HSC - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Theresa and I will be your conference facilitator. At this time, I'd like to welcome everyone to the Harsco Corporation Third Quarter Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. are telephone Harsco and copyright Corporation Corporation all this on webcast by Also, and of behalf are rights Instructions] conference, accompanying presentation made Harsco [Operator reserved. subject to this Harsco Corporation teleconference. will recording be other other are of any Harsco No conference written the party or this permitted redistributions telephone recordings by express Corporation. without consent of

may participation your agreement. Harsco turn to over call Martin indicates I of to call. Your Mr. Mr. Corporation. begin you Martin, the would now your Dave like

Dave Martin

welcome Vice joining everyone and Dave I’m for of With Director Theresa, take Executive discuss Grasberger, outlook and is Senior morning, our Martin, and for your This you, Thank Chief the of Officer. Minan, we to Harsco. us. our Relations and and our We’ll year. questions. Investor Pete XXXX Chairman Harsco's for Officer, will then me Chief Nick the President today Financial results third quarter

highlight administrative however, Before few items. a presentation, let our me

as quarterly First, presentation a website. our call of our for PDF as earnings the been to this slide have posted well release

is website being our replay be A will recorded webcast. and on call today. available later this Secondly,

and to Third, based federal cause of our and statements securities These differ statements. considered make are that actual certain subject from expectations risks knowledge to within that the the results laws. current are statements we forward-looking forward-looking will meaning on are may these

as to in non-GAAP A to slide that see considered SEC undertakes for Fourth, Factors section Risk statement. reporting our recent well company GAAP call, financial presentation our and in the any The is reconciliation results to today. no obligation For uncertainties, a results refer may as revise risks included this of discussion most adjusted XX-K. or earnings on such forward-looking release we purposes. our are update

remarks. Now I’ll prepared to begin turn to call over his Nick the

Nicholas Grasberger

exceeded and have quarter. good our us. Dave you or everyone quarter either the financial you, a we solid results The morning, very Once XXth Harsco consecutive met again, for delivered guidance. joining marked thank Thank

The began trend expected quite bit to a than third were two better continue ago. over and quarter performance the improving years results of

margin quarter. recent invested single In segments years. very margin which I XXXX consolidated was and highest the investments payoffs a of margin previous on the business similar three double-digit in the operating XX%, capital, also mid fact above many occur was to stuck despite are where years to pleased our growth in is profit of Return in for in that our over recorded the now quarter digits expected any each XX am in the XX% results beyond. in

to also the Our quarter is the outlook for due improved, fourth mostly rail business.

Altek profit and We a segments I'll forward make expect exceed the and and to turn to metals QX facing metals very just comments minerals, we minerals growth comparison is on XX%, of QX last challenging in over then Pete. year. while call third momentum few rail have revenue our In these year year. we completing innovation, and expect growth a XX% the investments industrial look The acquisition, resources commercial earnings profit and revenue of and and and growth in supports consecutive that in roughly even higher to XXXX. topline to made to rates build and next generate growth our

mix of and anticipate towards over could and will environmental which more considering we to become that innovation, of capital will to With heavily both significant customers that returns. margins serve investments revenues on In their focus provide the in addition, M&M weighted renewed various we're boost our value our processing time innovations the solutions, byproducts.

me solutions platform, environmental update acquisition, briefly Altek latest you our on the let our of Group. Speaking

Overall well for even process greater both opportunities identified This and than the offerings. generated Our the confident in we've new to we're integration the that several is yet of nearly continue adjacent of to realized. technology M&M's interest realized mill Without will and service potential tremendous both to complete to has very question and M&M the industries potential as believe has ministry a business to services fully become core is solutions byproducts our we and transforming customer into we number product the markets initially and in in clear. path business environmental drive across such provider momentum. more growth as a invest maintain has be as aluminum of

has are another Our products, profit both positive Rail years and levels, well new providing particularly markets. operating on opportunities industrial QX efficiencies business supportive pursuing net dynamics. to from with like few due your equipment Significantly, year. year for XX% highest should and difficult in operational our within segment each a quarter last America anticipate delivered maintenance We strong of competitive equipment, in momentum quarterly is next Harsco versus delivered much of shipments new in markets, excellent After parts. of attractive and industrial years into benefit backlog the of up substantially about market we profit reach its basis. outlook has yet that The business several a record conditions our grown many backlog for North improved. improved

cost innovative provide addition, the to reductions over In few next new meaningful lift profit products should a years. and manufacturing

