Earnings call transcript Q3 2023

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

Operator

Good day and welcome to Carpenter Technology Corporation Third Quarter 2023 Conference Call. All participants are in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

I'd like now to hand the conference over to John Huyette, Vice President of Investor Relations. at sir ahead go this time. Please you. Thank

John Huyette

is you, Carpenter Technology Good Third with ended This presentation everyone Internet over the morning the to Quarter call XXXX. XX, welcome slides. and March being Earnings along XXXX broadcast the Thank Fiscal Operator. also Conference for Call

Lain, you Officer; Thene, movement. President Please the Speakers Vice note, phone, call for and President time Officer. a today you of experience those Tony and on Executive Chief delay Tim by are Financial Chief listening may in and slide

Statements on forward-looking made be can cause from current factors by that management June materially ended during year those this for attached report statements recent could statements expectations. December filings. Form XXXX XX-K found XX, exhibits earnings presentation in that Forms quarters actual are the SEC differ forward-looking on results Carpenter XXXX, ended filings, to September for XX, XX, to XX-Q are Technology's based and these Risks most the the the XXXX, including and company's

Please unless surcharge. special discusses otherwise operating referring based excluding also adjusted operating reference sales that and margin, noted, following surcharge. to excludes on discussion, the or revenue management that sales income when is that items excluding in note When

I Tony. turn call will now over to the

Tony Thene

Through quarter, you, rate performance. in lowering performance incident on the call morning We case third slide year third Thank John of our of to X.X. rate. begin total safety good quarter the the today. saw four review the I'll and everyone on our and XXXX, was a year-to-date improved fiscal

hires transfers increased to either increase in into is As tasks, new year-over-year due or the roles. new new undertaking discussed rate we have as employees the recent quarters, largely

invest any task, to additional in job and monitoring employee to or new follow-up. for continue We with frequent a training

us be of continues rank workplace. one Although safest zero companies, manufacturing goal a would as the to our metal injury injury rate a X.X

a Now, of quarter. third and the let's turn to review slide five

our facilities market defense by environment, and each driven markets. a our we and demand ninth consecutive growth. higher With price our increasing excel. end-use of notably, was our continue productivity expands operating strong to our Most backlog end-use marks the demand And in increased of year-over-year. markets, This end-use ramp at Aerospace backlog across operating performance quarter gains, environment sequentially realize XX% XX% third the The we and quarter strong demand which the with margins. see

In another this price to of on announced week, we increase X% XX% transactional our fact, business.

in the learning. our production improve to continue productivity our safely force, employees by onboarding centers We and labor the facilities investing new of required our training to across across all accelerate of

We of are starting to realize and performance efforts the productivity segments. business benefits of these our the

the operating quarter, of SAO our expectations. $XX the income delivered segment exceeding million, For

to With end-use market. defense aerospace able aerospace medical in for The and segment end-use the for medical products in demand material turned in in income titanium additional PEP the improvement and were In ship operating particularly quarter. and and with we strong productivity, the the saw for strong customers, another defense particular, performance recent our to million we markets. $XX.X

with $XXX quarter in remains Finally, million the our liquidity. as healthy, liquidity total finished we

Now, let's market the six move end-use to and update. slide

end-use our All end-use and flat essentially sequentially, markets of were which market, the except was year-over-year medical sequentially. up

for backlog long-term and near-term each our market and outlook. record outlook positive remains of Our support end-use our levels this

growing pushing to across to continue up meet of year-over-year. XX% traffic Customers continues sequentially our demand. and submarkets aerospace delivery continues to higher to ramp urgently chain sales seek and Our supply aerospace planes XX% XX% grow, to and aerospace production levels. end-use Global material and request ramp for the accounted for market defense the new was

XX% backlog across increases Notably extended market to sequentially is our continues Aerospace Defense demand, lead rise. continued As and the a and have times result end-use backlog industry and year-over-year. up in the XX% of our

Our reflect urgency increases price customer record secure levels material. backlog to and

