FOE - Earnings call transcript Q2 2018

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Operator

Good morning and thank you for joining the Ferro Corporation 2018 Second Quarter Earnings Conference Call. An archived replay of this teleconference will be available through the Investor Information section at ferro.com later today and will be available for approximately 7 days. I would now like to turn the call over to Mr. Kevin Cornelius Grant, Head of Investor Relations for Ferro Corporation.

Kevin Cornelius Grant

Thank you and good morning everyone. quarter conference second Ferro's to XXXX call. earnings Welcome Ferro's for XXXX. the morning, we'll quarter results reviewing be XX, This second financial ended June I'm Ben today President pleased Chief joined Thomas, to Chairman, our Financial by Officer. and Vice Schlater, Peter and President and CEO; be section and Investor our earnings on release deck available conference the The website. presentation call are the of as are I'd we conditions today are making like we comments are of today. remind to them view statements see everyone based and the and our that circumstances some of on forward-looking

included encourage may those change. the in presentation. both various deck. However, earnings earnings disclosure the conditions Please adjusted presentation contain to today's refer conjunction change on and you the Description and views reported as non-GAAP and financial are in basis. and to Also release release statement We that will these discussion. with results circumstances today's call the forward-looking of operating information review in measures reconciliations and our

this our presentation We quarter. format are modifying slightly

will the certain recent and review We Peter. then credit and on Ben back then will and pass the activities. on the year of units it summarize of performance guidance. comment in full will then begin performance XXXX to the financial acquisitions three quarter results Company's business Peter Peter's Company's comment the with our

now As will to pleasure my pass is address to Peter. the It we before, over question. reserve most hour of your call to the

Peter Thomas

global good team of Ferro's another morning performance. and everyone. Thanks, Kevin, delivered strong quarter

our continued that alongside in Right for functional our solutions price. highest we've at years. in earnings demand across and service In the this technical power share experienced least we per the provide second coatings fact, were quarter products, adjusted business, XX strong

innovation increased the earnings Without diluted to $X.XX share foreign XX% to demonstrating went losses are GAAP optimization XX.X% $XXX.X. year combination. per EPS per sales the headwind In per amounting to Our back they on currency $X.XX $X.XX dynamic basis. $X.XX XX% to share the over delivered share. almost second associates share increased last adjusted adjusted net and business quarter, quarter diluted as the in a a and of an per per transactional our share, increased

quarter second came our One for organic to index from run expand has products. of reason is extended our quarter consecutive growth growth. Ferro's of organic new The the vitality our in of approximately Xth quarter second was that continued revenue XX%

teams are have been date growth said, organic we to build acquisitions. concentrating robust innovative said results on and and should growth the organic pipeline As acquired profitability Ferro's we creative our now leadership impressive. products future. to efforts to in have how a supplementing through the the time, we growth accelerate with and of At technology both innovation the same These propelling drive acquisitions

synergies. our us each looking future are for for strategically these and release, position operational pending margin quarter Ferro financial provide one enable least They and our optimization The have present for have advanced units businesses markets, or to for we press is we of to expand Ferro's completed addressable transactions current Ferro acquisitions, and home our accretive reach acquisitions enter across our high with second reported to and agreements commercial earnings. align our business immediately noting a opportunities new It extend acquisitions. Regarding other markets, worth immediate in innovation that be for opportunities. leveragable with to will strategy are brings are acquisition at and benefit targets with all In technology, that to provide words, products also we geographic as recently our growth growth. us us and substantial of three

We three of business units. the each for on opportunities are finding to execute

values a of acquisitions time. I competitive say specific may pathways this extend attractive wish markets, are you our have we at fast to implications In expand Ferro to out transaction from additional global they a disclose leading I innovation, common the acquisitions. acquisitions. manufacturing footprint to growth our help customers release and model subject point an been somewhat grow protective not was opportunity we offers. to which a technology From standpoint, investment that to notice, positions to localized the the In process options that regarding do technical closing support. $XX current the recent relationships or of being we also they present are the definitive for As information will future am aggregate, is from niche prepared that close with appreciate and thing run that and in that acquisitions such customary should a growing growth agreement out million. technologies approximately to high signed in have the so, our of the drive the organic doing represent transactions benefit in price these additions

to an and subject on accounting customary synergy to to deliver million to $XX in million adjustments synergy adjusted basis the of $XX them to $X.XX $X.XX revenue expect $XX million million annualized We $XX in purchase and adjusted per EPS share EPS $XX to to million adjusted share. EBITDA, adjusted $X.X EBITDA, earnings diluted million $X accretive of diluted $X.XX in to per to

have our consistent Our which for capital remained time. allocation priorities, reflect acquisitions some actively

capital like to about At repurchase inflation. Ferro would XXX,XXX quarter, stock. approximately acquiring we I price of amount shares point, Ferro to second raw the certain a say also a of however, the of shares material common word allocated this During

raw about expect to job to due has typically to team material pricing quarters remain offsetting to attentive inflation two intend that and managing continue Ferro and material inflation an recover strategy. Our able within raw We done and of increases refund price with We going forward. we diligence headwinds. raw excellent material cost are and

so also days. the much We’re situation is in news watching the that are tariff these

be had our earnings good business would All delivered To suggests the our net very being digit puts fact resulting limited. growth. three business takes, in profit up, economic tariffs analysis strong there of in direct Ferro while units are current Our the quarter. certain gross that and performance impact double sum of proposed sales, another and

we at drive near growth sustainable organic advanced growth producing rate profitability. to and strong is and a acquisitions pipeline innovation and long-term on Our

complacent, the While now innovation are in I detail. come individual far business long after Ferro's from over range our discuss will dynamic of to goals. back performance call comments turn where Ben. this about strategy. in the I optimization talk unit and pleased and more to we’re we with results phase the Ben our to will Ben’s

