FUL - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the H.B. Fuller Fourth Quarter 2018 Investor Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to of conference Investor like Doyle, to now President Vice Relations. would turn over the Barbara I Please, go ahead.

Barbara Doyle

Good morning, call. earnings XXXX fourth and welcome to our fiscal quarter

Our take and Chief President Officer. After H.B. and Jim remarks, Corkrean, Financial speakers we prepared Executive will John President Chief Officer; Fuller Vice Executive our today are questions. and Owens,

our me our non-GAAP of Before the over call you statement. I harbor to presentations remind and and turn safe Jim, please let our financial

useful measures. our will is operating measures These earnings the believe today references of and is understanding include these addition our non-GAAP investors non-GAAP the financial XX-K. included of are the release. comments the to results. in measures of performance GAAP Our nearest in Reconciliation measures GAAP earnings to to our our in measure release Forms We to in results discussion and comparability to assist that in XX-Q and of our

our remind duty that conference undertake this expectations investor statements me comments in and Let not current made differ on discussed factors any filings Form in risks website our be and do and are release, forward-looking. during at update call assumptions on expectations We any that other the and redesigned call earnings are and forward-looking making Exchange available reports this that during these also results risk Securities XX-K of subject investors.hbfuller.com. with and reports to statement. Commission. These because you statements based materially could Actual are our factors to also These are uncertainties. we from will

Jim Owens. over let Now, to call the me turn

Jim Owens

the you, and on call morning. this to Thank Barbara, welcome everyone

points strong gross XXX $XXX our key debt, million action $XXX segments encouraging. combined than more in was results was company paying Organic the quarter all up in The with of million creating of resulting basis across X%, our were positive generating market of margins adjusted momentum positioning and target. our revenue cash operating and debt all us XX%, exceeding plans up Our flow EPS in very improved paydown year-over-year are fourth down strategic businesses.

the of of of improvement in quarter. in timing the out in a the we in half. slowdown China shift more showed each EBITDA as the currencies were our somewhat the headwind and In fact, margin early but impact the quarter, were quarter-end, due mid-September, our impacts we companies that to a was one expected. In seen fourth than in These in second the called year-on-year segment

of in actually rate in Asia-Pacific a quarter. organic was decline growth the Our in region forecasted X% revenues lower the fourth

against rise fourth creating addition, of on fourth and operational U.S. currency these half factors in Latin In enhanced a second the Chinese growth performance quarter euro of in we currencies to renminbi expected. strengthened our the our dollar earnings greater underlying currency and many macroeconomic shifts XXXX, in the than and continued the Net impact versus quarter. revenue American and we

our forma strategic Royal. For targeted the actions and expansion throughout cost compared achieved year, the XXXX X% of growth organic we for margin full Due with delivery to pricing steady synergies, drove pro we year.

of for year, Royal. China was of a on full increase XX%. year EPS growth XX% in an last versus the $XXX of on For and million, an Royal, impact rate and growth pro forma significant basis versus improvement year. had XX% adjusted pro and margin EBITDA organic slowdown EBITDA negative for and EBITDA up was $X increase in forma our prior versus resulted Adjusted a X% above XXXX. currency Adjusting in Currency a of XXXX for of EPS

We with our of EBITDA our million provided good was EPS dollar XXXX for of was it a cover into in will total, XX% year our ranges, debt of $XXX Our paydown million target. to Fuller of be very press midpoint deleveraging XXXX. increase, when XXXX the the release guidance have XX% strong In last At $XXX a paydown later our includes evening. full guidance ahead H.B. the year million, growth us guidance of ahead momentum our more and adjusting target. rate continuing $XXX of which an detail in a John call. strategic for debt will in currency headed

pricing inflation. more from consistent Pricing we XXX report in XXXX, an drive as annualized abate. quarter first performance increases offset points these including achieved the in company’s fourth gains The the for three gross to XXXX, improvement, imperative We first shown fiscal benefit delivered of I’d we material on like the further margin have our course During offset Slide year’s over these raw as imperatives materials. each helped In we realize to we pricing identified year. on the to business X. of to took quarter. on than actions XXXX the of material call, you last will increase actions raw see raw basis

