PKOH - Earnings call transcript Q4 2019 | Park-Ohio Holdings Corp.

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Operator

Good morning, and welcome to the Park-Ohio Fourth Quarter and Full Year 2019 Results Conference Call. At this time, all participants are in a listen-only mode. After the presentation, the company will conduct a question-and-answer session. Today's conference is also being recorded.

If you have any objections, you may disconnect at this time.

Litigation I today's remind statements call in Private started, statements that as get XXXX. the on of made may Securities we want everyone to certain defined Before Act Reform be forward-looking These forward-looking and may those actual cause from to to materially uncertainties differ that results projected. are statements subject risks the press XX-K, of as with in well relevant may which A Xth, as filed SEC. and list March be found company's XXXX release uncertainties risks in was on the earnings the XXXX,

company as measures the accounting and under EBITDA adjusted as defined. and Additionally, accepted may EPS defined discuss Adjusted generally principles. EPS of EBITDA not are performance

For a to recent earnings to EPS attributable Park-Ohio for reconciliation common release. shareholders the a company's as adjusted refer and reconciliation to of please income EPS of net EBITDA to defined,

turn would conference proceed Please Crawford. like I Mr. CEO Chairman, Matthew and over to the President. now Crawford, Mr. to

Matthew Crawford

conference Thank quarter you to and year-end and morning. good XXXX call. our fourth Welcome

focused of want While current to I do occurred some much discussing and that open I business of recognize will by today's accomplishments XXXX on impact coronavirus, last that important conditions and the the of the be year. call

new launch and expansion -- Assembly better opportunities, one and cost and First, of positioning, increased the has components excuse production competitiveness. or improved in Components engineered me, Products, business new the of Engineered which two provided facilities already strategic product

increased key ongoing development. highlighted launches business induction on capital offerings, new strengthened previously activity to group our over a Supply and by Components and by in new aftermarket and Assembly reinvigorated equipment XXX accounts relating Technologies, in significant supported backlogs Two, business customer technologies research announced new in focus due to

Four, near-record cash by quarter And an price combat focused basis importantly, chain fourth generated adjustments perhaps margins points implemented lastly, enhancement, the flow. gross supply which of operating increases. through tariff XXX and last successfully quarter the and impact an to most margin on effort between first and improved effort implemented Three, year.

business These labor industrial remarkably the here. customer turbulent the year social, and enter sell-off business winter. are late accomplishments the and market concern a declining during we over lay were we production of early make given said about of disputes, the coronavirus, trade Therefore, stoppages points excited and XXXX markets, most ahead. Having done to our that, economic of the current foundation during work and and cognizant that and of the a I want impact few opportunities the fall

travel, family within implemented of has First, have we Park-Ohio customer contracted sickness service. protocols. interruption the Two, had we've no appropriate policies have meeting, knowledge around who we failure anyone and coronavirus, and to of or no

we XXXX. seen our significant China significant be have Mainland overly This while challenging has in our of of achieve part some during China And been the a a slowdown an hoped revenue headwind particularly had there. to Three, new business. will our not is this improved we performance business regarding profile, to

government associated Four, become the business while quantify will the that it point business. the has our of impact this virus to likely our clear the response virus to unable in impact increasingly we're at XXXX, and

related to most segment gas already Engineered our seen our softening touches We Products and have which markets, directly. some end oil

and is in reminding that by of anticipate designed headwinds them. everyone Park-Ohio from to occurring while the we those the that now, weather even close or to to want didn't materialized XXXX events benefit I end these

regarding a than specific, business more be customers we products, diverse end more To and before. are ever markets,

XX has is more liquidity our and surviving than management from near cycles. Our team at highs, position business and experience years' benefiting or all-time

sales six very about had performance to future. and XXXX, I during our be Park-Ohio Lastly, like excited time long first earnings know the continue and a ago, it of near-record months seems we record had

to over it With turn that, I'll the Fogarty business. Pat review to

Pat Fogarty

below and several were earnings and volatility were events sales markets. our well by of quarter onetime driven in end fourth our our as demand key Overall, expectations Matt. you, as Thank

the GM quarter significant the results. and were impacts customer delays fourth car all, of labor First in strike of new our launching to certain models

events our rates by segment the unusual our earnings optimistic affected locations in approximately this fourth quarter throughout $X.XX. share and million business impacted have negatively our $XX continue Components new being Assembly seen we approximately most will the of are months These year. by per improved of revenues two first launched and In and production XXXX, on

