LECO - Earnings call transcript Q1 2019 | Lincoln Electric Holdings, Inc.

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Operator

Greetings and welcome to the Lincoln Electric 2019 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode, and this call is being recorded. It is now my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you, and you may begin.

Amanda Butler

Thank you, Carmen, and good morning everyone. XXXX Conference Electric's Lincoln to First Call. Quarter Welcome the earlier you attachment in can released as this our our the and results financial on well as an We Investor find Relations at today release slide presentation Electric section. Lincoln website call's lincolnelectric.com to as

of Lincoln's with Chris well detail. year me Chief as performance full Joining Mapes, Financial the an will Chief will and Officer, quarter today call President on Petrella. begin our discussion the Executive overview Chris Vince Vince the and is Chairman Officer; results as cover more in

Following are questions. prepared to take our your remarks, we happy

we Before our filings uncertainties due that number of are of forward-looking discussion, be and and certain that actual discussion results provided and the in risk results risks and factors. on our to Forms statements a A release, materially note of expectations made start may some may this our may SEC our XX-Q. during our in call differ press XX-K affect please from

measures earnings available discuss Relations at in measures Chris U.S. non-GAAP of to A In over comparable GAAP. again addition which And in lincolnelectric.com. conform not Investor that, our of to that Mapes. the tables our measure the financial with do is call reconciliation the most GAAP in found the turn release, is to website we section financial I'll

Chris Mapes

we achieved investments. inflation growth Amanda. you earnings pressures am growth on Good pleased Thank good executing our morning that everyone. the report successfully and quarter to in by mitigating I

mitigated acquisitions largely X.X% the narrowed volume sales impact represented benefit basis lower business. in exchange activities U.S. foreign with basis a a managements growth in as growth in offset integration higher Automotive volumes, well in point successfully organic investments our substantially declines quarter by in favorable our year-over-year resulted in in declines automation, sales International a primarily basis were inflation slower on good in unfavorable recent and at exports XX our First X.X% to operating to XX%. quarter and from of the a mix sequentially the growth million, segment. held This of improvement a adjusted steady translations $XXX.X XX in and income We as improvement and price Welding, pace point and

Moving adjusted strong to remains with income and net share X.X% X.X% basis XX.X%. earnings to XXX points earnings, up per Returns increased to ROIC increased $X.XX. adjusted

also our This returned cash share $XX of We rates record confidence million higher superior reflects and returns. and our in $XXX dividend its elevated the combination million rate in business, a of quarter. track the in shareholders payout to generation strong through XX% repurchases flow

Slide to X. Moving

narrowed sales the segments Looking Group the weaken macroeconomic reflect the declines continued continued Americas in the International also and outperformed key first to and China Welding’s Harris in segment. organic trends in at conditions, sales our well but notably quarter. Welding quarter such Italy Products to as activities, France. integration quarter, European as Welding softening industrial International economies organic both as in

Both rate. global automation and in at organic increased quarter and double-digit the start versus on automotive construction organic broad periods. slow led indicative to the remained industrial gas year growth typically comparisons. production, system all gas. had and sales were this activity at relatively stock heavy of and International of challenging uptick in the the the infrastructure which year oil healthy sectors steady grow year. balance a volume End-market needed Rising by related is oil Looking to mining prior in substantially construction a organic percent by General the a industries, costs Equipment consumables Welding. generally percent percent declined transportation fabrication in infrastructure will basis commodity low-single-digit areas continue anticipate product both to and contributing sales and low-single-digit and products, faced from and demand. equipment We a prior drivers support are these to through rolling year. construction General fabrication sales end-sectors

auto a changeover the schedules are exceeded weak new in pipeline in sector. us vehicle plateauing performance cycle. transportation strong that America stronger rates is Model in XXXX this investment and and industry’s capital production in a area suggest automotive this quoting solutions late activity helping Our project win North given

to X. Turning slide

that are combine solutions proprietary the marketplace waveform our mix. showing equipment our excellent leading products the with and By engineering that excited recent are reception about coated software best-in-class winning we several richening We in in market. in consumable systems, are solutions

