FUL - Earnings call transcript Q4 2021

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Operator

Good day and thank you for standing by and welcome to the H.B. Fuller quarter four 2021 earnings conference call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. that is advised recorded. be please today's being conference And [Operator Instructions]. like I conference to over now to the Ms. hand would today, your speaker Doyle, Investor Barbara of President Relations. Vice Ma'am, ahead. please go

Barbara Doyle

fiscal H.B. Thank Welcome November XX, the Fuller's year ended XXXX fourth fiscal you quarter earnings to quarter operator. XXXX. for call and

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

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

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

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

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

Jim Owens

was year-over-year $XXX joining adjusted at everyone high-end Fuller to of and growth, We quarter digit revenue XXXX quarter evening, Barbara the Thank growth XX% of segments versus double XX% organic you pre-COVID XXXX. in Last strategies XX% of levels. of of and revenue pricing and H. as B. fourth compared with had fourth EBITDA call all our revenue the million result $X.XX EPS. Organic strong including up reported and innovation morning. welcome efforts, a service three guidance this increased our the results,

actions a XXX delivered to gross EBITDA debt quarter result recovery our points We a X.X also ratio up challenges. with pay versus the in cost despite to quarter year. our to down margin commitments And associated continued we ago. significant of have decisive saw the taken rise margin year pricing all on we year, basis from reduce as in times with and substantially during every a third quarter the virtually our the debt serving X.X chain customers times supply We as in unprecedented to

adjustments, inflation. persistent restore material And of overcoming value margins. inflation swift actions materials. catch-up enabled and our annualized operating actions early this execution these employees priorities, fourth improved significant capacity. At we and we year. Volumes annualized saw strategic inflation in improved throughout year raw in implemented productivity throughout our our the material from pricing took beginning on volume the team up, XXXX, of again as priorities three us with demonstrated the our are productivity of the global pricing pricing of fourth X,XXX three and quarter, quarter cost raw of in impacted benefits the set XXXX, has delivered million operational Our value and all growth, to we outstanding We over environment. operational In to the actions. $XXX and We price

that inflation management have overall capability the results the we supply year, the While this built success. of been organizational enabling chain culture that the and the important strategy, is drivers it's company's and

and consistently H. collaborate our is principles Our with great strategy to and And and customers is suppliers, is to solve as to our deliver technical Fuller's to B. our fastest. effectively competition. values customers faster do challenges a strategy global while and that teams that place our culture Ii work. within solutions adhesive enabling innovative to first demonstrating this to success. and than serve

for the the H. sustainable to year raw deal for we and better of sales promote COVID-related on share to and helped leverage across many successfully navigate of reorganized greater our result XX end-markets widespread as aligning footprint organization, over and demand invested objectives. impacts. efficiency global and last to materials, packaging fourth numerous agility, to and employees and demand shortages we needs we built our all designed speed Because Our sourcing customers the continue that last construction, Most supply shortages. a roofing increased business market importantly, we this and needs our execute by we delivering gain persist segment's continue and the to systems Fuller strategic to metal on goods. in enabled capture for for new units, shipping to three customers. adhesive effectively way each our focused increase flexibility solutions of organization pressures, over centered within B. specialty actions, chemical operational end-markets, plastic still the our In XXXX, capabilities chain Shortages material customers labor these XX% the to streamlined high disruptions, today ability to is adhesives for opportunities We us In deliver meet several in with innovative have a years. quarter and raw new into and we global consumer our shipping segment. with manufacturing containers inflationary but and led

regulated all Our sprayable in more speed with solutions roofing for VOC innovative markets. bonding approved is and use installation increases efficiency

sensitive levels adhesives, and vehicles, we more and In sustainable we solar be demand our in and are consumable markets environmentally friendly including new engineering hygiene, quickly And our delivering solutions more glass, at business XXXX, packaging. efficient grouts, adhesives setting automotive adhesives panels. managing could customers. that delays and In material in microplastics insulated increasing launched record the significant shortages XXXX, and flooring energy for level new to with innovation reliably. chain residue efficient products, adhesive demand meet while pressure new to enable won electric for Our in of mortars raw same deliver we more time with electronics installed support health or and spikes, of supply decompose no new adhesives ready-to-use products