Technologies agricultural segment, truck, markets. half the customer in Supply in Secondly, in defense decline in the most accelerating fourth notably demand of the an end equipment from markets, we and second our quarter heavy-duty experienced several

quarter sales a levels the and of were result end in these compared levels. quarter have in and purchasing In and schedules of decisions. levels part sales fourth production daily believe We segment. Daily year this demand early of fourth unusually holiday the improved low year-over-year levels XXXX, decreased XX% by our to of

expectations. operating our a exceeded significant we of quarter cash and impact cash and improvement margin seeing fourth positive On flow flows initiatives. note, progress free year positive and the Also, our are made full our

improve certain to to managing customer and actively implement in business each segments, pricing. vendor operations actions to of which addition margins our We in continue include streamlining

the in Mexico Also, we press projects in of and specific extruded several expansion molded plant years, fuel, rubber the and capital business. been our Acuna, important and installation our growth have over of ongoing X,XXX-ton the which past Arkansas, aluminum completed projects, including two forging

equipment we other to pricing finally, of Also we Erie provide bank Erie the are results on facility and end term under in extend amended the aerospace agreement. And Engineered XXXX completed Products markets. the segment. to our for The a strategic of included its during XXXX, supplier improved our and capital credit to industry borrowings acquisition outstanding Press, to

discussed. fourth previously quarter, I by Technologies consolidated to decline in to the year-over-year This our was compared XXXX. the X% were sales million of volumes and of driven segments, the now million quarter details fourth Turning $XXX our net Components lower in $XXX sales Assembly as Supply

was gross margin quarter fourth XX.X%. Our

levels to first associated half second Press the our slightly XXXX XX.X% quarter Excluding of margin onetime in compared demonstrating higher year, acquisition. Erie in initiatives year-over-year are were the improvement take effect. costs, our by margin with driven SG&A SG&A the gross was the that XX.X% to Fourth half beginning of

in income profit compared of $XX.X flow-through to ago quarter Operating a levels. $XX.X the year the a result from sales lower the million as lower million was

a As and result, were $X.XX and our GAAP EPS adjusted respectively. $X.XX, EPS

and in our second Operating cash cash million, XX% been million. free Since $XX half flow the increase of $XX.X was totaled has free over flow June fourth million $XX.X and was the quarter strong XXXX. an XXth, of flow cash

in million compared Technologies, down basis, results. key a I'll experienced on agricultural the Now, Throughout segment markets, sales totaled to fourth period. the several year On equipment, products. in sales XXXX X% year-over-year. were our $XXX Supply reduced and including $XXX end and industrial In segment quarter full in we $XXX comment semiconductor, million consumer XXXX, demand million,

market during full both sharp the year, assembly a quarter we grew XXXX. truck in in certain in truck the and the of was of partially quarter. facilities X% the experienced sales XXXX third was which This heavy-duty for the strike at demand compared an unanticipated decline by labor quarter, XX% quarter to fourth fourth the While down driven decline

up in demand I just year. increased full our the X% was outlined, volatility for market, volumes which offsetting aerospace sales the saw and defense Partially we

sales defense in business in aerospace and XXXX. earnings well we growth XXXX, Our and in performed continued and expect

gain supply during Our traction the year. industrial strategy to mid-market continued and

XXX new During added XXXX, customers. successfully we over

accounts these these to results, did beyond. revenues to segment continue and significant and to have on we Although XXXX penetrate with more not our a in products new expect impact customers services

was $X.X fourth for quarter income the ago. Technologies year a million million in Supply operating Segment $XX.X to compared

related product compared to margins operating from For price tariffs the full and million and in year, a which income to facility $XX lower consolidations. non-recurring in decline $XX volumes, was both commodity The sales increases, million segment year-over-year result increases XXXX. year, the in half operating the of income of first affected primarily was cost in costs

team customer the to continues and pricing supply half seen XXXX. increase adjust of first in Our the offset Supply Tech product more make chain to to costs than in changes the

such million million, The the In of mentioned compared net strike quarter the had in the SUVs, our fourth Lincoln the the revenues as on segment our Assembly delay the mid-sized in period. launching $XXX XXXX quarter. in Ford segment, Escape the totaled impact and X% previously Components to new sales car down significant models, and in $XXX Ford fourth a Explorer, GM impact the

of of and rubber-related was equal Segment million operating the essentially results quarter fourth favorable volumes $X our the our as higher negative in year-over-year operating income aluminum business from income fuel lower sales businesses. in year-over-year margins and offset impact

and to basis, The in mentioned. by Full XXXX. On segment $X.X the compared million decrease $XXX closure segment operating was $XX.X onetime in in driven sales million $XX.X to plant million $XXX items costs of year million million fourth a were quarter income XXXX year XXXX. previously was compared full

in are next the car light this that segment as growth over three years. five believe positioned increase We to products our model new and launches for truck

We expect emissions, gains continued increase as light-weighting, per electrification. in content vehicle reduced technology and value to demands relative also

