation was the earnings ongoing our basis, results and discussion key We of remarks, of nonoperational to items, non-GAAP similar restructuring management management's be use amounts results by unusual, or under our may reported The exclude an comparable and enhances is Adjusted included otherwise unless A which are

and the As results we the review Slide quarter X, our to for turn year. let's reported

and $XX net EPS million fiscal fourth operating income $XXX of of reported the income For delivered million in of quarter, Valvoline $X.XX.

$X.XX. year, cash $XXX full from million, activities of income operating the Fiscal XXXX delivered Valvoline reporting million. $XXX net of flow $XXX of For EPS and million was

the certain primarily with accounting the of the and Beginning of standard. essentially items income reclassification fiscal XXXX Valvoline revenue sales, the new SG&A. in recognition standard cost a of statement, The adopted impacting is sales impact year,

$XX For net QX, impacting had the $X for non-service million to expense. no offset and and expense, OPEB were roughly more An after-tax. key a of after remeasurements items, after-tax gain the $X to million impact year there changes income. Core and In profitability. to added was income acquisition-related earnings, tax $X North expenses a than were pension bargain full netting America's this year, million of related after-tax purchase Restructuring by mark-to-market X QX million amounted

million items of and expense. of after-tax $XX related fiscal OPEB QX XXXX, to primarily In were key pension

Slide to our move review let's X, let's adjusted Now results.

million, adjusted EBITDA X%. Our in QX was growing $XXX

in year, grew year X% tax million. EBITDA EPS quarter came Core in were America. of per lower-than-anticipated North ahead cost by Lubes of roughly year. grew the X% and the for strength of Quick and the included for in the full For expenses QX the ongoing Adjusted benefit quarter $X.XX level share. and adjusted XX% Results EPS driven in and discreet expectations grew a for to and $XXX

results. to let segment Now, to our it me over turn review Sam

Samuel Mitchell

Sean. Thanks,

and EPS pleased in with QX. growth in our are We overall EBITDA adjusted

Core in to to strategy International. Lubes, America Quick on in maintain our North develop work growth focus Our to is and opportunities

and net Most in implement were to driven These the same-store model. growth this expand quarter We've make of was sales new set adding by of retail services strategy. built initiatives XX% the capabilities presence growth stores impressive XX.X%. continue by and to progress XXX we to broad year generated the against System-wide our our to We in retail Quick ended results quarter, at the were best-in-class system. this XXXX, successful a Lubes. was

we again performance and throughout and Market to have North year-over-year expenses the as year. Core they sales In continue More-than-expected saw segment in the improved America, impact QX. volume DIY challenges in America. category the costs a in contributed In first volume of EBITDA. volume parts Europe quarters, picked three strong quarter up also in International remains Asia. to in modest growth and After growth soft growth Latin in

grew Middle in markets and China Africa by joint the However, ventures, offset these Including East, softness in volume growth X%. unconsolidated region. was

sales Foreign flat and exchange to EBITDA. adjusted impact profitability leading continues to negatively

Let's franchise stores in growth Company was look take grew Lubes sales X.X% slide. same-store at the performance closer XX.X%. a and stores grew QX system-wide. XX% Quick in next

a the For increases. our sales XX.X%, of growth, XXth consecutive year same-store full for representing year year, record same-store sales grew and

continue in improve retail through our driving model our We best-in-class and investments marketing our these technology, people, to industry-leading results.

and a sales and same-store exceptional ticket quarter the the For between results. transaction year, growth drove balance improvement average

growth pricing. sales to of same-store continue generated points increases from non-oil-change About implemented the customers and near We price add our to and growing beginning of retain XXXX. we revenue and premium by was X fiscal mix, benefit

units continue stores XX As our first Canada, year, X outside to we've in the throughout franchise in stores, stores the company with done U.S. including and QX add we XX company-owned company stores

Oil growth of XX XX comprised the XX additional we included XXX system. in XXXX, XX stores net acquisition of acquired the to strong and franchise In added constructed new Changers the stores. Canada, locations of newly company The stores

turn Let's slide. the to next

For strong fiscal in Lubes XXXX, continue. growth the we expect to Quick

about our nearly of XXX for to those, talent system added have stores the leverage we to add as next plans stores development new year, ground-up we the XX to expect teams. We we've

well in have target stores per we to few built to our newly pipeline XX on next year our over years. the and team place, nearly up way moving we're the With

stores. add and Our XX franchisees between should XX

expected are also to meaningful acquisitions New to store growth. contribute

continue and experience X% our to convenience superior to We on expect sales teams same-store deliver increase X% a to in-store Quick based trust. Lubes as

segment will past to an on with adding in to and new combine years, EBITDA. anticipated Our over fuel we've the two along operations, added low focus the we're stores midteens growth ones the

our our out app our penetrating last including quarter. further to our focused company technology In model, service and luxury store new XXXX, markets with build and further in new on be customers. investing our capabilities and with SUVs to we'll trust programs trucks. We breakthrough invest in that continue owners transparency discussed cars new marketing more and to expanding of light-duty We're We're vehicles. target to we rolling also