Another priority year synergies $X from meet of an in our million target $XX million for synergies of was cost million Royal We fourth in the integration $XX delivered incremental full XXXX. fiscal for to XXXX. the quarter

have XXXX, we that For million $XX will of place in additional synergies. deliver plans cost

a am free including XXXX. will us focus down on our to XXXX the and by debt $XXX I and pay for working year. focus of exceed flow in million area happy flow the focus target area, XXXX. Cash repay to million debt that be to report management $XXX good to capital during allowed third was a goal cash of capital this of working end continue management, The and our generation

putting down ahead reflects two-year in for us million our of original plan XXXX, $XXX reduction. debt debt additional Our of paying an plan

which third year-over-year, volume market, view offsetting organic Now by improvement a XXXX, drive improving quarter. XXXX. actions and I’ll driven next actions organically sales over over margin volume is margin a in versus the emerging to segment year-on-year quarter. impact in the in we revenue led improvement pricing shown our Americas, expect quarter performance, helped Slide pricing year. along X, organic fourth pricing cover current Pricing grew moderated and In the compared up strong sequentially gains X% carryover on strong mix margin weaker In the and were environment the show including for by particularly third EIMEA versus the year core Europe. last expansion with X.X% growth trends similar Americas,

we As we similar currency A will to half XXXX, the half margin revenue become we similar margins the single-digit lower currency EIMEA be a currencies expect on of euro in constant in Currency lessen full first move will the impact year. comparisons EIMEA year for into in costs QX negative a XXXX, the negative impact expect XXXX. some the have at as to underlying improvement. other level to expect the with impact second dollar-based we offsets the as combined operating weaker In of easier. XXXX, and growth

decline was year-over-year year dollars margin offsetting improvement compared pricing XX% XXX with basis sequentially China. was a in down X.X% quarter. up Asia-Pacific good were third and in XX%. also EBITDA increased last points partially from with revenue Organic EBITDA of XX% up the

by while performance. Construction economic away part we to trade quarter, plan Our maximize tariff segment Construction to quarter last weakness current view drive margin segment unresolved, revenues is Adhesives, the will Organic and strong remain and our that declined growth. year-over-year bottom issues continue in the In China are following complexity Adhesives from managing to of will construction line we X% products underperforming customers performance this but fourth in portfolio as Royal the in reported moving as profit acquisition. reposition order to continue

XX% portfolio The versus into repositioning. the with Construction, margins this are in the basis Adhesives points quarter On will improved of improved year, We year. prior XXX basis Construction driving of and portfolio Royal for pro increased forma last repositioning dollars margin with by XX% continue XXXX. a compared the EBITDA

a revenue XXXX improvement. revenues growth we negative As of performance margin strong quarter full first in and the result, with year flattish expect in construction

Engineering once Lastly, strong again very growth. Organic was strong. XX% revenues volume both to increased with Adhesives pricing performance the contributing and in

problems and continue our our solving across than applications customers competition technology. new market as many with to by end leverage win know-how global We we their faster

quarter. growth organic a sequentially a basis revenue strong China, third double-digit in we executed we year quarter, In and up impacts and driving XXX this growth Engineering year the the by and robust low material headwinds. from and points raw XXX XXXX, the expect slowdown maintained performance up in margin quarter, in gains segment continued with in Adhesives Engineering from solid growth driven in have continued counterbalancing and significant very points basis Overall, We Adhesives last in market. XX% portfolio was the well improvement. margin the profit cadence mid-teens improvement, currency all a organic EBITDA strong very

improvement very in and throughout execution strong continued fourth Our quarter growth margin XXXX well us for in and positions the XXXX.

our turn me detail. to call financials John guidance over more discuss let our Now in to the and

John Corkrean

for about fourth Thanks forma the for raw $XXX control modestly and foreign XXXX. Royal, the the year. On flow provide from dollar was of last margin XX% as we quarter. a last $XXX from Cash selling, taken currency expenses. for guidance a diluted operations had the that general up details expense about pricing driven basis fourth throughout basis the the actions strengthening down well versus financial million throughout and fourth Revenue X.X% as as versus very as fourth some forma for from during year. we as grew quarter actions versus quarter, Cash anticipated. adjusted operations fourth pricing grew Organic an Jim. last share in was year’s XX% in quarter I’ll material $X.XX year. the additional during foreign revenue was as adjusted reflecting year realized performance the up strong earnings benefits on well of strong in quarter took currency impact year, discretionary gross the year. about This per million the pro of and pro Volume fourth basis versus of resulted mix by profit Royal, was approximately last year about was administrative quarter, negative synergies. the of and impact X%, flow On X% the XXX up reflecting thoughtful a for adjusted points year-on-year