The essentially growing year-over-year to primarily XX% higher increasing their were flat was manufacturing year-over-year. of surgery, electric by and driven activity. up market demand medical for are sales The And XX% electric results meet surgery. sequentially customers end-use ongoing for accounting growth in

are to continues outlook be overall positive as year The medical XXXX. calendar rise to expected procedures throughout

of compared XX% to increase vehicles. and rates are heavy-duty as last for strong this X% year up replenishment X% year evidence up calendar X% transportation in and backlog sales and XX% of We year-over-year. is inventory demand and market sequentially throughout Build seeing to medical the are of market accounted The end-use sequentially chain supply with both our expected was up low light-duty end-use XXXX.

and and market supply, end-use energy outpace driving energy for was overall market X% focused sales last growth demand growth to compared demand end-use in sales fabrication. of and consumer reaching energy up accounting business the and used materials year. into end-use The cases, investment and XX% industrial the The market material solutions high-margin to capital continues like XX% margins solutions. our remain in we due similar the many XX% accounted semiconductor to sequentially for We high XX% to environment. solutions for up year-over-year. now Defense are Aerospace In on of was unique up XX% and material sequentially our business for supplying Demand up are a

it summary. over will turn for to financial Tim the Now, I

Tim Lain

volume. the XX% year third income Good the slide excluding surcharge in X Sales start $XXX.X Net were were statement sales same Tony. Sequentially from quarter sales increased on summary. higher XX% XX% the morning totaled Thanks surcharge excluding on a million. period ago XX% sales $XXX.X million everyone. volume. I'll higher on and up

was the million in in and increased second year of $XX.X the fiscal our quarter and growth both year profit an the quarter, sales higher year-over-year, $XX last prices. and base sequentially operations. that Gross are to note would the outpaced throughput also our improving driven The compared and by the driven mix $XX.X by I improving across volume same current in XXXX. of growth quarter product volumes million productivity million

year The increases. selling improvement sequentially. offset mix inflationary XX% and quarter profit XXX% by in up is is profit product the partially gross and sales higher driven Gross cost prices by compared up to primarily and same last improving increased

expenses SG&A up $X same SG&A totaled roughly the reflects the last higher roughly quarter, in from period and in third higher costs, $XX SG&A $XX and adjusting line expenses about costs million increase million other recent of special a SG&A were certain item expenses. The year-over-year. The the third million variable quarter, sequentially. expenses million up quarter. in accruals, for corporate in largely year's the travel which $XX.X million year When third ago were includes higher the compensation timing $XX.X

expect of $XX about XXXX, the to we to be we quarter corporate As cost fiscal look year ahead fourth million. upcoming

operating $XX.X excluding the Again, the was prior of price is special by and the income items improvement the productivity in mix second current in quarter volume Operating was in profitability million driving being gains the recent driven quarter, quarter. adjusted in benefits. $XX.X year $X.X million loss our and operating When increasing income million. with impact was along

fourth not about on to The interest Although was our $XX.X to the in quarter to slide, revolver on increase be $XX recent due second currently expense compared rates expect current rising million interest borrowings. upcoming our quarter. We the outstanding quarter. is $XX in the interest our shown million expense million in

XX.X%. for tax the effective was third quarter rate Our

share. demonstrate the be We XX% approximately continued a rate results current per improving continue full year $X.XX by for momentum per was environment. the to to strong XXXX share XX%. quarter The supported expect productivity that demand effective will and our Earnings tax

surcharge million surcharge. Now net were turning to excluding XX% higher increased Slide excluding $XXX.X Net or year, million segment excluding X sales Sequentially, the Compared volume. third XX% results. $XXX.X on same higher SAO last the quarter surcharge our and increased period XX% sales XX% volumes. sales on for net to

on volumes to higher sales combined productivity prices product efficiencies volumes gains, we sales The stronger higher products. higher continue to by key of a the market Sequentially, drive an in slide. end-use mix with shipment markets, year-over-year as across improvement and the the of due driven Tony mix momentum in as our operating drove net improving net was impacts reviewed