M&M expect industrial and perhaps well. fact, as I XXXX in In to business our exceed growth in proper that each in rail and the of XXXX

direction, expansion operating specific, of remain we driven of to close revenue ability to more I to in as our teens XXXX internal our next mid by year, in be am growth markets be our plan To be our team a their in margins. our confident the most healthy initiatives. expect growth strategic we expect will with further execute So and leadership end and approach our XXXX, we very the while

the in acquisitions plan that through weeks businesses will shareholders above of pursuit past in perhaps the repurchase years, have to of only invest shares. capital to a in to as our not our the we when rate recent organic continue but the in as We we growth, Nonetheless, of at also well. return appropriate evaluate few over targeted

company Pete to ask now for in perspective. and provide your you I'll So further thank your support interest our and

Peter Minan

and Thanks, Nick morning, good everybody.

case of sales. And the in with are and better the North well, mix this benefited exceeded let Rail. momentum me guidance our our our aided to QX from operating contributor In start largest see units, Slide income quarter, million Harsco’s than of to as $XX is by million, business Among addition, the the So $XX our it's the third in for quarter building was $XX business. higher Rail in range anticipated adjusted quarter. again with equipment aftermarket favorable mix the a we very volume America. in million better which good more quarter in the results X, This result volumes and to in third was

some Another driver than lower forecasted our was was of the anticipated expenditures. than our we to better results which corporate due timing of partially spending,

increased in and share. is segments Each quarter earnings change of a with strategy. prior XXX% industries led our Harsco’s supported operating we're growth realized outlook year increase million. increase income revenues segment we're a to adjusted compared per to a This XX% XX% the with $XXX and each revenue again second to relative double-digit for margins quarter. than third revenues the of segment quarter XX% and in margin increase XXXX, and also at relevant quarter. of continue We still that operate quarter, businesses, from the in executing Metal in optimism looking levels. so in and forward very and the peak Industrial believe our implied fact generating performed against well the to by far to performance speak the profitability achieved our meaningful Overall, innings each A our early line highlight. pleased with operating of very consecutive of Our for the guidance our is certainly earnings real a greater also the in each

third of compared again portion $X.XX $X.XX to a to in required one lower rate. costs of the I the of quarterly diluted Generally the of with the we purchase to a also share to Altek Accounting adjusted compares our under in Our is prior per per share with guidance year earn-out like from This was related adjustment out XXXX increase result item non-cash lower our would $X.XX. Principles. which earnings interest range attributable and a earnings had $X.XX quarter quarter, tax Accepted to accounting point effective and acquisition small unusual

You price related earn-out should to the adjustments expect the future. such purchase in

flow the on from quarter slide, XXXX. little was this million. total cash This of in free quarter changed the $XX third Lastly totaled

free cash unchanged $XX at million flow cash in $XXX the advances fourth the in free some for QX so in to years in expected is flow million, are prior generate in full we quarter, guidance free other and collections flow. businesses cash as also expected significant sizable year to Our strong are our rail anticipate

income translation was our impacts. with earnings from Also in increased segment in X% let in third revenue impact Slide $XX foreign M&M segments, were increase primarily well exchange contracts also The services growth steel and partially at our foreign and demand positively impacted pauses quarter affected contracts million. quarter rate. a negative planned $XX as with offset starting exited revenues to translation metal also compared quarter impact X. on These to improved SG&A minerals discuss year. The Meanwhile, of is prior operating our of change of me approximately $XX additives exits higher $X in the and the our our adjusted increased as third after The million metals sites by stainless link the million. exchange these investments the million results growth net XXXX. in business. included the Now attributable

quarter. of XX.X% In impact reached the metals results were our operating the the total, expected adjusted operating quarter. material in margin to not third As income Altek’s