Cleveland. customers. Together, that sites Industries targeted will additive print efficient in initial The quality that that. were versus have machining consumables the total offer a from wire-based Brazing XX% in parts. redefined for at investing which new and metal locations an parts, business, area these customers’ Introduced Products in and quieter, five over is to versus reduction technology. In launched smaller, leadership formally printing deliver Our hearing and drive our metal formally a are unparalleled mid-XXXX. arm leverages today’s additive at of complexity. along in proprietary here the new customers and an facilities the especially represents average believe are an versatility solution large-scale six with aluminum than performance, launch automation, to with and our welding very the This innovator been exactly This does new an is about finally, and alloys provides Electric great accelerated this Harris use. XX% measurable by the development feedback core demand Michigan home high we Using to exciting that these bed last core about These ranger This four our broadened quieter United which metal additive we can in will on and this provides the additive an in product up out Group, the product will our be strategy which we expected use rate. in of and the of Xst, expectations. process Launched to within product. our market customers build developing XX% Baker is metal across near manufacturing represent Harris. X% deposition late of to acquisition On printing center space. time a we doubles This is in prototypes near easy lighter, a headquarters is increase April even cost XX% growth our automation, are to excited States. in at in at And and build development aerospace customers’ business grow improvement expected a HVAC size shapes standard Detroit, We applications. redesigned set. sites leading Harris��s and solution software large-scale better and consumables, in in generator we powders, February, are automotive solution can for tooling and growth additive productivity weld to times next robotic aluminum in market, least consumables grow competencies FabTech which welding this a new welding at engine Lincoln rate formulated industrial, the we announced late is ground to year metal industry heavy quarter, the of over HyperFill years. two-times now

excited active we early equipment achieve sales in and leading expand XXXX. still OEMs we in and are construction the we the capacity working to will I are aerospace, with over opportunities. While automation combined XXXX to of address stages, by a and billion list pass Today Vince. call now, are in to to expect $X growing actively And industrial additive

Vincent Petrella

Thank Chris. you,

X. Slide to Moving

points higher volumes, and benefit Our and from acquisitions, X.X% by consolidated X.X% impact foreign a first a exchange. on quarter offset XX sales increased lower unfavorable X.X% price from X.X% basis

to First to XX quarter price and margin points mix. favorable due increased basis cost positive gross profit XX%

expense flat was to dollar in terms, relatively but basis XX.X% SG&A points decreased sales. XX of Our

we $XX.X XXXX. As million International integration and costs, integration income asset Welding Reported our income in acquisition, related to additional transaction implement and quarter rationalization an merit approximately $X sales. XX.X% special impairments item results incur operating million charges per Operating for or cost primarily from wage included the increased in to and the we business April, expect of balance million annual salary of wage XX.X% activities. of to $X.X in increases

$XX.X by special income to increased a Excluding of point improvement million X.X% XX% adjusted Unfavorable or basis operating adjusted prior the foreign exchange year. items, $X.X million. XX sales, operating versus reduced income

year compared XX.X% with tax first prior the in quarter Our period. was rate XX.X%, effective

tax tax special Excluding current XX.X% rate a XX.X%. the was benefit the lower discrete quarter period. rate of tax This rate year compares first was due to The in with items. year prior items, our

in option be our tax We discrete and year and full of extent subject mix the range the timing effective exercises. expect to future to average earnings items tax rate mid-XX% XXXX including stock the continue of to

XX.X% earnings $X.XX. tax diluted from prior $X.XX translation rate per reduced exchange share $X.XX, $X.XX in the lower per with quarter X.X% benefiting year. effective an and Unfavorable by the share earnings basis, adjusted First increased diluted On repurchases. increased foreign EPS share compared to to

million. at cost XX.X% EBIT cost. higher Now dollars and to mix Americas wage held moving lower price X. X.X% EBIT quarter and steady $XX.X rose to offset the volumes geographical as Slide The favorable Welding segment’s first segments on helped adjusted and adjusted margin salary positive

year year growth narrowed quarter, actions X.X% comparison a higher month. in X.X% due the Looking XX.X% organic of The prior The surcharges. reduction however, at demonstrated sales the prior price prior growth quarter tariff top-line, against comparison to business through achieved reflects seasonal in March challenging Americas pricing challenging segment’s sales growth. that the and a the in rates Welding in strengthening organic

