FOE - Earnings call transcript Q2 2020

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Operator

Good morning and thank you for joining the Ferro Corporation's Second Quarter and Full Year 2020 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 conference call over to Mr. Cornelius Grant, Director of Investor Relations and Corporate Communications.

Kevin 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 and joined Chairman, am Officer. President be Peter Financial pleased our Thomas, and today Chief President Schlater, Ben by CEO; Group Vice and to Investors release earnings the call our Web are available presentation The of deck site. conference in and section as are I'd we conditions today are making comments we like are of today. to remind them view statements see everyone based and that and our some circumstances of the on forward-looking

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

Peter Thomas

you positions increased products leadership sales we to market Good do able were customers. profit a to volumes part quarter joining resilience Kevin. increase margin XX% of essential the basis quarter, our our the points. in We gross criticality performance Thank the Ferro’s of Corporation’s this in the for XXXX we to XX of industries. XX.X%, an because and our everyone. morning, Ferro in demonstrated us to second and portfolio of provide second quarter to Thanks, value discuss results. decrease Despite our

resulted. improve, efficiency operations our have we through the product performance The believe this to development gross also and the stabilize manufacturing of challenges economies margin gross navigating continues taken focus quarter We performance our the pandemic levels, facilities and that and achieved on to the recover. and In of to optimized business sustain our to difficult global expand innovative actions our COVID-XX addition, the quality business the especially while and improvement. demonstrated power contributed circumstances second and we in increase margin as our of macroeconomic

We and leadership recognize these the They our than during positions. safety challenging and dedication have to priority delivering market their no level health strategic of our professionalism we continued at times. employees, and have higher maintain the highest priorities our advancing and

We all grateful around what world have teams to our the for they accomplished. are

press improved with second the favorable As quarter we prior down from a was in in said quarter Demand ended. in with relative second the as results, were our to trajectory latter that our quarter quarter expectations. part the line the quite earlier release in while yesterday, the quarter of the issued second year, second

with relative We up this levels to will trajectory demand are seeing the year. that us quarter favorable third sequential confidence second in the continue of albeit quarter, to improvement the signs that give meaningful not yet last

point cannot the the unknown, strength we favorable Although year. through momentum see is world around the expect no recovery and that with economic this reason at continue timing the of to we

basis the we with do regarding certain to contact the on close picture an stay from are upward XXXX, in we expectations quarter third thing second we behind for half our gaining serve explanation in they order customers in needs new our that indicate for expertise that that key largely One assistance we of the clearer basis based their quarter. They their inventory of the second to about leadership patterns track the a is the more help market This and believe favorable turn quarter will third on learning out are began our providing our and our with more the our functional see them, and coming in customers direction to to This for little macroeconomic confidence them a forms technical the customers Conversations design our products. we and saw coatings to trough of in status of quarter. industries positions. demand. second is a same give as me expected Let is leader position our trajectory. are market maintain the

In up addition, into quarter and from optimistic see production. that sequential third cautiously inventories we customers improvement are quarter through ramp the as fourth will work we the

serve of particular from we addition, or in our times. protection lines declines In these the of the measure products against in demand uncertain breadth product particular provides for industry a in industries

with our and optimistic future are aligned also which environment. macroeconomic portfolio about continue the current are innovation trends, unsettled initiatives We macro because the in even

have explained programs. Functional that We are coatings product the our opportunities innovation. trends innovation create core solutions the color of for previously and our these at macro

Our markets. products electronics and range are a wide functional automotive, in industrial, applications across coatings the used decoration, construction of

of address in to designed our We for of invested the trends, enhancing customers’ have opportunities stages Ferro play products technology an position these and at new platforms early to essential growth. existing additional leveraging portfolio development role with prudently that it emerging

of is for trends in pastes sensors. our in we increased is are Demand in driving the second quarter, one resulting that double-digit was sales with the in electronics demand example, an As strong the aligned macro growth. electrification, sector which

such materials EVs, as Things, communications converging to related next-generation around the virtual electronic AVs, electrification XG, more. and Internet of efforts R&D applications, Our for are

positioned the well continuing are also adoption of digital We for technologies.

specialty this applications. of inks our and Our color inorganic focused wide products as digital next-generation variety digital on area business, that equipment. In substrates, solutions printing product is and of we a a R&D in organic organic with inorganic on pigment support as offer well range printing

and pigments areas as customized color is individual Reflection, anticorrosives. Infrared food continuing to directed toward functions modify R&D packaging for in for solutions such Our

well-known growth positions leadership relationships to scope leaders market value door Our enhancement. the opened innovation programs offer and today. of significant These for have and relationships innovation with

to a are choice regional these global leaders. We of supplier and innovation

benefit provide to our value customers and Ferro technology, Our global enable to on focus with significant strength customers partnering in growth. their presence and our from

business our very We’re about enthusiastic model.