We base. expect these customer help new grow our offerings to

quarter, America's performance by branded were year. EBITDA X%, but Let's Core the discuss slide. grew Core affected the We a throughout North remains that down declined second the due to in decline in challenges year-over-year X%. volume sales segment next progress X% America volume addressing market QX, the and North was have America in for these primarily The decrease made In on Core the volume market improve channel consecutive the North retail driven unsettled. adjusted challenges,

underlying to The continue have business approach. as selling base volume with we the our differentiated in channel remained success installer steady

proposition value-added expense premium us by retention driven helped our Our ongoing operating benefited in primarily program. has and better-than-expected reduction EBITDA cost expense mix. customer increased and Adjusted quarter savings, improve from the

the review Let's Core the on outlook next North America slide.

the are invest flow channel, its indicates, XXXX, North with focus cash In our targeted America goal progress making using strong our As installer to on maintain we growth our business. in opportunities. segments. stabilizing to is is generation Core the In strategy

the dealership needed Instant current Our with business recall bolster for Oil by Recall us We're market. win to Valvoline help designed partnership our in relationships services. heavy-duty of with customers our helping car the grow Awareness also encouraged with new strong Cummins, to referring sales dealerships is leverage results Change early us by which their force partners Program to fleets is customers our safety groups and

DIY the still category in are dynamics Retailer-driven evolving.

We value brand. consumer to of our strengthen focused on messaging continue the our

We for - Valvoline partners develop forward. to going are right working retail merchandising key with plans for our the the

growth expected in Label channel our branded to Private next the year. of is However, pressuring the retail continue volume

volume. We of in the expect for by retail to expectations driver margin lower-margin negative lower mix $X.XX of growth coming declines the a higher-margin year. installer to between retail installer offset partially modestly and The channel continuing $X.XX is unit primary be modest branded

to programs flexibility Our ongoing reinvest cost the savings to stabilize gives help us business.

EBITDA DIY our the additional and plans services low-single-digit Overall, in promotional mid-single-digit launching channel. for segment. we include opportunities and value-added declines Our anticipate volume declines strengthening installer the

benefits lay year essentially the that International in included results [Indiscernible] a of the acquisition the and recent bright in the by volumes. year slide. spot mixed our International on was manufacturing been QX, has to Eastern on Europe. growth of QX, our Europe move with for region. and the in aftermarket continues next for pressure which Let's and Volume growth to continued in China flat heavy-duty during sector

driven than channel of our that a double digits. continued including by outside up Asia, few to efforts, China, markets grow, were development

car passenger helped progress make America performance and of Importantly, expand in duty adjusted flat. the quarter, to as our keep QX, to impacts EBITDA in to JVs. Volume returned we including growth the launched Latin offset in to heavy grew X% products in continue portfolio. foreign exchange Their

As Slide on you for can growth year. XX, see we are on in volume next the International focusing

that on we key business. growth Europe, Our continued focusing opportunities XXXX. base expect We'll we in across in is most see over can our time. be international grow markets expectation in In share regions to our

and and also up We Eastern customer capabilities chain we and acquisition, enhancing integrate benefit, opening Russian our and as supply European our to expect service. markets

momentum marketing that we we on product expect support in America, passenger Latin and associated expanded heavy-duty business, with growth build our our in car In the QX. continued saw portfolio will

relationships with OEM products as larger growing aftermarket additional Asia, coolants also with including our such We're key China. accounts in expanding and in

us volumes on our expect the our success. production In from reinvigorate to now. investments position long-range model, International long-term expect roughly new to channels, line a accelerating to for China to XXXX, Overall, in we're and with and track, is plant X% building we grow X% in our platforms year we brand begin Our growth to targets.

next These negative improvement EBITDA roughly be foreign impacts, limit profitably in will anticipated expected flat. with year exchange investments, along to with

it review over Mary to Now financial to pass let me results. our

Mary Meixelsperger

Thanks, Sam.