of revenues me the increased improvements strong basis CA's of most gains. strong team improvements demand points. and discuss in recreational up well met reflected compared and EBITDA the HHC of last material compensation glass, also Engineering points adhesives towel the by organic EBITDA absorption strong and textiles construction QX quarter increased end led Strong gains versus beauty. XXXX. in and adhesives Organic revenues quarter, had sequentially as up in points XX% extensive costs margin significantly growth third year this versus and share XXXX. by HHC as with revenue energy, significantly fourth by strong slightly strong in Engineering tissue up drove execution, operational our by volume growth outstanding gains segment with margin versus performance slide as the fourth year-on-year, up margins woodworking, and XX% consumer in enter and was quarter pricing a markets new with positioned an variable quarter double-digit increased of adhesives strong raw execution. strong increased our environment by margin QX to three in were demonstrating in all the we is segment, to another market and Construction associated of an driven little XX% conditions vehicles, very and compared XXXX. are and the basis higher we higher more Now offset They four and XXX higher delivered Year-over-year organic with pricing pricing. year. improving technical health growth third extremely and segment XXX adhesives on gains. year-over-year, as end driving where extremely costs increased offset move XX% detail. tapes pricing underlying over improved footwear. EBITDA performance variable The year-over-year driven strong momentum XX% over and by prior health Construction revenues of XXX by volume results. expense. by hygiene, year, XXXX, on over XX.X% and higher consumables as organic EBITDA let markets quarter as margin challenging with remained year, of insulated performance quarter, construction pre-COVID well material the double-digit labels, leverage with strong XX% in have business basis results strong XX.X% packaging margin also demand versus applications, of up as EBITDA strong pricing share at raw exit continued adhesives compensation

end strong, environment the remaining to and and demand believe vehicles engineering planning And also consumer tissues towels for demand first XXXX, the market solid goods. opportunities We remain products, a we improving low-teens, of XXXX. are continue for and half the base in and markets show will the total, inflation and that improvements a demand and where Looking driven assumptions health remains into believe and residential electronics, continued ahead growth year underlying durable XXXX, solid. activity organic packaging, by demand anticipate case will adhesives end we activity And volume commercial share will hygiene strong adhesives In modest backlog persist. construction our for we cost throughout pricing growth that gains will for anticipate growth. of that with in given we pursue business continued paper strong will

in the costs for raw quarter inflation fourth in we quarter to less sizable, though versus exit Our than current is the outlook fourth The seeing to increase rate. of XXXX XXXX are continue material QX XXXX. is

relatively material the EMEA broad-based showing We businesses expect the with inflation less be the and start year increases region, raw and to than by Asia to consistent the across Americas.

price inflation. We regarding vigilant material will continue raw will to value and remain the

raw XXXX and ahead. strategy have to our face cost and us in nimble XXXX and continue challenges business the XXXX to in effect and actions our markets is offset taking we material expect that to a challenging resilient, actions in increases over to pricing enable necessary backdrop, outperform are whatever Against our XXXX end our operations economic restore fully will demonstrated we our $XXX in diverse as are we executing pricing take And are million performance QX and We margins. we in again in well.

quarter fourth our our me Now for and the detail results to John turn Corkrean review based let over planning more on in our call assumptions. expectations to XXXX

John Corkrean

I on Jim. Thanks quarter. additional begin financial the will with some details slide fourth on five

Adjusted revenue XX.X% same quarter, impact of up year-on-year increases was impact up down organic year Adjusting from up in standpoint. positive as the versus pricing Currency For more a material revenue raw the points a year. basis in volume with the a the favorable last XX period from margin had offset a for versus quarter, having last quarter. was and was gross of but X.X% profit not than margin XX.X%, currency, pricing standpoint XX.X% dollar X.X%. XX.X%,

investments higher However, gross third selling, reflecting to XXXX higher XXX this expense administrative by company's travel general compensation support versus fiscal and and the performance. year, up of basis related well driven up Adjusted pricing the was strong execution. variable other points growth year-on-year, as as profit margin to was quarter

and strong XXXX, year-on-year earnings execution negative construction rate market were which reflecting $X.XX Adjusted SG&A quarter $X.XX, of for For of $XXX share. of the year, by Adjusted X% gains. a EBITDA about quarter was XXX share despite a versus down impact in a of XX.X%, topline XXXX, full year performance, high of as points percentage driven share by basis adhesives our drove the QX and good assumptions quarter, for million the at the up end was XXXX. planning the versus per fourth up versus revenue per adjusted last pricing tax higher