essential over more and for that by optimization With initiatives insight cemented turn performance. high then trends. into and I’ll innovation the focused aligned Ben margin, products, We’re our quarter discuss significant to results, second with are the segment Ben? macro that, I’ll on call

Benjamin Schlater

Thank morning, by the to I’d business echoing everyone. of comments during start the pandemic. the the like and on especially contraction quarter, to in you, resiliency good Peter’s the Peter, economic due

second refer second to on operations. from growth of quarter the an numbers today’s also second mentioned our profit During a the non-GAAP on this continued quarter, example to financial of continuing gross quality believe to of above for we good rates performance the quarters We the for results can the the call, the on basis the second can are X, Investors see that highlights is and true of two adjusted operations XX%. consecutive of compared a with quarter margins continuing which have The the note you reviewed XXXX. confidence, our and on are the slides underlying and ferro.com forward. which that, This business X gives XXXX on contributed. constant in as basis I’ll Please of the going find move discuss the all financial presentation and the section. quarter results X adjusted With Ferro mentioned, associates about currency be consolidated to the accompanying in us portfolio momentum to Peter I

declined gross the XX.X% profit basis XX.X%, million, XX% expense adjusted margins to adjusted million, to to net X, profit and adjusted $XX.X million to sales EPS sales to X.X% declined XX.X% declined XX.X% Slide adjusted points gross declined or EBITDA in quarter. XX.X% improved XX Net by $XX.X Moving second declined $XX.X adjusted million, SG&A to of $XXX.X to $X.XX.

adjusted results declined global Now by activities X.X% SG&A basis moving On adjusted $X.XX. to year-to-date X.X% X. XX.X% optimization sales to to EBITDA previously and second reflect corporate and declined for Americas million, divested to associated profit gross EPS the and related adjusted $XXX.X EBITDA million, for both margins basis certain $XX.X our X.X% profit quarter, manufacturing XX.X%, programs. adjusted to to $XX.X million, improved adjustments margins businesses, points adjusted primarily net to XX basis, XX.X% Slide optimization $XXX.X X.X% gross with development to a million, optimization improved adjusted expense costs to declined non-GAAP XXX These declined points declined

sales, our our and fees, legal to professional turning $XXX,XXX to adjustments the costs to $X.X optimization optimization In we related related Americas to restructuring to quarter, to one-time in of businesses. manufacturing $X.X $X.X $X.X $X.X the ongoing program. have of of an other there for which adjustments due $X.X acquisition to of reflecting have which primarily of million and actions synergies, manufacturing manufacturing fees we the SG&A, in finally, initiative. million, expenses costs approximately First, million $XXX,XXX And impairment, adjustment and including optimization million and initiatives of related optimization achieve was development of Americas of cost corporate optimization of our related million, and approximately certain divested optimization consisting that initiatives, related Americas and million global to

adjusted to better lower above driven to margin. gross material quarter. adjusted costs, and XX.X% gross pricing. delivered margins resiliency consecutive XX profit to the for The business prior year basis points show margin and second was XX% quarter, product sales continues gross In has product to quarters. profit raw adjusted the This by Turning two second improved compared mix

programs. our the of is in being collected of liquidity used $X.X press receivables optimization by from on part working which with cash sheet, of XX.X% on by inventory $XX quarter, million We of operations drivers cash what be capital, strategic margins. items, see the GAAP temporary metric expenditures well related the was XX the less basis. adjusted in we cash flow flow not capital to we million at This subtract expect lines expenditures from Table million. operating our the driven adjusted limited returns. quarter, the X.X% other free a statement we from operations under our earnings our From program, cash year constant from positioned on that, to as to Ferro free SG&A. adjusted second largest net most million to on $XX.X Peter me prior GAAP Continuing but In balance second cash for quarter, debt cash move our calculate in and of builds standpoint. service be received an million securitization quarter profit investments, plus currency I we cash and nature. now changes cash or and available mentioned, discuss in to flow As flow expect sales net cash $XX.X or from expense to compared brings I’ll will to, million would flow $XX.X this XX.X% including, the momentum combining to in shareholder gross flow sales continue by following adjusted lower also of or This of GAAP view activities. flows, can the to then second Americas found in this In discussion outflow information a add was for our with and $X.X arrive release. SG&A cash capital

XXXX, As under we of revolving of had liquidity credit June our primarily $XXX.X of availability XX, facilities, various credit and million, approximately facility. Ferro’s cash consisting

maturities the XXXX. to significant Peter prior to through comments February over back units We debt add Peter? no of before of questions. to business I’ll call that, the final have we each take turn With and his walk

Peter Thomas

Thanks, Ben.

