LECO - Earnings call transcript Q2 2022 | Lincoln Electric Holdings, Inc.

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Operator

Greetings, and welcome to the Lincoln Electric 2022 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. And this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you.

begin. may You

Amanda Butler

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

results Financial and Gabe with Officer; the Steve Lincoln's following your the our Chris our Steve finally, Chairman, Chris President Bruno, will call financial business our our Executive Chief conclude happy will questions. and on prepared Chief Chief with remarks, Joining year. our performance And of we're of cover Mapes, to for quarterly in Officer; and and a take more Hedlund, assumptions Operating a today And and Chris overview is Gabe trends. detail. Officer. discussion begin review will updated

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

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

Christopher Mapes

everyone. Amanda. you, Thank morning, Good

record challenging organization of of strong growth customer-first We Standard success I'm the operational an our quarter to and million, X% did environment. and solid volumes and Higher to excellent $XXX The from achieved offset XX% returns. margin of XX% and XX% the price record acquisitions Welding a unfavorable initiatives. Demonstrating execution benefited second a record approach XX.X% Slide We which XXXX and effectively of volumes, achieved another organic in capitalizing manage job our a led sales, operating growth higher X% the in sales operating by partially foreign exchange. Strategy a profitability, earnings on Turning report on We commercial adjusted X% our segment. including X. pleased from in margin. increase incremental Americas a profitability increase and XX% quarter We with impact

from to Adjusted exchange. constraints, costs performance. automation of maintaining These higher team's are improved earnings increased strong Europe. record factors to operational share per supply management $X.XX, offset leverage the a inflation, effective XX% chain and unfavorable employee in operating We and helped the and execution foreign

and Operating share to call a return approximately returns achieved Officer, Steve year-to-date Hedlund, to to million, we returned the Additionally, capital repurchases to includes invested going repurchases. on shareholders share of solid record our our million $XX Chief cash I'm organic the generated quarter And $XXX flows in the million XX.X% dividends and bringing our pass We which trends. to through sales cover now in quarter. $XXX

Steven Hedlund

morning, Thank everyone. you, good Chris, and

of categories construction and all by three quarter we been key demand and in improve inventories. satisfy capacity our momentum for to Heavy our both second solid achieved segments markets Slide record in for demand Industries General current and had need end momentum high with product their reduce of most at second mid-teens at on in sales Looking acceleration of This growth reportable near-term their driver demand, every transportation and X, XX%. across energy our automotive business has all the all of led the across which increased our nonresidential the in and reflects infrastructure, quarter, productivity growth. Industries A Pacific. region in organic Asia except mid-XX% backlogs level which the increased depleted in activity of mid-XX% to strong increase and segments remained customers main rebuild the sectors, many and

we continue the to continue many with for now chronic I'll These slowing even In and detail. energy North vehicles. significant consumer more support to electric several a sector. cover long-term supply addition, of including nearshoring see scale demand of the industrial in second catalysts, sector suggest quarter America bolters pass and call infrastructure, factors growth that in the investments and government remain in -- regions Gabe shorter financials in globally, the reshoring in underlying to should And strong chains to

Gabriel Bruno

Thank Steve. you,

X. Slide to Moving

Turkish XX% $XXX offset Our FTP euro. lira in to X% XX% approximately exchange from foreign The partially quarter increase consolidated from a the sales translation, a unfavorable a reflected our the volumes by increase price and and million. acquisitions, was primarily and X% increased benefit higher which X% Kestra second

including an Welding take our key to and basis across as inflation volumes continue persistent $XX and in increased will inflation benefits Americas raw profit broad management Our execution mitigate XXX in cost operational materials, approximate Due raw business, to margin the offset actions improved Europe to inflation necessary. to in material freight million segment. points and as we gross LIFO charge from XX.X% automation

million decreased of XX.X%. as incentive and sales well increased SG&A as costs. or of $X to employee percent discretionary XXX expense higher due points basis $XX primarily higher XX% SG&A compensation as spending. to million a Our

and a income expense XXX million, to income XX.X% reported point basis margin be We quarterly sales, of increased the a run SG&A line a operating year's of current prior achieved versus to and continue in dollar improvement our adjusted expect Reported operating $XXX and record XXXX the with to adjusted basis we XX% upcoming on margin. rate. operating

volumes, performance items. expense cost We structural management an and in incurred XX% margin a million and the quarter nonrecurring from generated incremental of Our which reflects other price geographic savings, diligent mix, favorable margin. income $X.X

our approximately effective quarter discrete rate tax mix to items. second earnings Our XX% and due was of

items. year rate in low tax expect discrete anticipated range, mix to the be of to effective to and extent continue XX% tax earnings subject XXXX the our of We full