And in our demand Year-over-year by compared finally, were equipment continued market, strength million gas to aftermarket XXXX $XXX the the quarter the in $XXX in market Products sales million our oil lower and sales the Engineered were by and offset in the fourth aerospace segment, period. in business. primarily impacted from

and customer and of year and pipe induction was group, XXXX, machine demand equipment, services in group. our and equipment full products This our the increase aftermarket increased year-over-year. parts million, an by sales our X% $XXX forged were increase For our heating products our segment threading driven in for aerospace industrial

group to technologies During to necessary XXXX, investment in our products. existing advance industrial equipment make the R&D and new develop continued

aftermarket new which improved operations, profile of our European only historically also the We sold equipment.

was decline ago. the compared million Arkansas. to fourth operating operating $XX income mix to of year result relating year-over-year was XXXX. plant fourth was costs unfavorable new And $XX.X in press quarter $X.X in million million million and income our operating in our segment quarter start-up line $XX.X to product full income the for primarily Segment in to due the year, The compared in a forging

down XX% adjusted and in earnings the of per the $X.XX levels full our our compared record down to consolidated share For year. of $X.XX year, earnings X% year-over-year billion prior were revenues were

the approximately hand including earnings impacted have year Our our our were borrowing $XXX by and certain industrial the continue arrangements. of of half XXXX capacity non-recurring ended to sales on of and global especially events and million affecting challenging cash We unused a million under various year. of liquidity global environment the million, $XXX $XX financing businesses, strong in second and automotive

our time. at due financial are and supply end-market globally Italy, on China and coronavirus impact certain foregoing finally, demand, we of especially in the EPS guidance issuing the customer to this impact on XXXX chains And unknown outbreak the facilities, and

and CapEx XXXX which and through reduce margins been increasing in operating be working improving consolidated cash initiatives, efforts year-over-year, increasing capital. implemented various earnings already will flow Our free focused on have to

back I'll call Now, Matt. turn the over to

Matthew Crawford

Great. questions. very We'll Pat. now open much, Appreciate floor Thank the the color. you for

Operator

Thank you. [Operator Instructions]

Our first Chris your line with Please the with question Van comes Horn of from FBR. proceed question.

Chris Van Horn

for taking morning. my Thanks Good call.

Matthew Crawford

Chris. morning Good

Pat Fogarty

Good morning Chris.

Chris Van Horn

seeing you still guidance Now, you're the but EPS. of I quo? but boots could shipping? Any of are detail impact, foregoing on sense us the like concrete I you kind still know and are right a now. for others probably you know certain happening sense it's some on -- status of Are new, end disruptions But in what's markets, additional ground the give

Matthew Crawford

at Chris. that. I'll shot a Sure take

think little softening gas and have mentioned, a oil both market. Pat I the as I seen and we in

continue been to that of into going but So, market as market, in for late, to particular, has the us year, anticipate we soften. challenging that end

that's group, their So, important Products in our part Engineered an business. of

will be headwind that question. without So, a

any As we disruptions to or customer haven't had we shipments. failure also meet mentioned,

So, in facility Most around a Europe. we in have point. impacted do have notably, -- Italy, directly Turin. our We this at not it has facilities Northern business facilities

with They population. in from now a in government Italy crew right regarding to are safeguard working skeleton the how conjunction the regulation their

will requirements or we for relatively look as is a That's customer us. transferring to production appropriate. at So, need small meet business perhaps helping

So, we'll work that. around have to

facilities China, of most all Chinese In for China are our consumption.

anywhere as down. been of and XX% So, they from believe, them, of up between and been them, up, staffed. those XXX%. back are businesses of shut situation back all XX% I they've operation -- where in Most have in to a been ramp capacity They've

customers The been as it's have relative our good to their of news activity for there customers, is, consumption, been most Chinese well. of restricted since our all

So, demand supply. not outstripping the our is

in the on that's the appears business. terms back it of But upswing not

as So, my of a we're business, comments, not to I the direct impact ton. mentioned in terms seeing in a

up nicely business tell a the anticipated a nice We extremely where does of had said, last relative this our think year, We certainly is to this the came I it's over sort into very I greater itself here concern to difficult plan as in from optimistic. to year the year, economy North that virus and government's point. at goes our America. what, but response

Chris Van Horn

imagine, perspective. color. And does maybe you side and it fact Okay, how due obviously great. a buying that from it there just side? on side, But from et on the headwinds of equipment, the gas for less the your oil cetera. affects Thank positive business oil that to supply your then demand a affect I supply demand But customers side, is the are from a anything and price

Matthew Crawford

I'm I benefit; But here. time. Pat that's imagine side Great, on I the can't moment has We've oil probably can and been on giving to with question. natural I'm be a a side. speaking supply anticipate the being long think, a to gas it I well, exceedingly been But -- anticipate material. focused, I additional I think. favorable -- you, more second so some a honest can't give for been we've good Pat demand

You to all? up that want at clean

Pat Fogarty

market, segment, market, the tubular Engineered oil and by steel products equipment induction drilling and also as affects a would result The Sure. gas group. in and which oil a into way, the prices. in of in less side, Chris, we our gas affected significant be our machine ship especially end lower And our Products forged

And affects talk you well talk as that well prices end forging lower reverberation other as our products markets so and you utilize as of end mining, when about about equipment. other gas and our agricultural markets the oil

for but as our have, is that, we significantly So, they monitor prices affected. definitely demand continue as products drop to when

Chris Van Horn

Okay.