Now quarter our performance reporting I’ll through you take segments. operations second continuing and

As performance which changed business. glass enamel also we now of segment coatings, functional porcelain a reminder, year, and our our the colors this earlier includes name to former

basis $XX.X functional gross on declined So the from year second over with let’s XX.X% Adjusted the quarter the down a coatings constant XX.X%. period were In sales currency net Gross functional margins in to begin on second declined XX.X% a profit quarter, from prior basis. segment. majority the $XX.X discussion currency gross XX.X% coatings broadly constant as and sales industrial. the vast This impacted such Certain our million. of demand, end the appliance home the quarter. also customers our and worked due inventories from pandemic. manufacturing of resulted through decline larger to profit during million to The of volume COVID-XX many markets, weaker automotive our in

schools what high-end that began to transition working are support communication virus-proof we through electronics Examples brought is and from second the would home. workplace on we this space the by and in call virtual from However, memory growth devices. see quarter to what

year. Our materials prior was the approximately XX% business up in quarter electronics the compared to

people is more several focused on past schoolwork electronics, the in not to the sensors electronics space we have the Ferro’s away jobs found in high-end materials and investing electronics broaden mix. but their in their to only enable technology customer the or automotive Over also workplace our efficiently classroom. from consumer electronics do that years, or

Our apps products elements and critical using the to being healthcare people and also are in assist telemedicine. monitor devices used

the automotive shutdowns This in automotive and the production due in quarter, declined by As primarily U.S. second the sector globe XX%. significantly anticipated, approximately during Europe. sales to across the was

up the Pac down second some quarter, a production in However, modest we as quarter, late ramp started the see was and that automotive comparatively Asia XX%. to region result in a

Our and retailers closures segment bottles driven for the hospitality bars, materials delays to and demand the also porcelain for softer lower XX%. XX%, restaurants. to construction decoration business due months. resulted the approximately in U.S. In schools in from digital were used and due for item was down of and in printing as lower enamel primarily pandemic demand down These business, and commercial hotels decoration several which industrial were business declines sales demand by distributors both were approximately luxury equipment. There that hobby by products, was the Europe are closed COVID-XX

worked the inventories manufacturers the outbreak. to This As appliance causing some larger I larger COVID-XX to backlogs home their finished have deliver is through of in mentioned, early appliances. some them

from expect customers see benefit XXXX. during these the half We by increased to of production second

Now a driven XX.X% In plant price the year basis sales XX.X%. utilization. the $XX improved segment solutions turning on XX.X% quarter costs, From mid-teens. points and color and business Pac had XX%. compared we of segment gross high down were from consumer declined down currency margins a to net the range, mid-single of our a gross to prior second lower basis material a paint from many to part our regional profit XXX In primarily pickup down the in improved started points, our pigments end XX.X%. raw was pigments was Like markets, color which perspective, margins XXX were constant to sequential packaging. $XX.X Viewed at Adjusted in was million decline. Gross we pigments but segment. quarter, quarter, in a million perspective, basis in increases the do-it-yourself by quarter. the the see year teens digit down the in latter Europe, to And region, U.S. Asia quarter prior the with solutions our

managed customers second challenges of we the up, are point it that past quarter largely the have sum through to believe experienced. economic So, the we and low our

from potential anticipate what in to with business the improve the demand increasing momentum and know we ending are will continue the expect We cautiously We today, quarter, quarter. to sequentially we sustain on the third optimistic can accelerate year to the begin in based including Coatings our a our those point at initiatives, we major the sale where of related to growth Tile our of the benefits Business. fourth

our that Lone half We the and to Esmalglass. in in of wanted Business year. announcement its and so have of a which Lone Coatings or also update this manner, the terms November actively XXXX. closing we on close the its the to to the Ferro of according targeting currently happen transaction transaction, the working Star timely a expect parties can are to been October Star sale in second of you affiliate, Tile Since

we look resiliency our fourth I’ve for focused quarter business, a and of confidence at portfolio operations. have the and optimism third discussed we As cautious for our the our more quarter. innovation-driven our more efficient technology-led and business the today,