X%. the higher operating each versus slide on quarter operating approximately improved businesses exchangers the the more The So which last for imply margin for segment’s than operating quarter increased that within for our XX% XX% to in an change. million the consolidated of X, third would margins the of segment estate XXXX quarter cooled demand XXXX And of increase $X heat now period included and accounted industrial revenue excluded year. the real industrial turning third earnings quarter. Also in the of if to may XX.X% current Increased realized a relative of sale mainly three you operating was income. air recall income operating gain revenues and the rose in on comparable

in increase We’re investments customer this for XXX% at year-on-year trends other backlog our also underlying year-on-year. during $XXX the in is And two and million ongoing quarter. with quarter-on-quarter strength of in the the an notably during an is in goes reflective the of and energy also U.S. growth industrial the all-time industrial backlogs XX% record of activity the markets, amount Segment industrial beyond Where reached is businesses bookings very Industry. Energy clearly quarter, backlog the quarter. which showed end pleased and

more was slide timing shipment than expected margin the a million. increased and have now for rail in year-on-year in So Revenues quarter rail to be translated income X, to our we changes XX% certainly August increased the because very this segment a back XXX% highlighted tremendous $XX result. of to and of QX in to a going quarter, segment case. on that the strong third XX% operating its These proved third

year-end. North America, and Europe first quarter the as In to under meanwhile, base are the represented all SBB track higher the to progress relative equipment totaled lock and fact, handed win improved the In aftermarket and highest important good the customer to SBB, internationally. months, to in these the to Asia mentioned and third strengthen favorable down York profits revenues year the contributed upfront been in in more the result. we recent our an under we have prior as five Asia work quarter activity subway design more August, over another business All And in we XX years. here attributed Underlying prior utility than make vehicles on Rail well continues product in with to New we our The the two continues a as our second and to of to contracts. U.S. continue for the on earnings is million Southeast improvement and demand for contract. announced contracts system. with quarterly mix. vehicles Rail's $X

excluding million end wins XX% well as year-end. $XXX others, are which our now backlog of backlogs of SBB quarter year-to-date. is the As than totaled amounts the it strongly the a these up Rail higher as was at at result

a few Turning Slide highlight X just here. and final to outlook XXXX, our for items let me

both this full improved be million, to million be our a well as and $X.XX.This In share spending rail, support Likewise, prior increased equipment previously. and income adjusted million million demand earnings and year our rail year lower than mix operating $X.XX and now of the $XXX to prior for $XXX outlook driven now forecasted adjusted share $X.XX to range guidance is $X.XX changes is to outlook. a by to expected compared range the a better per being expected $XXX First, has are year aftermarket $XXX primary to to levels. increased of compares to of net segment per our as corporate. as corporate And sales between

cash interest free LIBOR rate businesses. at our higher the We the rates. manageable throughout on flow totaled have labor outstanding Moreover, Our which mentioned at debt has we've a year-end. we've very with true are to adjustments. seen believe call that and approximately foreign recent topical in not position subject related material unchanged would underfunded on million same million very end costs impact $XXX $XX volatility and at We half as To-date our exchange impact impact based of cost inflation been for financing guidance $XXX expect is also is pension a have our one Interest outlook, positive not year, And any million. had increase us. our rate raw we’d months. is quarter sustained to within any that material

Now I mention me other quarter the turn before to important two guidance, let items. fourth

times end the our the of declined at to leverage First, net position X.X quarter.

program further per We at under of aware, you're And average share. repurchase program, fall XXX,XXX as by secondly, shares a to an repurchased we announced we've million just $XX To-date ratio expect approximately $XX this ago. the under this few even price months year-end. share

projected the to between operating quarter. $X.XX me in Also income in conclude In million million $X.XX expect QX, is quarter $XX $XX on increase adjusted fourth So operating to income and diluted slide to to as and compared adjusted the be prior our million with of XXXX. be per let share of X. earnings per earnings we compared guidance quarter with between of fourth as year $X.XX share $XX

Rail’s and to forecasted be is change year-on-year. fourth XXXX and Our profitability also are corporate versus slightly while cost income Industrial segments improved in expected quarter be to the the Metals show of should favorable, lower

for year. that recall SBB fourth the shipment year, of may we've last the of in strong overall similar of quarter quarter million in challenging year experienced unusually line profitability was last top the strong due and a the of very makes third timing, recognized which fourth You to $XX product Also what to Rail in comp. segment’s revenue, this mix quarter

take this concludes be that happy our point, prepared at remarks So we'd questions. and to your

Operator

the Hammond. do line Jeffrey we have And Instructions] [Operator a question from of

Jeffrey Hammond

good guys. morning, Hey,

Nicholas Grasberger

Hi, Jeff.