Ben Schlater

grew Slide good numbers consolidated on I to quarter a second expense an XXXX. adjusted organic the quarter are you, spend the second X, to sales everyone. or improved Investors like to increasing Slide to a of $X.XX. XXXX total million XX.X% minutes second quarter note increased X, of to sales. XX.X% in per with of financial EBITDA second $XXX.X $X.XX gross I SG&A XX.X GAAP net to XX.X% X using adjusted by comparisons that results reviewed Starting in highlights to accompanying the a are refer quarter results X.X%. currency. share XX.X% presentation increased versus million. basis in ferro.com the today's we non-GAAP $X.XX be X All from sales. and Peter, EPS find performance release, the Thank and financial can the with XX.X% million earnings XX% We XX.X% net the second X, profit XXXX, which Adjusted quarter million section. $XXX.X press and sales and Adjusted can on to of XX.X volume was would the and you of review XX.X% constant diluted adjusted grew or morning few compared net Please the on

Now XX.X% and $XXX.X EBITDA expenses our profit lines. year-to-date XX.X% mix With diluted by sequential in $X.XX by $XXX.X review expense was improved $X.XX. improvement second second million. GAAP other to XXX XX.X% offsetting for raw XX% grew increased to basis adjustments Adjusted and I’ll $XXX.X of gross volume SG&A XXXX I’ll provide grew adjusted related quarter an to share margin points, performance. XX.X%, EPS X, million. Slide to headwinds. reflecting go through gross or increased over XX.X% helped adjusted efforts sales. quickly Adjusted XXXX compared turning to XX.X% of profit to and to in our per or overview that, continued earnings quarter the material of We quarter $X.XX and and the net quarter We of income million one-time sales net

the were quarter XXXX, second a acquisition related projects. For optimization our to there of few and adjustments pipeline primarily non-GAAP activity

and acquisitions of primarily First, to cost of we optimization related had XXX,XXX projects. adjustments approximately to sales,

we associated one-time income Under debt expenses charges X.XX there to advance related to corporate to action finally, X.X to adjustment as related of restructuring have an and and adjustment quarter professional development about as well adjustment was optimization we impairment, the consisting synergies. extinguishment other with had other an SG&A, of fees optimization second of approximately legal, with expense, million And to certain in of related million acquisition facility. the in activities amended associated credit our Turning expense initiatives certain projects. and and and million fees X.X

to Now go through turning Slide I’ll X, SG&A.

as expense SG&A the XX.X year million currency or sales or a dated adjusted of compared sales, quarter in net net quarter with million was second The prior of basis. XX.X% XX.X% XX.X on constant

accounted is absolute most in increase of business acquired for Newly the dollars.

there. continued to are That grow about year-over-year me operating feel the the cash see we flow. continue good line we and as top leverage We good to brings seeing results

free adjusted of flow cash inflow operations the quarter million use year. $X prior from second continuing for of a compared the million X.X For an to was

CapEx optimization cash activities. we reminder from cash a flow less M&A adjustments, flow other As to as define relating adjusted operations primarily continuing and GAAP free operating and

we X.X at sheet and optimization depreciation related million of to restructuring the This XX.X to million we to million gets items, use We items of related there other capital cash then operating X.X flow beginning adjustments to flow as components and back of add GAAP of you start of million subtract X.X million. continuing So subtract million X X.X amortization change million cash of of XX expenditures from From flow the million from X.X of use other net are projects. with and in we cost then XX.X million. adjusted million X with and our add X.X adjusted for cash acquisition free and arrive million operations our in and capital working P&L balance operating meaningful investment follows. non-cash most income

XX.X continue the optimization million reminder, adjusted XX includes program. of to to figures referenced related in major to EBITDA the capital past, CapEx estimate program end we of spend have to related this plus a benefit the million As the by a XXXX we

addition in spend based higher capital planned in Most typical seasonal increased historical usage The of anticipation working build some our material strategic working business growth integration So prices. activities, of of by well of capital raw anticipate half the with our a to just driven the inventory pre-buys will CapEx. levels in the few working on driven and more consistent versus was variance and in prior capital and primarily on both We our reverse want second minutes our year-over-year, to year cash as in as optimization I year-end trends. by flow. increases was of year planned

I our driven of continuing XX% second summary, growth growth, guidance throughout flow operations full We our model in business continue for and by very consistent in was Company. the very product about year our innovation change ability conversion. just and not the from cash would feel our So and feel reiterate to on consistent about to outlook year. the based expectations We deliver the and does that for good adjusted programs, organic acquisitions the optimization to cash still new XX% quarter second our our quarter, confident with

for in call the this XXXX. prepared I'll concludes the to now Peter of the my second quarter our discuss back pass outlook. remarks business units performance and quarter from So, the to the

Peter Thomas

words our Thanks, to of our performance, business three few overall say Ben. segments. With a that I'll backdrop each about

to the X see business the second presentation, our you summary in Slide Turning quarter segments. of XXXX can

points. were up profit XX.X sales strong and basis with constant gross XX.X% begin was to let's growth up on sales profit reflecting currency million. growth. was improvement of another Performance XX%, Gross XX.X%. basis Coatings, Net Adjusted X.X%. sequential and Organic Performance margin So, was sales quarter-over-quarter quarter of were a XXX turning Coatings profit volumes is

