FUL - Earnings call transcript Q2 2021

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Operator

Good day and thank you for standing by. Welcome to the H.B. Fuller Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Barbara Doyle, Vice President, Investor Relations to begin.

Barbara Doyle

Thank you, operator. H.B. to Welcome XXXX May quarter for fiscal the Fuller’s XXXX. earnings ended XX, quarter second call

Our Owens, President Jim. over are will few and Officer. speakers items Jim our take John Executive and After turn me Corkrean, Officer questions. Chief before Please Executive cover remarks, I to Vice prepared and let Financial H.B. Chief we Fuller a President call the

translation references impact divestitures. reminder a that currency our First, of organic the which excludes today the include our and revenue, to will or foreign impact on revenues acquisitions comments of

will measure financial non-GAAP and their in earnings to Reconciliation our the call. discussion of We measures. sales EPS, XX-K. nearest understanding also operating GAAP non-GAAP in other during assist refer discussion revenue specified, refers with performance is the in and GAAP measures to these EBITDA release non-GAAP or to results are margins companies. of included and adjusted to measures our measures earnings compare of and believe are revenue our investors XX-Q to reported adjusted of our to to We measures Unless results These that otherwise U.S. useful is that organic this addition in discussion of and how U.S. refers release. our Forms

these on made current this of also in the due to resulting will at investors.hbfuller.com. Many and could assumptions differ and earnings call expectations that be, results or website the on XX-K and from and our factors release, These be XX-Q our on economic with and and exacerbated global are Forms and expectations our based factors uncertainties. will We making to COVID-XX environment. filed the are available these and forward-looking Actual call. business risk statements discussed uncertainties in this during impact SEC comments statements by subject risks are during risks materially

the Owens. call over to will Jim I turn Now,

Jim Owens

growth ability to raise achieved in solid significant prices double-digit in company, on in geography, certain and customers evening, EBITDA line we including the the and technical our in Adhesives versus with growth. a XX% H.B. to solutions overcame of Fuller’s each organic Asia-Pacific second very Adhesives including region. and and keep welcome year. growth a in Fuller’s XX% Organic chain revenues strong another strong met remains second our support revenue supply strong up assure and against everyone all-time growth and provide quarter second quarter and up XXXX. chain was increased the collaboration and very and XX% EPS moved adjusted teams, supply Last quarter. and in of adjusted share. Engineering the segments we Hygiene, the made of also were and reported key Thanks, We evident in customers our XXXX, the Construction need the quarter to to strong quarter, last Barbara suppliers X% versus both and and Americas, each in Revenues Organic that revenue Health adhesives the because was is customer but segments XX% in grew geographies. which of Consumable revenue supply as quarter raw container $X.XX segment innovative EMEA and revenues H.B. H.B. gained increased broad-based critical of disruptions quarter our growth. across for quickly differentiator competitive XX%, in of supplied. experienced growth top an record call. global earnings demand Fuller We Throughout in we of increasing shortages, market material and ingenuity of year-over-year,

efficiencies than significantly dollars which volume EBITDA XXXX, COVID-XX-related year-over-year. Adhesives. and X.X% in by pre-COVID about revenues Construction quarter of increase drove materials mid raw XX% Strong organic up quarter and in also HHC increasing costs offset the more versus higher pricing and growth input Adhesives second operational some our levels. a Total forecasted. increased XX% are increased business, of double-digit material revenues in growth impacts, single-digit leverage from no with are by the had the quarter, Engineering Raw and we cost the the with driving in in material from raw XXXX, in benefits with Importantly, end second coupled rapidly we

We million will to-date implement of quarter. in an third $XX adjustments $XXX have and annualized the implemented additional price million

of These and adjustments specialty to as prepared impact are increases good for made chemicals price progress do in in year. Suppliers capacity commodity the will purchase. material we have offset We raw the necessary. more restoring fiscal this

rate will until going of uneven levels rebuilt inventory to forward are meet the likely However, fully recovery be demand.

material expect third and the planning by anticipate to Our the raw volatility the begin assumptions will pricing offset material that of supply inflation raw over and will be expect pricing that will to increases the current end fully quarter. fourth XX% year-on-year quarter. lessen We now in the our stabilize

the expect and additional margin benefit and see seasonally quarter, quarter, headwinds our is pricing typically the which in in is volume quarter. will gross third which we We margin strongest fourth volumes slower for

of pay-down the more we targets business innovative the to to this us drive time, our and taken in quarter, profit our target our serve level, competitive at provide our actions the achieve our debt reduction our ever in and same increasing across and $XXX line Our while have with global last seamlessly year’s in XXXX. enabled and over customers million operational debt to price for than on quarter were sourcing critical expertise, continue efficiencies And differentiation. chemistries agility our