by for year year revenues organic XX%. grew increased fiscal adjusted results year-on-year Our EBITDA strong. the were also and XX% EPS full versus was very fiscal Full Adjusted XX% XXXX. up

in to growth the on capital for reduce guidance XX% sales With know raw higher from have growth organic quarter, to year million driving that EBITDA XXXX. And to operations XXXX we double-digit to on the XX% continued while the let the range For of debt and throughout to our requirements times of year. continued to impact absorbing to what significant of strong, about material negative turn today, the cash to of now year, anticipate be about of net X.X support off higher revenue debt costs in as end working revenue the me $XX that, estimate fiscal paying our and flow debt we the X%. will year. we a full X% currency Based we

expect increase, material more to be as million operational representing We year-on-year than a offset costs. $XXX between XX% adjusted higher and and to efficiencies XX% EBITDA $XXX raw pricing leverage million,

expect We tax tax rate rate and core our to XXXX XX% XX% our be between to core XX%. of XXXX about compared

range result year full to full to million in count XX $X share be would about diluted share $XX million shares. and year between expense be and expect earnings adjusted in $X.XX. the assumptions the interest to We per of These million $XX average

full fact week extra the X% will compared estimate quarter. XXXX. that typical realize XXXX seasonality dollars $X a a have full XXXX full Taking will quarter. fourth the compared to week favorable $XX that EBITDA Fuller extra the fiscal well with full to first XX% business, to approximately guidance year on approximately in the XXXX, revenues All all additional reflects of impact year consideration the in occurring of one H.B. into of of million year favorable as we the impact on the as reporting of year million in have versus week We this expect XX% to EBITDA and

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

Jim Owens

rigorous we again Fuller. our profit double-digit the results I market-leading to price-to-value we upon in that of ago, operational market and said After a that we revenue volume resiliency strong today difficult years. H.B. our can in differentiated to organic couple continue last the us we revenue, this deliver and in fiscal volume year of diversified EPS John. as portfolio of build In XXXX. level to in strategy Thank expect nearly investors the growth, from should greater a XXXX and XXXX. say XX% momentum are growth XXXX, record execution capacity we conditions. enabled demonstrated performance I end you positioned growth have confidently deliver performance demonstrated XXXX productivity of reported Significant created of solutions and

year customer-centered Full inflation. led by growth our XXXX year While also our from our grow revenue the seize contributions model. business faster XXXX by competitors organic ability strong as showcased through collaborative to increased increased EBITDA raw than volume agile and and pricing. growth dollars material XX%, we Full opportunities impacts from XX% XX% mitigated bottomline extreme

sales inorganic Our last high-value We over over momentum improvement the In innovation that nonspecified portfolio of billion in high-growth in In towards we and in decade electric we XXXX, make a as portfolio our vehicles, e-commerce in expand repositioning in And nonspecified EBITDA sizable will $X.X appropriate, innovation did XXXX, EBITDA continue company with were exemplify XXXX, adhesives. packaging, our with organically applications. year portion XXXX, wins XXXX. to will buildings, panel invest specialized our In new solar pursuing billion we in in dollars are that portfolio. expanded, time growth less accelerated company new adhesive to than and solutions. the of products driven significant also investments. These well margins adhesive where portfolio of In by margin a in increase $X.X double-digit wins our a quarter strategic share higher-margin positions compounded the adhesives period. including sustainable compostable winning sealants continued which us also in and opportunities, Growth has packaging, XX% our strong a has medical specialized, applications. another the our we of adhesive specialized and applications. we fourth this the in driven for sales of

have We strategy. acquisitions and scale within sought-after are viewed the given a record track industry, a integration strong our as buyer proven and of

an three balance our committed exciting an disciplined below target improved will to of have times. sheet we and of strategic balance and opportunities, buyers While we sheet remain pipeline debt-to-EBITDA

our was our H.B. by delivered the employees remarkable lived headwinds. enormously We consistently environment. continued XXXX Let complex their our to inflationary shareholders our issues close year exceptional and Fuller in And a me challenge. supply business for global confidence our customers, and served volatile company. shareholders thanking supported for with up under

tremendous to digits in year record again. be We decade both have Fuller grow projected performance is with to XXXX over made double strides our positioned the bottom H.B. business last for line bottom in double-digit and our XXXX growth. accelerated with we top and and the another line top

expansion, positioned year-over-year Operator, execution today. take beyond which so to company remarks well has prepared this growth margin the questions. the some and open concludes leading can XXXX years performance Our strategy This call we and into ahead. is our continue our capability to please us

Operator

[Operator Instructions].

first We Stifel. of come of line from question the have the Vincent Anderson

Your line is now open.