versus $XX towards to a reflect SAO the significant operating our improvement operating and run rates. improving third same Moving year The to fiscal quarter. of operating our quarter, results. recent income XXXX quarter in year second income continued reported progress million our returning an last both recent results

operating year-over-year $XX.X product mix of also our on has a coupled is sales higher basis, performance. improved contract driven to an transactional SAO due income improvement business. throughput from was largely which This million improving On the activity and and adjusted increases cost both and production increased price with

higher of improved increased to our income million partially continue offset $XX.X ahead quarter. meet is in last expectations variable as which driven On accruals by current This we operations basis demand, the quarter. ramp by to was we set the compensation a strong volumes, the operating sequential

customers income we needs SAO levels activity $XX accelerating generate in future. to on to focused in pre-pandemic the operating the This million income in range for XXXX. fourth as the remains team safe the year of production SAO quarter anticipate our a a it to return significant fiscal meet manner have the on upcoming Based ahead, Looking $XX operating current expectations, and flow foreseeable is of mark would levels. will of million

demand quarter segment Now XX% in the surcharge. in sales the quarter X% sales Net million and or year primarily our million increased results. Titanium year reflects our XXXX and The growth and Net sales Slide of from in turning $XXX.X XX increased additive $XXX.X excluding third net were same surcharge PEP last to excluding sequentially. year-over-year Dynamet businesses. fiscal

also year-over-year titanium the In ago. quarter and We've in from in Medical Aerospace the and business Defense both in sales defense seen and a our primarily defense in aerospace net our and primarily both titanium net and the increased in significant a sales improvement same Dynamet additive to applications. Dynamet reflects markets business, sales end-use year sales driven sequential sales market. The additive by aerospace increase market increases end-use

year to in and quarter reported same $XX.X the million of current income adjusted year the in of income income This of quarter the million fiscal operating second $X.X XXXX. a compares In PEP operating ago million. of $X.X quarter operating

year-over-year in by in will year range of the operating improvement and million quarter operating higher $XX upcoming businesses. PEP our anticipate of the Dynamet We sales income million to additive fourth The driven XXXX. currently $XX the income that fiscal for segment deliver largely is

improvement. adjusted compared The the current quarter, $XX of million an with we to a and increase of combined an flow. attributable in is inventory a of million, In prior earnings, build to to cash or sequential activities, inventory reduction $X review generated the turning operating from the largely cash higher $XX Now free quarter. XX million slide

materials reduction We will anticipate driven from The in operations. more levels upcoming by the reduce quarter. balanced the be and of flow fourth will increased a shipments inventories across that we current the

In quarter's by to progressed. cash higher receivable, is largely other $XX as of terms of use driven million working accounts the current the sales, due capital, increased quarter

million $XX spent capital we XXXX year expenditures. fiscal of on quarter third the In

year We capital to XXXX due in million, to to fiscal expect $XX million of timing $XX slightly our is range be the projects. million previous to $XX guidance from of which the million capital expenditures down of $XX

Lastly, we million in a important an in as I XXXX. continue return. to year cash part quarter free those continue our free adjusted our of shareholder the constant dividend in shareholders and fund to cash mind, our details which reported of overall flow adjusted is of With $XX flow fiscal included highlight, third we to negative

free Looking ahead to generate adjusted we fourth cash to expect flow. the quarter, positive

Our we liquidity facility. $XX our of million including total and liquidity million, quarter of and million current under with $XXX cash credit the healthy borrowings remains available $XXX ended of

credit to increased group our the month, facility million agreement, agreement banking this to size April our executed Earlier $XXX $XXX amend million and credit Under from we XXXX. maturity extend we extended and an to our facility. with the

not that was is million effective quarter should $XX in the end. You increase reflected slide, note the this as post incremental