We products maximize are but actions end superior have our the by are raw material costs can the market The segments manufacturing drive of to and are and are and increased. proving are taking targeting optimizing margins market, the proposition have most business be selecting profitable we to those on opportunities value our successful. optimizing production base high services. All customer technical concentrate efficiencies we our that to we and of to realize our

also benefiting to attention are from and increased We standards. health China's environmental, safety

by the their are performance, to manufacturers are government leaving local improve the some health environmental, Chinese safety As and pressured market.

in manufacturers performance is higher demand. with in our markets experiencing result, growth accelerating seeing world, where particularly and we business a where stronger as health business growth materials for safety the for and are in our As such Europe, fact Ferro we stable the higher strengthened. Spain market more Italy environmental, are In the and with price economy as value In growth concentrating Performance segments our we higher are around emerging anticipate Coatings markets efforts. do tile points,

Performance and Glass Colors Now, let's look business. at our

compared Performance Net basis report and automotive year's Glass margin solid of our is produced XX.X% see business was flat profit $XX.X volumes to and You'll ahead Organic a of the XX%, was Colors high currency part sales last grew sales growth. market Adjusted XX.X%. constant gross rates. quarter increased that delivering of The essentially well million another with quarter. growth up sales X.X%. on gross consistent

the to second the other Pacific low X%. sales market only grew teens European market Our and while grew quarter automotive in itself Asia

We our service. products, touch initiatives, our share innovative high high from quality competitors because market are of of taking the technical and

remained second Pacific in materials last white was less quarter. packaging preferences sales the was While year's double-digit, over grew Demand in America from XX% colors. showed customer electronic up Decorations North more markets, shift and Europe marked for in mid Asia with as our a single-digit to robust. growth strong

our is more and printing technology our business trends positions to including and LED, that leader expertise Performance us well class anticipate we a Glass given in Ferro horizon, XD talked the the more. expertise. which from technical apply to have coatings, emerging On growth mega Colors XG about smartcards, we

these the functional advantage innovative glass take forefront by of our at mega opportunities We’re created the position trends. markets coatings and to multiple of in

profitability sales which to digits recently second facility meet and points. our in will continued and Overall according serve X, constant by over Adjusted business X.X%. was basis currency the in Volumes Ultramarine end Ferro single sales value were increased Ultramarine the opportunities quarter but and low business customers. Slide the metrics Columbia adding primarily was driver short of polishes XXXX three for growth $XX.X other to are our not, reflecting growth gross profit blue, sectors. margin products summary. is business polishes. markets turning a pre-buys XXXX that Color for surface announced improving they eyeglass in organic, year-to-date you manufacturing second services improvement customer quarter for see a Innovation in Color automotive is for Color to we were sequential the for businesses strong reported Solutions up to optimizing provide Solutions quarter business, as our mix to business global concentrating basis market, Now plastic memory in the our all advanced to production in Net by are pricing Solutions in due the the was markets in sales net a our in XX lens the on blue large performance chip only capacity the due our on and reported On part Gross strong million. for we expanding to technologies higher by up XX%, supply. of by our also demand. quarter

units delivered contributed. again, with another So strong all Ferro quarter business

successfully executing are innovation and We dynamic our optimization. of strategy

portfolio to also optimization business of want more Ben initiatives in-house effectiveness. program and the addition benefit growth the this made initiatives, program our broader million a acquisitions, have yield also new XX the is profitability CapEx expected that related efficiency have to pursuing while by bringing throughout we to developing to mentioned XXXX. our the But we that made up support that major enhance future CapEx of opportunities including products initiatives effort everyone that much comments, program into are technologies immediately our to Company. with understand and In We include optimization in we investments and and Ferro that through enhance

with is a to customers. touch For in example, collaborate needed higher equipment, where expanding areas operating our

production are for blue. capacity, Ultramarine to increase the additional are growth. efficiency, such many We given underway increased such recently any and expansion to we of At there future sites optimization value specific position create adding as time, programs announced Ferro

remainder the Looking XXXX ahead are to of year, reaffirming we our guidance.

adjusted We are than exchange rather rate of reaffirming in change to our of a in of EBITDA our from the U.S. euro for adjusted our prior of to a dollar conversion XX%. XXX reflect $XXX just the our full we to we the million, in rate adjusted guidance in $XXX $X.XX balance the that operations flow FX FX even $X.XX, year the exchange guidance though of the change Despite the our year. Please and not of XX% reaffirm announced assumption XXXX the XXX included guidance cash EPS acquisitions to are million note guidance. guidance

We reference. guidance of in release section that earnings the you can FX the have provided sensitivity

further Vision focused XXXX ahead, very goals. we achieving Looking are on our

As a about cash margins at of EBITDA XX% to XX%. are plus of reminder, and XX% free these goals XX% flow XX% gross to conversion

We I'll the these are back a against And our portion over and call. stronger of progress business Kevin goals Q&A for turn to in the good the making now, process. call building very

Kevin Cornelius Grant

the first Thanks let's Peter. question. up call open With that, operator, the for

Operator

[Operator our go Gabelli with of Please comes Instructions] Company. And question from first & ahead. Morbelli line Rosemarie

Rosemarie Morbelli

markets opening on trends you to et more focusing the light, in fair are that are that on if not acquisitions. meaning acquisitions, least and little Peter the a was us LED cetera? Good give good your it be pending digital, quarter. the smart wondering you morning could looking everyone will bit cards, they meaning but last projects, very on a for. what congratulations ongoing And I assume Is we And as to mega