narrow down up Volumes weaker recognized second Welding solid on of less construction end-market sector. quarter U.S. with and we challenging Americas fabrication demand sales was modestly. lower exports from out to in general and strength automotive in sectors expect infrastructure channel contributions industries, the and Direct as softening all tariff in from greatest end-markets. in except X.X% organic saw automation comparisons, gas the We which trends heavy and further growth in surcharges. quarter the were in the oil quarter We price declined the the segment’s

organic increased the acquisitions X.X% and held sales we mid-single-digit relatively announced automation from equipment two in quarter prior Americas First Welding in the benefited quarter. sales percent consumables fourth with year performance. steady

expected are acquisition balance the approximately of acquisitions $XX X. year. to also Industries million April revenue add of announced the These through in of We the total a on Baker

Welding $X.X margin helped price higher International X.X% mitigate adjusted and XX.X% decreased and mix to Moving weakening and EBIT translations Volumes the acquisition and Europe, EBIT Italy. from by notably oil an Unfavorable cost end-market and points and construction From the as as adjusted integration million volumes in increased improved activities. volumes. perspective, reflect percent exchange approximately rate in we Europe. X.X% million. X.X% to Organic a EBIT at reduced activities in with be at decreased activities in double-digit sales soft, in the our lower anniversary impact quarter. of the foreign the integration International of benefits sales organic decline and to to integration France conditions to continue Slide $XX.X a start The are to a X. macroeconomic management, gas well infrastructure, narrowing as segment’s improved rate Price but sales XX basis Welding X%. expected in organic

a and in Harris challenging Worthington volume acquisition December XX. channel the on margin aluminum a X.X% Moving Harris favorable from Group, to and their from first on business solid increased adjusted improvements. against acquisitions X.X% achieved mix, $XX.X EBIT XX.X% points prior leverage adjusted the year benefit Harris recognized OEM X.X% growth. higher Industries’ comparison XX the products EBIT Products basis of soldering increased demand volumes million. to the also XX% quarter productivity of The to volume in

from Moving quarter working to $XX from Cash of the generated higher of Slide needs. reflecting XX. operations million $XX seasonal a of We in tax in capital cash payment discrete the quarter. flows cash included first flows uses million approximately operations and

million in XX. reflecting in to We share $XXX repurchases and higher acceleration XX% million shareholders to quarter. Moving $XX rate the returned an Slide to the payout dividend

be full year We business capital also estimate $XX spending in to We in in million million. $XX $XX capital to the the expenditures. range of million invested with now

and We growth capital call and investments for like returning program expect With balanced the share to dividend Carmen? to XXXX questions. maintain allocation strategy repurchases. cash over that, a to I in turn shareholders prioritizing our our through would

Operator

And Research. [Operator our Melius with Wertheimer is Rob Instructions] from question first

Your line is open.

Rob Wertheimer

range I exciting that’s or any of I parts obligations Hey, to putting prototyping the of few maybe out the like? some the of now But out wide on a or start starting know the us a people you additive. your technologies in stage on it’s with an and only up considering a together few I about maybe narrow long cost-effective right for wanted good actually time. things can for initial morning. detail anymore production mean, it of in more years been advance? you’ve color announcements or give what that if capability you for is of – stock initial gives what sort assets

Chris Mapes

replacement prototype Yes, opportunities Again Those have at metallurgical Thanks. opportunity for is maybe Look, excited larger to the make these can we parts. we production is stated, focused this Those Lincoln within well, able parts. very present Those we as parts for Electric that that about Lincoln growth real parts for we that area look. and technologies parts expansion natural larger on a to maybe But have robotics larger are be long-term and parts. business that competencies maybe products. Electric. larger making the parts. the it’s we of within the think

