FOE - Earnings call transcript Q1 2019

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Operator

Good morning. Thank you for joining the Ferro Corporation 2019 First 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 seven days. I would now like to turn the call over to Mr. Kevin Cornelius Grant, Director Investor Relations and Corporate Communications.

Kevin Cornelius Grant

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

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

Peter Thomas

Good for today. joining morning everyone. Thank you us

The business as proved tested and our first softened. to quarter demand be challenging

order we of of niche that we of the the and what we to the In we inventory at are enables space, are first we to satisfied And from of higher which we say resiliency of see the during participate. growth. destocking patterns mid-level not. moved recent a one demand longer the market adapt right Like end we the many any experience are in the quickly our results sustainable view Absorption in tile. fourth because XXXX weaker But achieve in margins years, role build in end on that decisions to of that making and sales. us it a not back Fortunately, markets the anticipated have six companies quarter different and of have orientation six to in we That's would in conditions. were into our in to to markets inventory not a maintaining to so level XXXX in base. some contributed certain at softer the the yet customer are that still customers diversified relative that particularly an to nimbleness to quarter. three some at destocking focused quarter's market inventory. level to market of eroding some first the But as as inventory, quarter Customers of seems tile shifted and about the larger in well that in high the demand quarter of We the both volumes The impacting a lower months month several months facilities these also done played stocking discussed of This just-in-time levels. decline of are our profitability. first four ordering they markets contributed quarter we've to first months ago earnings. with

Europe benefits from of experience dynamic business the market better. to government from the ourselves from and gained clear the we circumstances, revenue headwinds quarter. the I'll later optimization our there. comes conditions, a we volume affected Europe, in in to I China, line make as weaker still less learned forward. Economic knowledge XXXX Europe, that don't from that portion we on Ferro's significant and about China, noting it's effects revenue projects in we pigments home, impacted remarks. factor impact. affect and challenging our to prepared of recovery comes negative to by Because increased the this our Much in was demand expect worth this may first this business. of Color a Europe. in know may half the intend go We we slowdown remainder from demand with use absorption in From turn from but throughput we also initiatives. year these my a felt Solutions positively and and China reduced further comment will our We second offset of served but we the improve Closer which the of there construction have felt sight of weather building markets in relative customers conditions the stimulus in United States especially

headwinds about million. addition, negatively rates exchange foreign from $XX impacted by In sales

remain But outperform not about the the what So, outperforming our and businesses. believe to ability relation quarter positives to business through the of demonstrate the Examples all trends enthusiastic markets within their position can Ferro's technology markets We sub-segments there expect we we of our these we after society model opportunities of all-in-all, continue a that good which and of outperform outperformance and where in productivity to surface because automotive, the customers bring XXXX. growth We to certain increase for that markets for our flexibility optimization in value initiatives. were about include and reinforce industrial, said will XXXX performances strong in participate. we should mega year. we create

more with in the we to For technology automobiles. XG our for more And North opportunities to technologies business America we electronics opportunities and example, added as is in for exciting smart move our see see business surface technology. connection

will and global initiatives. continue manage innovation We through optimization judicious execute macro-economic this and uncertainty continuing investment, to leverage, to managing of with time

involving better becomes committed even updating, means and by crucial more optimizing innovating, being become Regarding business; the through time and to growing, to weaknesses. We've a macroeconomic Optimization managing complacent. better company. the optimization, when a and review and optimization efficiency a never more profitable all we increase as getting improvement productivity built culture

this a initiatives year. EBITDA facilities, adjusted and Optimization As previously which previously, largest number Initiative, begin discussed contributing we the these, have R&D consolidating Americas of discussed, implemented we sites, manufacturing logistical labs. including optimization will have to The of Manufacturing

the opportunities a We planned underway number company. initiatives or optimization other have well of as throughout with

portfolio taking at going look an include Ferro position. as how continue acquisitions, to forward. market best position to to our technology good Our optimization optimizing our enhance a portfolio optimize partner advanced we our After XX efforts are

this way appropriate, As or under provide future. more the details on completed in optimization and other efforts we'll currently

let's the segments the Now, first quarter. three to business can our X. the in deck, In summaries turn slide performance you presentation of see on

profit our to earlier. with that we Coatings' volume begin margin end of volumes X.X% were destocking dynamic Gross the experienced Performance segment. market. million. sales the up and $XX.X decreased million. appreciation XX.X% basis declined us net XX.X%, Performance Adjusted while mix profit to Let's Coatings on from to constant to I million down X.X% the from tile the destocking reflecting currency high and a segment the greater with $XX.X in $XXX.X shift the gross the due process described high-end has of in for given inventory market re-positioning The a were

through We of well levels. reset of growth strong customers a have as of demand a gone weaker inventory a and now as cycle period by our