You may ask your question.

Vincent Anderson

morning. god and Thanks

Jim Owens

Vincent Good morning

Vincent Anderson

want So construction. I start to off on

of gave pretty little I to you discussion that detail, You a which but about a dig sprayable your you And into just maybe talked growth product, new was more. one, last there that the to sales strength unseasonable. And I anything bit lot mean, maybe in roofing of led with call wanted you out think was you mix didn't I with of noticed product year. also and Was about to improvement. said and the broad-based timing very margin specifically? then that a regards

all to I and new that am that the product there considerations just any of strength? to if So are where fits trying parse in timing out

Jim Owens

Yes.

the but think, really our are our innovations construction, the part looking growth of number I it behind in of important story. at a businesses, up shows our in is all there

to growth certainly some had technology actually across We We of product. the We deal allowed broad-based we a demand, put in labor would have early our but shortage. what's across I markets So the year. last that capacity that adhesive place new put business, right. we The us growth. meet of some to growing construction this in purchased in strategy in with say, year, not it's invested is majority all that our

that labor, to jobs do finding allow less So use our the customers faster. products

Certainly, of pandemic, There's and into So a bottom seeing momentum there's the first things that have a of but demand, just started on blip. quarter momentum a And underlying show that short-term I think in and the that trade top it some of fact business. talked better both week. there's this about really XXXX, I wasn't lot good the sort were lot we coming that of down. at And in we line up business.

Our team great there them what doing are job on what chain they issue, is a customer hearing from need. customer after supplying the we supply

a for to think the true supply of going see to think a be are say, that it innovations. what have construction that's combination I quarters it's and of prove well. and pleased with been to as I So chain going you saying I would the And I in in XXXX couple we be

Vincent Anderson

you. then kind high Thank what in level, of with are seeing higher-margin you exposure quickly right. China Asian in And now, All your of some demand a outside can how with particularly about you just businesses right outsized performing? talk exposure at are to

Jim Owens

still is China lot slower but a at growing, Yes, rate.

me highest have which about said quarter every would would growth. have just is China, region the China, China. You I your question, asked

lowest it's probably growth, our Now right.

expect of in Slower it's even parts in expect the given November, everyone of And certainly it's slowdowns uptick the and now, look seeing factors customers, right. year. growth. were place from are in hear we export right There's energy growth December, phenomenon in slower later we if world. couple So that China. let's at But of the a And we in But some other a little and here still slower. there, last, put I January, what does the say, an China. think the COVID-related and some you policies than well,

Vincent Anderson

products point there? Okay. of focused quick And It's slowdown. the China It's just broad-based a clarification. specific have to nothing you

Jim Owens

China, It's broad-based in yes.

again, then have In at rest of as a other position. HHC our or auto, got growing, the pretty And And diverse we business China is, businesses. would other broad-based across solar like CA say just in business not don't So growing as our I we markets across. rates just that business. higher the EA, have

Vincent Anderson

bit adhesives. area electronics? some Thank you. that one I today on on overall But how right. see something strategy also conductive curious in you on, focused your electronically business have in on just to I is am All Okay. really And your products you is quick important where a are an just And smaller. then website, growth? that a additional

Jim Owens

of adhesives, Most question. not we specific our do for great and good see we as but a some it opportunity electronic It’s have a us. is business Yes. conductive

substantial a built challenges. business problems have than faster solving these electronic adhesives very giving They customers' are We by competitors. us

the electronic a most conductive are today. of of portfolio tackling our on thermally our and it's I nonconductive electrical our strategy, products area, a teams conductive. them are vehicles and Our But of part would well. area is growing growth small business especially say with less

Vincent Anderson

I Excellent. it. appreciate Okay. Good the luck year. on

Jim Owens

Vincent. Thanks

Operator

Thank you.

the have from question from the next Jeff line JPMorgan. Zekauskas We of come

now open. line Your is

You may ask your question.