We industry interesting their industrial business seen a technology that with multitude them across couple relative that of value ways. created having can for creating can aerospace, are participants is this in that a and to that automotive have conversations believe and be value be very generally for of something general

from is ways that and months in might machine through the potentially the of weeks a for application One several for to days might that to completed to them created the an be marketplace. that to and external able is value be or manufacture speed day part ability take the get market,

where machine manufacture and We high the of probably wide is give to types a relative very the feet example you were three block metal and long that part. to part an XX The that is was quickly. saw of material. our you out technologies more only XX% well feet from a might manufacture the X% example to were help these they that, context part proposition of much at was I three Industries that to manufacture can for with have as I and when value large machining out of that aluminum, applications, a today Baker of to creating greater OEM we a great think believe business, they feet probably long-term, ability taking X% maybe and didn’t block to as a machined begin I to solid particular part that that Another the material both from that

of a couple we a we very believe our growth of So as focused We a applications host business as Again profile have already opportunistic over that it be on the some that in several have for launching for process applications parts, us. large we out large can that seen and applications of stated, we mid-XXXX. build years. next portion and orders larger are

Rob Wertheimer

for I’ll get fantastic. in regular line, That’s questions. Chris Great. back Thanks.

Operator

Thank you.

is question next with Boroditsky Our from Jefferies. Saree

open. is Your line

Saree Boroditsky

of Good a commentary morning. I includes lot growth price. appreciate, which positive the believe but geared the end-market I was towards organic color earlier

volume far you are earning what understand us help this from has there so seeing just negative weather. activity? about of end-markets been higher then impact the lot you talk could And So season or lower

something you is that So also saw? this

Chris Mapes

perspective, I Saree. you fabrication, structural, Yes, and those growth strong and I tell in double-digits in – volume still strong up from oil those volume all are and in of growth. year-over-year categories would reflect we gas. a saw heavy mean,

a to XXXX. factor the challenge the had monthly We had March we XXXX in March we March that on weather We year-over-year a saw in of comparisons quarter. was strong our actually biggest very basis. the and performance question, of cite as very challenging a contributing wouldn’t moderated when weather On in strength just was

Saree Boroditsky

from between the going $X you the just additive additive on automation could in and categories? billion that sales XXXX two And Okay. with help then, the by out question, so on

Chris Mapes

we which those XXXX additive. we one point, and how scale this business. going at now entity as will build the we those are to successful portion businesses identify splitting are actually try that on Industries out about acquisition additive acquisition them between Yes, really just and we is Obviously, are two. them depend internally. of is But and Baker acquisitions talk the in continue and will between continue to It to the building not out we up to view as really a the of an out automation the businesses

Saree Boroditsky

was That Thanks. helpful. Okay.

Operator

you. Thank

question from Vertical next Our with is Research. Joe O'Dea

now open. line is Your

Joe O'Dea

morning. Hi, good

Chris Mapes

Good morning, Joe.

Joe O'Dea

talk whether where or mean, seeing might a be underperformance? you is you Could see about concentrated the that’s other little export market softness in that are seeing quarter? of the be the not, to end-markets concentrated of any some turns in of line with And I on or kind China, The in your being bit which China? turns competitors performance degree you specifically just color might your you that just in then,

Chris Mapes

Joe. Yes,

macroeconomic trade be $X in think perspective. slowdown performance now. some from to So, on one perspective, year our that for understanding were I to over been over leading an as general conditions down exports, about of the was China competitors, in down Lincoln and that compares by from close issues I of the able the we probably much to trade a was It China particular significantly than they attribute year-over-year comment also And have discussed as prior decline how – other were to affected $X I million, export Asia that that decline. XX% million are on would reasons for far wouldn’t a in China on the time and face the basis. our same a

industrial same other facing are export the China. into be surprised U.S. So, companies I kind challenges of wouldn’t if

Joe O'Dea

remainder saw volume what’s activity growth the organic Americas cadence into then think of first specifically, half we has get kind That’s expectations. it you to seeing as it. the improve just also pretty the to set Is trends if tough? similar embedded comp just comps matter or I then, up to you the the in quarter I suggest but half And in a second of segment, really we talk quarter first the first there better if a helpful. XQ Or Got in quarter. back and than the the don’t know the for full year the anything expectation year the are underlying just of could about really for what are is more your year? of

Chris Mapes

I way, at And growth look you - although did observation, that the will was a quarter. the good have of prior significant a again the it comparison. it’s Joe. we second When year, challenging it see quarter off first No, in moderate the slightly it

a half So, We we organics if a quarter. we perspective. comparison what surprised little see bit, decline in as decline volumes a first year. similar something improvement the line second then off we quarter or hope largely that experienced we we second unfolding in slight to will in finish the wouldn’t of narrow a see in bit first from the easier be slight with little the half a be And the but but

in see will the become comparisons a to little easier. Americas We bit those

macroeconomic But have think starting the are have first Europe continues second to XXXX. to comparisons have we will quarter. second challenging challenges weaken seen I outset environment the think quarter in the in we now of of certainly into going We we the if soften as the at and quarter

Joe O'Dea

I details. appreciate the Thanks.