Margin in and Consumable quarter to grew organic last me the our the applications, quarter bags and which on discuss XX Even improving year by Storm year-over-year, last our segments let line XXXX. with last revenue improved in roofing Slide adjustments fulfilled flooring label. HHC quarter strong EBITDA and versus gains X%. the up commercial was the across Hygiene, backlog leverage, the pricing and XX%, organic than quarter strong following versus year, on top growth X.X% were benefits outstanding Contributions both majority year. EBITDA Construction each segment in the revenue move points increased more Now, X. improved, compared significantly restructuring line a increased drove strong versus in non-COVID-impacted considering beverage Health volume expense when performance driven very across last margin sales in the basis our up share significantly from multi-wall and with good is and organic and the segment orders demand as second markets, temporary XX.X%, Sales Adhesives’ we second quarter XXXX, Construction second versus of was result at management. Adhesives’ underrepresented up strong of growth HHC organically. to effects have was implemented an Uri. comparison prior as a performance increased to by the strong year from labeling, business of X% strong this tape second and of Adhesives disruption packaging top growth we XX%

over see the few revenues additional have realization in increased the expect the to the EBITDA roll demand. P&L rest up improving quarter adhesives in in weather results strong woodworking, reflecting growth year of quarter vehicles, to end-market exceptional Adhesives’ third organic last extreme electronics versus begun the And with normal to through costs share first looking manufacturing Adhesives’ all pricing up Construction We for last and were pricing of our year. XXXX, markets non-COVID-impacted and that versus the service end second temporary year, weeks back organic return automotive, Engineering in quarter. first insulating revenue levels Adhesives’ higher already as by X% some costs, XX%. gains last glass. strong, material were raw in versus after and event with Sales offset unfavorable required and Engineering extremely the were year volumes nearly recreational to of increased mix the XX% of XX increased were

in continued by year-on-year, EBITDA expect quarter and grew second performance. volume double-digit year Adhesives’ segment. We Engineering growth this XX% strength driven exceptional full

fully as and pricing actions are offset EBITDA increases. expect raw impact implemented improve the material the margins coming in of cost We to quarters

assumptions year rolled demand and as and open Looking full in will ahead Construction Revenue will actions, revenue begin of demand units strong. results, drive XXXX XXXX. business world. levels. end-markets Engineering to materials most exceed Raw considering Adhesives the growth are Overall, at to economies our full continue supply remain volume now elevated our normalize are through in we demand strategic performance in pricing pricing HHC, strong our when continued the versus up planning will most XXXX. versus year of be the growth around Adhesives, each volume to improving gains solid that coupled tight of in strong our vaccines chains continued growth out be strong with expect our in continues year anticipate and will in and to as share XXXX We double-digit

me these on results let to planning call over assumptions. outlook year second based our to the Now, quarter review and Corkrean our the John for turn full updated

John Corkrean

the year, XX.X% period million million adjusted of to impact offset volume pricing as was reorganization volume quarter gains X.X% additional same than versus partially basis will period cost controls points and compared in Currency All lower XXX total and selling, costs. was Net was offset I The by profit variable expense a versus last our Slide revenue of with the strong requirements the savings versus the line $X.X last organic and growth XX% and all growth offset share points details last same three effective the basis up lower margin strong reflecting the reflecting the margin improved expense quarter. Jim. savings increased operating was first for second we strength restructuring by declined performance revenue, growth, realized compared most were $X.XX, XX% Adjusting organic company, percentage X the reduction. three second debt general XXXX last operations interest year-on-year last raw half the Thanks, XX.X%, business gross general higher on volume compensation. up which pricing $XX X.X%, flow tax income reflecting XXX of our XX XX.X% material strong $XXX balances. organic and associated by year. with begin XX.X% up in in gains basis and EBITDA XX.X% validates the to for down total volume QX profit adjusted per year. period variable of with up as of gross by revenue million well When compensation positive working top second on Adjusted from Adjusted year. same financial higher half earnings in performance. non-COVID-impacted GBUs. administrative of Adjusted had by points quarter. of costs. top raw expense as quarter for pricing quarter XXXX, rate quarter driven Adjusted and $XXX as second material growth a Net some was of was support believe the to had same XXXX, last income as higher revenue down interest that the reflecting as Cash year-over-year. year year, with debt the our XX.X% and up to by currency, raw associated higher growth capital well higher was strong for compares X.X%. leverage, line were in with year, compared the material strong the with period In up pricing to of costs of GBUs versus income million up

to same down full the the compared pay-down plan million debt continue million. million paying and in We XXXX on $XX period during first of $XX keeping for our half us reduce $XXX debt, last to track year year of

year we full Regarding based double-digits. growth the be in revenue low to know what our today, on outlook, we now expect

increases continued that deliver given million recall, Based third a accelerating to As growth the lower the in for business on raw the XX% expectations year. and be range the you strong fiscal we is expected now offsetting seasonality the the of we to and guidance continue increased exceed expect remains be price material margin million quarter adjusted to to the we up EBITDA basis. second will timing strong for XXX line points raw revenues in top about last of quarter XXXX material our our quarter the this unchanged, basis volume XX% as growth. pricing increases, to $XXX EBITDA guidance and third about third to sequential we of quarter versus on our than cost $XXX and expect quarter

pricing from which our volume quarter, standpoint. actions improve in fully As are implemented, a margins quarter also the will fourth strongest is

to of will year, some during approximately to flow Owens that, allowing target XXXX. the for million We closing call comments. maintain turn $XXX strong expect Jim With to cash back the to debt us down our the pay be of rest I for