other outperforming our that second positive optimism has starting quarter occur contributing the Current saw the factor of the us half year. first would of telling peers. Although level we confidence One quarters in half, we that the on many and portfolio be second fluid to In businesses XXXX we to EBITDA significant extent, to our insight, the electronics the we some as increase acknowledge positive. This our even more customer to our patterns meaningful two of favorable the half been margin well is improvements expect those continue business year-over-year and a are our and can that as order optimization compared levels sales as to you, we volume mix to initiatives. performed in RemainCo potential from mask with conditions to earnings, expect first Based gives the well. have margin in is innovation in second the projections. during in on gross the execute we

signs has made optimization of entire V-shaped fact, innovation In see a the phase portfolio. during our Ferro we strategy, enriched mix the and recovery as result improvements which our of the for of of a

to when will have normalized we volumes So bottom environment, macroeconomic the reasons are we see in both we good to return expect there. more that lines pre-COVID to opportunity the from and a a and grow top

questions. us to for again joining forward thank your we look So, you and today

Kevin Grant

Thank let’s you, operator, the Peter. first our open that, call up With for question.

Operator

[Operator Instructions]. you. Thank

with ahead. line question first of the Please go Res. G. from Rosemarie Morbelli Our is

Rosemarie Morbelli

Congratulations. Thank you. morning, everyone. Good

Peter Thomas

Hi, Rosemarie.

Benjamin Schlater

morning. Good

Peter Thomas

you. Thank

Rosemarie Morbelli

potential call on. missed have you if getting new company. I you of RemainCo has the should changed Tiles or as at operating the COVID COVID the And apologize. beginning looking post way the I problems of uncertainty of touched what as the Tiles about with post wondering post-COVID be how a in terms was I we and for I actually. still are had even and the

Peter Thomas

Yes. Rosemarie. Thanks,

address during let’s looked what indications are of the [ph] the things structural structural team you seeing, I I things we emerging a changes. And we we it the – to changes business. as we our it on And maybe key know items seven personally of look investment. certainly emerging a do or looking concept do business because as up we’ve going at using do around there last apply look about of course, we result here, as we COVID, it, that more investors eight this point COVID at into COVID we’re if with think our are what to an of speak which the something – accelerant. regarding And more teed some conviction is like call, the

a we change, go And have and bags that concept things again. our of looking we’re of where structurally prevalent products look handful a recycling. into plastic at the will you certainly, things single-use become lot at like will of more this that sustainability If would

inks pigments that spaces. We into those go have and

health like not all the a higher type foodware Of just like, risks or things of use. carbon type associated mention not and the many course, dinnerware with concept, of bags footprints alternatives but this multi-use any that single to

post-COVID. we So terms in hit the the if spot and piece, sustainability of recycling at look we

Another leisure. consumer to piece be remarks and home increase venue entertainment certainly migration in think of you’ve course, I an electronics environments, it that’s we the entertainment really even would on prepared important the will of see in of and concept of remodeling, drive heard smaller And large course. the and

know and between electronics improvement, as You our XX% to with of electronics construction, position represents as home much like, the that our business. XX%

substrate would So end us, R&D positive we impact our more to architecture paint in our of functionalization and on polymers feel applying electronic the – of packaging, around chemicals, should types doing, a markets major that talk that. printing We course, and houses. the that we’re about new work germane I’ll for to of show very in things the – like pigments area the good selective that in more the of we’re long-lasting demand which some bit, a with types on and polymers of the

behaviors So feel that’s second structural here very the emerging and fourth important. chain? of first in Changes quarter, the entertainment value the How good purchasing it us to consumption and well. quarter We about this packaging, shift at the the see tail the food leisure of as food very in think quarter we’re in We is about space for the sharply in starting quarter, end and it. concept in we saw a high. third cause COVID certainly in post and will and food

in any space, heard and and that our equipment. types And something in go operating whether demand medical the electronics industries go it’s or respirators that mentioned significant of medical ventilators type type bolster we’ve remarks, ER for that and There’s and products of that even quite telemedicine will of activities the would into would served into or healthcare nicely certainly industries. and for healthcare us prepared that’s really you’ve investment it

of activities to body what out hear And see and You’ll in automotive we sharp vehicles. are have nice products. talk noticing in going which sure is some defining applications. ceramics, pull we the type those sector, product on recreational and even the I’m for more of though new everyone’s is a automotive and of bio forward, commercialization that we’re demand down starting the when travel we’re industry both about new Also, road demand

they’re relates we down is the the Because products and into it third fly, stay of other as don’t a to As to a close experience, want maybe for automotive many that a transportation to but miss than And stay but the types applications. demand bit. certainly discuss been the moved they to maybe automotive have definitely our don’t story people here traveling, as they bit up want in a people there in want as in bright to here, know, second they want has don’t quarter in little can hotel.