Matthew Crawford

just to want across very but that we diverse Now, businesses, to that have not forging and of inside Park-Ohio, context in I group. because say just put also the equipment

aerospace defense so costs. the where So that's it's fixed businesses high has is that in incremental business agricultural of -- that's some and certainly resides, where relatively and this

inside the meaningful flow-through. the group even So, forge Products But of the in revenue loss negative and has Engineered diverse. group, extremely this -- we're

Chris Van Horn

and for in I'll last One for me the you that. Thank Okay. queue. jump back

cash than managing expectation. continues really to track you're your well. Your flow seems better like capital It working

a on we a draw reduction what's any in that uncertain improvements to And into saw here? and working you in some Maybe reduction know facility, You CapEx? as at the times then but capital CapEx. need I head driving those have all

Matthew Crawford

I'll Yes, high-level with comment. start just a

think working I can do we a on lot better capital.

last and Where that ourselves traction area an will think we to lot focus harvest. effort we we've on got nice do operating a year that's like think and feel continue positioned try through is I So, I margin. some I have of on the

XXX some think, my as that I swing, was that point So, I in and of comments, mentioned mix. basis

be benefited mix got the the volume in the -- increased just of hurt downturn, to good -- So, by like me, clear, over or some Tech the we the what we excuse times. in Supply

flows think that will into going that. amount from work a tremendous that benefiting cash year we're throughout downturn, the last chain But year. our On and I pricing of and work there's supply those year, benefit benefited down went the us this

real which the are are improvements, those millions. in dollar-for-dollar So,

one. So, that's I number think

you've of that see to only I the coming the CapEx. prior on CapEx, our begin address end We calls we're -- to the us that of -- reinvestment pledged also couple think cycle. end

expect throughout year meaningful We improvement this well. a as

being in pivoting more goes on. capital let Pat of little momentum credit. talk -- about capital working But I'll as anticipating aggressive some bit we're got and and So, the And we've actually and areas. line the other year on working a then

Pat Fogarty

Thanks Matt.

would we view $XX million. to be, million. around annually, between $XX to Just could go which our in difficult spend two to that million ratchet maintenance annually. down when rates, we is last and add CapEx. million historical capital spent $XX run a And what times, we to back our somewhere comment somewhere years, The And around you $XX we

control So, that we can carefully.

lead of around and for still especially And to not number have expect -- and on that that. progress do times advantage Relative managing things and our to did also some inventory, to implemented growth. but we up to improve expect going future take we're I continued capital, working to progress, but pass the during would that we year, there's better of us we say opportunities make opportunity good a

do Relative And situation down draw stand, head fluid a things as to progresses, expect helpful. availability, of that pay significantly in to depending Hopefully, now, what's significant versus economy. on down and where that's that's obviously, global our going Right draw on expect we the businesses it. year a on based to result our availability. we on as have don't on the our where we would revolver

Chris Van Horn

Absolutely. Thank and good you luck. the so much for time

Pat Fogarty

Thank you.

Operator

you. Thank

Marshall comes your Edward from of with Our question. Company. line proceed next question Please with and Sidoti the

Edward Marshall

Hi good morning.

Matthew Crawford

morning. Good

Edward Marshall

And sure reason give EPS just not curious, -- a soon? run the did Or what kind a understand no not, you terms? that mean, general have I'm idea -- Yes, I you did this I I'm an do CapEx very and number probably you understanding guidance. Thanks. you in talking missed of it? I just were give for might just change could if CapEx year,

Pat Fogarty

what dramatically think the a would million CapEx has on down said, economy years. run that be in historic the for reacting. than how million CapEx, we two been is our past Ed, that depending indicate we've normal And manage levels but $XX would it I to Yes, we be can that expect to $XX rate is what lower

Edward Marshall

of what could you're $XX Do you and million further saying, expect to you think be lower, given in million, it to and you be that range $XX is weakness?

Pat Fogarty

Yes.

Edward Marshall

Got it.