Jim Owens

Thank you, John.

critical During current the greater our the outlined are last imperatives These three against priorities recovery inflationary quarter. well and environment. price supply-constrained second conference each key executed we we COVID and set the three in XXXX call, in I growth, for of volume these priorities productivity

first the supply-constrained and creating our environment. priority current our is gains durable to Volume supporting shareholder drive Our share value. growth in by growth high and volume foundation demand are customers for

organic and appears, second considering quarter of growth year business compared levels second is quarter our second a HHC our X.X% grew last strong X% organic the business to XXXX. in pre-COVID quarter very XX% Our revenue growth in of more had than overall quarter significant even the it

Our in environment. we value implemented price price effective million strategically later manage planning pricing million $XXX an the July are $XX from we inflationary increases to increases additional through in QX. this to in is aligned second XX imperative and in March We X deliver

agility global developed impacting In businesses productivity changed overhead for second across delivering environment, third also today. for this priority last our volatility culture pricing labor our outdelivered robust as quarter second are of second and benefits and clarity, strategic and of market-based supply to excellence speed industry are and and innovation factory our operational constraints the percentage programs. quarter and H.B. and our Fuller’s has the decreased our is in shareholders. capacity a challenges COVID-XX through company our customers release In and the the supply our revenue greater we our that customers and competitors operation are collaboration We chain, our quarter, of delivering versus have in year. and how supporting the results operate on we

navigate to adhesive position and industry the global our for continue take business a will we constrained leadership so continue concludes deliver rising build our We the some today. customers our to our strong Operator, prepared for up environment, the and grow call shareholders. results of This we on please our can supply remarks and questions. challenges in will open

Operator

Vincent [Operator Thank you. Our Stifel. of first the of Instructions] Anderson question from comes line

Vincent Anderson

morning good Yes, thank you and everyone.

Jim Owens

Good morning, Vincent.

Vincent Anderson

little but morning extra unpack for things. this still outlook, of couple and you trying detail some the thank So, the of a to on I a am slow

gains a missing something? growth, just like So, all when seem of volume then depending half more growth, weighted in the carve Am to And half. of I the for half, through organic sounds will back there the in what the on second the that up, top organic just year. actions about to flow get double-digit first I it of like like we low double-digit it kind call doesn’t it half of is room line like towards lot XX.X% the low year. And you at recorded second least the sounds it looks price in

Jim Owens

guess, double. I I low term. overall, as Think yes, broad is the think Vincent, a Perhaps, that so double-digits XX% XX%, of low –

modest you should of volume we certainly growth pricing say? during to the you are along we – numbers are the XX%, up, So I projections and do quarter. not are talking numbers, we that the price like I like in XX%, you somewhere think growth, out, volume XX%, are ramps yes, flowing want John, there range. continues, what have the that – volume is more something half as in to we And with that those that very pointed growth have second think that. But but said increases through something – significant talking gets for probably yes,

John Corkrean

Yes.

think second I factor, for have Vincent, other the we the is of less will in favorability half the FX. year from

year half based year. on you, gave digit see think the or we expect XX% that in low-teen I of So, I full to back still growth the Jim to for number low-double the that XX% growth and think

Jim Owens

Yes.

Vincent Anderson

discussed on about helpful. think Okay. should demand then And I of appreciate we hasn’t is normalized to how impact thing we a mix environment? that this Yes, get just that’s in really more one as it. margins all been

Jim Owens

mix for us. positive that a HHC our CA quarter actions and EA QX. to say we the CA. have And as them the would are slower positive hit customer half ramp drive I in improvement little we was than recognizing notification pricing a have second throughout and go and the get more quarter. Yes, overall, going in very taken as business. It up in positive – It’s think the is And typically I we the that this year little QX of EA more really

see and margins So, where have our their business with were right. that will here great positive a that their margins a the They improved ramping versus up you last doing job, fact combined of is mix, HHC they year.

we a you see think positive I XXXX. will effect So, mix head QX and into very certainly into as

Vincent Anderson

are side, one My on Great. so on constraints? will is on standard question the where then and fairly or of hold terms, easing because these so, I a well just material pricing rather naturally those they somewhat quickly price. of Thanks. unwind last quick one of the bit are have how – it’s just prices and you this price tight so communicated of share to will price some the environment raw raw some And for material exceptional with is, there

Jim Owens

surcharges. Yes. in believe We increases don’t temporary or price

little don’t you right. have So, of very that,

in stay prices we the we right. notify in that’s explain and – our increases We is and raw permanent, business What we our why our place. are customers. They have price value, go We material do – up quickly.

little, here embedded yes, if – temporary here. in – increases So very there any, no is

Vincent Anderson

of lot. Best you. a Alright. luck. Thank Thanks

Jim Owens

Vincent. Okay. Thanks

Operator

Ghansham Panjabi line Baird. next question of comes Your of from the

Ghansham Panjabi

morning. Good guys. Hi

Jim Owens

Good morning Ghansham.