Operator

you. Thank

question from Stifel. Nathan with is Jones next Our

open. now is line Your

Nathan Jones

everyone. morning Good

Chris Mapes

Good morning.

Vincent Petrella

Nathan. morning, Good

Nathan Jones

detail is ground can good what Maybe us terms about data those Obviously, any just of what color order rates on guys guys seeing the there? maybe there Vince, over the there could you little daily you just very at bit last you on consumables point, side? in more Europe of seeing you comments this macro of, on are the give on on are the one not on in talk up Europe. a ground following out

Vincent Petrella

Nathan. Thanks, Right.

in So, including But big did some We have are and have – certainly are in headwinds countries the decline those other in macroeconomic see engine the from There we countries biggest contributors. some meaningful the Italy. some Germany. year-over-year couple economies do smaller some of we Europe three activity there. being declines a of France

of perspective comparisons have Nathan. tailwinds from the some though, easier We

a said, integration of we to as narrowing As executing I the continue Liquide that year-over-year acquisition. in international Welding will I have been Air with the think we’ve see Europe heavy performance activities anniversary we on

index quarter that’s half seeing the perspective. though – continues the headwind we is pushing the plus and will in been we narrow year. quarter soften Europe. second the of the activity decline softening it’s in volume So against as that we The finish macro X% think that last and months what’s continue in a in second narrow But manager trends first clearly off from few we’ve industrial to to purchasing the the

more the growing internal integrate are from how finish second our about own year we the the to in So businesses. concerned of continue then half off we perspective and that initiatives to

Nathan Jones

what you think to split the voluntarily Is underlying is markets? the it volume to versus related possible for you softening acquisition/integration decline

Vincent Petrella

the macros an because it’s relatively were were the of growing Yes, have last markets, bulk said would slightly I our that declines of question. interesting the year activity. the and integration if not flattish

quarter. would think declines steel attribute declines some that I’d first you I the and give of this this the but I markets softness in overall time, the we split hesitant markets. the as a I in showing markets to welding at exit the volume think are the Europe some to be year,

Nathan Jones

less question one maybe the there were quick us gave previous that you a follow-up strong, that volume off then a to you down? us were – one markets And the some regarding strong that give three double-digits. as were color Can Americas, markets on in any

Vincent Petrella

markets the modest only were terms. down know You were down that in

was So, hundreds general those. amount to of dollars. of modest of very thousands one fabrication A

down. the were outweigh again, all collectively categories example fabrication that’s So, of then, up Couple was to significant. meaningful reluctant And Americas. those areas down. was that But say in heavy of But there. oil trend lastly, offshore were that in was other powergen and significantly for that quarter a gas am subcategories don’t and including those the nothing I shipbuilding –

were they but So meaningful. declines year-over-year not modest

Nathan Jones

my questions. taking Thanks Great. for

Vincent Petrella

You are welcome.

Operator

Thank you.

Baird. with from Dobre next Mircea Our is question

Your open. is line

Mircea Dobre

guys. Good morning you. Good Thank morning.

Vincent Petrella

morning. Good Mircea.

Mircea Dobre

of me. Couple questions margin from morning. Good

heard that say round looking sort you does that to million with So, that of out and imply the QX I salary another impacted really wage going quarter. forward? starting I April, pulled kind inflations was are that you per by you of XXXX at wage increases, I $X Am think not – of

Chris Mapes

But was was year almost there underlying inflation first in No, instituted the that a ago. well. wage as in quarter

are highlighting increases we the So year us incremental be that SG&A in affecting unfolds. the will as

are So, those increases prior in year cost in first our base quarter. certainly XXXX’s

Mircea Dobre

Okay.

