Earnings call transcript Q2 2023

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Operator

Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the H.B. Fuller Q2 2023 Earnings Conference Call. Today's conference is being recorded. placed to been noise. any have lines on prevent mute background All the be will remarks, question-and-answer After there a speakers' session. [Operator Instructions]

Thank may you. begin your conference. you Steven Brazones,

Steven Brazones

Thank Chief Chief have Executive XXXX and second we John today you, will Vice H.B. a After Officer Celeste conference President our Executive and remarks, are and call. session. Presenting Officer. operator. quarter President Mastin, Corkrean, to Financial Welcome question-and-answer investor Fuller's prepared

these non-GAAP will included measures of let in useful begin, that investors our in Reconciliation remind nearest measures. non-GAAP include our supplemental compare operating references are me in certain We accordance understanding the are believe determined earnings today and we Before release. that our to to performance companies. to everyone financial to with measures are GAAP. other measures performance results to measures These comments our GAAP the with

otherwise Unless EBITDA to revenue EPS, and about about measures. non-GAAP comments margins adjusted refer noted, comments to profit organic and revenue refer

also detailed during the of factors earnings our release, risk comments available will and uncertainties. based that on materially risks filings Securities during are to which investors.hbfuller.com. our call be to covered These and at the made factors and and Exchange subject due in results are all call. We could in expectations current statements with expectations from on differ Actual statements assumptions this are making forward-looking these this Commission, website our

over the now will Mastin. call turn Celeste I Celeste? to

Celeste Mastin

you, Thank everyone. welcome, Steven, and

and slower demand. despite customer and adverse was Our industrial second expectations quarter destocking profit in line our strong with performance actions

growth adjusted fiscal improvement we production cost deliver to raw and and remain Our scaling on XXXX. is while significant changing track ability growth to price manage in in dynamics successfully delivering EBITDA and EBITDA margin material strong

portion us, to of remains volume large significant, of industry. than to to QX but of not effect point much a Global the expect demand sequential half unique industrial in second over the an inflection stronger tapering performance we currently volume due is has underlying and our the comparisons representing with or destocking, be our year. stronger annual implies, which activity customer quarter slowed, portfolio destocking This the across our second portfolio but year-on-year our activity is

consolidated all our X.X% experiencing sales organic and declining in quarter, volume revenue for declined the year-on-year As second GBUs results challenging conditions. with organic

basis HHC and respectively X% However, customer by we CA from organic sales in organic declined EA the in while was in in quarter. sales improvement the to CA Organic for decline year-on-year in XX% more for second the than XX% principally EA significantly from both and heavier driven expected than trend sales year-on-year sequential a X.X% was improved expecting, organic were and year-on-year on down down QX. than sales for deterioration for in we destocking HHC better activities anticipated. QX adverse The the by

was revenue up well From a the prior year. to the very at we profit our despite improvement the the and declining X% the continue profitability perspective, we year-over-year of versus and declining business. pleased performed basis, drive adjusted XX% with a midpoint and progression guidance, very volume EBITDA actions On XX% for quarter that the team’s are net second in EBITDA

sequentially adjusted points and XXX result, margin year-over-year XXX to points a EBITDA increased XX.X%. As basis basis QX from

this organizations effort and significant help of deliver chain supply of sales, margin improvement. manufacturing combined The a our portion

time, market the substitutions customers ability supply our lower customers win-win them our maintaining are our to while execution continually procure enable raw collaboration of and chain Our changing group our costs supply, appropriately product receive I'm team At of to to the dynamics. same materials implementing and only by position or at margins. a not sales to the is and proud manufacturing but market improve with organization cost. their leveraging also convert availability our very through adjust improving the our lower to to

very $XX Also, consistent volume, guidance. inflation with from continue we confident other ability the continue price offset cost our result, XXXX to cost net management to previous achieve and to we in a benefit in raw As in to expect year-on-year in acquisitions. million actions and between our material year-on-year fiscal by approximately savings and wage from remain $XXX from headwinds $XXX lower million million impact

of Although the we a costs and be through largely the for acquisitions. this grow the offset we we believe continuing the at year larger volume headwind be will first able by aggressively will to development to than anticipated business managing quarter, impact more end

the Now year-on-year, to revenue X.X% broad-based driven and let quarter. our by high product HHC’s unusually principally consumer the In activity second in on segments destocking me organic customers. of down goods by was review move performance each in HHC,

The underlying pronounced packaging more experienced activity Although destocking while and to the markets volume – consumer labeling customers hygiene segments stable and one remain quarter. led second beverage less for towel destocking for were the and declines demand as expect would HHC in HHC’s affected. tissue impacts double-digit in market

increased basis favorable million raw and material price EBITDA to margin and cost management points drove the improvement XX% year-on-year. year-on-year good EBITDA to control well XX.X% for $XX HHC expense as adjusted Adjusted increased as XXX

the X% and year-on-year basis Adjusted increased improvement The EBITDA cost raw EBITDA adjusted favorable EA XX.X%. points than Adhesives, XXX price volume quarter growth material cost durable profitability offset declined Engineering lower for the more second due bus, was strong increased and actions aerospace related and also organic and disciplined in driven markets. This goods by to X% margin continued in market EA rail automotive, and in management. revenue truck In in to construction the in and year-on-year segments.