million for fiscal year, XXXX. well Strong year. working review the for in in XXXX. I’ll forma XXXX the the increased cash Royal of XXXX to strong Royal that, from of of by debt-to-EBITDA With profit at net during reflecting based H.B. as cash operation generated for year, our in trends paying XX% management. cost in for XX% fourth us XXXX, allowed now our by debt end fiscal from X.Xx X.Xx of the debt pro in our the ratio businesses reduced combined down target beating on $XXX That of Fuller capital and acquisition of guidance million full the repay business $XXX quarter fourth Excluding improved and as flow the the the increased quarter cash

X% pricing Our of projected carryover reflects low X% XXXX is in projected single-digit and grow to versus volume organic revenue a growth revenue good X% to XXXX. XXXX X% to Net in growth.

on double-digit Foreign organic in to From to Asia-Pacific, mid-single-digit low unfavorable revenue continues in rates, impact be Adhesives volatile, expect a but in we segment continued EIMEA based current have Construction organic of standpoint, Adhesives. the is an currency X% X%. and growth to Americas, to on growth Engineering expected

to midpoint expect part We range. of related unfavorable Royal contribute an synergies the of $XXX expect EBITDA million EBITDA in full first of year-on-year that X% of exchange volume improvement business the as to will operational achieve growth XXXX, year the and Based of seasonality million. to would early in of as at growth, anticipated the impact $XXX this about adjusted pricing the and This acquisition underlying we represents carryover, between XX% quarter. of XX% the well the to delivery of approximately the on

to over million. year. expected year interest about and amortization incurred expect depreciation ratably about be be Depreciation, $XXX expect amortization interest year of to expense full We $XX full and and net million expense are the

expected with demonstrating for investment operations year, Royal. of $XXX fiscal resiliency in core XXXX rate flow unfavorable our higher Cash in year. XXXX, and tax in approximately expected our of tax million the XX% tax be but million integration second improvement result about the and to U.S. from flow continued the timing of our rate of be tax the cash heavily flow impact The fiscal not which impact of did expenditures and working profitability half $XX of the cash XX%. be increasing includes to capital. us impact approximately XX%, XXXX are between be rate compared expect in certain million cash weighted We a to XXXX The of reflecting to of is core elements XXXX our the approximately $XXX will more to Capital legislation new XXXX will us the in of that fiscal XXXX is flow similar year. to

repayment million XXXX investment $XXX our $XXX devote debt for keeping million XXXX. to to CapEx of through plan flow cash of after expect ourselves down the of debt our ahead of pay We from

all midpoint of and an fiscal adjusted Given these of we synergies are EPS the by this The growth, offset represents and factors, guidance full year versus and acquisition the $X.XX. higher dollar growth of approximately XX% improvement, between the of XXXX Royal range introducing underlying of impact driven by year solid unfavorable $X.XX related organic a to rate. tax operational a slightly stronger range

me over us to Jim back up. let turn the wrap Now call to

Jim Owens

you, Thank John.

and underlying debt in improvement EBITDA our cash This Royal and effective and is in synergies New business excellent fourth XXXX. solid strong growth double-digit acquisition our rate, strategies Adhesives, the wins from repayment in XX% in performance pricing growth, business Engineering evident EPS of results flow drove organic quarter.

XXXX, that tariff until view economics captures China resolved. guidance will that are current and to our trade uncertainty ahead set have in we disputes Looking continue

We a remain currency the XXXX. also headwind anticipate will into going

positively negatively China could point, it it of and we In slowdown At challenging terms surrounding biggest provide line sensitivity raw impact could broader if conditions our raw results. a see top potential to Lower our U.S. in this impact also do guidance strong in or a dollar China, to Improvements of were us but material a dollar assumes outside guidance midpoint ongoing range. above that the could relatively positive our weakening happen, deliver impact material cost the neutral enable guidance range, cost, economic continued not China. results. of

case expectations, economic change negatively expect a million our However, of for our impact with in $XX the actions, versus guidance with broader offset materials, positively that be lower H.B. the raw XXXX. with EBITDA impact an certainty line other incremental will We a and broader Fuller, in that in We’d combined conditions the factors strengthening make these estimate forecast earnings material XXXX for slowdown. will bottom original cost slowdown dollar $XX of would China in raw impacted million line. the of we and approximately by in remain