$X.XX. earnings increased diluted XX% to share quarter per Second

special items, XX% per incurred earnings increased Excluding $X.XX. a from a to translation. to diluted $X.XX earnings We foreign record per share unfavorable exchange share impact adjusted

sales benefit from Moving pricing all from maintained the operational region an to automation to double-digit sales adjusted by led XX% We growth and Welding segment XX% increased points second in sales approximately increased XX% the XXX in on Kestra product Americas million. markets product mitigate in X. growth basis segments EBIT growth. performance margin accelerated in Americas contributed percent Slide XX% quarter reportable our that cost EBIT automation, region, growth. organic approximate XX.X% $XXX effective EBIT equipment. Welding led to and in increased volume quarter. margin adjusted as growth, points in was acquisition which The low approximately to basis areas management solid and improvements volume implemented achieved all by to The approximately end inflation XXX the Organic volume area.

Pacific actions X. due through unfavorable increased the COVID region activity the In XX.X% of Volumes persisted geographic increased to approximately operational to increased inflation The Slide improvement Organic The record sales to XXX relatively in approximately taken adjusted slow cost Asia mix EBIT EBIT with from were to segment's International adjusted translation. Europe, a to price management, and shutdowns margin points Welding exchange associated industrial mitigate prior and approximately broad primarily continued benefits declined Moving due that volumes steady XX% to basis offset year. to China's initiatives. in X% versus May. foreign by XX% million. $XX

improved the trends Europe demand heavy impact our on sectors industry in in volumes business, modestly the automotive the Excluding of have increased and quarter. energy Russian would

Moving Products to Group Slide on the Harris X.

unfavorable EBIT and decreased XX.X% $XX XXX continued X% and pricing basis in certain points expenses and and mix commodity metals associated declining the to Second with adjusted incur decreased quarter margin adjusted the EBIT as integration offerings. approximately acquisition higher organization to million, to initiatives,

was expect We material industrial persist in approximately sales recover FTP XX% from retail point anniversary raw on will weakness applications to higher factors price which quarter. volumes organic a on into and XX these is as trends. to the increased rising weakening through and HVAC August. consumer reduction channel, acquisition gas by in which serving the offset a in expected X% The year-end benefited also costs market, in the in strength increase X% from sales specialty the persist Harris third to basis segment

investments to $XX to and higher supply Slide working as We to to inventories million sales customers. and operations Moving generated X. in flows service due mitigate and constraints cash chain uses well support as higher cash from capital of

seasonality normalize in to rate, at We accelerate inventory second our conversion XX% the expect a in or cash above cash reflecting actions to initial half levels. generation

shareholders in through $XX quarter, share higher achieved XX.X% We CapEx XX. Slide a spending returned payout and but $XX to of execution, to I We in the and discuss $XX million Moving million to on million our return year. operational dividend to M&A accommodate invested of assumptions invested capital repurchases. ROIC XX% record reflecting will an the approximately range strong continue our Chris the call XX% to the pass now over And active updated program. to to back for target balance a

Christopher Mapes

Gabe. you, Thank

Turning to Slide XX.

dynamic extremely under well conditions. exceptionally performing are We

through anticipated raising still be sales in the to we high Welding in reflects margin mid-single-digit accelerates, the in mid- our assumptions. percent region. compared to half and enter solid growth our Americas quarter, end rate market now be as growth year our percent range, expect consolidated range. we operating demand are prior to work momentum increase to first we sales incremental in mid-teens organic with The as and performance our volume that growth third We percent full income our As strong the organic and backlogs record teens segment

energy We industrial inflation as concerns cautious Ukraine impact on are activity. invasion raises Europe and the availability more around on incrementally and its potential regional

assumption typical supply do year that full expect in in we in the the cycle. our our half also headwinds margin raised Harris this will all We back XX% industrial third segments. execute year operating within in our as to business for of of high net impact incremental range their retail income sales chain. the We We've mid- some in positive quarter seasonality to be to areas and the of expect for continue also

generation dynamic job in cash industrial effectively of this questions. the and managing Our our team improved operational conditions. continues call our cycle. earnings turn to to proud returns continue positive I'm and to I'd do customers And an drive over through to like outstanding servicing these our ability team while for now confident

Operator

Jefferies. show comes from of I the Instructions] line our from [Operator question [indiscernible] Please go ahead. first

Saree Boroditsky

Boroditsky Jefferies. is This from Saree

of some you You and talked in such that you such about consumer. secular markets gives channel weak decouple Could about autos the are the as ability end talk just you these where cycle to hearing this for with for reshoring? what you the confidence? infrastructure markets from of in some as the trends industrial are the energy, And