in a versus increase a use fourth push good forward, good, So course, you can and things about second, we with the because COVID better. demand there’s private get visibility the of all When see bad. not we’re type quarter. quarter always we positive if knows studies even when certainly bad, though we you case resulting the products, some have dig our into third automotive also but limited are it our and the if the automotive, do do as aside we can and see things And that of in market of in particularly the the that quarter the in for demand lot you going the of And vehicles. in was And the read second. visibility, first for talk everyone negative,

We’re context. all about

that trying half the to to the of challenges studies a and people going a we’re automotive But many second people and was a license how the patterns one of years use So in-depth companies dealers seeing and that that some population, product were also demand concept have for cars. the And of also on year. we XX% from transportation, didn’t is feel to want about don’t can millennials some a pickup to five drive. see and XXs, the pickup the with, that in order need the back late our for around of to for that early the – public lack deal the of have ago, teens like

there’s seeing what nice However, area and first homebuyer is those there’s are noticed, I again, urban what demand if we’re positioned a first-time – drivers, that much in generation that demand out for quite starting people space. reading you’re And of situation don’t a of we’re is this because moving but the and know like you’ve the to pick up. nicely

the way, healthcare, medical I chain, think So some based from of by road our an leisure, the also entertainment, dense outside using, and lens concept travel, urbanization, and recycling, food assessment on sustainability, this model. COVID experts say of Does answer using your enhance as portfolio at fits in bill we our to an question? that space, of that least XX% the business our accelerant can

Rosemarie Morbelli

more you, then All one. little back details get just if I’ll and give could ways you Yes, on a right. Thank the Peter, Peter. than in more queue.

and leaders. with you on relationships terms give us you actually understand with? that what – new In doing mentioned you are more innovation little to who Can a

Peter Thomas

exciting albeit opportunities, them are would very that some not We you, novel Ferro of the agreements if maybe out of all that some you those is think like bet pretty than be. to with that in of heavy assured, unfortunately really have to there, that. rest that We’ve more abstract. But share be we I to with would with involved very cautious confidentiality things nice but some of committed are we’re some going

things functionally and those could certainly forward, our enhance looking important However, would become portfolio.

Rosemarie Morbelli

great. Okay, Thanks.

Peter Thomas

You’re welcome.

Operator

of next is Our from Fargo. line ahead. Mike with Sison Please question the Wells go

Michael Sison

quarter. Hi, guys. Nice

Peter Thomas

Mike. Hi,

Michael Sison

the of in or confidence seeing through of half? that and can give you be second the sort maybe we’ll in us control you in terms you in the felt could of some the fourth. carrying you’re improvement what in Was third of walk that little you give Can that us color? July maybe that to on sales improvement some a bit get trends momentum into there sequential that terms more profitability Peter, good mentioned the more you

Peter Thomas

the to And me to Okay, been of It mentioned underscore and need good. RemainCo question. three last was That’s a I’ve May. the deal reasonable do had of April. it mean the peers you has lot framework We with view the about by that RemainCo. of in patterns I a terms for And calls will making a have actually that business And of point order to what month important for people of April bookings give as was at that? find why And that know, good the is XX% opportunity month, commoditized days you XX business, When in may us, an important? how many in after you patterns. already our to softest that an for you a it order look more them. XX% many But the are made.

you of all But So interesting have eight we that a Each one the those know order order pattern so. with for pattern. of. or some of those to MBUs days be every very RemainCo, has XX

the pattern which in gross see the every – an four an example, eight MBUs to lower weeks be the average. more aggregate, order we For products may five in margin-type to seems

tech, an piece find electronics those weeks at of to relative glass, X those if that may and in rest you move can to X XX, maybe X look the patterns patterns. be you at order surface XX-week up to you between would colors us, And functional spot clip. performance XX be or in all As XX, that way a margin, XX coatings maybe And weeks. gross are to XX, the

we take through to quarter. predictable And the more mention patterns. part be second, think Because good we’re of talk order of they really, some quarter actually for ordered going into and did good quarter of around to was to how the November trying we’re why that a really first that how the first So we is because a had the the back the come did reason were first moved so that orders. in likes, quarter and did people the fruition sales

the the made a or comment a be pattern gestation order to pattern as a of good MBUs way XX-month would for trailing I of flush go at of forward So RemainCo a portfolio pattern to a type full basically through or the that minimum. allow XX-month yearly a a maybe of looking the

is think So your understanding may as dimension, that’s one one you year through come the into how the planning order of part. pattern, the like dynamics we it are. That’s process

and part, second quarters? at? what what first many good for light that do being the why and second about look about are the many, looking might like so back feel folks. the third Okay, part And we The fourth quarter to we