by XX.X% CA negatively destocking to roofing year-on-year. volume continued be market In Construction customer sales particularly Adhesives, the impacted activity, in organic declined segment.

this month phase. We the first taper activity year, first better to CA and quarter will destocking to began significant the quarter. customer quarter, each last fourth of macro the progression first experience destocking and the for run CA be starting organic customer course. its resulting level activity destocking it to GBU believe has largely in through this complete However, compared development was in year-on-year improving throughout sales second the our to

Adjusted EBITDA improved margins. points profitability. demonstrated extraordinarily with expectations volume to percentage quarter costs, quick greatly for sequential was adjusted significant business to XX.X% EBITDA expeditiously restructuring on XX by of actions reducing considerably Construction for EBITDA and This in turnaround courage in this CA management basis profitability mid-teens significantly a our return which the to margin cost ahead second in increasing and driving driven leverage improving diligent team, by the great Adhesives

CA, following destocking improved the quarter that down their Pacific, sales the was EA. China Geographically, EIMEA versus quarter. challenges in accelerated in COVID year-on-year America's still X.X% declined China impact as the moderated lockdown as said navigated through year-on-year With HHC X.X% Asia the and restrictions. but revenues in decreased and Demand organic in of down first X.X% growth organic during reopening country the In was of organic customer year-on-year.

While year, improved sharp opposed in are sequential and continue of a we now the and trend half demand longer slower expecting China in has a to the that as second rebound. we expect to recovery

industrial related and a particularly demand to goods markets. economic slow, continues From in durable construction global standpoint,

the and to remain impact our into this Overall, as down strong market customer marketplace abate. of weak position of and for are of share declines our modestly planning unchanged. is significant driving levels the destocking levels for We the year destocking current improve We next that impacts from remains in markets demand the year, today. but in customer majority is believe and demand true the volume rest

opportunities. and to us a a valuable Now, M&A accelerate I'd strategic focus to strategy. like for our of continues to growth talk be about the realization our of M&A tool many

concentrated are the risk. tuck-in on and that meaningful low carry drive acquisitions and integration relatively of We keenly synergies strategic pursuit execution

which to multiple. businesses EBITDA We multiples well post-synergy our have current at a enable robust below proprietary pipeline of trading acquire us deals

are to EBITDA transactions as These are deleveraging balance and often to synergies realized. accretive the sheet

below net Xx, are to committed allows synergistic in are capital flow to strong that capital still smaller $XXX our acquisitions for profile structure to allocate strategic while driving accomplishing us tuck-in We million highly cash this our $XXX ratio objective. million annually debt-to-EBITDA

with significant capacity strong and acquired chain growth HHC UK in market by profitability During an synergies will in our This and quarter, enhancing packaging acquisition through Adams, adhesives leverage. segments. cost labeling a presence optimization accelerate the position and company is supply industry and consolidation a transaction the we distribution This with market expected second headquartered Beardow network.

based XCHEM in specialty infrastructure portfolio. Also, of adhesives the Building initiatives. North will for acquisitions, Africa adhesives Arab Emirates both the this construction the specified Adhezion, of an realization and and which in range of diversifying XCHEM offers growth in a the applications East, industrial and region. wide coatings manufacturer that is Middle adhesives fast-growing highly two of closed globally and strategic month, of we two United enable our medical market scale most strategic a our business

broadens The highly Foster’s supports outside its and its to Construction exposure. States CA's products Adhesives portfolio CA's acquisition grow directly of improve specified diversify for of mix acquisition for and United capacity and countercyclical the CA's expands flagship applications. geographically strategy manufacturing business the market This brand

profitable and broad is and with scale than solid, for purchase in XX advanced care It which Fuller $X healthcare billion the countries, healthcare Tissue company The more distributes in unique range adhesives customers industry. adhesive more the medical disciplines. XXXX in the global in of company's expansion patents. the XX use Adhezion adds Seal decisively and U.S.-based wound capabilities medical innovate XXX a acquired adhesives and from adhesives of highly a for creates than H.B. to a positions in certifications manufactures acquisition in to space. for This platform

in are contribute and approximately aggregate, adjusted million fiscal $XXX EBITDA Since the fiscal the we've this In in five in of beginning fiscal million by of and EBITDA in to XXXX. acquisitions completed sales, $XXX expected XXXX $XX million and transactions. collection about XXXX $X million tuck-in in year, adjusted sales

purchase equates Xx is debt-to-EBITDA and post-synergy purchase than excluding multiple. $XXX less a for collection price that XXXX adhesion multiple EBITDA, million than price our combined net the multiple current and is to transaction, less approximately of the The a

adhesives are and to we are the excited become Fuller largest pleased We of welcome in to new the members very H.B. the these Fuller, pure-play company team H.B. part for family. our to world, companies

Now, to John more the turn results review in quarter our me and Corkrean our detail over to for call let outlook XXXX. second

John Corkrean

Thank on quarter. I'll additional X financial Slide you, the second some on details Celeste. with begin