Jeffrey Hammond

the segments? that dig on in spike mid-teens your how that, in So, growth growth one, the on color about out any rate three and Nick, does really does just to us that just little XXXX, want comment future the organic that a incorporate maybe deals – within between might what's give

Nicholas Grasberger

within all, line new the growth it Within growth be Industrial new Well, Industrial about Jeff acquisition of services XX%, top and Rail, organic, the all of all first and that rate growth contracts top-line would it’s few M&M, of rest A in would the market of be I three organic existing it's both from should Rail approach could being that and at and be points indicated almost organic. double-digit. balance the points the that sites. Altek

assumed acquisitions of additional no course that in So, guidance.

Jeffrey Hammond

picking know And up versus kind service know on you international visibility just class new on class of Great. rail, you then the North or and Okay. contract one parts – double-digits. demand? Thanks. rail from How Rail you of wins that know you just America is kind just just underline much of know

Nicholas Grasberger

mix. While certainly a

North that's wins in for you expect in announced few know wins years. We've equipment We large been few year depressed growth significant to to course. US the outside market next now both expect backlog American the fairly ship contractual the that our a past year. we will next of that to begin then strong and U.S. the business aftermarket and be And continue are in the

outlook remains We have remains less visibility there the but positive. –

Jeffrey Hammond

and go greater the do just finally, think medium know, then you and you where about I margins view. growth what you can you Rail you and you know And over know ultimately Can informs mentioned that than XXXX can Okay. be to you Rail think M&M think And Thanks. profit rail into XXXX long-term? talk industrial.

Nicholas Grasberger

I Industrial and one other guess energy, the inform of trough where provide clearly cycle relative lift business view out relative the in is the business. of larger a on two. America, the that things M&M cycle Well, to so It's equipment oil then just the maintenance is its in to two coming to is to going North a rail basis

markets they're outside North backlog, of into others in lot year. contracts to materialize wins planted of America, contractual we some Beyond in seeds which a the new and the already certainly that have coming in of yielded expect we've

So few innovations the quite product new categories, product are we we think new impact game also that will on have recently the launched a and industry. changing

each So that’s combination the those. of of

seen margins, already a In the mix pretty aftermarket in equipment. we've towards terms significant of shift to relative

So I’m any not come sure going to is that richer. mix

So I time. in kind of that think a seen of for profit… margins in benchmark the mid-teens over be kind The reasonable rail the margins would we've

Jeffrey Hammond

Thanks. Okay.

Nicholas Grasberger

or I more …driven by by than price suggest. volume mix would

Jeffrey Hammond

Okay. Thanks guys. a lot,

Operator

our of And of from Lake Capital. Street question Rob Instructions] the line Brown [Operator next comes

Rob Brown

Good morning.

Nicholas Grasberger

Good morning.

Rob Brown

of the nice to of does I there, that On in the you how Industrial backlog how the do visibility business, just market? terms noted little a cover into feel XXXX you about the that much bit And XXXX? trends visibility for very backlog, and get in kind wanted

Peter Minan

are well of backlog. visibility, and Hey in significant Rob, backlogs continued it’s on very, bookings robust. got the in Pete. be of to mix, excess very I XXXX quite the depending six the the We months mentioned earlier, I as as got mentioned we've good And

continue probably next that got we've quarter XXXX into or and will visibility indicators great So so. the frankly are that

Rob Brown

I how sense exchanger mix that give you what’s Okay, much heat business how your new sort us versus general facilities is related much just of of in good. guess is could then to energy to your sense, LNG related And markets? a

Nicholas Grasberger

skewed Yeah. much downstream the towards is LNG. The is upstream than it and mix more segment

of and LNG. business been of. XX% kind are proportion midstream that With increasing probably share would XX% lower nice with have some it's upstream in to we've aware historically So new in and won LNG that not even said, a much we we

LNG mix. the So, in lower bit are actually downstream roughly than a like but that's are trend the in they the our upstream, we margins

Rob Brown

Okay. environmental Good. the of on of Thank strategically business, And the on you solutions. talked kind you. sort then M&A about

end how level, of high a customer. at maybe is the sort Just

Just may set some demand level there of and a product just market the piece of the is kind that there be in at or is a been solutions high sort for customer end how change color the environmental of market? that and

Nicholas Grasberger

critical Well, tightening their environmental for services market every it's the the terms be in contribution provide their But a on it that creating and basis of managing that value seen and in driven by the operate the globally. will byproducts come the value sites. to customer. which sites their on we challenges we environmental will from so regulations logistics, and in continue changing We've greater relative core on

higher faster as There's generating that logistics that so intensive closely core both as we're the well of lot we that will the are the than segment products that business. – business. is less attract internal margins clearly down innovation capital environmental grow a looking applied innovation of the solutions and some external or at And clearly very logistics should and I that business, mentioned

Rob Brown

over. turn I’ll you. Thank Good. Okay.