Peter Thomas

Yes, and for you upfront. the thank comment

to those what a and have XXXX. next to XXXX in of that now can programs we I that shareholders the interest with tone can generation of One customers that this. I in what our about want sets long of we tell in consequence, things working as in has what where strong to more coming think things the as know on are And products very And you projects will in a own positioning think have because customers and But project higher you the the are the you years tell last we many repositioning, from objective mover strategically that, about the about, end off is first certain the opportunities also is our position, set or years visibility customer that and end -- in our you developed we important those perspective only position. a where about proprietary a with And relationships that things, out our next in and to have generations. is Certainly, many XXXX. best are aligned current and see move those X you you as say the innovation of those we away. jump years in these we of we I the you a hear stickier a once one and of but note the can innovation solid chasm what's will as can markets. we you're third the through high X revenue with on second as twice you've that acquisitions as also maintaining And not of past and the we've ourselves the X are the know X have that heard of that lot right lot X.X as X in year it's the markets end with again lot over respective those you you very

operation, about our complement So, targeted as up customers, pipeline, we started the bolt-on to migrate it mode, grow we're we've the this we've the we our towards to think innovation technology adding innovation right cleaned portfolio. sequentially,

positions. on We Those are earned a we new giving lookout. performing those us the same generation. way customers are the opportunity are We in our because

perspective know last going that two hearing what you you're strategy. So see I of and gives in change a through the this you're years to of

in and right, it already and positioned acquisitions, opportunities. these XX created with PCG, different next application to group coming our the rate absolutely a headed have with each technologies, support out that you identified they've Misquitta Barry products innovative We couple Now their of those are electronics we've customers intake growth the new made, of right, technology the with funded roughly programs of areas. team. surface and over hires with you're have particularly his by range the And some We seven key ourselves with high-end we with of years. office new businesses

think way So they much will because the of we've of fence with need made, portfolio, is as our buying around pillars were situation, to. course acquisitions we it of we part done and are best a that that an expertise as speaking but in we technology those not we've that the should that people so they're put to inherent are and which what acquisition, there deals pipeline you buying our are in organization with customers, a know that to technical synergistic also

doing but us franchise, are you? continue they high allow customer hence that those us So, acquisitions businesses, Does end and within we're a of everything allow that three longer-term the only preserve help this the the to not growth. at to

Operator

go with our ahead. next from is John question And of Please Capital McNulty BMO the Markets. line

John McNulty

areas end and better are of they your segments kind guys to growth two on. than what that points these of I better of guess markets each the I I have was implies hope even of doing would've X And rates certainly, focus better terms that expected. guess I you I X target than that. kind probably or organic than at wanted looking areas to in in to The each

some about that's from? relative be better? is outperformance of So that markets where something Is more how traction. the I -- getting we that where that is expectations it I to outperformance where where you're guess -- I'm coming coming your longer-term thinking doing end And from? should pricing? guess, function where wondering the Are

Peter Thomas

Thanks, it's Peter.

here's look should So, you way the John, at this.

you thing again my a at those organic just end. margin projects answer listen lay the but require continue high type what The if is each see that first pipeline, unfortunately customers question, filtering we see you into business first three to higher They of in have years. the and to will next the cluster to four long products can the

The know did that we We second thing at the We first overall till as is X this. the in up is vitality X. believe very about running or index and pipeline a end robust. hit organic the hit you We year 'XX we're XX% this not think of started quarter. and would

in So, the more are made lot what of projects And just with what past. time. sticky of short that were we than progress pipeline, we've a happens in a doing period those

basis points This the yes, the the aggregate base XXX also vitality XXX about So, is technology that is with every because expectations at know I index. And is that typically pricing where discussed And the index. added you happening. we forward is was that has before happy to going positioning XX% element that higher year we today. will vitality are growth, end as continue said also high driving is the margin than higher organic which to year is it, it the pipeline XXX

we we optimization. were was of customer the on bring thing on programs just optimization everyone and to doing quarter those want alike. and if understands it, some that rationalization in discussion optimization for management, was If be its not we that, we mentioned inventory to that and business you roles, mix beat the want customers remember we to its if about necessarily remember business price, the when Part not and we there make beat value sure first tile but I things rewarded

definitive optimization work each happened the from even here also end is single-digit. to sequentially, embedded flat, high X%. of business in sequentially was So here volume the at, at quarter first look it that though organic is what Look grew as of going that tile. market up the what that's volume was And high have in is the response to and the volumes tile growth you at quarter, to first with with within part look our

So end for rationalization or proposition that having we the moving up were you if of our optimization forward. all will, success you facets felt very value this germane

and is want Color and each So, that pound door. capacity we optimizing every we've entitle a done on were that Solutions that forward kilo also of businesses to of mandate we have off also value all goes that the going that sure or been going make of have the because in our the in with

faster cases, are X% we right in you’re growing So X%. a some bit the than to

and In fact, you where Ferro X.X, could was know, the see if you our tracking we to on double based proxy model, GDP areas about waited those look at we’re sell we almost of that.

are the end X. we’re number line, committed And bumping up and make that going that strong to is you? along up that sure to to foundation of we’re we that to going my in team's expectation So, we’re a number we that to, deliver we the and have expectation that we sure want Does we up higher somewhere to make the on help bump you’re is X the right, deliver. end say order that what to

John McNulty

helpful. Yes, And then question that’s hugely guess capital around I the was allocation. second more