growth by rate, achieve XXXX ago, these currency our XX% impact debt exceed with significant will The is plan. about $XXX Investor is in targeted and year. line performance Day changes paydown and between by in positioned time our Investor our performance XX% cash XXXX. EBITDA profit remain have Day. occurred plan for a a Our and well year on based target in the meet management We adjusting to million in China conversion our rate factors, rate, EBITDA to our outlined underlying our or strategic capital strong This during that high of $XXX XXXX, and million since

and remains underlying Our is sound unchanged. strategy

$XX savings segments acquisition a from in with We $XX leveraging management are and in on paydown. Royal market core specified improvements margins our confidence targeting differential as synergies and significant focus The flow highly global is and million track EBITDA adhesives. by cost by deliver to cash of leader is free growth our our our improving in on are our debt business commercial capital EBITDA million Operational delivering world XXXX.

That in cash result financial to $XXX debt million constant deliver growth and through XX%, will the X% in growth excess targets XXXX. at which by currency, underlying Our concludes of are of comments. EBITDA a of to over XXXX end flow organic in X% paydown our

let’s operator, So call for the questions. some up open

Operator

question-and-answer Please of first We’ll is Baird. now Ghansham go ahead. question begin Instructions] [Operator the session. from The Panjabi

Ghansham Panjabi

to morning, Year good guys, and happy you. Hey New

Jim Owens

New Ghansham, happy Hi Year.

John Corcoran

Happy New Year, Ghansham.

Ghansham Panjabi

guys. you, Thank

XXXX. where on mentioned, did you for of expand for quarter guess that segment margin that fourth I EBITDA improving it that come Americas also you thought XXXX? the adhesive the for you would basis in margins that? volumes fiscal on First an And segment, the off, year in on expected Jim, Can segment

Jim Owens

were quarter coming I quarter, Last year this about second Yes, said would we we and were Yes. XX%. the the be think we we XX%. into of that XX%

XX% we’d XX% what is expect. I to think

performance So expect take of were into And how a together, year as just last last pricing the Americas. volume the that that exited And volume, X.X% the we some down brought range we we – about we I we that the we if did of of the underlying quarter, really pleased flow year have were in and Yes, mentioned going terms now mix volume had bit work take Wisdom an think, impact. pattern little early through you in this But this with that of quarter. you out I that business if I and forward. it’s think cost the a P&L. that quarter

If you volume hygiene, if durable and strong the that’s in America, this and more you been volume of a like take that offsetting in some we pullback. assembly And piece good quarter, took polymer and really out. positive areas little areas would’ve Wisdom of a Latin probably out, like packaging some we were slightly bit had our combination performance price-sensitive paper

piece think of start that good that we our in the present the underlying volume I So performance biggest core next mix business, we in in PVM expect will up year. showing we see

You’ll that also be have price some positive. will impact

want add you do John? to that, to So anything

John Corcoran

No, good. that’s

Jim Owens

Yes, okay.

Ghansham Panjabi

XXXX? you gives and did to in that so Thanks point? on you China what Europe sort X% to core then, the at that you’re what mentioned far seeing softness And And referring second, helpful. – in some this you construction that core you been, of of, data in January kind slowdown the to of, from That’s to have Europe, confidence December seen the Is sale has macroeconomic, in China, specific has you macro slowdown, the thus a keep U.S. been volume sort then out standpoint growth guess, of choppy. weak, I much. X% referring in

Jim Owens

how it We in commented China. – predominantly we look we done at it’s little didn’t actually on And estimated of have Yes, Engineering a Adhesives. QX, that, I Adhesives, you in we Ghansham. strong it core Engineering in better was actually if had do China little in Thanks, would’ve when Europe. see weakness a was. And worse then than We was China, it Great. pullback Yes. expected. outside weakness our

or destocking destocking seen a probably the in little there we weakness some so I less us that I the gives China. there’s of think, a but QX think, right, there’s as bit that think, negative far in positive, we have overall last As in little in QX month China, is two, numbers,

QX, For us the the all both hitting New all Christmas and us have Holiday, we February. months December Chinese in winter Year and between