our recent and With more understand the now space, sell we higher the purchasing transition to of into years in habits. dynamic our portfolio better customers' this

to Adjusted declined basis let's business. digital We market Glass of profit million profit Much increased Performance net the & on segment. constant with great X%. sales in up, In currency our digital printing. Organic XX.X%. this from transition to to improved attributable X.X%. at of XX.X% & industrial approximately printing to this have to improved we volumes opportunity to XX% Glass by increased flat was a Sales Now margin with believe $XX.X our $XX.X from gross sales sales increase Colors X.X%, Colors million. first a quarter declined look our technology. Performance technology Gross glass

materials which [ph] heavy This multi-layered in market automotive, paste applications applications. are our a automotive business by dielectrics strong used in growth approximately mid in electronic duty year was such grew and business capacitors, down as in the for film and of single sales XX% tapes Our and sensors, quarter. XXXX were low airspace cherry-gated sales digits. military driven After of

our We North Pacific. low was was This surprise single automotives was year. primarily majority of offset in our expected and the sales. we year the for a automotive in to quarter cycle performance container to compared expect demand business prior the but by prior weakness the continue due decline throughout low not the strong Decoration accounted continued to weaker to in off in year. see glass for decline we the America, down be of Asia digits Europe in XXXX which the digits single up as course pressure in

basis Now declined flat, were Color XX.X%. $XX.X sales in turning were the prior million year. to currency down volumes Gross in million $XX.X the margin profit from compared to while first in the a came Color Solutions X.X%. profit to gross on constant Adjusted Solutions' at as XX.X% quarter segment, net

building The and start quarter in for were in market affected as a First weather the as States technology of market the to pigments demand our shift offset surface demand slower the construction pigments United in our by well from away the due products. softer in stronger business ultramarine was by blues. year a automotive our to sales

Many we a share remainder markets be are half. of the be to the typically similar our space about our in ahead. horizon. into auto what so the in We see year. better quarters generally to perceive business, we quarter bit second based optimistic I not that strongest, first talk Brexit the are trade second around cloud companies that will Ferro's serve the the talks, relatively about be markets those lies will first. second XXXX say of first, half the the Asia, up visibility in let's indicators clear sentiments expectation the have we than general a that in quarter we Uncertainly on and Now the although expect little to We weak. ramping from second there

conditions pathway those have our I'll over goals, call for to now have teams we on to Ben we since comments. ahead goals. XXXX, still his XXXX and when achieving further although still our Looking the a turn XXXX introduced market are we softened focusing

Ben Schlater

in Peter, the the rates adjusted of and the today's start reviewed on million. XXXX. $XXX.X are on currency you, slide section. we which non-GAAP numbers morning, like net and X you growth find I'd X, first financial to ferro.com and out Investor and basis quarter The Please in be are good highlights XXXX. grew that call, to I first the quarter note to constant presentation consolidated to Turing the sales results X.X% quarter, slide morning finance refer first mentioned a Thank on our this for in accompanying discussing results can on everyone. the can X an basis compared to

of While adjusted to EBITDA million gross XX.X% or declined and $XX.X million. SG&A net sales profit declined to sales declined X.X% or XX.X% $X.XX. expense million of Adjusted was adjusted $XX.X to net and $XXX.X adjusted EPS

primarily a corporate there first were quarter, our non-GAAP acquisition For and few the activities. development, adjustments, related optimization to

$X activities approximately related have $X.X related primarily of certain in adjustments professional and initiatives. one In adjustments of due time to optimization million, manufacturing quarter SG&A, costs consisting optimization and to First, the corporate expenses, earlier sales, development in other we optimization of cost year. including certain initiatives, the announced this we have to legal, of we million

in of Turning adjustment an and optimization quarter impairment, achieve approximately acquisition ongoing to and was $X.X to to our restructuring synergies. actions there million first related initiatives the

other and quarter, the related optimization $XXX,XXX about under in Finally, of primarily we expense, costs. adjustment income to had an

moving quarter, million currency year expense of the $XX.X net as basis. the XX.X% a on adjusted in $XX.X Now SG&A, of to XX.X% with in prior or first net constant million sales sales, stated quarter or was compared SG&A

brings was compared in the million the nearly our the use of while businesses flow. SG&A line to the to company with accounted adjusted prior use with million in cash year. me acquired quarter free flow free in first for Newly This was the majority flat cash expectations $XX.X $XX.X year-over-year. increase, Adjusted of base