are Our the and full sales the during QX were year. on results year Reported quarter XX. Slide XXXX increased summarized X% for X% and increased adjusted

exchange, of Excluding these revenue drivers in sales the the sales periods. foreign increased increases. X% underlying Pricing volume impact both of would've and mix favorable were by and recognition primary unfavorable overall

unfavorable and gross basis, costs in to rate on recognition. basis margin quarter revenue points lower growth in Favorable mix adjusted from impact our the contributed a despite XXX modest and

incentive compensation gross the in flat, would've driven year, excluding versus and last and revenue by higher was been higher the For expenses. Increased advertising recognition. SG&A year rate marketing QX roughly margin

investments marketing development year, new the drove the Quick as in and SG&A. within in teams, Lubes, increase in both well advertising our store as For

and EBITDA X% FX year more and impacts. unfavorable mix Adjusted the with X% than and the of overall improvements SG&A margin offsetting increased higher for benefits quarter for the

items. XX to to move Slide discuss corporate Let's

key effective for X.X%. was our rate effective Our Adjusted items, tax reported tax quarter rate for was the XX.X%.

impacted also adjusted our by both XX.X% year reduced the which During discrete reported respectively. rates, tax a benefit. and full benefit XX.X%, were rates and quarter, million were $X This tax

Full were flows year activities $XXX company new plants by from China. operating last expenditures investments cash million in strong million. remains our and $XXX flow from million, driven store Free $XX in additions $XXX Capital million. cash was at year, increasing

expect the we top additions line and both unit in in continued growth on Quick XXXX, slide. next in growth sales from same-store low fiscal guidance International. single-digit benefiting review and and growth sales, Let's In in volume strong mid-single-digit Lubes

to With growth these to on representing longer keeping million $XXX X%. term to year, we X% plans, nearly of rates EBITDA adjusted X% meet of to track growth anticipate of X%, next $XXX us our

EPS EBITDA XX% growth, is our effective $X.XX. adjusted together $X.XX rate lead tax of between and to expected fall next and Our adjusted with year to XX%, to

our million benefit depreciation about expected from also for but our X%, to we to in in China adjusted the which $X.XX this to range. up discrete expenditures in nearly Lubes will The to free of EPS $XXX to primarily in to from benefit, investment new million in in be Normalizing increase peak flow, directly growth, $XX added be as year EPS results and anticipated Quick will EBITDA due XXXX. our our ongoing is investment increase tax Capital our to higher million with stores. cash impact in amortization flat plant. the are $XXX expense $XX store XXXX to million new growth company-owned line our next expect spend The company QX CapEx

of accounting of $XXX add standard, the will assets already Beginning The balance in income. also million fiscal built lease to to million impact sheet. net small to is roughly XXXX, the reduction into impact be our Valvoline will be EBITDA new primary which and lease-related with a roughly $X will liabilities There guidance. no in adapt

first The declines. to typically typically quarter - volumes, me, fiscal lower includes excludes generally excuse mid-single-digit seasonally sequential leading

do the year million XXXX, the a performance of range in expect but first We versus Overall, expect a million. the we we a of of in start quarter anticipate to seasonality with adjusted of level slower QX fiscal much similar to $XXX EBITDA better year-over-year XXXX. $XXX

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

Samuel Mitchell

a exchange and challenges end encouraged several which We've by to in market Mary. implementation through new start initiative, reacted, Core managed high our top line Thanks, headwinds year, and challenges and foreign of America the expense North very in savings plans note. a in way XXXX, on the helped operating International. promotional us I'm teams our year growth slow the including

Lubes Importantly, foundation XX% already we XXXX, up continued We further in of make EBITDA, for the we from our adjusted Lubes expect objectives. have building in to strategic represent XX% growth great the future. XXXX. Quick progress the in success momentum business. our now Quick In on

future the Core American in International. business, for do, work stabilizing investing have North We but while progress making growth we're to

our aggressively resources opportunities. allocating business to high-growth a plan are devoting also to service-based strategy to We high-return, model, this of accelerate and drive significant. The service-driven these benefits shift capital projects to

As we our DIY shifts the services, dynamics. earnings business market consistent are as of strengthening earnings, more enabling future addresses stability profit mix the even growth the current towards

industry-leading to value to in our faster customers, strong more our more business driving deliver business in convenience, stores very and investing margins. We're a model profit with more growth

against priorities, to we we continue execute core and for our to value shareholders. drive our for growth As Valvoline expect

Shawn it Q&A. With the that, I'll turn to line open over for to

Sean Cornett

for [Operator Sam. Carol, the please Thanks, Instructions]. line open Q&A.

Operator

[Operator Instructions].

Morgan this morning question Stanley. first from Gutman Simeon from Our comes

Xian Siew

Simeon. that wondering, be laid in on a Day. there anything just guidance We of? is bit out guidance it's Quick the aware Or for This than the timing? we were Investor there of the lower Siew store on Xian Lubes that is should just little was kind Is kind of the

Samuel Mitchell

for So same-store is... actually consistent growth. It Day the Investor guidance is guidance with sales

Xian Siew

growth. store Yes. unit No, Yes.

Samuel Mitchell

what about said XXXX. we we in is also believe, and would we I on we stores guidance, Investor that that year exactly our Day, a adding XXX in expect

Xian Siew

I a mean it little bit was Yes. just narrower.