Pat Fogarty

to range in be or that would I expect lower. And

Edward Marshall

Got it.

find, parts. might it on automotive we're timeframe, the looks industry the within shortages for understand like it chains especially the virus, can't April you, around curious, but I you of look might just-in-time not the certain supply you we find that manufacturers today. at quantify hearing, As I'm just

that supply kind seeing [technical Asia? of that difficulty] a of you out dynamic Thanks. are lot of First,

Matthew Crawford

little there. and a bit in bounced out you So,

hear So, entire And as it, now, year enough. we we the of of we I But miss has in think I the that the then if got environment. though but think didn't auto the -- some clarify the as I question, opened question. stable feel

particularly of But be have some volatility. could out we've some platform-by-platform a challenging -- seen particularly Now, coming quarter, overall, stability. fourth

a and the or forecasting from not get customers they we tier that in disruption. plant information So, we're the notified our been about basis the on our by by -- OE we and -- have any expect regular

stories. So, of we the heard some have same

of some in at premium are We facilitate the kind the But are that gaps time about. of talking this not would paying parts. some the for OEs are to we OE that schedule familiar get you're aware freight of major disruption facilities

So, well, as as start. sit the here forecasts to today, is stable but a tuned. The we year off stay obviously stable look pretty

our to something Chinese -- in Speaking than issue. Chinese to really again worth manufacturing Technologies supply business, less largely China. do once We that's our I an so plants import of $XX not clarify, product million from Supply demand

been have boots and have we the we ground -- So, on there.

are proud it's all is, from going supply Supply it else, can't Technologies. our And there us. from quite feel the come that We promise been a that is it's anywhere team, OE risks can extremely come not level, you to comfortable come being and while, this the and at to won't chalk on from if going this over we but associated a up not horizon. of a and chain don't my disruption I point, for this issue major sense just have the our there have with me at is

So, I about feel that's how it.

Edward Marshall

if but business into of us I some but able way. to of you understanding guidance, have term, be the understanding be the Again, QX? relevant And give a less to I to short might how books-to-bill it. could you at got heading it that it, kind the provide trended do look wonder in Got likely different

Pat Fogarty

comment in that a comment planning we're year-over-year. Matt with in that we because our process where started mentioned are situation, would fluid that. to heading, improved things of not We we think outlook I such light prefer on

Matthew Crawford

what and basis going weakness in of on us in to but said I'm market. some and I of I than has a gas Other anything would refer mean have before, more seen generally Yes, end the we candidly. relatively to -- stable kind going that which troubles on we I'm environment, is than oil the that, that's the the it's lack begun year visibility current --

Edward Marshall

comments. your very Got much. it. Appreciate Thanks

Operator

you. Thank

Capital line next comes question. the proceed Our of Barger your from question with Please Steve with Markets. KeyBanc

Steve Barger

morning. Good

Matthew Crawford

Steve. Morning

Steve Barger

will just Again, I unknowns. you're the understand Supply growth do why for year, real Assembly? all Tech given And you but some challenges face and still guidance get foregoing I this directionally, Engineered expect that

Pat Fogarty

in Yes, some Assembly a actively we and -- would booking the Steve are started more products growth. new business. launched year, number this we that Pat, of believing is Components new we've Obviously, see

Tech, expected it's is little Heavy-duty a Supply hit. to be the In significantly before truck challenging. down coronavirus

was -- semiconductor to XXXX growth although we we -- such going for as and markets, other in so provide and heavy-duty end defense, us. saw aerospace stability And aerospace and just challenges to truck

Matthew Crawford

the new I yes, question -- let some new the -- to the any while hedge is is not really I path we answer not Supply to a Technologies continues investments line. that's have where answer be a we've let's to -- where actions and great business created while didn't at new Steve, up, with confident it's great and difficult am me and end ask about deterioration market launched, -- understanding you question Yes, a question, the a where like What of taken at going margin some your we Steve, we've of we've auto the why ask. ourselves seen to the business positioned

about volume growth new year-over-year, and going to the that question us to think put So, facilities the on a incremental that. and fully your will launched we path stumble new I effort provide margin. while more the around in about confident I'm we're business

Steve Barger

That's good detail.

it? we should worst the function that's in that of and December slowdown, first what Or is the Tech representative guess expect of Supply a I half? margin So, was XQ the of likely

Pat Fogarty

result, margins the our we're that have sales impact increase. November in seeing I daily daily of at saw our sales December; as a very Steve. levels latter, end on volumes low significantly. would did say We and an in And levels And December.

the optimistic will that repeat saw we our margins that December. levels not in I'm So,

Steve Barger

about had Assembly. of talk it. And did in you Got the new programs that launched some you

about wherever front, first they early kind Just China and the half as comps production your I should launches versus it taking of to the positive call I in on growth more or negative cuts, is the a too exposure, place automotive easier think the may half in versus in back cadence product be assume against Assembly?