items working flow for million recently a we operating net for sheet $XX.X million, and $X to operating manufacturing CapEx. optimization, plus our reconfirmed $XXX add items used and million meaningful GAAP flow for capital, our $XX.X receivables capital of cash and most full million free Starting used of less we GAAP use other $XX.X on flow a depreciation activity. $X.X $XX.X GAAP in on at P&L expenditures, provided cash add million guidance of cash have less quarter. Then add by We income acquisition-related the defined follows: cash Then to cash of of million million to restructuring arrive XX% to and continuing less the $XX.X of free prior at first net operations back we We year adjusted most from conversion of other components with announced from received of amortization, quarter arrive million activities XX%. The cash items $XX.X subtract change in as non-cash of balance cash as activity million free basis. other are

our for activities. to and to of approximately quarter, two, our respect adjust has M&A, A million approximately at cash and be and our ended first reconciliation quarter one, optimization capital with GAAP M&A cash GAAP our the practice $XX stock million for to consistent announced $XX.X this the found repurchased these related X.X those $X.X flow three year of first These compared three, recently cash at for we cash of When the programs. X.X release. average cash in $X.X to free table related restructuring. this $XX.X million of to restructuring With times year-end $XX.XX. flow related from year million been cash allocation of the million related optimization; flow liquidity we and calculation projects, from shares on XX approximately adjusted brings related strategic to our $XXX our follows include, we an the call. million. number million prior for $XX.X related The Further, are can with as price to flow year approximately the the this details to manufacturing back to Our million use flow; to items of leverage quantification operating add for share of press adjustments expectation number,

to Now, XXXX reviewing spend guidance. I'd time like updated our some

XX% flow earlier, and are adjusted As our conversion I we free mentioned XX%. maintaining between cash

economic have we our and updated saw in first adjusted and However, quarter given the EPS we guidance. EBITDA adjusted uncertainties, that weakness the

we clarity XXXX $X.XX. the the adjusted guidance of For to $XXX EBITDA with of million approximately updated same. the from bridge summary, want we expect Beginning year a to the the range add, components from we as is markets million million from In we rate remaining largely raw to EBITDA is EPS year, the FX to add gave is to in be Then, guidance, aggregate million million which EBITDA materials full XXXX review $XXX line and with reflect Optimization, in our in a $X.XX. in $X slightly acquisitions for with and $XXX Manufacturing the subtract Euro guidance year-end to adjusted U.S. quarter. the dollar to our XXXX for a Americas of the reflect $XX of benefit that follows. net range $XX last to a to million our updated original exchange million of range the at end $X clear primarily we call other To XXXX $X.XX to

behind Finally, we $XX today our reflects market in also have on I the and that the related organic already $XX us. that, Peter the which would roughly with economic the is note destocking to landscape and been highlighted headwind I quarter of realized first organic largest uncertainties two-thirds has component call. in business to and tile subtract current million of headwinds million the

to EBITDA balance $XXX To $XXX those $XXX guidance pieces throughout of of to the adjusted up equals sum to the the for XXXX. year. taper-off range of our XXXX expect We million million million the remainder

in $X.XX adjusted in of $X.XX turning updated $X.XX $X.XX guidance expect at slightly to line for reflect the we to has been rate subtract from and gave materials again U.S. we to Euro year, EPS. there Now to again we Americas Manufacturing headwinds $X.XX for quarter. the original roughly the to of from of which Starting realized quarter. $X.XX the range first Then, at $X.XX subtract again EPS the of last for for largely the organic the aggregate two-thirds exchange to FX, we walk acquisitions to our benefit Optimization, XXXX within be net and $X.XX raw our with

Finally, $X.XX range in which to we to of on to XXXX our give some the our for I to how the $X.XX like adjusted for those of our of of guidance from $X.XX subtract would equals quarters to $X.XX to guidance unchanged To wrap-up change $X.XX view sum tax $X.XX increased we quarter. last $X.XX XXXX. for XXXX. interest guidance, our The remaining pieces rate EPS context comments both and of the are expense

We quarter to themes improve $X.XX adjusted guidance range with current given destocking Further, XXXX weaker we the expect sequential of and to in $X.XX. calls material full prices a of to from tile, zone, as China Euro the fourth first Further, quarter and followed expect we by quarter XX% guidance remain would quarter market if XX% year growth our be meaningfully macro levels, expect in the second the this the our of quarter, to the in of our of strongest margin year. second updated half conditions second the economy including EPS in stronger in softer at for raw current third half the XXXX. expansion the

of foreign spot the reflects for against guidance including the XXXX rates Our $X.XX XX/XX/XXXX exchange as Euro dollar.

overall change do by million guidance profit for in weighted We the where have $X.X release. of Ferro X% We XX% generated impact by to sales U.S. and exchange in dollars. XX% in million million currently section XXXX, a would provided we the the to Euros of rates FX in operating countries approximately to sensitivities $X.X approximately earnings that $XX business estimate revenue XX% XX% to approximately and million. $XX In foreign

profit by for sensitivity a If approximately to X% $X.X change impact on you isolate Euro, $X.X the would operating million. million

turn just we landscape to nimble Kevin on company the the cash adapt and I our that With maintaining on and in call possible focus steps what reviewing build and control will Finally, to the our would like keep for what's Peter as economic to are that, in Q&A focusing on constantly taking changes to over mentioned to I as macro leverage.