XX%, let’s versus as roughly, we us, say. For were last down about year, you know,

of the Because So third when between and a going meaningful it at this last to up when second year very and year. gap quarter we third the really you from talk last year, going is spread about as to tightening look quarter. is movement, between be that year lot it’s this the the meaningful

We’re lot very visibility sit do meaningful nice a into being have third today than from that’s down to XX%. where And the we better the piece. going we quarter. And

patterns Now of have order quarter, longer going weeks the why first to weeks is the It those I third that? third quarter from pattern the the order that period. to XX hitting because we XX quarter of back in gets mentioned. some Because the or

good. third us really, quarter really the So makes feel

as more that quarter is one of that COVID even lead just make than me visibility think are that weeks Well, and see a could we model that what isn’t limited aside going putting into quarter that, second into mentioned what the heard mean know XX of third. XXXX a itself resembles what we we better start sequentially fourth gap, anticipate orders visibility the up delta first global you but that? one we quarter. have and also our argue that argue XX with would to and tightens our like V. third margin, the although the you that if suggest into model a year, the business what quarter a better manifest And through the highest might longer those to And next I way quarter business first into kind time the thing than the you’ve in quarter long have fourth between – I a our comment XXXX would Now that fourth different. do by

model. a So sort resemblance around that’s of the comment some with V business of see we the a

And that the mix. in so expect, of to we would concept, margins our because addition

in to within I in perform we of our this Now about, second third underscore to Each mix quarter. for fact feel MBUs you’ve in that into had see and that we And pretty fourth that year will because couple it’s each third or good third will quarter. give other we’ve quarters. moving of a the business let start new products we me equal MBU why – can the here and the in type to the into mention model, MBU, novel talk a electronics what things every some Not about to up, quarter. And that. the you really vitality second in late because lot ramp was better this we talk that whether in last nice eight seeing. opportunity us mix electronics. But of the tell because the have we’re the quarters and fourth quarter, heard lot we the we talked enrichment a moving important commercialized will the also very, manifest about of innovation will understand that one year help a third it the into what you, – very it’s themselves and And about We be and index. a us think range with products that are introduced like

MBUs, that embedded and that’s product the the mixes each what about within beginning cosmetics. rate MBUs the we’ve the our of see into of platform, very sub products additional half may going mention the but not surely some second haven’t tailing some the are a yet, and very new there and of you’ve think run very might introduced you into we me of year, of next interesting year If you trends talk healthcare, novel to food and you about bioceramics for of commercialized already applications. have That’s interesting heard

space clean whole that there’s have we for about conductive we where in that types high minds, properties the a that look enamels new us cleansed or temperatures actually the an it, of We adhesive food materials particularly finishes are coding. contact new off for can high, way at involved. in [ph] extremely have a range that How niche-oriented properties of bioinspired disrupting In way range a very would a view adhesive polymer our put of – the without applications. be nicely as

We pigments very substituting things and marketplace functionality. also yellowish vibrant dimensions oranges our other the of particularly echo-friendly on have offering and materials, but chrome with one type colors, Megatrends as our like still organic

have this four joking it I calls we up maybe said digitally And because the please of PVC, we our acquisition, able will enamels, now world. Dip-Tech think see plethora thing innovation for an cells substrates coatings the was beginning excited of a Another we’re the a very applications world forward, organic now ago. of way types inks again, wood, transmission a in with and with very certain call us Mike, of we individuals and understand like with let’s solution be that coloring them, of white that of about to around may equipment, a about companies interesting that be range these, brought fiberboard whole color for the be That’s leaders were would you glass remember, those very that efficiencies. important is course, solar integrated and the working And of that us And others. some the and you’ll improve moving long-range for long-lasting how and and heads, concrete, would with to products. we you inorganic dynamic

going which is out. I’m mix just So coming it’s that and echo embedded why already And again. then in else? this that’s to the occurred commercialization