Pat Fogarty

I be see be too months production levels second Depending half give the early. two the and think now. suppliers is comparison to levels it's at We first auto react versus where on product of how in expected year. half I'd first hesitant coming a right from,

Steve Barger

for or can And dollars or maybe you expect flat will you any Understandable. that way? Pat, controls talk just modeling, spending do SG&A swing through either versus year XXXX that hold this cost unusual in

Pat Fogarty

I we taking in the reduce reacted reductions SG&A. the necessary past, have as Well, volume to by have -- steps think to we in

I'm So, the year. able confident be that to reduce we're we're or level throughout maintain we should -- the at,

Steve Barger

Park-Ohio the but to or you relative already, talked some you think whatever that year? resilient the down up you're when is about more in say right you and diversification to expect place a degree of next topline it does, now, whether to fair to Matt, you And initiatives this the it. Got single-digit earnings mid-single-digit profile have

Matthew Crawford

question. the question. -- a the yes answer I Yes, that's good to is

because and about XXXX think react. this mean it's it an it try me stress will -- how to It's little we I bit circumstance stress test test think it's when almost you to that hard. -- difficult I business the say let comprehension. beyond Obviously, a way.

back, a we are general, The last incremental the But added higher look defense margin, focused are back example, and then, even when aerospace years. we the business. understand a market try we've that since often think dollars a and XXXX, in different business different on that. we in have at for do to And in couple revenue implications that of since like at end look been we the we're to

do yes, that profile since more better I even is margins. So, diverse XXXX and think our

it's model, be about pretty to But pretty do So, to honest yes, I you. that. feel with hard good

a doing why end year and business, is production is mean really have last and been. them consolidation. industrial of our we pursuing have slowed we're focusing that's focus investing right our or in three So, lot We're on of now objectives expense. it done we're the -- facility down, towards pivoted of I strategic a as the of them, three

that more now But focused control going to expense on we we're are we clearly see. recognize right as

So, better the us line. in we're We're this broader XXXX. think manage expense like think business. to that line the from I And going at revenues and we're margin puts I I -- that at to it do but a since incremental come position. manage going do where a

Steve Barger

the private -- that public And me. obviously, about in seeing Great. on happened for and for M&A? market Any just environment So fast. volatility last in or market it's public the multiples, happening one we're all see the is what I markets? given are what's that mean valuation affecting we comment really can and bankers saying the M&A

Matthew Crawford

how been from Pat, has while have about tank think a don't large M&A are buyers sort digested here. this do Pat the any-- common forwarded Pat mean, have had It's or I bit, I a comment my to what's don't in and market. for but e-mail funny to I a happened for let think little saw anyone's fully going of clearly a morning going I going I'm partially be, answer, time opinion. digested. in to you or I'll talking sellers this a you, digest to -- ground hard I tell I even an don't finding think there's time a

Pat Fogarty

I agree, Matt.

efforts to center. and markets to to be diligence up I better think front end that beef understand is going due potential have companies

delays going valuations. be which impact there's to a will I deals in as think result,

Steve Barger

time. the Thanks it. for Got

Pat Fogarty

Steve. Thanks

Matthew Crawford

Thanks Steve.

Operator

Thank you.

Our Marco Please next proceed question Partners. question. comes of Capital with Rodriguez from with the your line Stonegate

Marco Rodriguez

Good asked my answered. for question. taking my morning. questions been Most Thank have of and you

government in Just everyone of does, if as to the thinking as but sort kind kind you economic responses, the terms is you case best are we of follow-up. point thoughts out as the far of of base of your your ability, about terms XXXX? talk into understand, XXXX, fiscal guess fiscal a about, what play wondering guidance, want can of as I to of bit for little demand the just in

you kind as you where if facilities sound you pivot with can like where as comfortable far maybe it different go, talk other production of play from can and to but mean that are necessarily you're necessary? facilities I well, doesn't sounds as how if plan, you quickly -- to then things also might

Matthew Crawford

first felt We we're me a grasp didn't before, said though situation. is our let we of have said as didn't I this that, now So, changing comment environment. I current pull because rapidly we guidance as -- a our

As mentioned I've -- diverse -- year stable. customers some very they're are getting demand our businesses the of their and the signals their most are started are And stable. have from before,

and a because than not business where other gas, night, So, guidance deal. foregoing we're on here, TV good feel about hold today. the President second we is last don't pulled got the even well, it We is because really on oil big and said, obviously after this a

we're deterioration it's than to not us. by today, really we're ultimately for to can as we we digest other one that tell going and digest what segment, until -- our But that, a of very here demand. robust commercial difficult it So, us seeing customers sit

how plays that bet anyone's out. it's So,

I'm question in I production. understood sure not moving your

about bit -- question. you the Italy like think I'm with little facilities, not sure potentially meant hotspots other production regard out moving but talked what a what I that I some to European of into