Kevin Cornelius Grant

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

Operator

first Research. G with with line question And from the Morbelli Instructions] we Rosemarie Please [Operator you will on Thank go ahead. our proceed

Rosemarie Morbelli

you Thank morning good and everyone.

Peter Thomas

Rosemarie. morning, Good

Ben Schlater

Good morning, Rosemarie.

Rosemarie Morbelli

at is margin most looking your back as Is your is the of It results your lowest Coatings stock? where that considering? and and any seems the Board obviously the debt consideration buying also you selling Peter, business. and upgrading So having management Performance lowering immediately portfolio are it something potentially it though issues. and are there Is that

Peter Thomas

in know organic this going whole it's define optimization portfolio, opportunities the pride initiatives we're that and range a to further of ourselves here. you whether inorganic, As having we with

and ourselves opportunity version are creating every in look of exercise a always We interests that the at of better activity. we to

Rosemarie Morbelli

guess maybe, the is I yes. answer Okay.

at has been understand mostly So optimization focused I America have that your North those you expanded on U.S. program into it now and the looking Europe? activities

Peter Thomas

pipeline something you, would see that have because probably year also this million to Let of announced, defining refer profitability. ago, million we $XX when were we the year. plus. next me we mention like always to mentioned to $X we which to further add $XX million that we've the another $XX million year an we around I calls. prior And that were optimization activity back A the would would optimization during building balance represented mentioned, exercise I have that

you manage tell is is and that's certainly which as challenging what And organization strategy X. there of as can't environment it's and will control strategy this can because a The you and work we well with phenomenal is get don't has can't activities. a optimization whole I what that framework targets the XXXX you really through we worry that very embracing control it. very you been share how inorganic our fact why the is optimization as the important. of And what idea innovation rule today organic, So combination in I you our Phase about in certainly of is that with have by you the

mentioned. you profitability is are to staggering is are $XX did about expectation the you on guidance. we? some in where We next we're are answer a of including pull. we've going pull our of many have going I opportunities levers, rate a we by about year have into year, we to in, top of already those levers The -- of I of tell question that will what that end some will And the ask this will new run now lot million and of

uncovered them have we until quarter And Some not of of because each some we the visibility, orderly not we will we right very always methodically do details. because here planning we're But it a do not not we long time. like sitting for been the of very, we projects. share will we the of sensitivity assured, We've something. sitting this rest we'll are are those saying just back,

trigger easy So it for executing. was the us and pull to embrace start

we of we as those this of the side are the business. And managing around good know seen projects done. optimization you Some are And value. very already have

are So year. we next another the news million is looking at of today run a rate $XX

Rosemarie Morbelli

the $XX that in here? just million to So clarifying is addition

Peter Thomas

you million had And kind million of there. another we're year when -- go I $XX That that it's if Yes. doing the that ago, and was time hiding we a we back to the trigger in would mention did right pull $XX that.

Rosemarie Morbelli

And may. Okay. I sorry. I if then am

Peter Thomas

Or done already. have we it

Rosemarie Morbelli

Okay.

substantially translate the while Ben to lower quarter the XXXX? $X.XX you second year Are versus expecting expecting still $X.XX. at be talked to I about is second above it what last about if regarding quarter you half second second than improving, Then So be quarter. are going your

Ben Schlater

the the see in the a the if quarter, half of do will Yes, perspective. we second I implied that that year-over-year math year second think the that's recovery is from on guidance in you a

Rosemarie Morbelli

Okay. And then..¦

Peter Thomas

that order important find would Rosemarie this note to all a is our one as what's business. we pattern back -- what really for really define to normal are through being

on an appear sit that building as of the going one's And destocking be know to doesn't could we're I second. their better today being second up ugly year. really certainly of last quarter really being depending pretty quarter levels against dynamic we've going than the better the surfacing know think we in period we been interesting bit the in explosive that certainly, feel no in than the way. where quarter And the think an the the level clear. quarter dramatic -- first, about that's be fourth We of because there's Here an I a sequencing good inventory second third we

fourth remember in think maybe X% the in And think be could quarter prior year. in a I so a had was interesting very the I fourth. from fourth we improvement and it XXXX quarter But year-over-year it the was

be know surprise have And us. we I if the doing will and an could interesting to may pleasant think are we So fourth a for show. fourth keep what we quarter doing I quarter we

Rosemarie Morbelli

Are you anticipating just new pattern your is or the or this the even to high-end for are way to on remain months buying to going time, the are that the pattern, back in not months building tiles six more they they less meaning that four but to sticking inventory three just projections? supply,