Ghansham Panjabi

Yes.

X over we you period. is etcetera. were mix X-year are the to in a level segment, we focus right on a So if, there obviously, margin to level fiscal expect fact, price on is that the The And XXX that the there is year down you above that EA with out to your a And convergence on called basically if ago? and then points impact what towards? is was comparable XX% ‘XX sales basis time price relative working levels. going increases, lot But years line reasonable should recover that

Jim Owens

Yes.

right. raw it, on hit is you think I yes, The challenge biggest So materials.

So, what spikes of EA, of terms materials opportunity in but we significant pricing, the like for lot it in we materials getting and of real most a happened second seen. raw business quarter that it and in raw one the is in have that’s And happen us, a are advantage taking doesn’t of a automatically.

see you EA implement customers for QX there. price slip fully QX little into as to So, this we margins some increases. a that’s why But a will and the real the is here opportunity reposition us in

price bit So, as doing happen in it’s businesses nice that real that’s are some little it’s more the now raw to durable have materials one the just it’s XXXX. a in mix. I positive not other raw more as what’s again, goods a CA going think and kind on into is positive to coming of margins just businesses. upsides business the grown. and markets quarters here And EA but mostly But high-margin of mostly where situation. is material well Aerospace a real mix that’s of and probably There some than of

Ghansham Panjabi

converse a and mean, the on. it. so maybe mean on there volume for there half EA period? much increasing to impact is – you segment just on the give of with is by Got give so year, relative some way us can XXXX just impact the outlook I I And comparable Okay. and mobility this complexity us HHC, – then second

relative relative as XXXX? for far what half in so And raw specifically curious progressing indication raised I assume to prices, in then second Winter to just your have this point inflation you so cost this So, also, the you embedded year. impacted quarter then how by have as at second, things velocity, to are fiscal already us for twice terms outlook of to back the material real-time Uri. Storm out-of-pattern XQ? you far Can you in give a were And movement

any there specific so may that on was much. out So, cost call side XQ? recur Thanks not in

Jim Owens

Yes.

good and of what let I Okay, unpack yes. with will try A happened volumes. John lot XXXX questions. exactly

into you positive has much know, XXXX. trends full very that by don’t this volume year would versus each say go As I for detail one them segment. that we of

and here how – expansion we qualifications. XXXX, business out We have the lot in front especially rightly, significant manage really I and we towards last in COVID. well done So volumes. And are new were in customers we that’s the second business out a new won quarter. of throughout think We of pointing got what our and product of year a

in the haven’t We this about we our the to directly talked volume quarter company call this much constraint on agility a in But environment. it. that related respond of was generated supply to

customers So, than we our better others in the met the needs of market.

We able also products had those are all we we together are those as and gains new qualify we needs. to pulling that meet

the raw So, work chain to what supply get meet by uptick great demand the in sourcing guys supply in a the teams and constrained was to really environment. significant a and team materials chain our

far will the As questions, – second to one. and one, third will and go to I come I the X back are there the as

our there. supplier steel customers drums. had one into of bought about was our I that order the We materials just customers. famous of one steel and case. of one freighted out, significant steel, stuck we a had to from but costs second material U.S. to that definitely supplier that to We cost had supplier work ships. We raw our those quarter. There to And with share mentioned China what prices this the running. were in for steel. exceptional keep we ago out had converted in them in shortage We costs. that U.S. them exceptional We Suez customers didn’t a a airfreight raw had was from needs air third meet We we had who material of at to did. the steel the in with The who call one – short Europe exceptional We ship Canal, extra

exceptional we of had long-term the So, our did exceptional increases business. that In price the we we enabling this cases, of us was costs. lot get things cases, pay In margins it. and for out about customers some to a expect with

investments a are So, Ghansham? share that both the realization we pay quarter over turn forward. before lot pricing I go going was to gains this I of made John XXXX off, think, to in we what also, as question, on And and it question, your second

Ghansham Panjabi

It plus was the the conviction material baseline. of on raw is sort the right that XX%