X.X% positively pricing customer Adjusting a revenue X.X% impacted the in acquisitions was impact and down revenue quarter, down reflecting of same X.X% a year-on-year organic versus volume last in quarter had X.X% a period items, and net down by general GBUs demand. having the favorable slowdown XX.X%, in year. destocking and industrial for revenue all For X.X%. across impact continuation the with those Currency negative was of a

Adjusted up raw inflation than expense selling, general effect of actions impacts in net and was a year gross XX%, and variable Good offset basis Adjusted management, and volume. margin favorable other more of XXX the compensation year-on-year. pricing impact foreign cost flat as cost wages versus administrative initial last costs. essentially and currency offset profit lower restructuring lower was points material benefits,

Adjusted savings, $XXX year-on-year. the material raw EBITDA for the adjusted quarter X% EBITDA was lower on foreign the costs, actions and million guidance well restructuring which midpoint and of unfavorable during cost range volume, and constant at our quarter. This offset and On as up inflation approximately as reflects exchange more basis, up and pricing other X% of year-on-year. a than was wage currency

impacted by the was XXXX Higher adjusted $X.XX share and expected, second interest driven higher per in expense unfavorable second earnings Adjusted the interest of $X.XX negatively currency. unfavorable expense quarter and quarter respectively. EPS foreign as versus down approximately foreign and $X.XX by of exchange significantly

quarter Operating currency lower margins foreign volume, higher capital translation. offset improving in cash significantly than improved and year-on-year interest working impacts the lower and expense unfavorable the more net of as flow requirements

flow operations and Second quarter cash increased million respectively. million from by and $XXX year-to-date $XX year-on-year

extra X% guidance XXXX to With versus than full-year that, a turn revenue XXXX. our XXXX as as expectations We X% to now volume expected now for FX, This second versus down net of are week full-year. for weaker in revenue neutral the industrial be let acquisitions destocking to the to The half fiscal fiscal decreasing second activity year. and combined demand in me effectively organic reflects quarter, the the of fiscal of expect well slightly the lower impact year, the in expected XXXX. be level and

creating increase. to XX% X% acquisitions offset we to contributions adjusted by between cost Additionally, organic value a reductions from year-on-year expectations $XXX lower additional expect well as reflects $XXX as representing to be EBITDA continue earlier. to revenue million, This million discussed the

Combined acquisition these the Net interest per range activity now and higher and rates. and to is in be adjusted in of recent expense amortization is earnings $X.XX. be approximately $XXX assumptions interest $X.XX million of expected $XXX range $XXX expected depreciation reflecting expense full-year to to to result million, million, in the share

now be reflecting $XXX between million robust net end million reductions more the of full-year XX% XX% between expectations capital We $XXX in operating cash and the flow through of year. to year-on-year, up our expect and working

on based business the the over the we Finally, actions material million the of timing in year. between the our million third the of and year, raw $XXX expect to seasonality of quarter realize EBITDA course and pricing $XXX of of and

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

Celeste Mastin

you, John. Thank in the of am extremely the performance team our demonstrated execution current proud I environment. and has

use their the These not improve provide and of with value the to new innovations our greatly with do and our value to on and to drops, customers goal helping of are them service with products. the We to sustainability to exceptional our continue trucks, marketplace. customers partnership less bring more innovations centered

partnership continually collaborate capturing to Fuller. assist current for our associated to the is availability. e-commerce, challenges and innovative as opportunities their competitive Our key customers trends labor innovation We a such H.B. sustainability, them with with address approach differentiator and in mega

examples attention. innovations I for the to a would like that significant our world of you capturing changing are and recent couple just of highlight

significantly EA Sealant batteries a Protect, new in Fuller's propagation. the thermal Protect our was team EV encapsulant lithium-ion proud used of Innovation that exposed production is EV thermal for for when and the Award Adhesive delays innovation winner game-changing or a H.B. of First, to XXXX the vehicles. a electric product, lightweight reduces event, Council

of grow properties EV systems noise, the of benefits safety the new provide environmental will unitizing external significantly patent battery innovation us continue business. to system and enable module greatly market impacts. share and also structural more and The vibration, and by EV Protect mitigation EV to harshness absorbing battery improves to protected semi our the capture battery This

of solutions their reduce and sustainability in HHC HHC's, NIINE, the of bio-based partnering compared Care XX% carbon is critical the in products Full XXX an leading lower way industries hygiene creating incredible our the generates leading unveiled India, feminine which a in Series, Recently, customers, to new adhesives environment. is standard H.B. biodegradable changing feminine Second, was first collaborative innovating in hygiene, and the global across design. one new the napkins. market. leading manufacturer petrochemical-based industry's one customers, enabling our industry sanitary improve to technology of in adhesive Fuller with product innovation care to waste emissions Through sustainable game the creating

an Now, as I perspective. conclude my prepared remarks, I would like to overall provide

to adjusted We marketplace flow are continue strong operating XXXX. growth and well positioned fiscal the in EBITDA and in cash expect in

Our growth strong engender product environment. economic almost continual and upgrades, diverse innovation line robust profit any pipeline in enabling portfolio

to delivering material to EBITDA continue EBITDA performance another growth XXXX. and remains in to China the the half activities high foreign confidence improve, stronger us in to continue to to comparisons customer restructuring and Our as we year-on-year second fade, that year currency to strong up in expect trend destocking margins to through year, expand setting favorable a due actions, of ramp raw demand benefits price be end and of cost

That today. concludes our for prepared remarks

Operator

take from [Operator our Harrison Seaport Mike Instructions] question with Research We'll Partners. first

is Your line open.