With will Tony. that, the to I back turn call

Tony Thene

Tim. Thanks,

third submarkets Now, aerospace to Notably, recovery. year in each and continue accelerate markets. XXXX. of long-term quarter to near-term recap our with our their to of continues Demand fiscal end-use positive outlooks increase, the

the As to grow our continues remain a future. to strong result, we backlog it expect foreseeable and for

work centers To meet we onboarding our on new the are demand, training that, rates facilities. safely we are manufacturing of focused mix, employees to to expansion. we margin prices to productivity, To production do continue at increasing and all improve By continuing volumes, increasing to across see we will productivity. and improve improving margins to in improving expect segment. SAO the Notably, continue increase

our through will to our on inflationary offset increase transactional and continue and raw prices to material business. both mechanism We pressures surcharge contractual ability our

announced we price increases to transactional our round As this just of X% evident, of XX% latest week.

at inventory the goal year. achieve XXXX. in levels that our positioned further we income the It operating to is and year inventory note rate quarter we important of during through of fiscal fiscal fourth run remainder delivering of to And importantly, the decrease to range looking the decreased quarter year most ahead, expect the are fiscal XXXX

year slide XXXX our of to call, next the fourth fiscal full On achieving income to reviewed at this run fiscal XXXX operating I closer a the the by look rate turn our path fiscal earnings outlook. take last and the Let's year quarter year.

As quarter ahead right, you the chart have of our the we expectations. the on see in can third finished

quarter increased increase manufacturing recent primarily resulting and Our XX%, third guided sequentially to sales driven facility, heading was the performance XX% productivity, a our across the to. by in we previously XX%

to on With drive that XXXX of and by markets, quarter training track lead focused strong extending on safely the remains across developing growing we operating production fourth backlog momentum, Demand all and remain our workforce year income achieve times. our goal. as to continue remain rates. English fiscal We to evidenced

fourth with of total operating outlook. quarter corporate income $XX to income million results $XX costs, Earlier, fourth segment Tim operating quarter. the estimated in and the a PEP combined million for range communicated Those SAO company

to midst demand And of the of a markets. see performance Carpenter’s we our first in as Technology, It is time upturn fiscal XXXX. ahead, for in looking quarter expect strong end-use key the to continue an exciting are we year in

to to over a fiscal earning earnings years. return in this We to increase have year significantly coming we are levels, pre-pandemic well-positioned the and path

our and several forward We of with our the into have material more will and and sharing look Day May to our outlook Investor assets capabilities our go unique you. on detail financial when vision event We scheduled solutions, XX, next an for years. on portfolio we

information about time. our Relations your the you, visit please more website. for Investor For event, Thank

take And will turn operator, to now over the I it to your questions.

Operator

Thank you.

now will of Instructions] ahead. question-and-answer Joshua the First be The Company. Sullivan Please begin We [Operator session question go will Benchmark from

Joshua Sullivan

Hi, good morning.

Tony Thene

Good morning, Josh

Joshua Sullivan

more demand to coupled the COVID Just do think during how You've with now? you Carpenter given implemented operating strength you more other across SAO asset, has capacity much sweat model qualifications. Athens you aerospace the can of XXXX? system-wide . segments relative How have

Tony Thene

I you can Josh. at high a level, give

mentioned You it higher effectively than XXXX higher productivity to is FY utilization. was at was a and X% our be of couple XXXX One, them. projected or in FY Athens, what

coming as the on of And well, defense. and some as So off products the we we've now you have products aerospace them focus on changed higher-margin more our where of mix tail, such and on. the cut products

FY see should our in those should or three So XXXX. significant increase meaningful, you I combined a say, capacity versus

Joshua Sullivan

there. sets And does recently regards Can learning the to particular retention some rates? color just still on, with hire give you component then maybe new us skill need some the what that focus? like curve look Any

Tony Thene

in, the this less they than employees that or this are Well, we workforce think the bring five years difference six companies the big is year new maybe experiencing I most have experience did that or ago. four manufacturing and

curve learning making We're is progress. for the So steeper us. great

a big the numbers, third could That was You in see it here. step for quarter the up.