Jim Owens

got Yes. Yes, in to we terms of yes. where

we what raw QX. So, now is lower right were the are they in see in increases than material QX

to increasing decrease, It flow entered it are last those yes, a at when than going in But picture good where how potentially a quarters. supply maybe So, see where a now. We a – in early to in up. are and slower And We a of the world. we two globally pretty little materials to the chains, QX. around but in much. it’s are they a big some have flattening least some little see – sign. a of realize right downtick tougher QX. of flattening China do That’s in but usually than because those We different quarter the think see normal we still a a was it headed next going It’s here be matter knew of just was the was things question. definitely, I

at four we least out months fairly over the months. picture today, think good a next to have I three

on John, XXXX… So

John Corkrean

Yes.

volume math are you So guidance have I Ghansham, year look second based on here, and at but given, of first of high-single volume don’t year the growth digits probably was directionally, probably year, we I an half at have terms if think exact the and level. versus of you overall the looking in at growth in half of the the we XX%. in company the half to to mid second X% And XXXX are the

able bit, a year attrition And of this some to the we that are digits, to that we to Construction Does of that And reflecting think little see and Adhesives get. digit maybe pricing a of been So, I digits. first demand of in digit. mid-single in little high-single lessens maybe pent-up modest low-double sort the EA high-single the half help? of bit to GBU, gains by related HHC expect in

Ghansham Panjabi

so Thanks much. Absolutely.

Jim Owens

Alright. Thank you.

Operator

Harrison next the Mike comes question Partners. Your from Seaport Research of line of

Mike Harrison

morning. Hi, good

Jim Owens

Good morning Mike.

Mike Harrison

if talk sense I have a but know I the this, chain little don’t great you – about how was impacted you a can bit your wondering for if much volumes. supply disruption

had supply, And volume could you all supply been? volume a have your that higher segment much all restocking mentioned have raw just material half on here, a the I you would the had But you maybe is the that But lot from impact is what growth maybe there get demand. pent-up that from this not in how disruption benefiting some wanted, the You greatest sense the from first are standpoint? going at of the point. if

Jim Owens

Yes, really Mike. hard to quantify,

there that definitely during say is can quarter. realized we I strain So, have some that the

buckets, would filled we acetate, the say, business not. early constraints HHC in some the which quarter, certainly, in supply we probably those have all tight. got I very vinyl And So fully had to related

already there. that hand business are going the we auto to mouth mentioned Somebody

backlogs have We we CA was quarter And some in there is there the some picking up have are biggest chain, got right a business great we winning a backlog business business. but is because definitely place ago. now today and probably supply more than our

meeting but to there are is I it’s in job have overall, good we Construction backlog, definitely demand, were But area an a bigger So, where Adhesives. doing a if more. we pick

If more. of for sales And we really we everywhere good just you looking feels job. you tell team, my is it because part go, a are like Because would – a doing ask are they customers we very big right? number, are that

Mike Harrison

Alright. with to debt plans. the front, capital priorities And be track you then on continue your on pay-down

were free is if going flow allocation kind in become to your cash sense between M&A, and capital us be you target more give EBITDA itself leverage strategy the of you comfortable situation to expect think I toward an shifting that better Can growth. particularly when resolve attractive available? to a of

Jim Owens

Yes.

get So our below as goal EBITDA X. debt to to out, ratio pointed is right, you our

current I I at this of will X.X think will – be year. the projections end we around think the

happen next should that So, year. early

So, in that staying range we see long-term. ourselves

at opportunity that’s every out target, So, we look every there.

debt I lot and that in think been have for we of have the bringing down times the have deals made of years we couple passed we at a made both decisions a priority. in our the shareholders last great has

X decisions right ratio. time. to So, at will right for our in debt EBITDA is to the commitment we be make shareholders But that the long-term X to

Mike Harrison

I The in, if shares sequentially. more how think progressing diluted share X guess, of of a the by housekeeping year? count share should end is that? sneak million kind count, went up What drove we can model correct, if one the I about And And my Alright. about question.

Jim Owens

Yes, question that’s for definitely John. a

asked I same question. So, the

So, I give correct the you he can math. think

John Corkrean

so the higher share in sort share price less ability all results calculation. in shares the And function of it’s calculation, of to dilutive a buyback count meaning our

I number going on of rest it’s related Mike, to year. doing share would it not buyback but And related where not math. or are say, be issuance. around simply So, It’s the I to the shares will would It’s goes, around for probably share the the project same it’s the share depend anything issue. to we price

Mike Harrison

Alright. Thanks very much.