So weak for quarter it’s overall. a us

I that we of weaker, where expect, organic end one think, growth anticipating little range, factors, So certain because at Year you the a the currency Chinese to as very strong we’re of X% our X% seasonality may of impact, quarter that see little to lower much a New last with weaker of remember year year, last maybe as start year. if because currency X% you was down

a is little anyhow of So Adhesives, December, the to weaknesses in getting terms outside net revenue see January And but we any world, what – really North the wins and underlying strong Engineering with so doing America, get will the of in very far look rest we we’re in that positivity, don’t in Europe. impressive we the in in winning bit market. of China little continue around see weaker QX, in a team

Ghansham Panjabi

luck Thank Perfect. this good year. and much so you

Jim Owens

lot. a Thanks

Operator

of Mike The Harrison Securities. ahead. question from next go Seaport Global is Please

Mike Harrison

good morning. Hi,

Jim Owens

Good morning, Mike.

Mike Harrison

impact. material raw the about ask to Wanted

the shared assuming impact, of if – of that like fiscal it look during XXXX. that of I some Is you’re seeing say neutral at terms at on raws neutral where whereas assumption to you there. most up some in point. your the But guidance, you of or point? you’re in your details moved assumption a a offsetting have mentioned some fair is XXXX guess, profit You more of what sounds to this this And conservative it

Jim Owens

road I’d of say our the assumption is middle right now.

and a increases. raw recall of you there material declines no of raw talk lots talk was ago, of quarter If material

in specialty we And down, view XX% on. that come commodity materials, down, all right, and the things oils with not have the China, what our buy So neutral. driven. see – some commodity the is is we they’re is of materials you’re I But come slowdown, today supply-demand it’s material, net certain think coming of

slowdown there’s but is this could view there moves, second commodity and world, think to below say we’re the some would increases I the have materials still transcripts I bit. I quarter, those are a a early stays around in would raw we’re big today be see to I half oil Now so certain a the going all we you in as specialty our $XX, material some changes materials, see it’s world increases year, continues have in that you’d think listen of benefits say, supply-demand XXXX. stopped little seeing lot a if say in our to down stop, coming little too to And decline the

Mike Harrison

you Engineering pointed then not of China, it ask to automotive in and Can you like if you been And in wanted the electronics did slowing and China. be talk out, have hold up Adhesives business. even what better That areas showing specifically for may signs about sounds some business, slowing? in the would did that about like of as very well

Jim Owens

what are most hardest say with I’d businesses customers of saw who exporters. in China, tipped we the that

around in my the and did gets that and a that we generally. especially the a the ones packaging buy bit of until perception, community population, tariff see And little our the perception But money. and China the product say higher-end we export dispute trade that hygiene resolved are people areas I both and would slowdown across then and to is downturns. for is products spend of sell business hesitancy the there them did we had for We our like Those have see world. customers – dramatic pretty consumers,

think were but is hit are that generally export-driven. piece that back economy, things we’re at pulling in I people the hardest So the

wins electronics areas for For mostly these are us, like commercial in automotive, us. and

but and been where produced, there growth So electronic wins opportunities we’ve them. I think these materials, identified won autos wins bigger are there might more more big had been are there have

much not we’re impact there. as why that’s seeing So

Mike Harris

thanks very much. right, All

Jim Owens

you, Mike. Thank

Operator

Deutsche The go Bank. of David is Begleiter from next Please ahead. question

David Begleiter

what incremental synergies Thank XXXX? you good and of the synergies, in terms Jim, Royal morning. in are

Jim Owens

little Yes, John give so through. coming more I’ll we material raw some but think a will I detail, give a still you have high level, synergies

of closures year on we John this comment last on We’re start doing work savings. couple those. indirect then a will announced And can more a year. hitting plant lot of some

So those are, I biggest would – the say, big three chunks.

John Corcoran

Yes, good those are description. that’s a – very

side, cost On this things MRO service year. well providers manufacturing, side, the then like dramatically year we of year. to as non-cost that they fourth we start nice really have have in. indirect revenue wins and quarter kick the the up this synergies didn’t starting is year as this the synergies manufacturing in next Jim got that will alluded will to on show And next step up obviously, pretty

David Begleiter

million $XX of incremental XXXX. for So million $XX we Royal you have to assume, synergies in

forecasting you’re low-end $XX growth think of the EBITDA I million. roughly

question an assessment? really if Is business. isn’t growth, my any, So is that the ex going accurate in there be Royal, base much to