Marco Rodriguez

economics trying what where assume do have governments very situation. I'm anticipation would get certain some may overall I have scenario may terms you you how business. But guess, not of understand a or that sort is it's Right. to impact in what Well, scenario guys analysis sort of your of I fluid have or tested at I of a

like or or far, thus your great you specific on that a what to And impact as are region additional be of can where quickly areas things the the production or pass of it you one move shut from telling as again, plans time? is stock countries does quarantined, might area or deal take it to another countries additional sounds one great, price. seeing be not we based perhaps might if your in But that were volatility

Matthew Crawford

our cases, or a business model, which in-country entirely, has production we've developing, general, in of lot In regional. but not most either spent money

in our true, of that there and adjust, while to doing we process where need mentioned So, will that just and are entirely adjusting. of in equipment businesses we're not I some instances is the

to are industrial Mexican in exception generally Mexico. that, might world. think If Armageddon close a bit be position support the in-country An for they of a activities. with We I border, that's

issue aside, that So comfortable. I'm

are in Having and to forecast, was our we sensitivity asked and ramifications tested. that, which to the have and question, opportunities -- happen different and business about could our said what our where a weaknesses how understanding you

if ones address We've so know don't passed XXXX looks looked are first what I addressing. recession understand we spots industrial to recently understand the those be weak a that at and we but. that they'll where helps already like are, and or

Marco Rodriguez

That's helpful. Thanks. Appreciate it.

Matthew Crawford

Great. Thanks Marco.

Operator

Thank you.

question next Please question. of from George with line your with Our comes proceed Management. the Melas MKH

George Melas-Kyriazi

Good morning and Pat. Matt

Matthew Crawford

George, you? are how

George Melas-Kyriazi

that us the on there Good. EBIT Thank industrial and you're you. sort down Question that and of was up a basis means bit, basis, machined a have equipment which forged XX of reporting sort business product segments flat and Engineered two was telling points, was about significantly. little revenue you roughly Basically, Products.

million revenue, million of suggest $X $X EBIT So, points. margin XX sort but in EBIT, to is million, $X and to calculations it's that also like down million, in down, my the $X basic

you've in and there. some had gas oil softness So,

decline new that more the Arkansas, the sort had You've segment? press of in us there. EBIT particular give Can in color on you big the

Pat Fogarty

George. Sure, I address can that.

effect products and the a machine some from group, and as rail forged is gas significant in demand standpoint. the in as well group contribution in oil forged decline So, our

significant that margins. did a effect EBIT have our year-over-year on So,

levels production plant significant press Arkansas, up line were in costs our amount our down. we new because unabsorbed ramped a as In of on forging Arkansas, production were in

And really so that things -- drop those two cause of EBIT. in the are that

Matthew Crawford

talk they're this George, Matt. the number. -- about material that explicitly to both is press I'll

that it, without would So, I they're material. launched both sort in tell quarter. you fourth during dividing the of press We --

we think experience a saw forecasted, So, poor to nonetheless, a performance, in very but there, extent I large think always I challenging. of terms

will be that size, get on weeks. will of better And it of -- that say not would the size, Like better of coincidentally, every been and couple best any production our it important last that period day every that press, of to capital expense has it get project week. and

highly going get a that forging -- significant automated, we're asset. to every we better launch So, to as continue very day on

earnings, we am getting -- a And and better a drain it a than little day. it I on more will maybe optimistic while good every it's in it's that expected, was as expected, unfortunately, progressing place, and

month-to-month, a investment. excited that positive. but It's forecast going we the where trajectory week-to-week we're or about very of is about tough asset. little are excited to that So, We're

we're the start making two to to going But get months see the have from it, first away we're to closer us initial and the six working For quarter And to get that. benefit We're to going and little shifts. a all optimized. really of getting means results through better the that to on be think, goal, that's, our are time. first I the we'll to shift that

George Melas-Kyriazi

help of roughly dig Can particular so shifts, seems And -- opportunity asset? that one the from that? I'm it two that's have helpful. us but that Okay, me what's be to CapEx What's to and sorry in. revenue forging at the you focused sort understand an that to you and involved issue, expectations on in interesting

Matthew Crawford

disclosed think CapEx the of the size I have. we before, we the CapEx,

Pat Fogarty

was And equipment million, capital on the years. the spend been primarily Arkansas. George, roughly Yes, State over the and $XX funded two that's by that ongoing half last of

rate XX%. We expect, excess to of of our return have as an capital on of in we projects, do internal all

expect fully that we line. in So, be to

So, But continue a and and deeply that rarely absolutely basis, long-term think into plant. about I feel investment of to drill revenues good do individual the the we from profitability on standpoint we be down the that we of confident. an