Jim Owens

Mike. you, Thank

Operator

of Your JPMorgan. comes the Zekauskas Jeff next from of line question

Jeff Zekauskas

engineering. was and is but Thanks What’s HHC, very in in hygiene not much. the improving the to The profile in much first Why not from engineering? but business the so second quarter was progression difference? it year-over-year, the in and margin margin quarter pretty good health good, the

Jim Owens

Yes.

at speed think Jeff. biggest the I was they difference introduced which the pricing,

They earlier. better also our shortages job of business getting of ahead more did So, maybe HHC materials of this. raw a had

with have to customers. dialogue thoughtful So, point to And platform high-value able they raise that with as burning they to in very we I careful, businesses, want customers we more had these prices. were think a

So, notice. that’s customer a of of fundamentally the rest more But The the team the great just on thing prices. done businesses a bit HHC job jumping have the did same with difference mix. of yes, a

Jeff Zekauskas

X.X%? ability your were go the conference is out in think it be call, and faster? prices and volume my was So prices it of why whatever case up the last you up, memory that it turns in price, to about assessment is better would it raise up that so X% tougher, conditions is, that I quarter, they but And didn’t were your the thought

Jim Owens

Yes.

know look don’t So, back I we the at if scripts.

quarter, say, So X%. the were up more the certainly, than month of last I would Jeff, they

So said I of quarter, think and going are April said May, end prices raise right. it the we we March, in the was in and we that to

the So and effect went right, the we XX were we than month our into of of April increases now Most quarter challenges, a month X. into into the are a May price quarter. one

in period our flowing in are confident impact the we quarter. it And the numbers PX. our and We of So, PX you that’s in in period very six, what’s numbers saw here into last our see why happening. in

now, pricing So we like I expected. would say exactly a lot happened

announcing more. ended we fact, up In

and place, now agreed $XX I $XXX we last when this is million. $XXX and our – system happen call, think now right. I implemented changed XX. and implemented at that’s planning between announced say right, the I during are this be I are and July to million in March and And additional million it’s then, would said in we When agreed,

and volume So pricing plan, we like stronger. happened planned. we stronger stronger a as was happen little like little planned didn’t you point as a out, than we What faster. were And well,

So than and was what increases I little was we would and much a stronger Volume expected. say stronger raw stronger. expected pricing we were material pretty maybe

So, all were higher. three up

Jeff Zekauskas

the your than Why is business it in XXXX assessment? Engineering did better so doing in much

Jim Owens

there great built mean a of these put the Yes, XX market in leaders. a segment these those trends. whole allowed we’ve to really understands lot us are has move to hands of power share this gains, Jeff. that GBUs And I team

going new developed, and our the are they know our panels where are they are coming they are win. the they the investments team, trends where to electronics talk to you products out that where know teams, are that if to the new going. So see solar happening, being Talk

and are what talk team, and value. create applications going to losers to RV If you the are the our market winners see they in who

of it part business So generate But to it’s that one other saved you’re move, team is we’re just about much faster. in evolving organic money, we when growth. money us the in on enabling applying how model us really there our vehicles. particularly to valuable the talk new us, is these saved grow And and electric which EA calls that products,

Water from great has benefited business shift. a electric vehicles. We’re that job doing with

designed add really of Jeff, And in it’s opportunities. was just the XXXX, would ahead So organization too, way applications. new the team we’ve get to our I COVID, at during very qualifying aggressive

is that’s benefit. of some So here a coming

Jeff Zekauskas

that lastly, seeing? you something Is is you? for Ashland acquisition interested big Maybe Okay. that business. its were that Is monetizing too adhesives in

Jim Owens

we Jeff. on acquisitions, Yes, of any course, comment wouldn’t specific

I say the doing with good what will have our toward And said view would we’re best think a I going having for adhesive a with see business. strategic business. good a do they it’s as long happens it’s guess I what’s I clear right review. But shareholders debt-to-EBITDA said earlier, the to in are run. that. they we ratio that a

of world. the the growing review are that the happens, And our opportunities won’t if market to shareholders, see adhesives but happens organically. that We inorganic look right? we’ve business comes So when we our in company will be done right anything seriously. those good strategic the goal And by that best their for at up come we our ignore it out is in that because –

Jeff Zekauskas

so great. Thank Okay, you much.

Jim Owens

Thank you, Jeff.

Operator

question Our Citi. of from next the of comes Petrie line Eric

Eric Petrie

Hi, Jim John. and good morning,

Jim Owens

Hi, Eric.

John Corkrean

Good morning, Eric.

Eric Petrie

on a strategy. question Just

do end businesses Is ‘XX get about or you, the just to expand those into want talked actually to You right Engineering other applications number in you markets? in larger and for Adhesives. that and the want you

Jim Owens

number. the Yes, right say I would today, it’s

of of there. have but are expertise number markets, groupings those a other end we I it’s Some good markets, and manageable of think

of So whole business evolve. the a becoming right? automotive, these There vehicles within yes, a – is So sometimes but subsegment that right electric unit we’re at businesses number. is

Eric Petrie

to share then gains a customers. prior mentioned And the just you Okay. question, end better secondly, follow-up your supplying you’re because

strong. You markets noted you that recognizable point other is doing out What to or end EVs would was us? real