Christopher Mapes

Yes, where associated it not about the that's I the cycle, the this segments things the cycle, to still Chris. industry towards real whether got very you, I is the portfolio very positive really that's a positive elements that we're Look, that the with only see of we're regional we're in tell positive continued strength migrating today, just Think hearing ag. think the at of believe one in out and heavy momentum. business, I momentum. multitude And the are but also early. energy that early across from still mining I

the the portion cycle. Linc the And better entered see think breadth Electrics brought of many of recently know, in we've also of segments still believe when demand the positioning earlier believe that marketplaces this the in as are ones last themselves couple our probably I positive we type we that these cycle that over I the and industrial of you seeing the forward portfolio. solutions portions we're into leader. I and of years early demand. a us believe those of do positioning the we in solutions So across as

we are solutions So as benefit the also as receiving positive are being marketplace. well underlying demand adopted that of the into

Saree Boroditsky

decline. as levels volume then international at margins strong had even some you And maintained

more going that in guess, are seeing from I kind you to given how you're demand XXXX, So a margins? cautious as of today, And you volumes thinking how kind are a we think of outlook? should forward, see about what continue perspective about decline

Christopher Mapes

a for us followed you've look, first, Saree, time. long Well,

mean, performance European exceptional. quarter experienced I international the of of the is our shared in considering region the shutdowns and I Asia the because associated were the industrial always Pac the the operating the The performing that we challenges I the of want in Ukraine. they was team at exceptionally be to then on volume in operations think time European the in the for were well. do that We've had between dynamics be think range invasion that that that profit a to that for operating able level year market. an to long business perspective in accomplish is that this at that. August see term us was required that it frame interesting the to there market

for position, in variables. think think an relates we'll standard that improvements the to performance international that I we'll made few to be ranges the higher of energy have able of having quite to business we've the risk. confident business. we've area what as exactly last see of two of impact our that's confident because years strategy and our more manage those rest as I But to will over structural have the why within year them we've continue associated the that in XXXX the identified with highlighted and that very it in expectations from just the our that, through it But of the uncertainty meet impacts and the frankly,

Saree Boroditsky

to And guys in you early August. look forward seeing

Operator

I question line next show Blair Oppenheimer. from comes ahead. our Please from of go Bryan the

Bryan Blair

Good year automation or business half in $XXX million on know goal your everyone. revenue first still this year. full for Very terms low $XXX cited apologize detail. margin of I the profitability. in quarter. if this plus double-digit strong I for you I Is meets morning, again the missed million track

growth flow is Just customer XXXX. of team then rate looking your the terms curious growth anything that And progression, about would quoting continued about in into activity, trajectory. run worry forward, order discussions, backlog there

Steven Hedlund

is I'll answer that. this Bryan, Steve.

We the targets automation that business. for are out the in confident revenue laid achieving we've

continue very activity, good business. We intake, order to quotation see the for backlog strong the building

business confident this very automation we're So year. in performance the our in

Bryan Blair

what a appreciate on I the on tone color. tailwinds then international international. over place coming Americas may activity very and market follow-up take more And quarters. seem understandably cautious much that intact,

we there We in costs. that a up levers reading downside reset incremental of with more structurally see demand through. do obviously about other cost prolonged have you if You offer detail Is weakness? any can scenario case end

Christopher Mapes

thing the have only our they driving Linc improvement a would continue and is Well, that I work team across you was also. the that businesses there process in able robust business to international look, at to we're tell that Electric, continuing on to the be all process

at positive the the challenges to of underlying process evolve. completed solutions us solution had preference the that into business the we I foundational into developed segments I had the the business. that marketplace the to So we're comments, in continue upon least demand globally. operational how because And that that penetrating my wouldn't think us position Electric those we've of and will marketplace want driving some improvements us it's bit maybe done are of little we to see I I've it's the other penetrating it assist at there imply a the depending work to provide mitigating seen, many element, is and the of element look, may markets in today get will that inside these earlier an for all and of and for mentioned with in they're it's Linc a And that

Operator

question show from of go I our Dobre And the from Baird. Mig ahead. next comes line Please

JoeGrabowski

Hi, good Joe It's on Mig guys. this morning. for morning, Grabowski

but The you mitigate companies. about XQ to several from So the know heard but How been picked good quarter. Americas quarter I up supply far your in able going quarters? ask past this I'm this production the again. lot chain in the I you've a is, past, impact of past to guess growth and to supply it question first constraints talked have season, my continue issues industrial in earnings we've thus volume chain rates,