us. And which the the it the quarter find for into You that piece a at already, automotive you European then be fourth the almost XX% it’s to only flat. it’s to rather, quarter. down down supposed XX%, XX% third although projected in or been the in quarter, look if studies, look auto if you at And be – third business, moving industry, read you’ll the is big quarter fourth it’s

some at down the fourth drastic around in world X% so America, North you with But and XX%, XX%. XX%, look occur, see it that bit in order you If automotive which on in at newest third quarter, about the the little in way space XXXX and projections will end be the will of means drop, earlier to importantly, the a that we up look the year. more quarter a for might impact that going that be up would into the

to you the And and feel you some there. gave do. aside is line, with color I I’m it we pushing a why again, everybody trying that the we in way COVID data, So because but around whatever, is of lot provide using bottom

move that We’re thoughtful want be and not give we ignoring business, would we visibility with and impacting normalized it. to not But understand some a constant cloud of that state. to order be think some in what forward ugly in your would contaminated be

add you quarter of we around fourth. it together, and the when there’s the third So visibility why do into all the way feel we moving your

Michael Sison

be What balance And follow Great. Thanks. you sheet think to will the buyer? close be And once of Can Thank for the you the the the is do get you. to priority deployment confidence of your commitment degree in then cash? going give a then us and good up. shape. quick you capital your pretty Tile

Peter Thomas

Yes.

Ben with we parts, and have joint we we’ll we make – we it agree have to – Lone agreement. whatever of one and the is anything because comments we say a have, Understand to So that share in agreement the comment do will I’ll do that we do answer that and other. Star two on,

this in can of we you, to the non-tile even time Mark, per certainly certainly, key Lone the continue Star week antitrust more, hand And Ferro, on close it to two virtually But is at So certainly, be and this it Lone we July. tell antitrust And much how table to to, this on together and basically basically with over conversations separation doing non-tile Lone related system, cases, and constant the the the more we obtain color by tile and review are in own multiple for in parties at the deal businesses. can Star next relates regulatory you we’re and to because give Ferro’s color provide everyone substantial businesses, support both Ferro areas tile approval and that Star, agree will IT we would times now IT as and focused Ben we of projects parties And continue we some around. as that echo particular, will, the and functions if we’ve transaction you detailed steps. can And its Tile that is closing. and discuss this did running as to some work possibly we to transaction. authorities. I to have in all and the separated to which business and plan main

everything laborious questions, public. So know if is We it nicely it. it’s get defined so into it to and you – of everyone But away answered – would’ve was for a very the maybe public – everybody folks’ right sale was laid made I lot agreement may that out.

done. And so deal are this both hard get parties to very working

Benjamin Schlater

opportunities. to we you’ve heard beyond to and then evaluating think getting place focused Yes. optimization facilities with growth deal the time on continued a remain lot good. obviously going leverage all at post proceeds, debt. inorganic inside expect down leverage pretty the And sale as it’s spent of that. to well on – focused now as would be But We’ll a past, as looking while, the organic the for that deployment, Mike, we’ll both opportunities, pay that, pretty stay we’ve different number respect capital a to is of with in with talk both long-term also us I

Michael Sison

you. Thank it. Got

Operator

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

John McNulty

Yes. Thanks my for taking question.

would capital as working chunkier opposed source. you a of the funds optimization mentioned just in earlier little a maybe a was little And Americas had have you of because to use bit the that a of bigger So than the was admittedly, inventory side some of liked.

drags that of can we is or maybe on color we give we capital that half might it Is So XXXX? again? and should see the to it up see you about into as something cash when think picked the some working some back something flow could How in second that us that? released

Benjamin Schlater

Yes. Hi, John.

actually have about as look So at remember what net the if to AP, securitizations performed favorable percentage sales, have or in the by we And we so bit, $X as second leverage, million. to of those terms that AP with as actually we was AR – we and both to against a of collect unpack capital quarter, working we at look million it if in and little a AR we expected. that, on look at and that respect AR we $X

In better. fact, a little bit

sense the last in the sales, better as both receivable of second than than accounts percentage the which and in at volumes AP AR were of also actually on on And we as accounts makes of we we what in well a did second payable, percentage look given quarter were year you were as first quarter we If quarter. sales. were the better