George Melas-Kyriazi

diverse or--? asset great. of group pretty does a customers is Okay, what verticals And that serve, it

Matthew Crawford

only And we're exciting expansion, into markets. us Traditionally, that Well, not diversify capacity player one remember, industry. be about kind is dominant rail that's other the this what's to the really able has support excited -- to Construction business, facility rather press high-margin that of of to are position in a will top that This new not also that and our a but give in need, list. been we Traditionally, there's about. facility. it. a is a that few really

those some gas, and which later were not oil in also may in opportunities Unfortunately, the year materialize. of

only So, of back us expand, up business -- provide and targets. our this also and but but the opportunity customers not and yes, -- products, of current we're will those portfolio looking the to are some

George Melas-Kyriazi

seems us the of then if just very about a clear impact Okay, gave Assembly would some numbers It delays. sort have GM launch and you strike And of of about that, happened, But had the one great. well, that were Components. the some that been impacted performance. -- you question absent that stellar

it was the was it EBIT like million. $X.XX, Your if like probably seems about $X impact, and was X.X%,

have quite issues money, that of So, may I'm despite the in of plants seems couple business, It a later well. in see hopefully, that like it something you results of we'll seems is we'll China we've but -- the the some bit of the on. see some where sure going invested like

So, I you ask that want that. to out to point maybe on and just comment

Matthew Crawford

that softball. we you the I didn't -- it intend way, know listen, like the story-- it's George, appreciate but,

George Melas-Kyriazi

was a one not first The softball.

Matthew Crawford

revenue strongly one. we've that very No, and felt business, Listen, the in business we uncertain. new that the no, more growth about have our very is felt mean meant as we investments the good made the evolving becomes story in second business I about business. that I no. the

by the the in net we've on to given the because some expected We to it the that line certainly that we business we expected of come some coming are to China relative Explorer, we new to and the in to conclusion happened not new of what's conclusion time the but discussed. is the business now, have may others, particular, close materializing. not that anywhere that, launched of headwinds And

the or story is But those an margin market. the are in current the where business, is volatility to hedge, it's any at paying off new the to excellent that, said line. Having evolving pressure investments

that So, going that just and I year. the to you just you began And through think to I did throughout you the quarter. think fourth the it in see did see work your you're math

the going there. absent I changes the revenue in happens a Whatever So, think story on we is significant margin good got line bottom-line. SAAR, the to

we still -- story that at bottom still changed, but So, the bottom-line. the has like the the optimistic yes, like we're we story

George Melas-Kyriazi

And one, Pat. then one for great. quick Okay, question

Matthew Crawford

focused new And electrification sorry, doing going resist. light-weighting. and lot on we're I'm today a too, visibility. the a some here talking But quarter fourth We're not like that and about can't content because of George, our group triage lack remember, seeing extrusion increasingly to conversion add, about the to a I we're bit I'm of we of getting that in are orders this and

generally business at higher continue -- to we business. our add than old So, at is margins that

So, rate numbers, not slowly, of if even happening importantly, that they're the that's inside we'd is a good like. growing but thing revenue those at

George Melas-Kyriazi

a we see you do mean, to capital but were this working this expect flattish, it's made, to Okay, a great. consumed because -- How revenue's that? be you such make working flat, working the would of positive in know I capital but comment live Matt, Pat, of year? And then I the impossible I like on revenue sort it world, you like contribution fluid -- it's seems cash. to year, And sort capital cash

Pat Fogarty

George. absolutely, Yes,

the about a And tends use a XXXX think of more capital. capital when to working we of in our was Engineered segments and level business little different I -- up. Each what the other segment saw mix. that use was working really than more segments Products

And that, year. was provide in flat have absent so a we expect year cash. capital in on our working place, bit I skewed the during initiatives based capital working a little would But to

George Melas-Kyriazi

great. Okay, very you Thank much.

Matthew Crawford

George. Thanks

Operator

and management comments. closing Ladies to to would gentlemen, I session. for back like turn today's you. Q&A the floor Thank this concludes

Matthew Crawford

flow around team with strategic keenly which the for And of not that we're investing and we our we then clear to are Thank the eye a but focus what's that of balancing very business. expenses managing is to recently all aware doing the things I through importance situation. Great. potentially and investments you right are in a I the here, frustrated cycle, very dicey with of happened our much. -- the on everyone what want and reassure to balancing some our and risks toward say cash we're

And same time. done this we'll before, can you our we the gum at We've for recognize chew So, is walk all it that of and but frustrating redouble -- and time efforts. very assured we be a us. can

your have thank and good So, day. support you for a

Operator

this today's gentlemen, you. teleconference. Thank concludes and Ladies

lines your Thank you at for disconnect may this participation. time. You your

Park-Ohio (PKOH) 12 Mar 202019 Q4 Earnings call transcript