I So, XX% the forward, the when looking at price cost. I quarter, the because, from you we am I going margin and mean, from asking right, also in Americas, incremental the in am like benefit are talking and mix had something and

So, going the how for folks frame incremental forward, we however about to should quarter, want from or about think are if talking it? you margins, your additional drag year, an wages,

Vincent Petrella

the to heretofore, would that expectations by driven range Mig, in XX% as XX%, be a and same segment. XX% Yes, we be I I we’ve mainly that in incremental margins, the somewhere group-wide to our been to XX% so were in Americas disclosing about are the range expect number believe Americas

So, escalating we are drive going business hope offset those the through productivity to have continue wage to cost. to and to

primarily again to of headwinds will from in see will come through costs to cost raws. business in which input of certainly productivity have offsets improvements inflation. easing have higher wage XXXX or the cost an affecting and improvements for the some You outside is have the rest the wage we of input wages outside our But

Mircea Dobre

to margins, really year-over-year profitability obviously margin has and are here. as the on comment on again I improvement of lot an volume that decline well. Understood. shifting impact on not And understand a But then, basis seeing a still international, we

ALW to still business? fair double-digit then So, what’s it I I separate am going guess, maybe appropriate to core looking segment is put out is us a that for your this think you wondering, And margin-wise? for on can versus to XXXX maybe target

Chris Mapes

of a still that that on back will the to question. by be able we believe get which positioning great our Mig of we the really one we half that business to our can projects. are from to at I we more of grow complete that systems we complete We that phase integration process strategic not share tell set the I one. you, as of time can XXXX That’s point focused business. for moving we period well before you that other targets host our to a phase of couple that completion up a as off got time that of are the current integration integrations with

profile has would And I of profit like to business see the do how Lincoln forward. moved have so. now moving not doing operating Electric certainly going that business. have liked in quickly the we months the bit that are of team But that have work had XX there Europe. that it. to margin into on now in little entered do target or seen are bringing a target out from as that We that ago as into holding I that within on the we impacts as our work macroeconomics the positioning headwind Our the we a But XX% ability to are set execute we have integration we’ll to for business as is

Mircea Dobre

I appreciate it. Thank you, Chris.

Operator

Research. Trusz our question And next G. Matt is you. from Thank with

Your line open. is

Matt Trusz

for you my and question. morning taking thank Good

Chris Mapes

Good morning, Matt.

Matt Trusz

plan selling the would with compare how is on you can service early business this as detail? this do looking in you. provide far you as additive or equipment stay additive that to Thank you equipment mid-XXXXs? you greater the to model margins into And take sales discuss any Do go? the Can systems you going anticipate too

Chris Mapes

the as a to I’d strategy, innovation provider be of is this the are piece executing our first intention into that, say technology service of Well, on this marketplace. we

of because, technology bringing automation can additive the are as type in here to create about the the parts recognizing and this are other this are in those of portfolio given talking we challenges building at of who models. model. United experience the business types around as end enhanced making out of largest quickly And really it Our to that are think people has the deploying Lincoln strategy the I be in that global marketplace we the automation relates is only certainly front business and having States There these us the out those experience would technologies utilizing handful portfolio to a within world building that innovation. only welding

model. be So time at At see this would margins we see need would are that I our creating be are associated service centers a world. when you this portion really be are of in around created of be is our or us. exactly well in coming us. value, expect we But to model that opportunities with for substantial you the intention that should centers again very We point R&D that model the service towards intention that to a technical slightly margins in portfolio. favorable out may the value a handful able for profit as are it or we a to is that types to building But just would of have our type be this that the pool. extract really can what overall that of units

to So are term. building what too we that look it us early business out. our might profile this what as exactly for probably longer business for additive for margin determine are excited about can But be we the

Matt Trusz

than guess out laser How better that. to for compete powder, Thank have And there? be able might would follow-up this? And competitors that the but is a laser is on wire, with I and patent you. protection who robust being just you hot as this

Chris Mapes

first laser were of the early all, innovators Oh, hot we yes. one wire. of in We believe,

strategy. believe within that We it not frankly component a our well. be compete, we additive will able but very quite technology that understand be could only we to So broad

that, building to I think the and proprietary we there important proposition this is some look the value think that that we building what’s with So, understanding and we metallurgy, are have But of The bring IP able the robotics mode as in that competencies to importantly leverage. are that about to utilization will technology we competencies be the around software is of capabilities this. the out that.

match be others develop quite participants we be business. marketplace in able innovation the that challenging so, in and although that be the that that to there very is can be to be tool And will are who confident difficult deliver we frankly, we to this as capabilities a may very will marketplace, for out this other believe able build and

Matt Trusz

it. Thank you. appreciate I

Operator

Thank you.