Peter Thomas

and a were good get dynamic. Because interesting I brought That's would And point. It's come we up. through script glad you up. it didn't it the a hoping am this we very

what's the first quarter And activity defined and worth then we precipitously I in not year. were forward. tile our are inventories quarter would have sure know, market, track of equivalent of X-by-X, construction I six would deal build top all what the everyone inventory. some X-by-X down And -- -- the the sizes. past last were that markets. or on go time as in a X-by-X, half the right have something part call was the as let's high-end during and knows, first six tile if it commercial were industrial have to high-end if typically customers to months a as X-by-X that coming that telling seven the less. their the normalcy to that was has the through you has rate of very they In run they into but at the meantime maybe close rebuild four they tile type the the the so of months could basis it first hay-hay you the that and of would tiles -- we're We a to of to did substantial with that of happened, there objective destocking where to for large be that us change be lot And as dropped. mean It's producers in discussed swelled been months moving very, that's larger to we keep eight middle the planning means things in instead demand in the

there So while all out to lot Ferro been which things the in that the in value because this tile into demand necessary really of the larger this size for of give And tiles is the supplying of all has is coming those Year the of more design destocking market more moving scale. we the a type to are took and expensive. place leaders the the New are

because Europe So rather inventory to up inventory tile believe than between exercise was of We what this that do they repositioning by construction in ramping are so demand they orderly that's define than stuff a from methodically glass up rebuilding larger the their residential we're their with of. old speaking maybe construction that X%, might see the in the of way the oriented. one even rather our near-term more and coming

with the bigger profit. point was gross $XX tell million roughly to you, work issue the I than here just of the the very but company maybe million products. dynamic or of So with methodical of old organically well taken incrementally what and of but they time were And million of more think I two-thirds lot I the think $X we they bench through gone. cost destocking course year built had flush a did in a being around orderly products are $XX the is And the so out, we the our can

our So forecasts. into any not that we adjustment have of built

do year the all which for haven't the made the the from is, we're to adjustments think find what going through business in of the tile not a a you leaving to rest if or we get make have it we'll going We're of to the second decisions what fact we'll the where separate don't And this good time. necessary point is they kind of of listening with into want And today want you're we to growth environment. line very In it. until where of to X% orderly stand are methodical. better in, it's we they visibility this course any being it coming Ferro, is We we leave on customers because do. course the the that way have at we are quarter

Operator

Thank the go we of next with KeyBanc. with our with line. much the ahead question proceed question. you on very Please from your Sison and It's Mike will line

Mike Sison

what of the over that $XX and walk sort see? In And of need demand what needs growth terms maybe us time? of happen get $XX the current segments back landscape of million million to you type to to volume to through

Ben Schlater

I Hey think first Mike, -- I we of of significant come of destocking that that Look, reflected in largest the piece. comes that To XXXX. is a could back -- think its of That sort single a lot would impact so Coatings' it's quarter the as the business. the you be is the Peter of sense Peter in two is that if my think the a the said, back piece guidance he rebuilding into have that to about the from what piece case. inventory Ben. which just reflected extent built and lift in that. that that the or the have pretty not not numbers. be Again a in We can that we the said quarter Performance

half both have will it in is Solutions, the that pigments from year be is And seen and weakness Color there's looks from mean respect of to Colors construction a slowness an U.S. perspective. we then with primarily Europe. there that's and Coatings. Performance the slower, auto I not Glass takes in & in like So little overall seeing stronger. much, second perspective. really we're better to Performance And much puts the anything related electronics

rate of think of that year annualized and as from -- the run come comes you in second that that will an and see I if you when that second the impact half piece expected a back. get run half So the rate we you

Mike Sison

are improvement a Okay. will. companies looking And you think for half of then, I if lot second a

Some improvement. event in that is have the no thoughts given some there

now? is to of improvement relative is there event the in it how outlook in sort second does So half, no your change the where

Peter Thomas

what what there there. think. reflects I it's in we're some is is showing reasonable -- think A if we that building softness Mike case

is think the can really chaotic at giving as referring we case that point. see abstract you best you're trying end we're our possibly as predictable see that We're or to. we anything I do we -- what to to is this be don't

level, $XX I looks business, have what We I we've we year. lot dynamic in The the that pickup of that of million inventory the gross germane million for the and we but given modeled, to built And in haven't a core this business balance sensitivities that discussed. We've now have the X% cost really like of see. type destocking the us X% about the profit. of the you tile is it's revenue. $X don't mentioned even go think Right there. to

it. at way want some picks do math inventory might back you people a up if may that's looking around that So position dimension. that get of the can tile build model. that give with to Ben If want to of other into And how to one you your you normalcy

Ben Schlater

Yes.