So, there. have you got a target I know out

ability that of expected. have little ability see million year we the sounds at it on I little million kind what mark. for you How two? million a more M&A you are things would a see to per XX based hit are Or balancing to -- an you the we the pipeline an should bit aggressive are guess range? maybe hope $XXX that’s range. and buyback bit in than And a like maybe what the that Do slower? You $XXX of your I noticed think what we in about

Ben Schlater

John, it's Ben.

that same I getting think what more pipeline we about million to XXX it's quarter. throughout from good that with balance think M&A we that of now will at to sort the the year. what we doing look continue of and and to it you the at And we the buyback in the first have side. XXX balance the I from mean seen the feel respect of stock to I continue way on the opportunistically perspective to look a are

So, to deal view I from the perspective. on say our a the through takes away commitment from get ability that buyback wouldn’t our

Operator

And from Begleiter David of Please question Bank. with line our Deutsche next ahead. is go the

Unidentified Analyst

[ph] push customer expecting David. question in Bond were to Coatings Performance David guess optimization some you first I that mentioned is is volume initiatives This here that QX volume, QX. for in you

there volume discuss QX what your growth Coatings? QX can for for outlook in happened and Performance in just So you organic

Peter Thomas

Yes, optimizing program thought that looking analysis. have that in you're exactly in There what answer, to dynamic to fact, was me our referring optimization strategy all we're part I sorry business. last might Remember, but our is this of again. I’m again highlighted the case, let it customer relative based value facets do with optimization the is here. In at on proposition I

margin management the on to again in mix, that rules. about maybe with also position, We we more higher we what volume solidify volume margin make want maybe wanted I need a what volume that the targeted we to the of was the that And understand the was as a have tile more that’s lower volume. we just what up be. high at up is proposition talking But as So have we things, in handful talked was were value And traded business it a where sequentially, which the we about sure exactly first got. working not X%. look two you were business different X.X% part end that inventory exactly a things is way We of we we was our we customers sequentially enrich pricing business that for think quarter-over-quarter. higher end need better should mix mentioned, want happened, around, hey, if more quarter

why line what's our So, And margin. through we can right a are doing really are it up out a we understand couple the to at are that of what look are are a adjusting that are the model is facilities our we points. upgrading rest the and strongly. you volume, take in going to the basis customers Europe enough Sequentially, running we hundred is businesses. well that was of in process working important very cascading with it as before now tile through of And

In it. we fact, was acquisition that before Endeka our about XX% facility bought at running

the in up are We XXs.

end to and had space that the ability volume keep optimize market high-end at typically, important also our opportunities, get higher maximize that now XX% to why that understand not why And to and high-end level, as business we've that margin important the to that we once are are of to market as that X%. enhance absorption the our utilize to we targeted to sequentially. want strategy we only to buying the grew over that that's because that the much beyond share why keep of grow, business to so win is that our have once market high and facilities really we value And in the we we market relative So that are is. position end we years, leader now production. what to because, XX%, to in three goes of we continue past are typically the become do as in because What's order has but the actually leader, buying almost and things doing

relative is you the important business a with strategically long which now they to using that in the these started take a So newest space in high-end start that market emerging positioned, going understand short Company X.Xx time. all and share very we're competitor over And of better means to what a period already is acquisitions, this our of long we that even opportunities cycle of in we've way that majority find because China, done the than if over now are materials have are of greater some the growth X.X you'll legs companies markets, tile period the margin. in as with of

understand is that you all working be broader are candid well. I'll lay rationale and we strategic that there a whole all with part very this, a So, And it's we asking doing that before, for of but extremely is questions. didn’t Off how thanks on plan. out course,

David Begleiter

improved XX QX Do your question you margin in And on gross that reflect year-over-year you're to just the bps basis? second margin sequentially. is expect gross in compressed QX,

Peter Thomas

material as that discuss a the with covering position that raw high-end, but of to activities that reformulation would guess on that on were that in not that type type a doing guidance, it a I increases everything including well we're price pricing pattern. of we is as expectation moving our expectations to continue see

Operator

next with comes question Please from ahead. the And KeyBanc. Sison of line go Mike the

Mike Sison

and if half guidance, the it's close shouldn't it the second closed of I know in to affect those not have those your acquisitions but terms of In already?

Peter Thomas

those. of acquisitions each were you should business. there there know, you least because at we look at are mentioned one and it you for One, was three a Here's handful

the there. and day, have close haven't. some like close some the at we something they do there should, And may believe they of be if end And

Ben Schlater

that close see near I are or I if be obviously $X.XX term. could $X.XX accretion Mike they there in do, when in XXXX close of think a on purchase that you going sort expectation now some yes, And and it's they those the can to right there. depends accounting. the But, think sit

Mike Sison

for do then think the Or about that’s business 'XX, is you second of And it of think versus couple and you the at years. you QX, see What growth when half? Color organic the with there improvement kind nice into is last cadences great the again? in XQ And been, Solutions level? this it at as -- level in head accelerating same growth

Peter Thomas

year, we change chain technology cross phenomenal was the last moved of did year and of companies in of There really because the a a put were we and lot the with business. of business together. lot secured step triad we robust as selling change at activities structural point, had that those value a So, Mike, the we that up a additional we where really

continue So first and which with X% The if like lot pre again X.X% that to pigments for to demand tell half. is in growing in we you at half and you would of increase that’s our you part, buy expansion is What really pricing in to growth revenue the growth at payment our the I closer why was suggest the organically faster can you blue strong look just to reasons we adjust going program. look first space. second that can because that Actually of than quarter. it, that a see one we’re there is the individual of the globally Ultramarine our closer actually plans for if it's the volume, expectation announced the the we rate X% on

in outside the is We rate didn't expectation the that also U.S. but really speak up, continue will had we pigments. one of another market that outpace growth we the the to for