Michael Harrison

Good morning. Hi.

Celeste Mastin

Mike. Hey,

Michael Harrison

Celeste a to what lot making is and right visibility demand now. ongoing that very are of this destocking it that saying looks saying companies underlying poor difficult like is know

more pretty pointing understand on you or on is Is while or giving Can you're are solid. that in limited what visibility? order to what? us seeing patterns demand to seem confidence other be help conversations indicating what's You underlying that companies you based customer

Celeste Mastin

Mike. Thanks, Sure.

point the like indicative down lightened you EA And in is view we which at what also we're it by underlying is I quarter. we of and destocking progression which a single-digits in looks and as just have really fact, really volume, had is the of improving during We're the kind we a – look In significantly business, it of into EA really information, underlying of CA the month. is in our now sort single-digit this low we've at think that have half, volumes, the saw PX. the of about we lot low business this see business, comparison. when to we RPX, So demand, demand relates anecdotal and month-over-month strong seen month-over-month where up seeing

then one, involved the become they're And has the last that HHC, have last in we last destocking of was the HHC one phenomena pull and to to be business this it. out going

demand large to a as particular area. by consumer know, of businesses underlying demand So you around what in And I say out which in that year. my than in is intuition would we're companies, going hard products, lot and mired ongoing overall X% so but or settle it's seeing we're dominated typical is what it's demand like the we're say that a very business, seeing that lower because – see low that is exactly still destocking, X% to

Michael Harrison

value to Well, and pipeline looked that this and of different of at because more on for kind and kind we consolidation buckets or at would think a looking if about acquisitions. where that you do something category. defensive strategy, deals here risks makes geographies creation of I'm four those you versus M&A as matrix X Question and Slide four of categories play? a new the technologies new sense your you about buckets, have How think be tends that low and risk roughly that's split of opportunities more among how pipeline

Celeste Mastin

Yes.

the of the the be see very have year we existing best really a this have to technologies in into XX opportunities That's need to more what of expand the think for tends regions. typical and segments. by I we for is very growth. There this our new or to nature you be we our different dispersion that drive where see regions within adding a those for technology strategies to of pipeline is a going new – market acquisitions

Seal opportunities the of certainly deal medical Adhezion to and step we're are we've this, adhesives examples capability in are like a build there that where or However, and out the Tissue space building an the makes adjacent to sense into found deal it business.

to your areas is of So those side risk, the critical. matrix on on finding point that so platform right hand mean, the left right, what's I in

we you acquisition when they Adhezion because The technology. at loved the So was that reason that deal. have great look just

clearance, FDA technology. You all can robust they have see products many how the really certified have they

what In fact, cyanoacrylates, a a which version, applicable space. channel an they part a And us didn't octyl they which more, situation, why to which in we it's a to is gives an more have market, based extension good EBITDA. lot is challenging of our lot generating a that it's was of a very channel lot have that broader in But weren't market. of

it's things bring and side it's and box, it the left while in little always the opportunity. we're derisks there's on looks at of that So like there's because risk, four matrix typically that a capability part the of of the lot that a more are reasons looking hand we

Michael Harrison

you saw improvement? very can cost through Thank leverage? price, much. fiscal the at question we the into construction in to maybe And XXXX? How How pieces? sustainable this I second much we as really lot was the guess half level, a look much of of and actions. that nice last EBITDA is you cost had I sounds margin But margin as on you into that improvement walk maybe look mid-teens was the sort And volume Excellent. related is like then adhesives. It was

Celeste Mastin

Yes.

that margin So in a business business highly is remember, over is time be that that to And a the EBITDA mid-teens Construction level. high-teens specified business. will sustainably Adhesives

that what even back able lower we recognize in other a we we extreme the that wanted And we We building break the we seeing in that's businesses business. space January put of is be As you're than demand, a we're to movement place the knew the is, CA And product decided business, we're we to structure. targeting. that more in. that order in in point volatile had that buffer to lower cost in grow made decision turnaround what to

been on team's the working it. So

looks over and the done tremendous they've the year, a course of a really turnaround, quick it like of made a I have For work but you amount know difference.

then turn very of point out this I And this But other the and to and I'll the is by talk breaks over overall to is type. would the portfolio it margins, other John thing out I about for sustainability point recession that a before, resistant savings our how business. would out thing

We this, time can are our in we lower our of bring like that a cost this customers these value. a substrates, can really adhesive. help can or all that But a cost. We them at lower actions we pricing help position in cost reinforces lower use time we take at point their

because suppliers. we at a as lot can global same of we use volume the time, Well, demand, low that general leverage of have with

at So done to that time nicely has team our to the a to margins be reductions able portfolio. really buffer of demand fits EBITDA that we're cost this low experiencing. that ability this I like adding expand And extremely top a with think on nice job