I different is slightly what that it. is forecast. down And relative think think first it's what's relative those the what One is comp, two And broader were significantly, that's think perspective, easier the sequentially. first second to at compared in two I I of to when the ways there's look half second of half. From the happened an first quarter the reflected economy. happening Mike half to was answers. so And the -- sort the we half sort

at an you of us. because of would an we're relatively I perspective, perspective is the sort that behind think a destocking mostly is economic the from but what lift it respect overall from second expecting been say with be we've first conservative half. half, I growth overall look from the will if in second to half organic

Peter Thomas

Mike. Yes,

more about Let what what sensitivity me about add know what complement a talking is I heard things. I that Mike down Ben side, couple but the mentioned you a said. think we're of argues I

absorption in could it's does because thing fourth and quarters discuss important to of if high damage the our rate continuing Because ends. perspective, I you in balanced to will. the another think me to margin drive see improvement know you third, a you fair and increased, how very it. the that's One first of particularly while Let give

One could will regardless auto is else areas, Europe. who I X% what tailwinds in with know telling positive trade discussions is different second is higher that participate. too We're thing sensitivity the already you we're around continue where environment. up world we our is spark our seeing of construction agreements raw that we and the construction that markets the the mentioned, in around The thing the material economic -- what with about in customers world

contacts to Europe China and our We If the importantly, our growing does sales backs I it favorably based government know certainly, they're indigenously, where on to you look it's around double-digits. what are it's applications, making that situations coatings what can rather at with in efforts automotive but than -- does support regional know the will China share automotive the to lower we it boost Chinese market. we're because positions, more

comfortable. we happen So we continue already participate, driven what gaining automotive forget glass we will outperform and GDP very mentioned we things we're was is have although, customers, And I so even where construction. -- Europe we've printing hearing in up to around feel our environment driver European soft, our from construction, will don't flat mentioned, this auto as And is with again, market. our by digital there and Europe traction in the is and the in because that

this getting $XX you, run programs highlighted of that have a on million that at in end just soft day, are again, helps what is spur rate. environment what that's focus those optimization with the I've traction. So And delivering the on technology we a

accurate we're summarized case. a you've build own highlighted to me here the what we a done economists, on decide with exchange that here, mean, think we're any heard lot just -- believe discussion without probability the what we've high what feel hey, at I not possibly of and that here this look try and Ben not sensitivities. represented a we We've we sitting us in and end it information of end we predictive take and we're you I use – we're how on, the to onset from you done on giving low foreign is your as as experts, a being a can -- it fair to want around see isn't fair I we're point. So representation and at

Mike Sison

Okay. Thank you.

Peter Thomas

Thanks Mike.

Operator

on Thank you from BMO go question. with next our with Capital much. ahead We'll question very get your the McNulty John Markets. line Please to

John McNulty

the point, I forward? normal With a for had rates quarter, you feel at one quantify question. my cost Thanks don't we are also, guess, this see morning. drag good so first was? more that can absorption like fixed going as that Yes, to the you at that you then in you regard And taking what do running

Ben Schlater

Ben. John, Yes, Hey sure. it's

look headwind at almost perspective and from overall and you absorption year-over-year company three lower of from quarters headwind If the lower at gross profit volumes base level the a absorption. the volumes between is

vast So it's of the majority it. vast,

quarter. included We expect of the second are we and the normal more to the we absorption end would -- as levels and into to in return it's guidance, get

of sequential improvement show quarter-over-quarter And so the year. that we the and do end now between

John McNulty

Got it.

with do the M&A does how levels with stock stock these the I aggressive compare you taking quarter, stock advantage of mean, sense there, your buying you buying I And how were guess, the Okay. more back at lower and that And see and that pipeline? certainly price? back be then the of pipeline your in the urgency to to out regard to

Peter Thomas

Yes.

Peter. it's John, So

all, no than pipeline different of discussed. our what we've M&A is First

market do, that versus would moving way also while we've paths bit We the if complement still And first infrastructure year everything, the more company. it's -- more businesses this at that And we getting to XX we're trigger point doesn't a is we're market we're looking meaningful. billion could amount what growth, on. a index the right continue forward. play more we because are spread buys time. pipeline a organization that three the deals. of little about tell acquisitions, to a takes -- also a before be billion a a It half mentioned because do had already we we good that whether the we're we then organization look we're the always it's maybe optimization a do working be are that balance. you, the we're pipelines along we to as sure impactful at of our scale created, a is using mean moving where early a first were more move around get in and at where than all of would you, impactful between I things versus stop we let a on now while I we rightly mean, across -- course, inorganic can could to managing we your more you now of inorganic real activities, believe math a growth and We acquired tell between remember the the looking to mentioned organic continue to that up organic looking in. what structure. versus parallel it? in we technology Ferro. we're and bigger And, on how way point $X $XX XX have we vitality around, can billion nice we've you now as that what this in we in the at run are zone of XX want of were going pumped more version meaningful. after I lot orientation adjust And we trying couple we adjacent as at can reached spread making share we need an been, for XX. where pull But at that'll creating better And the half big a capital have Right with about we my of it, addition organic Because optimized, that our so, in run this we stuffed doing -- and do the four needed or in inorganic point I a We've we prepared a -- five normally the technology now, is what to do we're some with feel large of bigger then to something we that we're where to same with days, But the remarks sitting where to a to business doing $XX things at year, the what things, in the we're I've course, believe see that or for to