Jim Owens

this alluded of as us the currency Yes, hit next to flowing for I the a and us second P&L – through script, impact that will of in half that’s is we year. the harder big hit think, year even year there during the our

model a number. you that more build see So into have, that to I think you and I have any you’ll think robust

John Corcoran

Yes.

think I that’s right.

certainly with we synergies ago, as what of, if obviously, that the back our expected, we XXXX, rate kind you had year in impact of currency are line and China, believe right look in in impact is think what is a and the well. underlying right line expectations with at going I growth

David Begleiter

target, lastly, year. just number long-term in have And you your a of pushed actually is time up by level the on What achieving XXXX that that confidence frame? your in EBITDA

Jim Owens

a when see. you and build cost we expect EBITDA growth – performance what’s way is business we is the double-digit look our think, at underlying our what this I in synergies to this with happening this the of

things at So to comes couple crazy, a strategically, that it to X% delay things think, if expect the somewhere million could what EBITDA go that. I a $XXX XXXX should and around course, range of that lot. out us see organic Currencies XX-month rate, you from million this I of double-digit happens X% economies change $XXX the run be growth by will the us, lot go to if math, quarter-to-quarter, off, growth, But you then in lead paydown should all this in said, a depending, it range. year-to-year that debt world, as XXXX

we’re you, I possible. those So, as quickly driving toward but numbers as assure

David Begleiter

you. Thank

Jim Owens

David. you, Thank

Operator

next question Mike of ahead. Please Sison KeyBanc. from is go The

Mike Sison

Happy Jim, will New how you million, $XXX million for outlook wondering midpoint getting to XXXX, through maybe Year. million, $XXX EBITDA think guys. was Hey, can you I us $XXX walk that $XXX is if much the from variables of much maybe the And you organic have to the about cost from couple of – going next other how the million to that come years? growth, of will get savings? come over that that and

Jim Owens

no what right? So we in margin different improvement. top we Day, out way Adhesives, the Engineering think – see very strong have performance is laid you both plan than our the I Investor Mike, line and Yes, in

I XX% a think, margin of north up saw number get So XXXX. nice very you quarter, committed to and by this we’re

in improvement. is real EBITDA see managing good focus next or meet efficiencies synergy the – all on on about projects the laid our I The million our portfolios on million underlying margin you And just started. businesses in I savings we And blocking XX exceed those that for our to commercial in year Engineering Adhesives thing all different five mentioned executing that I that’s EBITDA at out our is very think and fruition. and pricing. along track we will cost when all $XX another think the businesses and with bring those synergies. on solidly $XX looking and in we’re improvement. are then this that showed numbers margin track tackling, Both we’re of manufacturing to product plants, number of projects our

So third that’s see. bucket the we what of

it’s So out synergies of you what and there. seeing numbers that Engineering XXXX Royal I exactly Investor operational improvements, about XXXX. see at Adhesives, currency and then right what what and to you are in And back happened this that’s Day, some you’ll that’s this go and fundamentally our Day, in Investor and we’re China we and think, the take talked if effect,

Mike Sison

Right.

one couple again, Okay. for quick pretty mean, the follow-up rate on confidence. Engineering just Adhesives And – been the the pretty impressive given of and the then outlook, again, growth has it’s I last years impressive

you by we XXXX pretty walk that in through down technologies maybe you in can How as Just where already good got what much your would that growth driven helpful? is so again growth you’ve you won the double-digit share, breaking are maybe of So this going growth? win of really be year maybe visibility? what terms be driving to hear,

Jim Owens

that’s of very couple a become business both growing Yes, of nicely. acquisitions the the well, that in we it’s very very penetrating opportunities touches driver the technology. business. leveraging now a organically That a by is sizable electronics I biggest had built sizable We has understanding business grow. But business of have of growth, globe. market our some nice the helped that And to one – think, businesses have by double-digit

customer So customers, customers with job now Coast we on in West with we’ve started big a penetrated the Chinese a of great Korea. couple and a

electronics going well to So all of different our we’re moving also really that’s in applications. business. very And

adhesive applications. Your in different your you’re XXX has Mike, cellphone that hand, carrying

So as solving the there’s a is a assembly The opportunity. it, really nice one we’re getting problem market for we’re us. U.S.