Seaport next comes Liptak from with question Our Global. Walter

Your line open. is

Walter Liptak

guys. thanks. Hi, Good morning

Vincent Petrella

morning, good Hey, Walt.

Walter Liptak

wanted In is a a little there with ask there regard systems happen that or I comments go that have to worse, later macro and understand are the that this follow-up I these the on operating from margin international a especially there bit step-up can – are upgrades Liquide Welding. may P&L Air from on question, but your costs step-up help to gotten margin year? costs integration away the

Chris Mapes

that think we I an can improvement the confident profit operating we get look, can. actually margins, in Yes,

the integration and is unfolded Walt, sales the declines. restructuring the what’s declines are happened cost As leading that processes

moderate after and continue we So stabilize to decline will opinion declines to my in down are – cost and stabilizes. begin sales the will chasing the top-line and sales cost themselves so, those and restore while

as half top-line we SG&A So systems and first year. of on up integration activities and will think manufacturing and we are continuing this and margins and new the activity to expand and to footprint the spend implementations exit restructuring catch the I that

Walter Liptak

Okay.

stabilize, continue the back declines half you do see sales we’ll to stabilize think we or as growth the through of the will it you see As think year? do

Chris Mapes

to environment that as to year to us growth. if the to say are level obviously, stated I business not with a that business and drive we half a caution that be ourselves The we for solutions have structure is preparing will Well, business stable we get we we that have growth only will of getting headwind in then to the are that model half we and it what get there that, But some into particular year. the would technologies back we the position half be to that, back where market understanding of for. growth do in the our believe stable in for in our even back will business for a see Europe, as difficult XXXX I would of able looking be we were we macroeconomic broad that late drive across marketplace. If there that position and of of

on back looking XXXX. are integration the then from will what as half and like what moving for macros to then into look we – we will still have the of So expecting we determine that executed those and have were we

Walter Liptak

right. Thank Great. Okay. All you.

Chris Mapes

welcome. are You

Operator

next Instructions] [Operator Our Research. with you. Melius is from Rob Thank question Wertheimer

open. Your line is

Rob Wertheimer

My And you to follow-up. then, deal confidence stick you. if was related was it Were the saw, of see on of Thank lack for of or kind are how absorbed any weakness is and genuinely that customers? ordering waiting hesitation Thanks this end-market as even we again. it addressed some of of there would weakness? though by you’ve question just pricing you think generally Hello do was it just your to that or more was you whether in perception buying not? any or the

Chris Mapes

of and our think on in So we view particularly really first quarter result one, geographically product-line the I order of significant pricing companies a changes, and in – both significant pricing XXXX I portfolio on any don’t weren’t basis. across patterns the there as movements a don’t first changes of observed

was see don’t from I So, a that. big impact there that

Rob Wertheimer

customer-by-customer felt you And flow can Whether then, like on hesitation any was that’s tell the it just just are? whether air was more really where generally or pocket other there way? by whether or you end-markets on, just from an equipment versus

Chris Mapes

generally think price that on escalating in in particular in prior out I I of enough of XXXX the No, the of as coming XXXX what of part on up had. I order impact we where prices were think there year of unusually we the that that and was March the because any period stronger April. there had your sales end-markets February and strongest was raised question tariff emphasize March We strong if in in of pricing and the would are April increases and and discussions. March bump been had the one quarter the and year, XXXX patterns an month prices is have can year and well it’s as prior raw dynamics, an to material in in a and

prior year automotive order pricing. March as meaningful markets what as But strong that of above from certainly if few have it don’t a in So, has over might and think bit for year, us. well a year maybe then had current any little this softer changes pattern little the bump have the extra a in I anything any might look doesn’t I including being think bit And like. a

Rob Wertheimer

very you Thank Okay. much.

Chris Mapes

are welcome. You

Operator

Steve is with Thank you. question And next KeyBanc Barger from our Capital.

line open. is Your

Steve Barger

Hey, thanks. Good morning.