Jim Owens

it’s our especially team couple in biggest innovator different then point driving last solves that And of don’t normally, driving way the environment, say terms gain by In I’d the trend. XX can our who things have And electronics look global GBU opportunities mentioned and importantly, the service getting I’ll in say need, have needs, on business, that’s we I to been Yes. we very In of those. with continue of sustainability winning, about service here a an outside how opportunities. energy-efficient the adhesive this done a we’re gains. since we’re a That’s almost the that. two that’s But share innovation because share comment between Usually, companies unique carefully – has of support new mean being a China, right? make win all in leader grow that our I our and and more we where I’d think and And to changing vehicles. those and driving are have business. what segments lot I difference trends in technology making happened some examples combination some as out glass patented in innovations we’re I What’s And up set we a opening the finding developed where exceptional went of second structure, that’s HHC, our customers’ And levels we’ve business, supply-constrained we teams at things exceptional. quarter, people already what’s the problem a to differentiator, of But we investments China in that’s customers growth customers make support how electric and levels COVID did as aren’t is about to are. that’s to opportunities. in in our year a is equipment. differentiator. new to China. of that us insulating buildings. for includes a solar,

biggest CA, guess, saw just our innovation easier-to-use, to because then make team and finally, probably you roofing is – a less is from that problem the an growth use workers. to there is construction standpoint doing workers in So adhesives area friendly such what environmentally allow you I roofing construction getting

putting new roofs faster a So big our of technology winner some is those there. on with

little adding multimillions dollars up So millions, a there of impact. meaning of is a little examples, to are lot that significant

Eric Petrie

supply on do your one do own much or or produce on Helpful. follow-up like that tackifiers Helpful. just outlook And how of expand in to these resins shocks avoid material then raw chain, look to captively And you polymers? prices? you your

Jim Owens

to goal I say No, backward-integrated. Yes. is be our not would

us. lot. commodities. materials The in Commodities less raw is good only or raw good XX% shareholders. buy think for the one details, what’s have our It’s We us of specialty of I the happening things volatility. helps with dig inflationary a that up materials. materials for went That’s our

have kind who’s whole of backward-integrated partnerships model we’ve got don’t the a So with suppliers. that volatility we somebody then of makes. And building

works So we favor. think our that to

will it’s we’re our is formulators. So captively. a technology. small make of proprietary polymers build percentage where And it where the ourselves business polymers But we for we makes mostly sense,

Eric Petrie

Great. Thank you.

Operator

Your next David of Begleiter Deutsche question comes from Bank. line of the

David Begleiter

you. Good morning. Jim… Hey, Thank

Jim Owens

morning. Good

David Begleiter

Thank back going to – Just you.

rapid did automotive business? these comments entirety assembly side customer, portion the back is especially there was on or historically, prior hurriedly said, that able some there seeing you the maybe of Or periods more of price amount the price the increases? go in retain have are these of the you when inflation of historically, to retaining to – to back but I has increases, Going your still been maybe

Jim Owens

see our what either products competitive time Yes, in we that where I is over new leakage. put really, say introduce become would anywhere slow prices we And lower meet they pressures a we very situation. positions a competitive historically, or you’ll don’t us

that’s automotive. say with I no, do a have not of But XX% kind would So kind any so afterwards. price-up, our business We about really auto, we indexed lag, multi-quarters commitments. price-down of have in don’t of

our a But they in are and price of the so business. business it’s you’re pattern XXX%. in – So go follow for most market. of not place, for will increases part permanent But part, the part most the that more the right,

David Begleiter

volumes next about growth it. a have And would on But the if you Jim, it’s year, looking volume next early. year we normalized think year, the just into more how Got for three GBUs? know I

Jim Owens

Yes. It’s to growth. early predict volume really

a drive year. That I will I raw a raising next because prices. of a half to going lot of a behind the materials revenue. here I get in we’re lot think we’re we’re margin to mean be benefit step benefit year think pricing going higher next

to really we’ve year, well, we’ve volume to I ourselves I be be it’d think if that, could And top have set right? higher we we margins. as of put it you’ll volume see going think it not head these be or could We’re this positioned but wins we strong get up growth exceptional. volume have I into think And a on growth. finish a amazing. to with without But very just QX, for strong of a a XXXX growth, here lot ourselves of lot

David Begleiter

right constraints labor you’re that seeing now? any business thing, last your in And

Jim Owens

pricing getting productivity automate at yes, the right? there see And then our it’s And a call, opportunity the So a lot big as growth, factories. the delivering our productivity. facilities, either but this to all drive volume constraints. are on don’t this efficiencies, about and is we everywhere, priorities labor or of other just I it’s mentioned, a we talk our in for – challenge Yes, but it three

great XXX-year-old I think we’re a employer. company,

the employees. inflation So on don’t wage and we causing you pressure some see kind probably little parts it’s have country same a but from companies, of of in the other things

have our managers teams job, one is my for plant every far, workers. So looking but of a good good done

David Begleiter

Got it. much. you Thank very

Jim Owens

Okay, thank you.

Operator

Your the next Misra question comes Paretosh from of line of Berenberg.