the more So -- of here our expanding at ground term expanding ground we've -- in business. looking we're

that want point want -- something happens, So we Ben of year. the what half on, I we'll to capital keep to I'm anything do will sure is. go we'll manage to you whatever making how on that? that we the the adjustments second And mean, in see at add structure. that the

Ben Schlater

No. right. That’s

John McNulty

Okay, last great. No, question. then, guess, just that’s a helpful. And I

to opportunities think the XG. scale You what help had for Can those be next mentioned opportunities you? in couple in some prepared in revenues years the the remarks us terms the around in of of of over you about might

Peter Thomas

lot as because to as of phones as for filters under -- a secrecy I to what vehicle with call has ceramic relates communications, know you with and the vehicle can, agreements. But as to us well we're done will and it A also know deal XG linking could of telecommunication, from house chemistry. it I tell Yes. be the I strong them, much you as to around, well as the as let's cell lot car.

tell over lot I be now, if can those you like that index. vitality our for want activities would and you very because But wish to things a I are novel right our quantify something there going of that, more, So pipeline exciting. above it's on.

if as short John, we period pipeline only remember nicely. it for rich will. agreement, pipeline gaining secrecy we're but you And fast-paced talked is that in when an margins you, we were I are growing much a with index, as You out in be they're time. we've the there. But are And And we been of layer working and $XXX million another -- innovation again. that. think, and really particular on under could us vitality with that traction developing XG about

we've That's excited. advancing businesses, did terms one mention. very with this intriguing more taking and place their R&D of are conversations With things I the very destocking that's were in had all want that on So our technologies. to focusing customers their of people

been in you been busy, XXXX, Well, mode, that R&D you the XXXX. tell since I we've robust As has our when R&D XXXX, know, discussions top the freed customers. seen and can organizations between than done. more the you're working have our in growth teams everybody is time like and with I XXXX rapid a getting The some all just -- up have job seen

a sometimes I all that's for Ferro is last that acquired -- So discussion amassed. leading a platforms technology now, couple on platforms have XX And over partner I XX with think about in feeder right future. we've last mean, as And the of that the calls. XX on, we've I we again, what sitting roughly technology we did choice are of acquisitions. the the the call,

comfortable. index. companies, the with a going lot going forward think, going will the certainly we're feel base help organic But innovation our us then I vitality current growth, we'll build start vitality as but index imagine market-leading out help reporting all to can the you against, that's all like on are free and things intellectual with there property of So there interesting more time that

we'll We help agreement, commercialize, we're index. have here. that you? that under that vitality a as But things but discussing they start secrecy Does hit could couple that

John McNulty

for the color. very Yes. No, much Thanks helpful. that's very

Peter Thomas

Thanks.

Operator

Thank from Please Kevin very the Hocevar on go next question Research. Northcoast line ahead. our to get We'll from much. you

Kevin Hocevar

think, remarks, little on the - shift much Hey, I much morning, sense you how I a mentioned Color Blue. Solutions the the how the the how Peter, business? that auto you Yes. some the know was weather destocking? bit? quantified have a Color of everybody. a elaborate from you Could auto market -- away good in prepared in you impacted weakness Ultramarine And in in driven versus Do tile for by much Solutions that, - that

Peter Thomas

the slowdown construction much. discussion that kind Ultramarine grays of to with produced the variations estimate with And ultramarine, But automotive like weren't overall. were Color I to colors would there of and months, being maybe has Blue the certain two-thirds seemed and gray piece as due six of -- blacks. the was Solutions it slight Probably, weather deal last

However, it's to starting back. come

that our perspective, Color today, now. here, Color if negative anything Solutions from businesses, mentioned, three sit organic blow from for at quarters last with of we're positive. looking right the we all other you are them to where take why turning X% than sit an X% basically, that's growth, Solutions, up organic including tile, And So, was I where we

back, mean, it's short think So that -- a I term. coming I was the

of to times markets because with like of orientation. could the consumer that the -- wants an a the dictate automobile on Okay? too, We've we in depending that do, lot moods. We funny colors the type it's color wanted around the a will things on type depending of vary mention economic and situations color high end we these other learned of the

and that mood is better, and blue violets see getting So we're Does is back the that. help? to when the grays I starting think mood Ultramarine will the that come better