capability Tonsan got with and lot lot bought bought the Cyberbond, Royal with with we of a recall, of packaging talent. some technology, a you great If we

position call solar. people, America, coming growth to to America, North of in some in North very nice the part rates as together business. industry’s really world-leading got the we’re is that nicely technology, our our go leveraging in general I’ll We’ve what plants of All

moves China, to deliver wouldn’t outside that. solar As been have able of Tonsan

wins H.B. the the in new in important on world Royal as We’re And another world, are of infrastructure some area. great getting coming I around demands then been get specifications. solar think, growth Fuller’s themselves great some aerospace, had able accelerate With the spaces. we’ve the is those around done on some to work specified solar very one. to

time to really with talking Fuller. examples. an that capabilities H.B. have a I list and team, five of team. help Mike, color? the that would we’re just around together, of exist when all spending And leveraging kinds or the opportunities good we’re but that four So energizing that some give Does I love world about long others, it’s of

Mike Sison

Yes. That’s you, Thank Jim. correct.

Jim Owens

you. Thank

Operator

Citi. Petrie from go ahead. is The from next question Eric Please

Eric Petrie

Good Jim. Hi, morning

Jim Owens

Eric. morning, Good

Eric Petrie

guidance your and I’m revolves? fluctuation? $XX uncertainty if million FX curious with between China impact in split that you weakness assume just China does XXXX could When trade out that EBITDA

Jim Owens

Yes, crystal we don’t have that ball.

think extended I an for we’ve it’s period assumed time So XXXX. of that

that’s think, I right. the

John Corkrean

of question your XXXX much impact is Eric, of that your China? currency question? is and Was was much one the in how how

Eric Petrie

Yes.

John Corkrean

roughly million s of That’s other. and of roughly and the half half The $XX impact is China Yes. currency half. the is

Eric Petrie

destocking markets? Okay. possibility you are durable inventory for a impact And any destocking noted secondly, is in slowing on assembly housing you manufacturing And in regions? is or other from seeing China, there

Jim Owens

the seen only Yes, durable assembly market. so is we’ve far, vehicle the Eric, slowdown in recreational

and far seen I Europe was and in think slowdown overstocking some you say, an – fundamental assembly China. outside durable a concerned, are I of as America and there. haven’t there North But So as the space real there would we see slowdown

Eric Petrie

Great. Thank you.

Jim Owens

you. Thank

Operator

Anderson of Please ahead. from Stifel. question next is go Vincent The

Vincent Anderson

you Thanks an new out? taking on side probably there’s there good at other year. And believe development to specific morning. question. coming any coin, anything you’re areas to of get number cycle there Or you to have portfolio outsized excited where be margin – When my able to good I you XXXX, product next are look Hi, of are a to lumpy want go where would many for the XXXX is win bell but are outsized just you’ll well. businesses? about numbers the across know, markets opportunity specifically that of I be And you’ll that’s there additional Adhesives the out and other business? helpful. Engineering then lower of broad any areas as outside And expect back

Jim Owens

Yes.

is Part in across think, some our Engineering durable durable a we’ve businesses, got is assembly I – Adhesives. sister assembly past momentum that market the to our talked in good about business. driven of how I’ve

a That’s specifically work on. have have Adhesives, dramatic. bit new about in just very driving but same quite that’s glass, So going across some as that the assembly, not growth, dynamic we durable we nice Engineering insulating of our technology in the kind we talked that’s of

core business with I and customers also, doing hygiene job are We around customers very a our in think, local nice world. the

in those think, areas. see two good I we’ll growth

that think I type this our there we’re RV, of only And I of where they area these these slowness, the portfolio doing a mentioned there. pay-per-conversion old see shift, work bit terms Construction little businesses, In we’re businesses. bit Adhesives some to And going businesses, a slowdown is be is core other in of to continue a a of drag.

and us slowdown reshape top profits really of of a to pretty cause move pulling out in strategic strategic that’s a line it’s portfolio So terms that a but will there, cost. by some bit the improving

Vincent Anderson

assuming China, opportunity if credits. in And geographically? solar, exposed business And the back you into photovoltaics comps, China – the you going into you’re I helpful, the what China? of cancellation some in could easy That’s update pretty us Can supply at some in that like look but big XXXX today where will thanks. tax outside looks XXXX, within chain had least like of issues certainly drill with gives XXXX mentioned us

Jim Owens

Yes.

leveraging their they’re I Again, but H.B. but the areas we we year But, especially because some well. this in not China the one opportunity. yes, was upside Yes, the I now pretty – businesses see point. regulation tough world opportunities of these there. in or and sizable solar, think, the we of see because some of changes manufacturers go large there’s did a as great versus are And for it us, still of of There applications think opportunity. on for us deep scheme us, a their that for into as but fragmented, own. start manufacturers number they’re too solar different transplanting government XXXX in we’re around any Fuller, the in it’s because don’t probably changes But XXXX, a incentive that world. is for facilities around the we the

in – of both outside and a us China net especially it’s positive in should solar XXXX, for be So a China.