Jeff Zekauskas

Thanks much. very

million I think know, working don't by, And target lower next maybe have so $XXX you year? Can I demands because that? for was your to $XXX debt to got about were you leverage talk and maybe you do million, targets year high. this capital original

Jim Owens

Yes.

if you Jeff, last year. difference actually And build. was you I or dig we year think balance this $XXX inventory this sheet, think will the $XXX million I year the real into did million, versus see

materials I as expensive, resulted So were customers we decisions inventory some with the late fact both that the supply in more deal certain raw the strategic buildup. we make but think made year, to have also need in that

So planning exited our the adjusted as we year. we

over-delivered we this we range to targeting you see we and numbers. between bottomline a reason standpoint kind given really was from the that's we what the met the the X.X higher a Overall, debt-to-EBITDA targets year. the difference of So EBITDA, exit some our were expected why because of

the are pretty we exiting so the with ratio And debt-to-EBITDA pleased year.

the mentioned just X.X, As we far our script. year as organically be would I at next in if look is think as below I plan, you concerned,

willing There's are number We there. smaller in opportunities a acquisitions. of do to

come to X. those will of fruition, none you see below us if So

us, three long-term exiting we into be expect But I should run do we is would like to that X.X think some within to bring consistently. year. the in to deals, operate three you long be where range to and X.X and this certainly if between that that are we committed

Jeff Zekauskas

really and maybe raw It engineering in And hygiene adhesives Was the or different? you didn't health segments, about What was softened happened? quarter, and year, you for have fourth demand down. what's the talk your demand going volume looks pattern guide think talk materials like was you What your sales enough your order in you on? growth. do about individual next if growth is? can And the it

Jim Owens

Well, overall strong, driven pointed construction. Yes. as very by first off, out, volume you was

was So to strong HHC right. the not year comparing in all are what and growth think we it look has have was Jeff, you at year. been volume to, QX But as of I last as EA strong. very

still XXXX you QX two those sizably. businesses, to year if of take So our compared QX this in up volume in

X% volume think we and So I as full in for up company, QX. were X% in a the year

If you see would look of similar you businesses, at ratio it. sort some comparing those two

uptick So in right full there year are the chain time. last now, that's a met this that in of QX there a challenge on big demand. is supply received But was

suppliers below XX%. we the So materials get is from

material. suppliers or Our late are short their with either

there's issues some with. say would markets, whether are sold chip dealing of customers our with more. So customers, you shortages end some in it's see I we or other can And have issues could

of volume have So a growth for low demand even though projected there's in lot we all pent-up reasons, those XXXX.

low think I have in what So That's built into script said single I digits. the our plans. we

that anything to we our lot add that? plan I think next a that's be potential is to have you built on. there's what John, year, a for there larger but want

John Corkrean

No.

segment, by say segment. would I probably business pretty it's I think about by asked Jeff similar business

a they stronger built. have We little have the in had volume given construction, opportunity momentum

Jeff Zekauskas

strong mean, half go year. you going up the are against first I comparisons next in of to So

in to and engineering and health of your quarters? couple first are So hygiene volumes going the for shrink

Jim Owens

see We the in volume of And No. see but growth We the week see Certainly, Jeff. one that year. customers, what Certainly we country. this certainly we there's not here already the in COVID month that We happened a Christmas based start. throughout are we growth effect see abate see we see volume January over first year. today, to the on one each a in businesses. starting with good into of

it's us I no, see XXXX, we showed So not and that least XXXX But this at balls decline early will in our great. Jeff, are crystal XXXX you, don't point. tell and very at aren't a on volume we will of the all this in go organic And the year. pricing, focused lot bottomline as different significant through situations year. of delivering topline kinds performance we a given growth growth see you on the

Jeff Zekauskas

versus And on the is are $XX numbers? two those What basis don't next of, there's know, lastly $XX funds for What least they of income an year a million, Jim, And for in inflow year-over-year. flow million. statement, John. maybe the are million at your that? In other you And $XXX cash an what year? other income GAAP statement, have I got

John Corkrean

is other a you big really will on line the other So statement in seeing not but see the assets line, in the that are impact cash you flow negative. completely, offset

And the impacts offsetting you it's in that so swaps different of way two of have then revalued. cash our the kind some really are So flow parts really of statement.

other we strong our XXXX in the income in fact versus based calls, XXXX pension you mentioned this income had higher The before have returns. we that asset see was and on

number you XXXX, maybe slightly be to the in similar will XXXX lower. So very will see

Jeff Zekauskas

much. you Great. Okay. so Thank

John Corkrean

Sure.