I versus think you like to XX XX XX. had to XX

just [indiscernible] okay. relatively - but Okay, Fine.

Samuel Mitchell

what I of you're store portion the think addressing ground-up guidance. then our is

stores approximately closer have the in is The we we the So XX in XXXX. pipeline. and what range expecting we're total, to in is to ground-ups add expect XXX what

Xian Siew

Okay.

Samuel Mitchell

plus. the expect and with XXX the franchise But again, growth, of fully at combination we stores to, acquisitions be

Mary Meixelsperger

period to over - range store we the construction about. On Investor that about had talked we talked that Day, higher ground-up growing that that X-year

it closer growth from XX we're in into year, stores grow, So next seen XX in year current year, - that XXXX. fiscal the stores the we've stores XX to and to beyond a we fact, expect

Samuel Mitchell

That's right, Mary.

Xian Siew

Okay. then base and you are Got of environment? America profit Core per kind sense. assumption? what's And within it. oil the about North for That gallon, how And thinking guidance that makes gross

Samuel Mitchell

has summer been we through the The Yes. oil market as pretty base into months move XXXX. stable and

of impact we any of just indication that relative is XXXX, expectation seen the our base into IMO inflation oil of but so is And having stability. haven't There risk some yet.

Operator

from from English Goldman question comes Our Sachs. next Jason

Cody Ross

you committed behind XQ highlighted in At Beginning the Label pressure actually driven and is on lower your in the competition. spending promotions Jason. Cody form Private guys mostly to segment, prices. of 'XX, the for increase DIY brand time, the by you in This

from that we're to year currently happy Now where a And needs done? how relative to you to are sit close standpoint work that, do with actually you Label? more much be Private you think into a pricing

Samuel Mitchell

Yes.

what XXXX. in all, of in terms First of took place

the took continue when growth brands. But to emphasize saw their conventional to other first to - as has Private impact particularly share business, to had as the competitors. that's in mid-tier back retailers summer significant Going as to that private-label And portfolio. portfolio, our relates our XXXX of really the on Label similar is declining from in they the of our a a it had some the of impact volume negative side branded we

versus the a with some that closing on front. aggressive of Private XXXX. saw gap addressed We Label in [indiscernible] in We Label, plan more gap merchandising benefits versus that that conventional Private

however, of certain side counts conventional there to into more to again, continue we segment. the emphasize sensitive the XXXX, on be move challenges Private there with price As Label, continuing

an what set brand. is the the we're elements. XXXX. promote retailers those distribution, with on to work of is with like, looks that us we From that. and And the key continue for plans to for One for your we shelf the how retailers, there's the shelf regard of So regulars area couple standpoint, set a where with XXXX with into then focus merchandising the as comfortable stand commitments

And merchandising I the still would improvement. for side, on have we say, opportunities

with North - the we I and solid we've cost And challenges DIY we of But we're in in allow this, how business. feel this think, navigate plans address given so these some marketing through we've I our that how got plan reflects that that been the business. us, savings challenges - both Core of aggressive the a the for the - to in how face consumer pursued place guidance we're will America we've programs DIY that and to some

Cody Ross

And one in Great. follow-up Thank you. can if I sneak there.

Your broader impressive, peers of been retail landscape. and performance Quick in especially has context in the Lubes

you've now a delivering. However, promising over record developed track and under of

you for X% guidance Going XX%. 'XX, your FY to into growth was and X% delivered

being X% to such for now you do Why a you You're deceleration? X% is for 'XX. are And sales for conservative? this think planning FY just same-store you growth guiding

Samuel Mitchell

stores and ticket. we've of successfully the more driving our also marketing in retaining growth Sure. planned something and mean and expectations what been they and have sales all. that of more promotions results our is not model those investing customers all, customers our XX% the for to Yes. exceed and But I our of XXXX, first effectiveness did had of we the And in year. throughout just tremendous the it at does reflect were attracting to strength same-store

that we and of is the portion at sales the the store XXXX, level. as was should The beginning of moves And are improvements, major same-store at understand that planning driven improvement, we XXXX. X any approximately thing points of pricing that not everyone one by our a pricing took XX-point actions begin we acknowledge

us attractive And a that puts so in in is rate. that given back guidance out, middle same-store XXXX, the growth for squarely when very you we've still which sales the that growth of

penetration. to doesn't and deceleration when the it really stores new comes any customer driving stronger you at performance when growth of this reflect So ticket type our consider driving

confidence comps. is this the very a continue So business strong of reflection these really to the have we in

Operator

from Research. comes next from Silversteyn Dmitry Buckingham Our question

Wahid Amin

Amin Wahid Dmitry. is This for on

Just to from the quarter, Midway wanted rather Core than bit you're on color what pulling you little North talk kind through receiving levers the channel DIY some installer a of you're feedback about the provide America. And to what stabilize? could channel?