So we’re perspective. capital seeing real traction a there working from

inventory. over inventory, Switching to correct. You’re see the we is headwind where

because product we’re lower-cost do inventory builds. The into we’re so of build had much to that relates that so facilities. these And large requires down we’ve to that shipping shifting product magnitude

is lot very from product a of perspective. high a this so And technology

to that inventory. release to up will this the course that next the we’ll and beginning the expect nine into then be course of we’ll of of over release build six year. year the temporary that I next over to have like But And nature. in we So that months. And said,

John McNulty

serve, is Peter, That’s look solidly, still holding looks helpful. at back autos markets you end electronics that And like the when it’s it. bouncing I neatly. Got then, like up

it? think So takes realistically actually Is of to on be that at from feel think digits, the to start aggressive XQ, the timing high-single it for based is demand or to a pull? that about down right of like kind something where to we that about too XQ when sales the improvement point are we way XQ magnitude the you could that

Peter Thomas

the of if a made this at there’s it think way we second keep last between were and third I’ll at you in from that, way quarter And improvement year, that is it. should and The that year through, to last meaningful comment year, quarter it the meaningful. of this meaningful we be gap what best XX% the mentioned of means going tightening and the look we and level looking at down

John McNulty

enough. color. Fair for the it. Got Thanks

Peter Thomas

Okay.

Operator

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

David Begleiter

John’s were tell Thank follow How you. improved? what us Good much they on morning. you can volumes versus Pete, question, July just up to June? have

Peter Thomas

But mentioned, Yes. We as our specific. they soft month. tell we May won’t better you be was were can I – better. was June

is was So we we’re what June better June, seeing than in like and May. July August. better than

see we So definitely, I how about the where question. trough. we’re clear then John’s And gets to it answered back

and said this what tightening gap good you second If about quarter year maybe versus year August, is feel and that the closure about course, between the and July, we of this meaningful meaningful. third quarter, last

David Begleiter

versus little forward? increase Very good. what color sustainable And impressive. quite being sequential maybe, a on that sales Ben, in just maybe Is sequentially? the gross that level drove down QX And solutions color was going margin in more

Benjamin Schlater

us really Yes, guys behind with had would say year manufacturing sure. as there’s things last solutions. second respect an from quarter we that color now. of recall, One, we That’s I about. in perspective Thanks, you XXXX, three some area a good headwinds obviously to feel are David. the

cost facilities The the quarter. second comps impact in work moved color quarter. second to saw that product we’ve have that is lower on have piece And the And we are really was the in single the the biggest a So really that started the take we into better. solutions. done hold significant optimizations fact manufacturing these that the first

facilities perspective, The Latin tell in and starts America, much I you take to we particularly color in other move. Europe more manufacturing are solutions much out cost as a is lower cost rapidly from of volumes in can Western piece that would that

would three So I optimization. those the the was of the impact biggest say piece things being

David Begleiter

very you Thank much.

Kevin Grant

one time Operator, more for have we question.

Operator

Certainly.

the from Global go is Harrison Our ahead. final Securities. line question Seaport with of Mike Please

Michael Harrison

Hi. Good morning.

Peter Thomas

Hi, Mike.

Michael Harrison

quarter. XX toward EBITDA a quarter. million over million third number, of number? QX meaningful did pointing the in kind We did quarter Is back Peter, that the first wondering, we looking towards in improvement? get quarter what first Does with the you’re second the little just XX at that

Peter Thomas

that. I And Yes. anything Mike, haven’t like should. we we said think

from third quarter back improvement feel what about that. modeling the to to second a see Just go meaningful the you and

Michael Harrison

mentioned color still then a All right. in improvement. about space? to your ask Yet, little wanted business bit like DIY You detail your the the the business, you was additional it can of to pigments And looks quite exposure bit. give coatings a down

you’re about space? how inventory other is can versus of where within maybe seeing auto-related the customer And levels architectural you coatings coatings your industrial So much business versus coatings? talk

Benjamin Schlater

Ben. Hi, Mike. It’s Yes.

pigments look at actually each the actually So the businesses down the did, of solutions, if businesses were what within least. we color

color then the hearing makes what technology to saw the do-it-yourself best larger goes of that would perspective. sense talked higher we the some which a order back solutions, you’re perform in and with businesses those patterns which And the of Peter we’re So from inside space, about earlier. have been hearing offs fall what

Michael Harrison

All right. Thanks very much.

Kevin Grant

forward for thank next We would you we us you in morning. like with results joining this We to to appreciate quarter. and your discussing interest Ferro, our look

Operator

conclude ask That We and your your you participation today. does thank the lines. for for that call please disconnect conference you

Ferro (FOE) 9 Aug 202020 Q2 Earnings call transcript