Chris Mapes

Steve. morning, Good

Vincent Petrella

Steve. morning, Good

Steve Barger

Just thought there the you’ve a tending conversation like to in made the investments material additive, more to around other automation helping handling any follow-up leverage machine into becoming pushing with to a customers there? service applications or non-welding is provider

Chris Mapes

that you would been something tell we’ve that’s Look, Steve. Yes, I doing.

already competency we’ve within that automation else capability our around of that and businesses, automation material of when businesses press acquiring been portfolio, these And portfolio, or got something So, are systems. business business. outside they’ve welding businesses across one business. cutting those these not we’ve has a or automation rarely XXX% handling the transfer that units or a moved We’ve automation their already kept if

continue and the competencies we’ve capabilities. areas. So that complementary capabilities I been you with at to those we But willing where we capabilities focus share and to in within expand those have is those find skillsets and welding portfolio, other would cutting. our still or times capabilities utilize

with are we as those exist those and would and accept working doing So, we already inside some business opportunities that. competencies customers automation of our of our

necessarily we not our is of those might. of have this we focused that at point portfolio say are outside types what target on Now We XXX% opportunities done that unique would capabilities.

the opportunities automation view some or value to if our bring it’s that’s skillset But that a finding We bring acquisition overall ones in area. business. right some at that they unique think we in if have we would that proposition add we additive that to and looked want just

Steve Barger

automation current by $X XXXX, that your billion mind? is in when how questions, that M&A versus of And driven to So, to growing do organic? in going the – is about portfolio in think you two additive one, much you look like

Chris Mapes

Well, I quite us. the and additive business piece like $X portfolio, going because, significant a for to the that don’t portfolio think model be new billion look needs frankly to it’s current that’s of a

So have clearly – and to is going it uniqueness. some

I like the the piece in – but opportunities in perspective So needs creates Steve, to those to additive itself, different and these we also within automation be growth a both it a the be because of growth as that portfolio. think to markets. M&A that, when needs very piece, see there just an marketplaces There component significant looking

we those if and seeing come number. with are and of I a acquisitions can a both. we that adjust So, some of will material complement out in M&A and minor bringing we we within in in that accomplished back successful were today believing might then more see be think growth multitude organic Obviously, businesses. space, that that But

Steve Barger

just a saying already and you cycle press release, you the America where North this cautious it. trends? one. call And we’ve called discussed then the In trends Got are and express around seeing one last the demand caution you China about are the today in of on period customers Europe that in

Chris Mapes

No, our here piece. I Americas not think are broad caution seeing as Vince in between customers we the any said earlier, necessary

business. I on for see we perspective where and it’s Electric our point So the in just the this think cycle Lincoln

Steve Barger

Thanks. Understood.

Operator

Thank you.

question next Our from is Nathan Jones with Stifel.

is line Your open.

Nathan Jones

us Good growth give morning the color investments. you some hope on can I again.

those more us then, to investments putting margins. you us color maybe are you this as that? Sure, of Thanks. Can give You going? you X and on where I drag tell automation down CapEx took some you any guidance are it's know growth into behind think you bucks, then, the that can a million And just Additive pointed And places. much what's how year?

Vincent Petrella

Nathan. Yes,

having investments during that quarter growth per cost a runrate the primarily course to the estimate that’s the and of bulk that .And around we conversation around $X of million So, are the been really increase this we’ve the XXXX. be morning of additive in

Operator

Lakes Review. Rodgers coming is Jason And All from question Great with right. our last

Your open. line is

Jason Rodgers

Thanks. asked. My questions are already

Operator

Thank closing Vincent remarks. for This you. not call Q&A our the in back to to any I questions Petrella session. And am would queue. I showing concludes turn the like

Vincent Petrella

call our on second Thank interest the for look discussing to end of your you, of today joining everyone very Carmen, and forward and Electric. programs thank continued us strategic We much. the of at progression for the you the quarter XXXX. Thank Lincoln in

Operator

day. And may the a conference. wonderful concludes with thank you we and you all disconnect. ladies Have This that, gentlemen, and participating program today’s for in

Lincoln Electric (LECO) 22 Apr 192019 Q1 Earnings call transcript