Samuel Mitchell

last your more one hearing say you of question Could had that I part it? trouble time.

Wahid Amin

Sure. feedback America within about was pulled? receiving quarter. you Could what Core about the of being are what levers North portion? I the DIY in on early And kind you talking are speak

Samuel Mitchell

Okay.

the that in encouraging reflects total our - we've of strengthening product last when the the few and North seen one when both and the that we quarters to greater had structures America, and performance, look programs. Core relates - after you progress we've did you is some been saving this speaking with QX cost so see making the look SG&A, in quarter stability structure, to do at So to that of our mainly at QX cost signs the cost

the is certainly So quarter. to contributing that

Mileage been less with Label it side feel DIY, DIY the current market answer be really Specifically, as where that from relates dynamics of through it as to there gave the the we've about share synthetic we and so and the I the business, reflects conventional continues that how to the to on pressure particularly XXXX. solid our Private relates High earlier segment side

progress a that So New offset the enter have on reflect partially we loss our XXXX, particularly view in the guidance making the branded that channel, we by installer as Year, the could that still lubricant we're the some side, DIY business. being some retail side of of volume for the does in

approach The comments the we're the the presentation also of strength more too. side This about Recall installer business, installer in making example on bringing of the with noted a one that Cummins side program. the service-driven and of to heavy-duty business. of the should progress the is side referral add I to

experienced you for profitability smaller So at we look in are North when overall, a American decline XXXX. and XXXX, we Core in forecasting than business volume both the what had

our we - yet. way Core all there progress that to business America so stabilization, forecast. our will that not making So And just be in we're focus were towards continue of the and North yet terms

Operator

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

Olivia Tong

the [indiscernible] talk Can is stable? on China huge And oil just amount EBITDA it first spend. Is the to of So taking If about And you then environment, have on it's cash much you My get So guide cash guide? want I flow. just your embedded just free despite flow? the you're incremental that the exclude base cost actions just a question flex should increase? lift like seems understand how in pretty pricing in what's volatile? more free

Mary Meixelsperger

'XX, excluding probably the free flow tax Year-over-year, in from biggest bonus Olivia, from plant, others planning is tax higher on depreciation, from opportunities. taxes. have cash some reform, benefited Yes. other accelerated - China cash the we drag

continue working fiscal cash sales do we be also expect fiscal investments in in our 'XX were in so modest they impacts our to And line then with capital we taxes see cash growth 'XX. flow. higher than that to And free in

So those higher probably that we're impacts the outside expecting biggest are X of the CapEx.

Olivia Tong

And then the oil base environment? cost

Mary Meixelsperger

question that ask again, you Olivia? Could

Olivia Tong

seems is stable. base it now and Sure. is right like fairly was that Sure. stable cost just It fairly environment oil

trying to much your base guide? move, you if flex should in volatile? oil guide more your start have things just So to in get does embedded how understand And what's

Samuel Mitchell

increases, position we're will actions execute pricing a that. offset us that help oil feel to some I we in even if see that base good

with in a position feel could in like good So a impact you worst, smaller but a at effect, overall, lag XXXX. we have negative we're as I a quarter enter

Olivia Tong

me. for Two Got ones it. last

of stabilization. North America, it needs like little bit sounds still Core DIY a Just

parts think Just unsettled. of curious your you called business I about -

when price you on is already? your in hit of there? you you growing in at? what that little of think take So more? then to of start doing? of have see just stride? labor efforts bit a And you you think The your competitor push What's your key And fruits Quick the terms can't some And market Lubes, do a you do why sense when idea

Samuel Mitchell

regard Sure. do to are we has with the drive we label. unsettled, different promote looking auto traffic DIY, and be it of to combination branded regard mass, retail Yes, dynamics - when to first to private consider strategies with the to versus with how current parts rather at products and how they

we're terms of those XXXX, And we what we're setup productive. we're promotions making. continue and be seeing we're progress to discussions their terms And we're so report because one that I our each each seeing That accounts to yet calendar got for what in ready said, dialed not of stabilization conversation quarter in. completely consider in with not on in there kind of how we'll say our tactics, it year we've of to and

our trade efforts. of that where DIY. aggressive DIY. and of has of the And That's in consumer and there. executions Those with that's in to where synthetic category to side I progress seen the consumer focusing our have our resilience are we the future good feel we've for the we marketing over going see we aspects our and we're shift been like portfolio making control belongs, in last where synthetic of towards regard that our in example, some couple that over quite the And the actions be programs, years