John Corkrean

just I'll margins and progression and couple the a the comments CA. Mike, of Yes. on add

So is the this seasonal that our first is and the the because most in fact weather of activity quarter. kind businesses, always in the less results obviously QX of lowest the of

it couple if QX. also up at was year look XXX do basis normal. That's not progression, Last the sign the QX from progression points to always a markets. is a QX QX but the This was only year you to actually QX. the year, year, up about see from of QX little probably than a to you a volume volume which seasonality, So this step last recovering from more

is it driven out. by cost the it's the some I'd taking maybe of seasonality, business the But points. we're basis and majority XXX say of So around restructuring to talking certainly of XXX

Michael Harrison

very the there. Great. color Thank for much you all

Operator

Okay. Mike, you're welcome.

Panjabi to Next Baird. we'll with Ghansham go

now is open. Your line

Celeste Mastin

Ghansham. Hey,

Ghansham Panjabi

on category some quantification kind to those question, volumes I Hey, to the Hey back everybody. started relates going starting of first. destocking, of get are Celeste, destocking specific you related so and which level and in you anecdotes the so the looks depending category cited? shoots destock are to How destocking Celeste. of the on are the to are like experiencing you green others that right, and of as guys. forth. categories guess kind to setting morning, there any think sort Good that back and versus as appear phase

Celeste Mastin

Yes.

this as and started extreme in can a really destocking seeing first too, degree. you CA we So see very

So have the Construction Adhesive flooring of And But of businesses in business, brunt both also businesses in particular division. and Woodworking construction along. our the now our have that taken has roofing sort we EA the quickly. then that. insulated has followed related for example lowered glass

trades, within the introduced in we've So feel XSG wasn't very a glass product first have we that construction it pinch. the later construction insulated that in in innovative but trades industry. to the some, And

I some share taking we of that that in of buffering but that even that was and now destocking we think kind – are innovation seeing the saw, So space.

so that just So I more in quarter. really say this EA, feeling started first, we occur, it we're seeing would progression then CA was

or EA, to starting China low China in starting funk they is in were volume that see business Now to that we're shoots QX. green the because of out pull

you down, China, in it frankly, at benefits volume from were Ghansham, was we and fact, EA almost a that. flat China was was In if down, flat, almost look lot volume

as the the to again, destocking And see we're of – a CA So business I EA fast. believe we're going see shoots. very as in to we're pullout some seeing well green going

that'll to They that level. going bringing through into the some value on I They pretty which significant right. customers is of we're a – see buffer mode. their being last this. also the were of a at sort with into story, And of to destocking lot QX this this able mitigate of done their ones job think performance. HHC nice fall impacts innovation, a volume And to helping. of into have is They're of to pricing impact different a help

Ghansham Panjabi

so know tracking as saw the issues, And what's base June on XX% that from to each the it to a gets decline is second et to But relates line, how sense year-over-year quarter? as your volume thanks standpoint month Celeste, Perfect. effect I a much. you choppy, cetera. basis relative volume the there's in trend

Celeste Mastin

Yes.

over down what look seeing in four total. decline digits we XX%, in that's so in XX%, is XX%, PX PX volume. we the we're our months, when So business for down kind PX last at of volumes And PX were high the single down

steadily it better. get So does continue to

Ghansham Panjabi

for Okay. Perfect. last just And then one me.

volume relates consolidated the to maybe that's a guidance As all case John. trend back base half it could in line vision What relates into of EPS half in question moving baked bridge for your are as and back volumes guidance the And for of your baking the year, for then as year? original your your differential you also the the between the it to the parts? you

John Corkrean

Sure, Ghansham.

talk had exclude the the last which year, extra of year. question, is so first will in of the we volume, year about the still half we on So drag. the organic extra week, down be week volume we we're when second the organic projecting the And that's impact additional volume. last Remember

down So projecting, we're to of expect year, similar the the second number half in X% that, even we volume to a probably QX. full-year in what and down for the X% is absent now be about down

flattish volume expect that's what to we get modest our full-year sort kind X% QX, So down of of the based. to guidance and X% growth, range to is

The question on EPS. bridging the

which one driving or about. is the million up. And of $X interest is that's expected million guidance that amortization, talked fact of million The had the to the rates acquisition of $XX rest probably be million higher driver is is, $X depreciation expected the at and beginning So other And change it we the than guidance, can about by majority tick QX. that of that the into kind midpoint the Celeste year. $XX increase. about And again, coming interest in driven. then at kind acquisitions continue our two driven of of than That's higher to that things, all the of is expense was EPS is

Ghansham Panjabi

much. you so Thank

Celeste Mastin

You're welcome.

Operator

Okay.

Next we'll with Anderson to Vincent go Stifel.

now open. is line Your

Vincent Anderson

morning. Good Yes.

Celeste Mastin

Hey, Vincent.