Christopher Mapes

appreciate trying you and manufacturing think our us board and has the to of several And underlying I be we circuit to within to of try in to you, a customer-first the think quarters, cycle. in pandemic I decision this we're that and just marketplace in we those Electric people. when hide in Well, our the just creating our advantage job able sheet offering, supply Lincoln an us job tell Joe, done for spend the assisted those have been mitigating it managing starts I'll that through relates here have that are chain a strategies we people that team, balance printed our some to last facility with the comments, to able equipment made for have I flexible a team in our business the our with ensure to I do equipment tell managing of again, we we inside because I'll initial solutions believe XXXX, But these I But saw our managing And start that our We've from not marketplace. challenges. utilize been it the as think I'll through support the challenges. to as fact early available our for challenges. have has what the remarkable especially Lincoln in has own really customers. think globally the more that impacts Electric, approach to a I there strategy I say And could and been a of us out done remarkable

JoeGrabowski

Excellent.

there expand was follow-up question. was heard And improved automation hoping in in you the and remarks comment? that I my Okay. I execution believe prepared upon could that I Europe, on

Christopher Mapes

I and Europe. about in we talked automation No, think improved execution

JoeGrabowski

the All perhaps there have pull forward think pull you you But follow-up In in Americas due All QX question volume or price the ask April then. was might a retrospect, Well, in forward thought looked right. a to increase. again, into another Last really Okay. I'll been quarter, not? do right. maybe good growth QX. there

Christopher Mapes

into all allowed that meet just be customer-first was just coming. backlogs And able It's from early a very the Americas confident that solid to forward strength those And in to QX demand us quarter, strong. that as industry No, again, that segments. really solid our across there pull it board are QX. a had I'm we've pretty shared, was business still approach as our execution

that So to from we we that had QX. forward still to some see QX I'm But area. strength within pull confident

Operator

our show Please Loop And I from the comes Dankert of Capital. line from next go ahead. Chris question

Chris Dankert

decrementals execution differently. perhaps? Good downturn, I shifted, international, the about has do go a a there. do into I But the little test substantial bit that questions. structure for on has get now a that back we just to to said, pretty mean, how taking Thanks decremental in if ask kind Just cost think morning, a stress has to how the guys. we trying do guess we to typical been you guys Like question of exemplary. there given you international? property changes mentioned think about

Gabriel Bruno

overall Chris, to a posture this I to look we a think consolidated we in be is Gabe. our model international business decrementals, as targeted mean, our that company. those about ranges. said, we're confident kind structured I But When would that in of have

half, range. So we of the first end at the ended the frankly, higher

will and range feel quarter structure in through pressure, some But within seasonality some traditional in go we're established. targets, second the within have The we we that our we Europe. believe that the confident particularly

Chris Dankert

took really the Or on [indiscernible] not into price is I pricing? increase thinking Got of bit a is growth majority the back on here. the it. I number or half up And the giving guess is part then up the wire back guess? rod half a that growth year pricing, just about in of

Gabriel Bruno

material you anniversary through the third to it still that speaking. is pressures and increases and of the your the if fourth on start quarter overall working price side how steady in broadly raw in and the But some we organic get steady, place to put And assumption. inflationary would hold in keep assumptions. we that's we're I Chris, we sales

Chris Dankert

Okay.

no still additional then? but in of assumed is -- kind So increase guidance that commentary

Gabriel Bruno

Yes.

Operator

ahead. question of Please next our the line Jones Stifel. show from I Instructions] [Operator Nathan go from comes

Adam Farley

on Once Nathan. ask to is is an inflection wanted hit your cost inflation, morning. as holding price of down? come costs on What question. net on Farley Adam This view I the for pricing another Good point. all follow-up

Christopher Mapes

I question. products mean with broad very we're serving a multitude a markets and of multitude Electric, the a world that's Linc look, different solutions. Well, of around

So in look, we've I you a seen a for inflation. our more inflation than the XX of in over level have of will ramp-up areas share business considerable months period last of time, to seen we XX that, decades with

the that able manage the through At have we materials able think marketplace. of is business inflationary Linc manage downside. have driven to Electric the and us to be cycle, I will provided the at lot business. frankly, a confidence able quite significantly to of to the raw our cycle, the that our may be areas able a of be confidence where that our got may of adjustments confidence our Electric, manage us dropped so to maintain the will that that to Linc upside portion I've we'll make maintain are to performance actually that cycle ability on teams prices and the the to ability that manage we've the on I we'll teams be there through the that And lot to and of inside be portion it

be and company we're give within not have managing think impacting those the exactly that probably about to way really particular be and pricing. the may a that materials that the how to there's never we product So or broad scenario regionally question. within product may you a where we raw we going can portfolio answer that