Paretosh Misra

Barbara. Jim, Thank and you. John Good morning,

Jim Owens

morning. Good

Paretosh Misra

morning. good Hi,

material three raw same the there? some there the in is segments contrast for much raw pretty part, material are increase the On or that is percentage inflation, the

Jim Owens

little the trying I’m in higher to business. EA, a at say we’re across probably that EA, and the little in much much in but looking would pretty CA, less a little same, pretty Yes. a more sort John, the probably in a little same I out. maybe EA, it’s higher

Paretosh Misra

Got it.

John Corkrean

of yes. As a sales, percent

Paretosh Misra

more going this said then like that to sounded in the And what construction, you to has is which than see that, And segment great. QX kind it of reflect of million then chunk on I in announced. pricing, hikes? just $XXX really biggest price guess pricing fully didn’t Okay, related been

So on you elaborate as well? just could that

Jim Owens

reasons. Yes, putting in area. little businesses the for EA EA, And a significant the is Yes. CA all said, But the little the in lead terms more Texas that less price start as CA our a charge Yes. and forward. HHC having but are off a of with I to HHC One, were on two slower than they have that. dollar factories probably two Yes, HHC of impact. great increases

had a So backlog. they

are So they we pricing our delayed. to the those. – of took didn’t while set of out pricing up, caught get and more because little a distribution have get a channels And then of up how is some timing the

now, numbers on this quarter So see pretty coming I’m last to but flowing some you in in it saw of point good really are much benefits the and very the see from confident they right through going quarter. you less it But quarters. we’re them

Paretosh Misra

mainly guess issues? that Thanks, solar Jim. one, you as is but I’m And volume automotive well? could the if hearing not anecdotal? or customers quantify that the about affected And shortage sure electronics last or impact, anything chip from I then customers talk you could by your you’re the how getting are customers

Jim Owens

the would say space, around got it fact mostly of world. it’s that in the we’re dealership you’ve cars America I Yes. a right, every in at the as mostly seeing all and around we see, and auto dearth

shows the lot still demand. a and little I lot a think But say of chip adhesives. would in bit up a are I of they using cars they So are shortage making lower still

they them sometimes, put And chips. with are in parking aside to them these

some because guy auto chip a the of strong been share we’re best the made be despite I’d some doing the that in automotive growth seeing gains, one not EV business strong some but impact, an issue. opportunities, overall, our of it’s business So to our work combination has we’ve quantify

Paretosh Misra

I Thanks it. insights. had. all Thanks that guys. for Got That’s

Jim Owens

Thanks, Okay. Paretosh.

Operator

time have one more for question. We

will question & come from of final Morbelli Your Company. Gabelli the of Rosemarie line

Rosemarie Morbelli

quite you able supplier mentioned were regular that you. it. and morning Thank a questions. not share whose everyone Good my because could Jim, gained taking customers thank supply you for you you to do few

supplier eventually have that do for will lower return in particular opinion, think, their the those think price you gained you do businesses to previous at Or a long-term? point? they So you your

Jim Owens

serve, commitments. there but based number like only were everybody those It’s customers an on we’re able were it sounds were supplying Well, incremental to Yes. we out market. long-term of we all – in the

business a a but commitments that bring much, So we it long-term as we value we of got appreciate we priority very where added customer we’ve for a customers, really it. and saw out had Rosemarie, existing the that

temporary. I wouldn’t for say question. no, So Thanks it’s the

Rosemarie Morbelli

looking inflation? more could at comments raise – area And see you any where are that to would potentially then fact particular you if regarding you the your are ready necessary, prices additional there

Jim Owens

an bit about When Rosemarie, I question, quarter China and think just transitory, seeing is of in than the see market, great cycle just would quarter. inflation I said in [indiscernible] ask broadly decreases. all we’re there the little the inflation is question it that’s a out super is this right. mentioned a [XX:XX] I the general, And inflation or second in It’s to say. that less say I starting – is third we

to for and we the market, we got increases got that tend that raise this balance if all its think and to we that. is just little is to My And whatever that the we’ve there suppliers, we to get timing a market will we I going So get manage, on in to shown material price There ability is prices investors in from is of a raw but our to to But right. the great right? do down. our Rosemarie, reason, way a are you more spike. point, than get

second say of going we tapering point we that see the of But comment. inflation So the in think year. that’s half would here I now, right the a of

Rosemarie Morbelli

Thank you quarter. a and congratulations on great

Jim Owens

Rosemarie. Thanks,

Operator

Thank Jim the Mr. to today. for turn comments. final call now closing Owens was you. for our will I That question any

Jim Owens

your about the building but future. your Thanks, excited for what for we’re on and we’re call here the quarter, the support everybody, questions, and also

a thanks for again, So support. great your Have day.

Operator

you. H.B. XXXX second conference earnings Fuller the Thank quarter does That conclude call.

day. lines your disconnect have wonderful and all may a You

H.B. Fuller (FUL) 24 Jun 212021 Q2 Earnings call transcript