Vincent Anderson

Hey.

just glance really have it of bonding Mike Tissue generally, sets. similar to because want chemistry But first skin I little at So a now Adhezion. cyberbond dig up kind a [layman], And fairly into more. Seal, to Adhezion just more brought adhesives bit

So talk or platform market about look something proper available business scale what products the a else? to and medical you does to creating growth leadership, are like? missing a best When it adhesive just you about through we having is

Celeste Mastin

Vincent. Thanks,

you at different Tissue So the Seal we're is spaces include four components. adhesive we deploys do through as and to that's you as wound medical we're And $X like a space when One market, which the that's the cyanoacrylate. the it, lot adhesives. medical space. referenced. looking this Adhezion, One And There billion that industry. adhesives adhesive what are an engineered often cyberbond tackling think medical what closure two in is, very other device you large mentioned, about

we we have well. product a a succeed the space device feel succeed in to to So in medical line right as

skin the skin. to our doing the stick is customers. we have pursue then And And existing we of third, in bigger category the some to with and clearly, bonding, the technology stick space of to that are more

we that EBITDA margin, transform I again, a a this that can $X that similarly. business, margins. an I this way quite drive really and us to see portfolio. in So feel medical XX% when helping high rate one billion growth high growing And those look shift big in Adhesives we've and the at XX% plus look very with overall margins. We to successfully. the platform adhesive a this I be we like big will sum made at we're again, is grown portfolio And pursuing, EBITDA as a portfolio EBITDA that the total as Engineered in aid we market high-teens space the a opportunity, added

Vincent Anderson

that I then, more never it's in until there been the up a to for helpful. in different kind chemistry already lacking? you broader about sets, at of then? quite business of unit were you play now. a That's strategy What lot has think kind these I least that, major industry broadly if the commercialization a leader market from but something that creating, distinctly preventing given Okay. coalesced very adhesives of guess Is you

Celeste Mastin

one are the pursue because adhesive focus play in that the is of capital is a we only it's the as this. we adhesives the and market. have what My So what would do, and pursue question. few to And also good this do the have scale biggest belief to the that company we we pure world,

feel limiting. be to So I I because there the to are we're here. others, having is for is expand acquire and certainly question certifications rate opportunities me guess It very largely going the where to because regulations qualifications have due not to to the a for us going it's market like a

would a time. So very growing is it would be, long take

be enter acquiring expedient way the for think this. Adhezion most do are the I to to like going companies us space to

Vincent Anderson

of at is benefit public kind That's acquisition, line, much how included of on some synergies, so that assume we commercial I at on And normal SG&A helpful. maybe type balance not expectations. product and to setting your And trim consolidation I mean, stay expectations I the the get could specifically appreciate sure if it. synergy on procurement just wanted philosophy to relative against actually cost include any least Okay. of fat M&A, restructuring on have these your a your of you just if portfolios I outs? the kind how you topic post-synergy in all. then, to

Celeste Mastin

repeat sorry, sure the question can real Vincent to I you for synergies got consolidation quickly so it. just – And make your

Vincent Anderson

Yes.

that or asset like restructuring three fruit where then yes? really commercial five really larger see, the and based XXXX if target. office synergies? that and there's in target the to of back comfortable about Does If procurement for you what that hanging you're market Does we you giving would set include to low bucketing were and that things on fiscal include from one and think initial like what – day and kind as more yes, a things you is

Celeste Mastin

Yes.

can, the is we as the we in a what define target synergies period. we year So it drive three can

So acquisitions. at When acquiring and post-synergy for XXXX of those look deal, We're other example. for collection Xx. look is some just around this the different collection of four multiple because XXXX a just multiple the and exclude a example, the very give Xx you kind at for you pre-synergy let's of but the around a Adhezion

Xx, especially from facility getting or raw be rationalization. to larger Again, facilities facilities capacity consolidation with material world. in acquisitions, are the Xx synergies, have over synergies. there'll So are there we there Oftentimes,

office yes, back goes, the as far you're right. As

the country In world. of fact, back a we in don't office every have

companies shared this. make office us into dominate from acquire material we have our which very And synergies existing move it raw the back We services to centers, work easy definitely of workload. for course,

when our had company's opportunity XX% in if at we theirs. bought. lower was When companies we compared a we acquisitions, the you – order we consolidation the on that these had which you look you the the just overlap we XCHEM more find and brought on are those step to take they SKUs between And Beardow, leverage of we it to where at is And you spend. volume, look of what further, like at price to about the case that those paid every acquired get price, then SKUs look a SKU

or cost and company works cases leverage around. again, to to acquired more two where three something, were base. way it other there the bought We're their the And of SKU able our

heavily synergies So as would can most then want spend. say course office. well And you facilities as I really back material three within to out elaborate? of raw the John, years come take from we

John Corkrean

them yes, million to organic synergies, synergies of XXXX, to you growth. of think XX% kind about the of the But that the if by if parse some you that synergies. getting and it's cost most of apart, Vincent, projecting $XX comes of kind are about So we're of that that from

XX% and explained, maybe are Celeste what exactly commercial synergies. So

Celeste Mastin

Yes.