Mike Sison

on some acquisitions, one need follow-up get in time probably And the quick place. synergy and you then to just

effectively in it EBITDA you year think it they year, these for and growth double-digit integration about ensures year? flow looks So, like type this when into of Do really if the XX, another synergies in next acquisitions Company. close more

Peter Thomas

Yes, we were I that. mean think clear about I pretty

is in where on the XXXX. when basis is, much because like doing towards want XXXX, think now I as what acquisitions first really But are you when we adjusted looking everything $X.XX. XXXX, heard started, you working we're are see those its to on at should I look an full start of you'll we impact EBITDA focusing roughly that to annualize everyone

XXXX. is we’re and you we visibility planning XXXX. into expect XXXX where are heard, all be moving for we're already and to really, Our already we around today really good as to where And

of will XXXX. So again full you synergies see impact those in the

Operator

next comes And line with our go Hocevar Please Research. ahead. Kevin Northcoast from of question

Kevin Hocevar

Question but indicated guidance, guidance, that you on greater. FX the would just you maintained be on

that was acquisitions maintain you I to that a like the turn you’re to the headwind, to What's included in headwind So a to allows To if it's the year. this what guidance? sounds the of half wondering guess turn going so the there offset because I at point. back that offsetting

So I offset? what guess the

Ben Schlater

the to business, underlying I continue the in we Kevin, strong half of the just where business It’s mean performance well see is the performing to year. and performing of expect second

regardless guidance able to in headwinds the we’re FX. So range of maintain of the

a So, perspective. we feel about good that fundamental instructional from

Kevin Hocevar

And industry? you like add pretty it And is much this on But can the Ferro? How capacity, adding a as is that a blue sounds you how capacity give is Ultramarine this, things result. capacity pricing for sense in us the are much ever near-term for then adding disruptions tight for there like when market.

wondering, all if could that? you on Just comment

Peter Thomas

where see for next for in market us share other demand expansion relative months a to us. Ferro our are three about Thanks the talk discuss the the relative the being that very robust in fact you'll we're we it position is, it's but the three that question, share for and than XX doing There not magnitude asking really we is hear what space. case important. has another again, And of because --

bigger we the means that than So three nearest are times competitors.

that we do and because globe. capacity an all we leadership continue of So major responsibility that’s to will we it around have a fiduciary that And the putting satisfy we our in position. put expectation in we customers, the maintain

Kevin Hocevar

us one should on you you in you XXXX? more through look Could think Is optimization How what timeframe. XXXX any then by it million me, like? waited? it Is of the flowing And XX that of do from evenly we remind the last savings the would P&L? expect ramp get backend of that

Peter Thomas

tail this. point you you at if we the nothing Yes, if are a it years first end when couple this because remember ago in there was of 'XX at is mentioned know we

then million recently it peeling you we note and point in bag first, just XX We we said on in XX remember, the XXXX million at then baked XXXX. it and we known. was a the we through where, want was And have you is keep said is XX if finding to million million it to plus, what's said hold that year, probably are on enhancements. we onion but is, obvious what of was be nothing to 'XX, because XX will important the are in $XX you million Well, more we that more that end as other focus if

part be now that share idea fully important 'XX. something what innovation is often, optimization program. there it's you to do be And constantly to only references I plus understand that million the one think XXXX not a are optimization. you we loaded. in for for I XX So, will it, big looking to phase, and going haven’t you focus are the have this on fourth, that is big XXXX we we with But we some it's will but that we tell will of as is made

based should becoming for we million than make constantly incremental XXXX, $XX is optimization. a process, are are looking included of million we better on to have feel end to everyone way where you but will $XX of to identified that which be a our optimization And of can that greater more in of 'XX there today another handful we what efficient. opportunity. tell We Through couple is

in want as good XXXX those was target now So has and those that, years become to plus much the XX hope We XXXX starting And we a XX now are as by are hope ago and cash couple I that's margins, what's that flow, we building XX% feel our Vision we vision. And strong XX% our that's by in that XXXX. now, and those that are strong understands EBITDA. everyone blocks now XXXX. real about why because

Operator

go Please is from with next Longbow question ahead. Dmitri Silversteyn And the Research.

Dmitri Silversteyn

understand, following up expect on the I XXXX to that kept Kevin's your constant. you things, want but foreign exchange just guidance that in question, of headwind actually, Couple

through some range You've $X.XX kind end XXXX back talk offsetting basically in you internal sort about that's the get mid- of experience headwind single Is going that maybe digit the increase the as of we or your so to into quarter. what of with second execution?

Ben Schlater

it's to think range. that in $X.XX I $X.XX Yes,

Dmitri Silversteyn

okay $X.XX quarter to $X.XX backend for increase. the range bottleneck of so

Ben Schlater

It’s half of for $X.XX the to entire year. the about $X.XX back

Dmitri Silversteyn

for to stuff tends and to quarter cycle lot be titanium, about a So, metals, have and dioxides, quarter cobalt, maybe talking notoriously lithium. about are tends talking to a but much reasons, as -- esoteric are we that obviously these we your of tends their outlook for reasons not nickel, to volatile that material raw own, raw the On the of materials of

your see are kind concerned the as in markets. XXXX these you you of that costs half as up If of ability do look to of and those How and far both offset second the sequentially at year? sort year-over-year shaping