have business do and with year. - second yet we're of have build ticket our we anything in to words, new services. better delivering want not - customers on doesn't view going growth believe your strong and where to because versus had do pricing I really certainly business, of this attracting in change to our taking this over consistently a question really why a competitors. competition small and - to stores involving And pricing and - it our have not long-term this some taking we're that the this opportunities we other a to with But we competitive And advantage is

in momentum want that be we customers the have that get cautious we aggressively services. some other of could and not of pricing unnecessarily or better new pushing to penetrating these too attracting so bit And way a the in

that our it's for great we're to sales So we need don't growth. We decision of to margins. more us our in take - same-store a our continue such front bringing pricing, And to customers. while the opportunity now to, we've going improve value more do and not strong to want to got our that

a again, that's increases cost So in as we position think If have I pricing. in relates of our versus we to competitors see it do explanation strategy that the take we're XXXX, of good because advantage excellent our to pricing

Operator

Our Stephanie Benjamin next from question comes from SunTrust.

Stephanie Benjamin

branded market - participation bit pressure on in the the market. And kind there of Private been opportunity end up first had you've of just Mileage in having kind the follow-up to remind DIY. then just just around is to just market? conventional your your Could wanted where High a the category focus to those on of us on strategy high I of the little your lower and your focus question shift capture little level, from away market's going, thinking of kind International. maybe gain? before, dollars investment the level on high point of a for of high with follow I help And an that that kind then just to Just curious, in Label just to segment to a this bit kind to the exposure synthetic segments continuing Olivia's of the and side in - long-term related the conversations some you segment DIY this

Samuel Mitchell

Yes.

very America, of provided Private talk we the value when these platform be geared don't Private bring where reminder, business the a business. pretty next that As we margin that low significant with label which our the the is couple And Private Label in for and continues also towards DIY out warehouse the that Private part accounts business shifts that one long-standing carries participate frequently Label Label too. good a strong and to from bid is the business Label frequently, provide of a for brands. distributor our meaning We and business volatile, North Private support Core is Label stable private fairly supplier in to to we've and field business,

don't to place play. attractive for we that's So an us think

And shifts our portfolio is DIY synthetic, so will lot that synthetic a to is And our brand. efforts of to the moving focus business strengthen of the the lie where sure strategy with strong. forward Valvoline making that's our be towards continues

Stephanie Benjamin

shifting back I just and even International. much what fiscal at for fiscal of kind of achieved - in just lower 'XX. volume it Great. 'XX just the that you've fiscal 'XX, than And the growth performance to looking kind in gears was and then you're looking

understand a there. be to couple years? out best, I the - over presence last you grower grow up that the should kind build be to low just see at your what's single-digit your that confidence nice a, there's gives been market you and of But of going share some step investments So such able to kind what from of

Samuel Mitchell

Brazil China, which markets XXXX. in that had we've We The XXXX. number our went in had that of strongest challenges growth It in and some bankrupt parts for impacted negatively fee from growth license reflect to that has we business had a We in noted Yes. America, that International in International the of Mexico the of some business. seen different business part changes been Australia that large of does been a slowdown exiting moving - in Latin we disappointing even challenges years. distributor a have lot we and of has made the a

in more in and our has as do the our strengths some forward, capabilities market, we've channels of the the moving confidence, business to improve seen to our that we with improve of our underlying some So team. distribution

in summer built the the for through Europe progress of we've opportunities Eastern as plant momentum and of So the expect share we've seeing could and and on momentum we where with see feel China, the XXXX good market work the the also in passenger we on in was to some good side plan on channels addition continue have Asia, we work we business. the each with that car the of had the to had into in XXXX, In still Cummins made slowdown of with new particularly business those more that that we're our XXXX. But excellent have to the in side industrial developing on heavy-duty opportunities challenges, Europe, the we're of growth XXXX. bullish continue in We've do an Asia. dynamics in our regions, side

we'll improved in believe I So China. see results

marketing did to strong we coming And Latin we in place have QX. I will a strong America of with the to that XXXX. then growth some do Latin back And think America, that return initiatives in pickup see good in

primarily, confident growth, that for feel Overall, share And the And when number regions we look reflects, that flat. laid profitable. us in then you at that grow strategy we've in of in better SG&A where XXXX the one growth to long-term profit in think our that past, be is leverage is International. projecting out business XXXX, opportunities growth as in line some International and markets. to we've there great that solid our global these but some going the positions these projected solidly top of I we're Valvoline of we're is a the capabilities really be to brand investments for is And making the each

in at allow us that matter And our so faster capabilities a grow it's and of investing teams to our really rate. a

that to growth growth And across XXXX, it get go volume deliver also getting volume our begin so and the expect But year on track should back to profit XXXX regions. growth, longer international we with of a I and growth term, investment profit deliver XXXX. that as for is to - really to in that