Vincent Anderson

All right. Thank you.

Jim Owens

Thank you.

Operator

The Research. go Please next question is from Dmitry Silverstein Buckingham ahead. of

Wahid Amin

This Wahid on for Hi, Dmitry. good morning. is Amin

on question going that the of year Just because Or is X.X% your out on was contracts is how a little from year? sustainable is that I’m breaking that something about year-over-year. else the Pricing of talking the that mostly Would mind And forward? and towards of above a the Adhesives. it end flowing quick bit beginning in you Engineering missing there?

Jim Owens

as margins of about Yes, we with the power, and on Investor our typically manage of we degree one say, talked the the wins. new well, have way I would areas new based at Adhesives, highest pricing we’ve though is pricing and our Day, areas the where Engineering specifications

were that’s in we of little but up and sustainable the on towards we second year, a that So momentum we pricing as half business. slower price business and a good got focused very getting growth, in in were that the

Wahid Amin

Thank you. mind of we’ve share seen here, you that there? increasing environmental just a a China’s affect forward? there one players. And Would if moving And in lot for pricing more will speaking on opportunity is shutdown the new market how

Jim Owens

I’m a you shutdown players, did sorry, you environmental mention? what said in

Wahid Amin

chemical producers. environmental for some China, within in shutdowns pollution Yes, there’s been

Jim Owens

Yes.

this China. helping impact of raw of theme seen materials, a been that so oversupply although, years. a are recurring yet a of in an in we big year, raw that’s us in material So, cost haven’t from What next is we seeing couple standpoint the it’s

because what now, we of like slowdown. the impacted pullback shutdowns of by interesting China. been a And there winter, be most But, in right shortages haven’t is. to see environmental materials it’ll today, think much any I long happens because are how of this in China

Wahid Amin

much. very you Thank

Jim Owens

you. Thank

Operator

Christopher of ahead. The Intelligence. next is Perrella Bloomberg Please question go from

ChristopherPerrella

How be question your materials run you Good year? XQ the year, in become before terms raw neutral And the inflection that A your materials morning, expectations know hit raw neutral I to long environment. of initiative are point to headwind. balance? positive you. the on for outlook. I material is a expect does thank the pricing back as on still full very tipping slower in half of probably the the going to raw

Jim Owens

are think, our especially be a now I say raw you think, a we impact would that right, our I more little And I will but you’re probably pretty pricing Yes, it’s consider when are become of neutral, is year-on-year, materials where great would QX China. say, opportunistic. bit to I seeing, higher point going the

I off will think you pricing that we specialty there year very the really for But and strategy see volume are where products, early opportunity last lower opportunities us. started aggressive pricing leverage. paid

ourselves in success those drivers after of for aggressive and I in upfront second one the the very ability our half of get more into positioning XXXX. But of was here and pricing to was key will of for the approaches our think that off turn us helpful QX. do year terms

Christopher Perrella

would a bit this a the much in at Or have missed also And negative is Products, And year? of with I then for right. guess balance Construction the that’s that to that dragged deselection. bit effect the of I half a going pretty already XXXX? Wisdom start mix that’s that Is did or All be you housekeeping. the back XQ? a completed this, of in – point

Jim Owens

be two-third impacting – was the a Yes in a of – yes, construction products months QX, started shift of little portfolio two QX. numbers Wisdom really so so has QX in quarter. the then out it’ll in QX bit the the three so, size And this

quarters work through. that So we to three mostly have

Christopher Perrella

appreciate guys. Alright, time thank you much, very your

Operator

concludes no the would This question-and-answer Owens other our There turn I Jim over questions are to conference this like closing [Operator at to for remarks. time. Instructions] session.

Jim Owens

your thanks Thanks, Fuller. everyone, for all joining and support H.B. for us for today

Operator

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

now You may disconnect.

H.B. Fuller (FUL) 17 Jan 192018 Q4 Earnings call transcript