be to people, on reading that hire bring our still we more need Dynamet that the good facility. now, to you're forward in as take and But So there'll so quarter couple areas a it level fourth a in and to seeing looking that place well. next being hiring There's well. want area. the We there as right on we're to successful capacity some we're more more

Joshua Sullivan

rates build Got like? aerospace PEP. then one or inventory the to look -- hand you OEMs build disruptions, rate Are more last having the cycle building these What ahead maybe does just at fastener big about. avoid jumps it. on little one customers And of

Tony Thene

is It aerospace nobody are medical those a both inventory now, Dynamet Dynamet, is just building tight. markets supply-demand is from SAO. of and But like extremely right standpoint Yes, right? XX-XX

a supply-demand standpoint. you So like think think Dynamet about SAO of from just

Joshua Sullivan

time. the for you Thank

Tony Thene

Thank you.

Operator

Next Please question from Capital Michael go KeyBanc be ahead. Markets. Leshock, will

Michael Leshock

that you contributions, wanted more three driving for just that asking XQ or versus Good that given the typically stronger are quarter morning. and to months mix is you I to ongoing downtime seasonality. experience out the maybe ago of how start how seasonal to volume some ramp are that the you platforms an seeing sequentially you in of expecting fare growth despite what are

Tony Thene

certainly time little that, you impactful be. a of question. asked know Yeah. how that because on the take question the would you Thanks for bit Maybe since

given strong demand, fourth seen we've in said, same in quarter mean, you expect that as the – quarter don't into go our fiscal level So I seasonality improvements first we continued of our productivity previous years. -- fiscal

So we that see seasonality. don't same type of

been Now over probably high has the XX around in know as versus it's the quarter XX% the X XX%. you and years first fourth past to that as dip as averaged

So that's a significant.

see So meaningful real for not a to us is that we're tell comment. to going you that

another I think up. meaningful last the increase fact another said or see fourth call step I in we'd the in earnings in quarter

you quarter is be Now, to the but would the the think the fourth even as give sequentially say we to major fiscal year call quarter first some next if first earnings more flat quarters. color we'll quarter first safe versus growth that earnings inflection to for past it's get I the positive that

type factored in we would that to first major extremely And inflection as an flat positive to essentially understand for least point at I all earlier as earnings schedules to be those extremely maintenance. that us. our seasonality And got with speak of would Now, quarter we're usually be be right and equipment maintenance And love planned operators the now need you going we run time. to you there we preventive to needed maintenance continue maintenance. to normal during good preventive we'd about perform talked do through but that the how But demand -- even fourth. XX/X that the essential you've try said we outage to growth know can we the preventive minimize and is that as that

Michael Leshock

percent wouldn't a you know the And as that business to And price over I you the ask But at apply that look business that you does repricing apply your be does orders increase today? well? then of year maybe it transactional your wanted What are backlog. on on if business. I to out to

Tony Thene

Yeah or XX% good one-year increases that pricing would be At under price business it's these to contract question. some business. NLTA is XX- agreements. a be whether just in to longer-term lead when on of type we we're that roughly any times time And a XX-week of XX% point our presently, we're that noted

business price now. then be we've from that us year to is communicated would coming one increases transactional on several over hitting now remember, specific the that's Now year. that XX But approximately this weeks last one

Michael Leshock

on aerospace the do is visibility business Got What have sense. it. then OEM And versus your makes supplying that you MRO into? That into breakout? you're business

Tony Thene

time It's body -- wide like platforms. I mean, see doesn't and point Yeah. near on get And We all we're question just or or or this don't get is sold I I a now changing it single aisle, that make any at matter. We're can't future. in out. Boeing it it the right is that I Airbus? lot enough

Michael Leshock

And Great. Jet did sequentially and for or then you Engine the -- me for provide either year-over-year? lastly sales quarter

Tony Thene

and note aerospace were And the quarter were record of at levels. and XX% didn't I roughly up total run were of in engine being can remarks. prepared Aerospace about my that a bookings in a just matter up of point do backlog product do sales can our sequentially XX% were the But primarily was I for XX% reference engine They year-over-year. flat aerospace really you. sales sequentially. our up as Aero engine that XX% also mix I that is sequential sequentially. as year-over-year

ahead speed aerospace engines. on full So

Michael Leshock

you. Thank Great.