Jim Owens

Jeff. Thank you

Operator

you. Thank

line Panjabi Baird. come next of the have Ghansham from the of We question

is line open. now Your

your question. may You ask

Ghansham Panjabi

Hi year. very, guys. Good a on Barbara. Congrats and Good strong very morning. morning John Jim and

Jim Owens

Thank you. Ghansham. morning Good

Ghansham Panjabi

just HHC How to also to specific impact increases all mean, could chain seeing by maybe a bottlenecks? supply on price And EA quite propagated also you? of and others. are basis I as segment? more touch just the you are on instituting think you the segment, I rolling guess your raising prices impact real-time any you What are of any down this on there's recently. customers sorts incremental issues in from elasticity Omicron clearly, been then we significant should about

Jim Owens

Yes.

EA, that China you yes, the like saw a produced questions. on a affected slowdown are from have quarter, I and that the their So right, definitely, some of certain production, things products in two impact bit In we little chip be think that there quarter. growth in can't

we some goods would feels of back all have have. the bit as chains earlier, seen already. that they we that's I in as had there. more an like if really customers a that And growth And the far that Omicron, So impact have across coming you as out of durable could what it's the supply demand have then met of see is mentioned markets even their

So one around We two little are month. strong of then at it's week and very we phenomenon December, to picking things looking here we the a as Christmas. a couple up are where things weeks saw exit a slower

will QX. we not slowdown China. but where impact overall that's our shift, see right, the mentioned QX progression. the with a We But so So fundamental far turns, along world see strong versus I here in in revenue continued

while I lot consumer price As a price far have different directions. they a as increase are people getting for hit of the and goods needed a think elasticity, from

the they I doing think market are as you point in is out, what sticking.

in the been have we spikes happened XXXX, remember, as times, some issues. XXXX tough and think, if that reliable there's very I chain So both crazy supplier you in in a supply overall,

those. project, So are really and all of we important being us, us well served opportunity the next innovator on I is the for winning and mentioned, the that next as

again our so some So exceptions, in with are the is mentioned, with some goods and ongoing and pockets consumer I here volume QX inflation yes, impacting prices raising we position companies. and our not as

Ghansham Panjabi

raw second down time a a second line, do year also construction side material the up on then think been still saying, my for inflect line is it. margins of think you realistic for I what you have time I XXXX? Got the are but is obvious mean, it's for reasons fiscal it's EBITDA question, XX% higher? I understand And also the since the to then follow-up, what And year-over-year. I quarter inventories, on

than you So have going think a Or to what higher of carry we inventories? realistic see where you in are normalization is timeline do historically? inventories of in to are terms paradigm a just you

Jim Owens

Yes.

do the right. made to our mean levels this we on clear have up I is think that's the So seen last go question, our goal we quarter, And I It's in and improve had have to as it struggle, a right. good goal always in here inflection QX saw we going to first to we I we that committed some margins and be QX. progression our that forward. some here

we mentioned, sizable inflation I got here. As

when going of think, So our the a maybe flatten But over at come you start are this you pushing But down raising quarter. if are more see to margins. when or million than good this margins are, inflation. as or that you And raws to happened I I raws inflation, am will get tell right expansion really where don't $XXX I very It's my little you when and up. will effectively. tell we good you responding can me that's are now, prices

things are happen. and making before it or happen, as anticipating We not moves things but the after

and out we year capital a points. capital, this working or basis margin your reduced working as down, percentage of some XXX margin when around then question then And come very progression throughout raws flatten start so expansion. sales to to yes, by sizable So

So And been certain year. every we we manage effectively. are looking of manage am that doing have been our cash our how we at pretty proud to of working we capital I make that's working capital all elements something overall.

down now are XX.X% revenue. of to we So

is inventory, that the simply I of inflation. think year, $XXX million look, you increase end Specifically there's about in inventory on of million. $XXX at the if Half

us cost goods inflated businesses. various our for products. that the our half of our inventories then it's across is So purchase And reasons other and building the we

important our And could are serve we chain supply an inventory. We of impact. customers. stabilize, enabling this to I planning it's elevated But the think inflation of and of have us to we to number normal go that. year part as off of are an to going course, So pull think not we levels back

but use So it and a inventory last use year, be it year will XXXX. a as cash of probably in be this of will as cash was not much

Ghansham Panjabi

for just week is you final inclusive week? growth Thanks. volumes, The the does extra that that And the extra exclude clarification. low Okay. gave guidance or of single-digit that

Jim Owens

extra the Excludes week.

Ghansham Panjabi

much. so Awesome. Thanks Okay.

Operator

Thank you.