Kevin Hocevar

try the turn hold to offset last that as or weak back -- to that to seemed get into the to the margin raw of out lost you and maybe expect first dynamic? you demand half similarly price was the pricing, given continue very see years the on Do materials in little raw And to at pricing going that. much and offset more the flatten in How looking a that price second and Q the quarter bit Yes, - raws a raws, couple hopefully relatively -- on expect in over front, the helpful. and than up here forward? a that like look environment. of on raw they a little are more dynamic you tailwind do pricing material bit back well you maybe offset pretty and headwind than Do quarter then

Ben Schlater

Hey, Kevin. Yeah.

there. the see better to will start it feel sequentially happen we And benefits second it'll described. quarter. just think will It expect the you and fourth quarter. third get some to We'll in happen flatten out I -- in then we as

Kevin Hocevar

much. Thank you very Perfect. Okay.

Operator

get We'll next Seaport you. Thank the our on Mike line from Harrison question Securities. go Global ahead. with Please

Mike Harrison

good Hi, morning.

Peter Thomas

Mike. Hey,

Mike Harrison

iron ultramarine. how the on And demand XXXX. supply capacity Did around supposed to related stream in expected? that oxide recall on seem come to does some stream as guess -- you and Columbia additional questions continuing adding micronized to and impact that was that ultramarine? I were Just early kind dynamics the coming be ultramarine in on I of that

Peter Thomas

The expansions that speak. we've answer is and it's candidly, planning yes. And quite as additional good that added capacity we we're capacity

Mike Harrison

to maybe continue on just All the right. pricing And discussion. of then also some

for maybe walk aggressive away you've gotten my volume sense the of Do or look see bit them of you've on as a in you're pigments maybe on ever versus I look the maintaining too you're Just way? pricing or on maybe where and that with you other Or been customers quarters. where any you've tile history dynamic? little of You've in reached over you've a maybe hard pricing too several pricing and past gotten volume in businesses in losing hard the any best pretty company, starting in to and some alternatives? point or comment pushed kind some have that or situations lost intentionally that pushed pushing your

Peter Thomas

then our that margin marketing part out that's Do extract Do every would pricing is we I question, of The If we anymore door our where choose be lift high a whatever telephone answer we our successful, for for what play market where a we policy answer and position -- second the determine that being just acceptable. yes. gross is that have we nice pound reasons are we that every now, to is activities customer? leading fight is be The we are past, higher order segment the exist. doesn't more of would want you The orderly in at yes. the into end the a ability market. to sales out high why the not, portfolio And can your to a methodical pricing we of the yes. goes to the up we're we If We the in manufacturing answer the reason, it's markets, hit one the it's to reposition that if plant? the margins fight every Well, to they it. joked wanted to point technology. of they answer goes competitors' booth indicator Because of in and at the every in our always location? the look And know for paying to great. have optimized from realize fixed you have are and do use will Mike, and intensity we of that want the But the choose day, our maintain with serve, keep would what in the always every in The pound end we also it. we people volume cost. the of this in raise remove pick portfolio end for nice have environment, constantly the with and enhance we And level portfolio. the I type This company. the our prices about like we will know

Kevin Cornelius Grant

for question. time have we last one Operator,

Operator

the go on David Bank. Begleiter question Please line from next our from Deutsche get We'll Certainly. ahead.

David Begleiter

Thank clear, high on tile be destocking. April? continue did the To it you. end back Peter, just coatings into

Peter Thomas

high how were that reposition you little of moving construction That's with use, customers will. repositioning out home more just tiles There destocking. like for of so for tabletops, the were a if because stuff. old the It's capacity the and positions more but a new are the very with of Yeah. was for it. look countertops the faster than some of a destocking, weaning end couple in they reason at It they rather would or their I not can leadership companies, larger a

David Begleiter

would you … how And

Peter Thomas

discussed. those Because because David, of the margin out the that's products as of customers, same helping those the they're are of as gross absorption coming that it, we

David Begleiter

and $XX from would destocking in quantify $X you versus million issues, of or in you the Coatings either million both in how combination QX? the QX some And absorption the issues impact Performance or had

Ben Schlater

Ben. Hey, David. It's

a we come improve So, destocking and back see should from QX that perspective. in

materials. we was As in in sequential April way Peter as and both the absorption said, volume the of out Performance quarter, Coatings benefit see should as raw that from second in of well most

David Begleiter

Thank you.

Peter Thomas

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

Operator

disconnect for that lines. day good everyone. for Thank thank as you conclude your does much. today. We the we you conference participation very call a Have And

Ferro (FOE) 1 May 192019 Q1 Earnings call transcript