Operator

And Sakai. [Operator from question Chris Instructions] have we

Chris Sakai

morning. Good everyone. Hi,

Nicholas Grasberger

morning. Good

Chris Sakai

in that as as Just incorporated far already outlook? outlook Altek is want this know I that the is XXXX to is

Nicholas Grasberger

mentioned top it's line. as operations Yeah, big the expectations is million starting purchase are mostly before accounting to to of of operating the million going The income neighborhood in of for year to $XX to be Altek the going generate Pete. first XXXX this included. to $XX us. I've is for in But line. due Chris inconsequential It's

Chris Sakai

exit – sort on any there you it sort and what I provide in of any will XXXX line? top Is Great. on – of mean how Okay. can of affect guidance sort

Nicholas Grasberger

about – of the timeframe, so plus in revenue previously we're we've anticipating which we significant only technology this quite obviously, May the acquired first talked full the business and of improvement year attractive sizable which should We're since should some substantial we've looking growth and the as had year a you'll be the is from salt most for There growth XXXX. growth this the year. this generate was there business get it’s in impact very part from which [indiscernible] is the

Chris Sakai

future is you're excited Okay. the know Would then that environmental acquisition a might region. about I acquisitions there be go, Great. where occur? And as as far pretty sector. another specific

Nicholas Grasberger

area in it's Chris steel function becoming theme byproducts. think waste to processing that acquire, geographies value aluminum. it basic that around such more is less which industry of in The I likely that whole Yeah, prominent and of that's a than as the much we’d technology is most the

Chris Sakai

Great. Thanks. Okay.

Nicholas Grasberger

you. Thank

Operator

comes from Jeffrey Our next of question the Hammond of line KeyBanc.

Jeffrey Hammond

a again ups. on back just couple growth. XXXX guys the just Hey, of follow One,

like is So Nick, think code. zip you XX% it still that MNM in sounds

two to So in the other the mid-teens? would push

Nicholas Grasberger

Correct.

Jeffrey Hammond

we pretty talked heavy MNM in in Okay. into expansion, the but And you know margins also should then investment trajectory that you you a How should I how period think XXXX? had MNM of margins. the about – about we continuing held back think margin investments,

Nicholas Grasberger

think I before will indicated that that's in. $XX That's into million one-time baked invested and we incremental XXXX MNM not that of cost in continue. that, about Well, we've expense

some front $XX but invest end $XX resources much not will to in continue probably mostly million, as incremental be that so there the in as will in investment XXXX, million. We beyond MNM

see terms you'll year, think I contracts capital’s growth than of more new in of in an next expense. MNM terms investments for in investment

Jeffrey Hammond

you how should we trend XXXX IKG in maybe Thanks. growth should on bottom we've about to think double-digit into really into in the know we to off industrial, just and XXXX, a into XXXX. comment you the in compare think just then about PK that tough And think good and two compare into clearly tough seen How how years a on that, Okay. Air-X,

Nicholas Grasberger

confident been backlog Air-X, on right. weaker top-line and and relatively and we Actually the in top-line next of our quarters will has that accelerate years you're PK difficult. several Air-X comp IKG growth times their been at the for becomes pretty – The for and think lead for more and the for certainly couple – the Well, have the past now. - given But product it look reasons for that various we're that outlook business year. we

Operator

no questions. further are There

I'd to over back Now, to the Martin. call like Mr. turn

Dave Martin

this everyone call. you, Thank for joining

later I through replay and replay any the look using Also questions Again, are details available Have in this earnings today's appreciate earlier, top XXth forward your As November be we today the you in details please mentioned a right Harsco with of day. context the at included call follow-up me and speaking release. will our release. with interest to of a months. we great in a contact few

Operator

conference This concludes call. today's

disconnect. may You now

Enviri (NVRI) 31 Oct 182018 Q3 Earnings call transcript