Harrison Seaport come We the the of line Mike of have Research. question from next

open. now is line Your

question. ask You may your

Mike Harrison

Good Hi. morning.

Jim Owens

Mike. Good morning

Mike Harrison

the wondering about am I business. adhesives engineering

a There Is are just what different markets. China really detail weakness mention just more in applications? of electronics little really wasn't You in noted electronics talk number the of there. a Can terms growth of in seeing double-digit you the about a you in in that showing up electronic your exposure?

Jim Owens

Yes.

year it some had than is year overall, softer a Yes, with customers. But issues and on had bottom the we electronics bit I little and great overall, some great that related think and chain sizable here wins. been it electronics. had very of for was the in to QX part supply some a a our top both line So overall,

the been wins. QX nice Not as had quite strong in Some in year. very as earlier it

Mike Harrison

you Is your thing? kind to expect that maybe recover? do Or thoughts trends talk of a there? And post-Olympics-type about that on

Jim Owens

significant of our of know, is there. a wins second electronics them have you a very And recovery of see here our business year. half by in We as the Mike, and number driven the Yes. lot happened we that

very expect we yes, of XXXX. business out strong So in that here performance

Mike Harrison

good to then that can And right. recovery just definitely over number But and think the dynamics trying well. there the as not those in I sense go all of of leverage was a get color a may volume on give was where that improvement, quarter. like thoughts operational EBITDA XX% margin are there? some next we here mix any of kind could impressive few unusual any quarters. the it on repeat? fourth margin drivers Obviously, more wondering against costs little pricing I All you business, higher some construction on if sounds and the performance kind

Jim Owens

a good And and materials was raw that Yes. say to game. improvement. has ahead really I to some lot and ability to that us early our strategic good of sort the are supply space get I drivers, some two in the done and certain picked ahead facilities our More getting that of competitors along of team market, price serve the would some driven debottleneck of of assets of would we of year good margin of in a drivers can and customers. all the make though, say by the certainly our volume increases of job you big sizable work biggest right. managing what two up are with the three outperformed debottlenecking allowed purchasing spaces some in number the a

been it So in a quarter is But expectations again, trend. are that's driving business have I we high-teens of where not expectations, always terms I are clear, one this to. for EBITDAs our and think

to have past. that's Mike, driving see XXXX margins they to why for. is consistently have this able see don't we but what So you have year be better will much in the use it, team to any reason I And a than seen shouldn't as

Mike Harrison

right. Thanks All very much.

Jim Owens

you. Thank

Operator

Thank you.

next of of the from the question line have Petrie Citi. We come Eric

line is now open. Your

ask may your question. You

Eric Petrie

Good and Hi. Jim morning John.

Jim Owens

Good morning Eric.

Eric Petrie

at just overall, less margins was, EBITDA new So adhesives in you incremental higher-margin taking full a talk wins, growth, for your year a look segment And applications. think, I below higher than XX% little about the average. engineering

that comp then model going do expense? is mix how just forward? why we of it Is And So higher it Is that? business?

Jim Owens

ahead the John growth There's the effect very that's based give yes, our nature markets, is terms going Okay. on you strong how customers mix the put timing a increases probably and sticky is, where where Well, we the specified and negative not, business business a will them try wins mentioned game forth I is But these on adhesives a little construction products. of detailed on I are the in that's the pricing. bit of of the and impact. was more when that of and with very answer. there a the and have given

as is not important speed pricing. of the the impact So long-term as

other is effect it businesses. as in the So that's aggressive timing of as pricing not some the of

you John? anything so to add, want And

John Corkrean

XXXX, there's dollar I expect same comp a XX% and that points, bit key variable and above on raws of puts to would last but continue. in the but the standpoint offsetting we impact from and quarters little the margins, it's that pressure little pricing still think a a two

Eric Petrie

Okay. paid, specialty Great. have And we M&A, then of seen business versus just assets. commodity more in higher terms multiples

on to EBITDA times at What higher-margin XX are EBITDA, a family-owned pre-synergies? side, that So paid the you? And out opportunities, of, I the this multiples you strategic of of a range are both your time been of kind think adhesives for handful especially Or do pipeline have think kind that's deals a is businesses point? the private saying fair XX done money in the business. and

Jim Owens

same right, Yes. stories privately think have Well, if you you read, that company, a I you are owned the read Eric. can

depends deals. double-digit most think lot on in the I for range on definitely of It So the of the depends nature it a business, expectations are factors.