Adhezion. synergies de if with look the commercial was It minimis fact, XXXX In other collection, largely than at just the were associated that. you

great is growth Because know grow to to a grow, it's And true what include unless the a we're to market, really we with synergy. in channel We synergy. just really, the which Adhezion business the revenue bring the quickly. don't right? So able to were example, we to the trying was rate synergies enable company bake will not enabled

Vincent Anderson

you I on excellent. details go. I'll appreciate all that. let Okay, the

Celeste Mastin

Thanks, Vincent.

Operator

go JPMorgan. to And with we'll Jeffrey next Zekauskas

now open. line Your is

Jeffrey Zekauskas

meaningfully did much. sequentially did area? or any prices quarter go in in In very any up area Thanks the prices meaningfully go down

Celeste Mastin

to are reductions a change or save gone So impact. a haven't declining. on their use to But lower of if they area. has save competition in money them a total of cost something any in getting more speeds money volumes or last carryover QX in again, we our there pricing lot glue. aren't They market, Jeff, Certainly, look price when saw use price by versus is now They meaningfully much more quarter as this that at the more to as the substrates percent down you value line quarter. versus going more customers QX, price us enable to

Jeffrey Zekauskas

is Where competition sub-sector? of price little there a bit in what

Celeste Mastin

you for see in price example, market in, the So competition China. the solar

in because you seen than of business, if more fact, if there's decline, market have this we've of part packaging I And of in – XX% been the parse And walked demand. at you sort share, sort fact in the that. parts. in it look in China, try of underlying at and overall, destocking business you competition fact, say to look between away of our more price would kind endline we've from, other there In out

customers on we've that about our share, market that to or market we away were how meet. predictive business to we've and relates from lost pricing ones. sophisticated us it As willing had which probably of orders that we helps that use is customers lost estimate And what analytics X% very kind many to we've determine model share a have walked not

Jeffrey Zekauskas

Okay. Good.

your $XX running half. year? $XX I think going Order last year maybe with be after the charges million first to And are tax. non-recurring the last maybe your non-recurring of of terms non-recurring million magnitude, think charges, for level they're In I were about this year that at charges

John Corkrean

yes, QX. I the non-cash to think one-off half. think were trying other recorded, ones think of hit there last items of least second in know the have don't that year Jeff. we in mean, is restructuring I'm charges I largely answer the at kind much. been so I far

So there I that good be estimate charges will half. in the because be they'll that's second think a level pretty some restructuring pretty continuing

Jeffrey Zekauskas

flow, And there's and talk be of your cash year year in about the why deferred roughly? end expect can to with then of I in terms last million accounts for taxes what's cash your flat half tax? in use And going think $XX on do were of what the payable by deferred they about and you the first you

John Corkrean

Yes.

say payable it up flat I'd on that be think would accounts would to I slightly. yes, So

in and We the are project we some expect vendor the fruit on to at a that half second would look bear working terms year. of to

audits. of obviously working drag a say flow driven to I'd We in related be and taxes, cash kind a year. the actually are On on modest way primarily improvements just tax second taxes in the a cash expect So continue quarter bigger bit overall, a by was flow would relatively half capital. to settling those little the old for this in of

tax So old that's negative I at $XX or six tax the the last less in and and line, with look months. payable audits line It's we've it's think tax that deferred if settled a negative. you a roughly, in line the million more

Jeffrey Zekauskas

Thank you much. great. Okay, very

Celeste Mastin

Jeff. Thanks,

Operator

Okay.

Next go Deutsche David Begleiter with to Bank. we'll

open. now is line Your

David Huang

Huang tailwind and the here you How about in been first cost and XX or to price QX how occurred QX think of on David and two numbers? split have is those much This between XXX Dave. Hey. then the those for I on headwind. XXX guess first half the realized should

John Corkrean

Yes.

So high a in loan basis, impact level, at look two But pricing of pricing up So at more material a the costs than first quarters, right? I of you QX. think the is end on if was bottom range. just it roughly so raw that in the were year-on-year, million, QX year-on-year $XXX

year to second of million to realized pricing of you benefit closer So the couldn't probably but $XXX that raw a exact we've realized but half less we an million, will $XX will haven't material benefit. And But the $XXX million. I give accelerate. number, become in

would bit first So the given a And materials. that's carryover out, pricing be I would half much then year's that given it, vice raw of play a I of half, and we're going this think way benefit more. maybe in the will little the realizing second say for of definitely more much the less versa than of what half, to kind kind

David Huang

higher that more guess for you guidance, that half to say achieve fair range range? could guidance to end it not, of realistic it's If the the still drive that then And I is of Okay. would what the guess I lower the the year? back

Celeste Mastin

Yes.

acquisitions to drive the done. the by end the more volume push we're dramatic so us certainly end business. of higher of throughout you end higher Also restructuring in look the of range. toward restructuring and If more The the with preserved continue to we've range, at it's lower a we the bolstered upturn the actions cost would going range

David Huang

in China. you are lastly, think some the on improvement? And about in you half I noted that volume guidance your guidance, on Can embedding of talk your type Maybe lower growth you what improvement China? are in I guess you Where that? seeing