Operator

Zekauskas comes Jeff question from from JPMorgan. next Our

Jeffrey Zekauskas

XXX,XXX was Quick gallon that much in to Lubes, growth sales? Of how the tied of same-store

Samuel Mitchell

It take any will to for provide us questions? minute on. Jeff, you, so a Jeff, hang other that

Jeffrey Zekauskas

oil regular in or I is more are And And deterioration that points? going Lubes a the is a do. oil price the mix in Quick sharply coming change the what have I points Or staying Or was the synthetic for prices improvement price plainly But change up? same? some are is, the individual offsetting individual down? they is, the follow-up. are for one mix I improving. like wondering

Samuel Mitchell

for has been pricing Lubes Yes. in Quick The us. really positive dynamics

our one of have where markets we seen any any downward. so And to need examples any in indications not we've or prices adjust

time, costs in when up. particularly our moving we've increases taking over price are So consistent been

to more benefiting oil the And with then changes, oil so we're regard improvements changes. synthetic really from mix more premium

continues trend that So to be very strong.

fact, In is oil relative - mid-XX% conventional premium to now well our mix oil all our of changes, changes. mix premium into

oil continued then mix services with stronger to customer services growth execute So better in opportunity better our other our real it's penetrate big really those loyal the themselves us other for count, in because and positive customer base. more changes and seeing we're

focus is really very in that strong a So us for XXXX

Mary Meixelsperger

And Lubes to increase as store acquisition Core the X/X year. stores. the from of from and increase, of did sales coming in remaining XXX,XXX had Jeff, then for of about previously XXX,XXX the your quarter in the was North first Canadian accounted question America that that segment in increase last gallons the fourth about Quick been I comp the noncomp business we served gallons That QX. estimate, And about versus

Jeffrey Zekauskas

roughly? if And Great. more raw by can your move in you since how costs And they much Did - in fourth material if did, it lower experienced sequentially Okay. that one squeeze I as quarter? here.

Samuel Mitchell

feeling Yes. Actually, in were we that price that increases base We QX. full of that executed effect QX. accepted in were full felt oils in we the increase

terms through. of increases, cost saw overall flow we So in that industry-wide

progress costs both help initiatives own the the However, expense level. on that savings margin we've our of note been material some seeing we we're us operating with that implementing that and some did cost raw at gross

Jeffrey Zekauskas

the or sequentially? quarter your net down raw go in for did up fourth you materials So

Samuel Mitchell

us give moment on Can you that? a

Jeffrey Zekauskas

Sure.

Mary Meixelsperger

Yes.

benefits from cost the from in overall some perspective see perspective. - we So price cost a the in quarter, price did

to up was in America about that And margins drove price was remainder North $X.XX, the unit went that really Our specifically QX. portion where then and of a Core about up saw we it cost. of volume mix from $X.XX

as So benefits mentioned, some also well. pricing But did actions see some as as efforts cost we finalization reduction we Sam well. of see did from the our -

Operator

next from Our Alexander Laurence Jefferies. comes from question

Daniel Rizzo

Dan Rizzo is This Lawrence. for on

years your above XXXX? several was million your expansion as be XXXX, opposed where will Given the for going around back can to and plans, assume next CapEx we it that $XXX plans

Mary Meixelsperger

XXXX. won't because investment in million 'XX in see that the certainly expect will levels is that 'XX. in at plant to to It we in we're of The to incurred $XX fiscal $XX that the really be China and be investment peak Yes. million China $XX total of going the million range,

store you going can returns assume continuing excess growth that so store see to as to over to capital really that that $XXX the the with up take our think growth. forward over in you going if investments meaningful of CapEx XX XX new from million with moving the investment So long our will we're stores couple or of be as I new in years, out, next from

Daniel Rizzo

And in pressure then stabilized I so and happening volume well going understand is this. I'm it's within North now? Core with has be XXXX? pricing what's indeed more sorry But under as but of volumes, and that question Or if more on - I'm America not clear yourself, thing a just to

Samuel Mitchell

with all Mileage low much we've of stable. expect the whereas right, around be pricing you're High - our environment pressure stable, cost actions particularly the end - and margins conventional at It's volume we it's segments, taken, that on is more No. the both the market, the really and to

Operator

from Our Christopher Wolfe next question comes from Research. Bottiglieri

Christopher Bottiglieri

you're curious is But kind you're you in in new to bringing holistically, some terms the talked internationally like, anything your potentially First, of services? done Lube level Quick of I Lubes anything that to And extent. then more if want there's doing? with? Quick learn if I that new think some b, about service just anything recall past, about being services dealing a, to there offering, maybe,