Ben Schlater

that. I'll feel about first. I Ben. it’s We we it the our with start good feel ability just good about of Dmitri, to mean offset last piece

beyond between we improve the hit have margins basis there. with zinc of two say relief job reformulation good just both but and first zirconium up sort raw points, and to price one the the continue in and are We we and really the have get starting both bit would we both for to We're Particularly sign I getting still sideways good has -- tighter. cadence the to fundamental eye those over close of Lithium starting else. that done on. offsetting on most price Coatings quarter really of over a that's we a we're delta this team, got side quarter pretty XXX The had two zirconium, us obviously his and raw market, anything to figured there underlying in guys in keep saw is a the pushing delta and I quarter a materials happening sort progress the something bit headwinds those cobalt the tightened are of and really the With more in respect we mean, have I Garcia materials. with little sequential fall see what's of we've to the quarter lag seen team of zinc with so probably they this really, that this Performance through out, reformulation. sort the on really see with quarter and mean than seeing where to of little second off. a a

see in of perspective expect quarter offset pretty the we're the rest and from pleased of more for the So an the we second how with that same year.

Dmitri Silversteyn

look businesses each segment. a you pricing understand meaningful I provided where moving a reformulate if volumes ability are guess for what at mix? the includes organic on higher case the then the for the your And initiative have kind you of are the it you a there you've And is the I'm and that's growth pricing was significantly the point growth. information just way guess just volume of volumes acquisition then and being volume to of that clarification you you give sale of of described presented assuming to mostly out sort versus components trying later the of just than driven by if I organic couple have momentum volume what willing taking Or I what up? are action? terms Peter to your in margin Was

Peter Thomas

board, a business perspective, organic up everywhere numbers of total in and also than volume anywhere of saw digits of which see but pretty in is the balance organic pretty would From Dmitri, or an right, organic inorganic going sort all the we revenues number, you're better were the is little price, pricing up the else would a end activity. across in Performance Yes, we more to and volume of mix we’re I say Coatings mid-single in business a you’re that’s the balanced. good bit include

We good also those. the this is really mix, saw is I good mix between balanced quarter of as in pretty was mean so Coatings the Performance well, two really

Dmitri Silversteyn

working question in working you kind four the capital the capital, first final spiked level kind to XXXX. its at highest seems to look the quarter then up And the quarter trailing of to a which sales, of

anticipation forward what if an benign. And a little hopefully the inventory, building business. kind bit we to second inventories about think half think function mostly in should M&A, a your year, materials of to it the more as we function this of on raw seems actually our impact be just, capital of stronger get need this of I going this working expect a of

Peter Thomas

high split we forever. would capital right and perspective above, really point All of say so proximal right working now the between I that it’s the see

of that the as see sometimes X% of end and that capital percent we very towards the middle X% Normally, sort year. is we working So the a expected. And through see between year somewhere deal sales of and the would of around XX%. as liquidates much

all is very typical. this very, So

you’re an well. business, piece it when just in on as is organic other growth impact of feet averaging mean The business I a X% obviously our so in growth that or the have

Operator

go Please Mike Seaport ahead. Securities. And question with from the Global is Harrison next

Mike Harrison

of just guiding a GAAP little here, flow the you're flow how related looking on your could compare free to cash at that thoughts maybe discussion bit kind free Maybe the just adjusted number to. flow understand cash on cash continuing

to we things just trying detail of as things going get cash much give like think as acquisitions, program available the down optimization a some to is like how be on? sense debt that you I us for pay well real

Peter Thomas

the so we on and just outlined most a no let's in look this release, sure, the is $XX Yes, around that that that but summary, CapEx at of between between flow flow for what the of would you optimization if adjusted program, the flow or using for press Mike quarter problem, say $XX delta looking and the $XX quarter, is delta free million second majority about second million again cash in million the you’re at this the cash we somewhere GAAP cash operating use delta vast we’re about call and free optimization project. for free that

the that operating absence sort XX% the year GAAP about you EBITDA flow million an and number look and that you closer that at million our a of below perspective. we of cash adjustments number expect think that though somewhere from low making. guidance from for XX I that to are would you balance for perspective the that so a we if you take to And look little bit hundreds obviously carry our year, be put XX% that, XX it's the at if year-to-date will so in would so higher It’s that the delta than of

in you kind of XX bridge. kind that GAAP with of spend to XX at look But perspective that’s project. for optimization put that’s So from considerations a how these that the we on more range

Mike Harrison

could And more I little a give wondering then, was if Peter, you detail.

regulatory have early some And mentioned related seeing segment are in environmental issues the being Chinese What they still you of do close. volume the in? deems that stages to You there? the competitors seen yet? or we that and Or market in play

Peter Thomas

benefiting see can are Yes, businesses. already we it is we all seeing the are we good. what it. of in most of And Actually

a you Let me give perspective.

look it. you let's that's start with first at the -- let's you to tranche see tile say where If first of are going because

the small producers in we towel are there if you really position China, end why type As products. you many never low for know tile took will a that’s of

in on shut what Coatings double-digit endings, we However, it high we're it to relates end those with find there companies growth a that the call business Asia-Pacific we a are we region and with business high Performance smaller blended in particular going as to downs. the basis, are model includes realizing