a good drive of very have to synergies us, we out got For position deals.

deals we the and So just generally, is usually better get that about on market. these significant can the return than anybody in pretty

returns So environments. those private a bigger also to hear there huge synergy and prices. good not a are don't some fit prices it's both and about are strategically and want they us some think to that are we see have consistently standpoint. assets are may for a And the other in as from more yes, us. be companies. discounts finding out get But position going And very right and have those the as been I little would delayed, that that us that I a the we good to we think strong People sell to from

Eric Petrie

just Do where less And assets Okay. yours have those XX% composition less a commoditized, commoditized then Or it's more kind is than quick similar specialized? adhesive? follow-up. of as it

Jim Owens

businesses. speaking, target Yes. will things very the be Generally we adhesive that specialized would

Eric Petrie

Okay. Thanks Jim.

Jim Owens

you Thank Eric.

Operator

Thank you.

We come the David next question Bank. the line have from Begleiter Deutsche of of

now Your line is open.

question. You ask may your

David Begleiter

XX.X% of Jim, Thank much you. quarter, from in you how the year? was surcharge that on realized the you of pricing last announced the

Jim Owens

Yes.

has in just the permanent And about But as of you a David. been on into switched in over turned call, that give put to that, was So number that surcharge actually before specific even I I of was last pricing. place. can't a lot it all mentioned pricing

So was the smallest a I certainly exact couldn't part And give of completely but number, gone. that. it it's you not an

a We it's there. forward. part very have customers it's where some the small pricing going But of

we moved price. surcharge just out So permanent have the to

David Begleiter

back to how it. permanent raised a do much given relief Got meant you And in cycle? much of you just get little prices think we versus is bit, any raws, if this this how do pricing see

Jim Owens

index. goes back. back to some XX% Yes. come negotiated XX% of But normally It's none right. delay, about doesn't XX% is Normally, just We there and of That is of question, on a index. about do it of business sort comes have that's a some, sort with it pricing our an some great of but back.

come So in extreme speaking, we a down. long pricing the to what are how time are. will and as generally adhesives see the raws conditions the decreases space, But have market stays

David Begleiter

you. Thank

Jim Owens

you. Thank

Operator

Instructions]. [Operator

have question Next from we the Misra Paretosh of line of Berenberg.

Your line open. now is

question. your ask may You

Paretosh Misra

Thanks morning John good and Barbara. Jim, and

go wanted question. to Just margin back incremental to the

margin XXXX right the the margins see it could segment you the incremental highest you think segments? in for that about maybe, Which way incremental what's do to let think ask three So way? me

Jim Owens

Yes.

I think have businesses higher said into have XXXX. overall But lower. HHC XX% broadly those because So a going businesses our I price XXXX, margins. nature about the the EA will XX% to annualize then a and there's and especially pricing lot delivered parts XXXX talk of the HHC are typically speaking, broadly little can talk between of are moving that's And and given the the in that incremental John and we we to

John Corkrean

CA. I Yes. margins And expansion would will in see in and similar the And we right. in That's HHC say I think of It's XXXX. the obviously. probably probably some opportunity there's Paretosh, three, EA I smallest think some for

Paretosh Misra

then most also just if you price recap terms maybe where in after if the but round it. closing hikes? given very be And of several I think will the have this end you of these Got just useful. recap, at QX gap could numbers, of That's we of recent you price-cost could

Jim Owens

Yes.

that more have QX that will expectation is out year, again. And our raw got had expand of materials. the we we we exiting than So price

than more goal our price materials. there raw is to So quarter have each is

and we are effects doing other what the the overcome Now business delivering we ahead trying it inflationary we we that's are in do game. as but to are have of well, that

Paretosh Misra

And those it. be well? rate, Or number taxes good would to one. as Got for XX% This last cash lower? tax XX% a the that is

John Corkrean

taxes cash overall, for Paretosh. number good a That's

Paretosh Misra

Thanks guys.

Operator

back Mr. are questions at like I over this call time. to Thank now you. the no Jim turn There to would further Sir? Owens.

Jim Owens

of Thanks. all your our XXXX in support Thanks and XXXX. for investors to

us for XXXX. day, We Have all are about excited good ahead of what's very coming a in everyone.

Operator

concludes participating. Thank This conference call. you. you Thank for all today's

You disconnect. may now

H.B. Fuller (FUL) 20 Jan 222021 Q4 Earnings call transcript