Samuel Mitchell

we those provide prepared XXXX, One we'll focus that focus trucks, of certain now existing preventive up going to we business in will there of we better across and those good have necessary. areas do areas part synergies some program enhancing we in all services, offer gap, forward. provide the the is some inform be But like the that which Quick make lacking services particularly executing service markets. were second marketing a is of Quick There diesel progress we has to is, services the Yes. sharing of terms - in and and penetration the that that trucks Lubes the of on. needed programs on then the yes, area and too. progress are that But it's services that of we the and support see our a that light-duty Lubes more that specifically, forward in a business, have of those can services, recall couple fully closed that to in look also one within maintenance an this with of to percent And customers diesel portfolio, are we couple

those per customers So our in and impact attracting can going to our that's stores. changes growth oil new with the that, in positive OCD, day, have to markets ticket very a or add on even

XXXX is big we Another our that on be that opportunity area and a in we'll into XXXX in battery focused have program.

But our strong batteries So years. needs hasn't in in to been consistency batteries be our we as also program offer for then life of and and measure provide customers. the batteries, the our left performance as new in previous it

that supplier place the new working And also is our in moving to in new tests system. we're and plan supply our so believe ability opportunity us And both consumers' we to forward. a significant those effectively batteries a better this with very for have addresses batteries

and throughout on for a benefits offering, broad results impact rolling we be in XXXX. we'll move us we'll ticket. our we'll So this I XXXX, same-store our able service And have in as to measurable into that which think overall then be program sales in see

Christopher Bottiglieri

Private the but a could there do. way know there if you you I And of tangential helpful. you've category category like other framework can Label can that then about Or kind the Is potentially I answer evens any where XX%, penetration? in to through power. bit a out more But of That's us it's we were - America - your phenomenal, is headwinds actually peak? - brightly, Is see I'm branded, guess? out give on like where quickly there framework figure is this little categories they you. seen more label private saturation at, think North brand or trying peaking? either so but the kind aftermarket any more a figure to just Got to when bottom point via where

Samuel Mitchell

Yes. in area. to continuing We're this do work

you a to don't And as level where to give Label have specific out. so to Private begins number I

look dynamics at However, when we second. conventional synthetic between oil sensitive the segment and price the

Valvoline retailers Label shifts category equity play, of comes and margin slower, to more their a have towards customers. of a focus back on is As think have penetration Private lot like the And with it traffic. performance. we how drive The synthetics the our brands we synthetic, been stronger strong has and

Valvoline, look at earning on a those so they they're a players, Private offering. with than synthetic like brands the Label when synthetic products margin branded And higher they are synthetic

stores, proven drive So strong aspect drive and that's is too. overall traffic. players to like to aspect, has one a And and other Valvoline, DIY branded base. the traffic Valvoline ability the for to Valvoline the these continues have consumer

see that Label And don't so think years certainly exponentially grow I that. Private we'll the in

towards they seen equilibrium the lost I some exactly mid-tier and have brands try next as lot big know say what we're a we and to and to that Label. as towards branded traffic just too Private in an of year. more this I think research that early we'll lies. the between distribution, margins, progress think do we the is, that as work But where optimize a and leap progressing forward It's replacing by with we've retailers mix on driving and right

Operator

comes Blake next question Global. from Our from Seaport Keating

Blake Keating

on here. Harrison Mike Blake Keating for

strength, Or growth? the volume on about with that? a we So to be should return margin International could business, the part think the International that of how sustainable

Mary Meixelsperger

also with amount of saw variability from the up year, geographic the the various quarter in margin actions and we fair really lag the part of we strength regions. benefit see pricing of in saw International some that they based earlier caught some price a fourth So on that. saw And really cost

where So seeing I on International that's similar going of be as how course, XXXX mix within of in they we're about to think margins they'll is in continue then performed and based the that the product growth the terms think geographic range the forward how well. a mix you to highest

grow my demand frame, we'll premiumization, technology some much time higher margins time within as their continue for horizon longer-term is, opportunity expectation lubricants. but the their increase developing countries have that's to over a longer-term through to Over

Christopher Bottiglieri

that then And in 'XX, we Right. facility? magnitude XXXX, spending of How on million 'XX, the plant or the All investment, the you've you $XX and timing just of from the remind 'XX? can contribution in China so about cadence out called about us think should

Mary Meixelsperger

The Yes. just 'XX million. spend was under $XX

So in into of will full the over next year fall the process little actually fiscal the bulk fourth incremental production bit a of into probably the in startup 'XX with of spending will XXXX. begin come The and in go quarter plant XXXX.

providing startup in the the headwinds business. We current year will that's on fiscal dollars fiscal see million plant a of - International in one-time costs 'XX, couple of some

Operator

you like We to today. everyone question-and-answer today's concludes would session. concludes thank for disconnect. may This And event. today's now This attending

Samuel Mitchell

you. Thank right. All

Valvoline (VVV) 10 Nov 192019 Q4 Earnings call transcript