Celeste Mastin

So and a then little maybe to John, I'll the speak China bit about there. talk you can guidance

the I So be while announcing in from Daily, And there incentivizing more in essentially of actually government page going in I May. was just I China front spending. was to there the was May, that returned China. domestic they're

near neutral. that from our lifted benefiting So volumes I particularly because believe we to are have

we're So seeing that's one that improvement source there. of

is the area other business, in electronics The interestingly enough.

producers to actually some be So down their XXXX. the XX% versus of in China electronics volumes are anticipating larger

That's an a liquid electronics doing a more XX%. in in we for we thinner, method and A a because situation is it's take are even other see And and innovate for have get taping material in applied use tapes. able adhesive more panel example better much a phones electronic that you favorable quickly just to that. and the been in is down not like more bond be like really say, is construct it screen. adhesive as and to But traditional as electronic some well, of tape can touch multinationals something numbers that some as happening where share those And create devices adhesives to adhesives to difficult And space. much are would beneficial. versus cite trends there's

we're underlying China, in question so share your in to think in well electronics I actual than through innovative doing space. take volume more just So that

John Corkrean

the terms development. volume in just And on progression of

was a XX%. in couple down So nearly was China down, was down first volume QX. percent It quarter,

of year, referenced think will I the earlier. think volume these half in second be but the We the Celeste dramatically. up up not

last we have think year. when lockdowns easier will you think about of comparisons timing in I China the

that upside. but there not growth, in we'll is investment stimulate that to optimistic China of If investment the an be we're economy, government terms in So significant robust. could see

David Huang

Thank Okay. you.

Operator

Okay.

Morbelli Rosemarie Gabelli to go Funds. we'll with Next

Your open. line is

Celeste Mastin

Rosemarie. Hi,

Rosemarie Morbelli

morning, Good you. Thank everyone.

existing have given the presume competition only lot really was space. I You medical a competition the it. appreciate in information, of and the you not one. are – adhesive I us the wondering if could Celeste, talk you about that I

bandages. We have bandages, all sticky those used

is in that as compete else how entrant? who So space you small and are to a going

Celeste Mastin

Yes.

wound the that space start was participant – in of So let's the product. closure their largest in with market. really, third the But Adhezion other in industry. kind really that part J&J of with is the biggest I second than that, DERMABOND think or

is particular technology a adhesives, and applicable a strong very that we had other feel do but to that's in already they medical in market large not places. position So

fragmentation. relevant skin we'll space and a is ability have for the In the course, players are participating lot really number of to you that there But And that large that it in strong some companies A in are have bonding that actually of there. lot medical skin, relates have to space. tremendous technology to to today. as companies told of a mid-sized market. PSAs that of in device we position then already space, compete stick can see again, We a

Rosemarie Morbelli

categories, $X three? $X that at look those split between billion space, billion that you major if and talked three you Celeste, can about you the So

Celeste Mastin

Yes.

of So and And medical biggest split is yes, the billion closure. stick remainder wound the the biggest skin. devices between to is then – seven part part it billion $X is, call of let's $X the the

However, is fast. growing wound while the closure really smaller, market, it's

of there's than there's as closed perspective And prevention well. think rather recognition rather there a reasons been sutures, use infection is that I to for to advantage using an technological bonding lot example. sutures some than wounds a adhesive from

I'll it as is billion a So but wound rapidly. is market growing $X call really closure about well. it smaller,

Rosemarie Morbelli

substitution. mentioned you remarks, your Thanks. That helpful. Then prepared very in is product

for are something what and or touch, And impact of So substituting you if feel us you your will cheaper. of environment usually their bit the to an kind could substitute in companies wondering substituting customers give are a this operations? I on was

Celeste Mastin

is about we product really substituting another. substitution, materials our talk we the same formulations really one When cost It's be should product. lower Yes. raw saying what for of

there's preserve our change that and see to once offer substrates, adhesive. So – adhesives, we'll into when especially with. oftentimes what substrates either Oftentimes working line customers multiple better go they're our just kind to makes speeds a out raw get able see And be of we in a margin us, we our things the expensive gets And savings understand an that's we or finished preserving lower material of able and margin. inputs the their depth formulate both to they formulation we know we to and adhesive, overall but customer within cost and one cost switch cost less adhesive be lower we'll for do. a a the a customer, the that

formulated that a money And more requires – a can again, able their usually line than a a we their different customers value a adhesive in customer time lot a and to just adhesive however, to like or our we save conditions. substrate out switch change is run saving will faster, a that customer qualifying pennies provide. being And substrates a formulation by type on by add new line specifically those them help this, of an to able greater that's where even being an substrates for adhesive,

Operator

closing time, And any to I'll the we've remarks. reached back our Mastin allotted call additional this At for turn time. over or Celeste

Celeste Mastin

We're your for today. everyone quarter second of participation results. proud Thanks, our

what a that. allowing drive you to deliver more effective and model XX% saw us great X% despite business are decline volume with an of EBITDA execution we coupled was think to I improvement going

So thanks very much.

Operator

And today’s call. conference this concludes

disconnect. now may You

H.B. Fuller (FUL) 29 Jun 232023 Q2 Earnings call transcript