Tony Thene

Thank you.

Operator

you. Instructions] [Operator Please ahead. from Cowen. be question Khanna, Our Thank go of will next Gautam

Gautam Khanna

Good morning. Hi.

Tony Thene

Gautam. Hello,

Gautam Khanna

quarter quarter actually to Is what normal going about talk wondering little you so do or we work are well? Tony, your visibility. based guys holidays seasonality -- if through December that maybe backlog could I than bit in just as that have better was you that the on a you

Tony Thene

Yes.

quarter So you're second our talking fiscal about right?

Gautam Khanna

correct. Yes,

Tony Thene

Yes. Well, yes.

going to the we're through maintenance. to that's we getting -- or preventive year, we're think smarter I able I but because make. way do be our know three to the extended the in get minimize And we now we're everything trying we're period next not in we're sell be XXXX in FY going a next to think, years. -- four throughout period a And downtime to trying now

little would work you'll yes, over you pullback tell said but So, be, to at as see quarter It's the as anticipate FY I you exactly least at any flat, Gautam, look what sequential first I a XXXX. next to early FY for of improvement through don't XXXX. we quarters significant continue me and those the

Gautam Khanna

pricing. And year to commented long-term start through Okay. results? up the some we of is of to as on through, the on your that Is see pick move better you -- it When it or we non-spot agreements? flowing do calendar already your having through going flow second half this business

Tony Thene

agreements. Yes. Long-term

a price of year. couple we've that there's today. That calendar through. seen expire that this contracts So a still couple is We will coming major have still --

But So more of input price I negotiation the hit would there'll wish some XXX% there know as there. be you as line. cost that inflation bottom has well. been

is get that, line. but pricing we the offsetting our don't hit to XXX% the Now of bottom pricing

your to So quarters and some high question, several level over to a we've seen see improvement continue price the that year. next we'll over the I last guess

Gautam Khanna

just one one. And last

I'm back can just don't elevated just -- -- On very constraints? as in And I -- later similar we it? Today know it it customers Is curious when it's I'm level. there it maybe that represents do backlog even XX% guys like the forward forward backlog today. constraint want quickly Is the want what call is from better? what production curious it like prevents backlog it ratio doing on just the is historically you is it Is you as applying one-year the of sales XX% to or of on? backlog XX% the Carpenter's ship a sales. look customers

Tony Thene

Yes.

up industry have. as driven thing new companies by now, primarily we employees operations. this you and same at We're ramping know right just not yet will like it's just onboarding XXX% in the stated For have that's other the

production more now. that's if gating my were the main So significantly now rates could I sell right right higher. material factor

higher went to and XX% another in take going and that quarter the have fourth third you and no, increase deliveries I that that's to by there's they were them the orders the step nobody placing would if in They're up XXXX into it. really But I quarter. said, can they plans. to say, to XX%, would they FY now Obviously, take

Gautam Khanna

a lot. Okay. Thanks

Tony Thene

be would be inventory, wouldn't that right -- That that right? build they take would to And material now.

Gautam Khanna

you. Thank Understood.

Tony Thene

You’re welcome.

Operator

This Mr. concludes back question-and-answer the closing over our for session. turn to I'll now Huyette John call remarks.

John Huyette

third you thank for a Have operator, day. and Thank conference fiscal XXXX our everyone today quarter you for us call. joining great rest of your

Operator

Thank Thank you. now has The presentation. conference concluded. attending today's you for

disconnect. may now You

Carpenter Technology (CRS) 27 Apr 232023 Q3 Earnings call transcript