Operator

from from Chris comes of Chris, I is line the open. question show our Capital. your And next Loop line Dankert

Chris Dankert

you. Thank

demand as Thinking helps still one obviously, to mean, term trends I here, quick Is another. look automotive, much very of follow-up. as very there. historically goes longer diversify kind do I kind automation trends, we it orders, tied how about goes, guess, of But any we a it's Just about think kind automation assuming of tied automotive. to the

growth Just for of organic there any outlook comments kind on right now? the

Christopher Mapes

industry couple it been portfolio not had Yes. of frankly, is diversification Actually, years as as have one automation segments. across automotive-centric might of that's our very ago. a the with we've strong quite associated interesting And a elements

particular that steel So in exceptionally a acquisition presence segment, one within to as doing of portfolio, which got recently, made especially just today. is been our fast-growing very tied we're the portfolio we've product acquisition development the has our the We've that market expanded the well. not the Cobot structural

So favorable and needs. talking lot conversion electric need variables not space as We've retooling you're automotive that lines many activity for about or to automation tied the This our vehicles that, there a some automation, in are in seen of creates although automotive of retooling to generally processes. automation portfolio.

So don't want positive to but in on to unit seen years. driver working that currently think tied it's next the irrespective imply the that space we've couple over we're maybe and of we're that opportunities demand it, sales favorable that many a of

automakers vehicles. many As to electric of manage their of portfolio of portions conversion the the OEMs through the product and

Operator

from show question Steve from the line our ahead. next KBCM. Please I Barger And comes go of

Steve Barger

availability talk Yesterday, dynamics But Obviously, from for advantageous. of morning. in part move channel, to installations. a heard manufacturer you look about demand Good makes we into to big labor the a maybe talk distribution And to staff competitive there? ability the can about that lack that due in Cobot you marketplace? integration your growth slowed

Christopher Mapes

Yes, Electric. variable performance inventories at needed available investments when and I've have ensure portfolio, we you developed also. us share you I and Steve, And We've that then been the we quite first had the the are customer our that managing marketplace. we've strategy frankly, Linc solutions only around Steve, to Cobot relatively to have products in that product to another that, try with in mentioned can that's to recognize, we and well that through

channel. quite into that marketplace technologies and in frankly, us those United have that across the XXX We can are assist nearly TSR the individuals, representatives the bringing into States trained

had of product for sessions us multitude So our of minimize on we've those to educating and some channel with as even that with integration. here them others partners in risks way a Cleveland, and adoption associated a Ohio, portfolio

those So to bringing of challenges with not it relates as product are the marketplace. me I you that getting types to will share to

Steve Barger

that are look out? that to looking further integrators continuing out targets Are as there more ways you you at great. staff that acquisition at might turnkey Or business? to there or That's OEMs as are build you

Christopher Mapes

I And that's automation last rate do I to to might or continued execution that. strategic over $XXX get a product year investments whether strategy $X XXXX higher million our Austria. of strategy. the We're basis. just our view it. business make demand portfolio, do all we is standard We've broad did investment billion Cobot to on the Steve, standard got like higher Look, around that product like the the certainly Cobot run structural automation strategy really We'll accelerate well we in the strategy of category those category steel continue our within strong the with Zeman to behind in automation,

Steve Barger

Obviously, an deals you theme are? don't the address to and just growth there there. a you're strategy. super underlying in close. something the underlying ask to I'll Is successful this. The participant yourself trying you Yes. that one more this in there. trends about for been make there are The already than you've more demand just stronger market is But just

Christopher Mapes

cells the to what that the tell they our or other enhance would you, understand team as to and into be try application continue for application. I to customers to But the look, product working function to to their looking our try it management automation applying into relates our the to No. voice particular field listening with we're offering. But customer teams are features constantly their working that's or with where might are Cobot of our sales

the almost within business. like that's a So rhythm

to front saying our a ability is of those example to examples across certainly, that that's no But of are an there major certain bring I'm that's us that. that solutions hindrance industry market. minimizing the the it's So in product in category

Operator

queue. I the call the This no back Gabe for remarks. in closing questions further I would show like turn our session. to to Bruno concludes question-and-answer

Gabriel Bruno

for Dylan. us much. continued and for thank We look everyone strategic the I on like discussing to today Electric. Thank in forward the you Lincoln would future. of you, progression very the your to call Thank in joining our interest initiatives

Operator

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

disconnect. now may You

Lincoln Electric (LECO) 28 Jul 222022 Q2 Earnings call transcript