We the was are single where up seeing business it business well digit. porcelain enamel our where that Asian high as porcelain enamel in the

it pigments profile had in a each good The to into our glass to single business Indonesia. the year low now where pigments auto impact that major China there have address. because business drag moving are We triad we customers were And moved are three us digits. is there in of business upper because business. Indonesia in also gone the there, of growth the one blended, first the a seeing us But because there Asian -- for to into growing we into more and low we that’s addition of growth. in double-digit for of the that great Indonesian the region a we that into -- businesses the for across -- double-digit and market Performance tariffs, of half is that. the our of was seeing the shut a And in In of we products lot the -- market lot Colors end of are Glass, down,

companies When the So, just stand if that stand that China, concession. with with of -- U.S. tariffs tariffs. the you that one working at and We it's would we be from look on were what there the analysis would tell that do European now the game the tariffs end of business only could probably benefit. can day, funny, Ferro it we

for think do that's So, Ferro a to of very, Asian suppliers and constituencies. of impact is lot order shut ours. for government's the helpful, us for to downs It's stronger air a clean Chinese those the as in The very or other everything position the right result. only of I but their whole competitors getting credit not all

Operator

go ahead, from our of Ms. Gibelli Please And & line follow-up. Morbelli Company. It’s the question Rosemarie last with Morbelli. comes a

Rosemarie Morbelli

was of international although about you Ferro impacted not of XX% Peter So just up the tariffs my directly in would by may help. questions operations. on be of said from that was wondering revenues your following actually that it one China I while it

customers, major the tariffs mean a could the your in if look I sale U.S.? hit you you're impacted at customers if you as back So, way, are be into they with product

Peter Thomas

prepared lot you reason spend as and very, this we is limited heard time we on very a Yes, this go the and remarks of the part in this. in of

where move the regions faster those with As that in follows over build we've 'XX application tough like, the in ourselves four we that we've target those through asset application growing our the more center were live approach positioned and we've and years and which 'XX. heavy past key customers

with like limiting in with with our and our auto is Because customers region what the we're auto Chinese up us. business so potential is the fastest producing market localized those growth that locally that's for growing are X% customers top is market with you impact double-digits. We auto know that the

reasons think model where demand would the tile the of North there low from China. would that nicely it And If American is, to suck is in be key producers would the the would around are locally comment benefit locally made self how into that's case produced the where So, up we about of lend that quite China is. imported on I the end our and are we and happen and think they guess right I that all fact our there customer spectrum. are in of the supply anything in we what will and U.S. tariffs Ferro type

We tile well, only right we offset and be the with limited. an and would is there would was with production Europe coming we it, are customers as do so local that there issue not our get with if local in,

offset That's off -- time I on very a it why in a on And we little course Europe, in are where going now of and we did between it's here. spend a of we with position lot very, lot said a it. news that. to was So, we U.S. what's think

Rosemarie Morbelli

really are is saying are lot your supplying you customers also having to a what exports? that so Okay, their as market opposed of domestic

Peter Thomas

correct. That's

Rosemarie Morbelli

may about savings quick from a that I XX I'm two you questions, have little it in XX if confused ask your And million XX this Is of optimization. target? XXXX it or is included

Peter Thomas

do will there There is that unexpected. in the obviously said, major things that we please blocks there million were getting thought then give it at that it is XXXX are be is said major we mentioned in things an that comfortable saving we're we you XXXX, why some was far were XX everyone's And we XXXX way but hit program were already XXXX we we building included It to those the get that. allowed saying were it XXXX you end comfortable 'XX of incremental to the as allowed that's our knew numbers that should start than to said we giving additional to together provide on From that are there are XX XX will working that, we XXXX not now major of thought. up. start feel That XX going project, whenever that then million why level at do always better comfort guidance have million because We that should plus doing why XX that around in back plus. in supplying and it's were XX others. a off we we that you better of little even project shoot All us and us million first that's program, in you everyone us where look also things. consideration we that feel that of 'XX. on and to is that like basis looking we of a what was hear it is at there. and to keep than now major certain XX address saying other to projects lower Yes, really guidance, are will move and that an to amount I optimization though out this bunch awhile you realized us XX wanted to the be we But we all maybe at do where somewhere between number for and plus that’s feel but should that we because XX baked and are into socializing XX we bunch little

that a pathway others that level that is towards years of that number that executed numbers need understand trying X not out like to address aspirational or hit a to out. the comfort put were people to have we lot solid We’re X that

we’re We that Does the you? help out, now build so with. hit comfortable pathway. have a that We're dosing you in executing should

Rosemarie Morbelli

X the could or however from Yes, it does fair to what number yet and million we be should the it synergies million add X is say another to that acquisitions. XXXX of another

Peter Thomas

the that’s mention correct. synergy to Yes million EBITDA XX that's of why XX adjusted exactly we million

Unidentified Analyst

very And ratio lastly a a at quickly as revenue, and SG&A level? percentage is sustainable of

Ben Schlater

-- Yes, that’s I Ben. think its'

cost trending really structure to terms expected be in top line. I business at leveraging where the the of we of think otherwise that's the

Peter Thomas

worth margin. be beyond of we're the much margin; together to SG&A, continues in existing how where gross And important even continues so, it so that high is Certainly, if pretty the really just thing, gross think close to just to a isolate flow and leverage seeing we margin -- on keep that if of eye I for how two through be really that through, really seeing Rosemarie, our of level. good well and we’re those just Again, metric. dropping other a that. excess us we percentage much the it's volume the on sales mentioning as relates

Kevin Cornelius Grant

the discuss results We everyone in We you we rest the Ferro look your for and day. to call in on forward the Enjoy of quarter. appreciate today. your us the joining next would thank to again with interest like

Operator

great and And line. for ladies you have day a disconnect conclude gentlemen, of does you our Everyone today. participation. We thank may your that rest your you and call for

Ferro (FOE) 26 Jul 182018 Q2 Earnings call transcript