PKOH - Earnings call transcript Q3 2021 | Park-Ohio Holdings Corp.

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Operator

Good morning and welcome to the Park-Ohio Third Quarter 2021 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.

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

discuss and EPS may defined. as defined and not EPS company Generally performance Adjusted the Additionally, adjusted are EBITDA as Principles. Accepted EBITDA, Accounting measures under of

company's of For earnings now will the common reconciliation Crawford. of to CEO. release. net conference EPS attributable turn Mr. Matthew Mr. proceed. over EPS and a the and President shareholders for please reconciliation Crawford, recent to adjusted Please defined Chairman, EBITDA I Park-Ohio to as to income to refer

Matt Crawford

very morning. much Thank good and you,

turn a relates to I Just delivery despite to to the levels is seen and business Supply our most perform comments in revenue about challenges a chain Despite continues supply well. Pat of to profitability. Technologies and talk few significant in pre-pandemic it return of ongoing This has challenges, before it richer as over terms cost. details. to

close small our activity have of benefited conditions accounts. market $XX New our is on million including noting midsize for many business improved these also to most track is this worth year. It and customers, of

recent products Brian as leadership broad Technologies. product and industrial uptick end considerable a particular our also and We Supply is highlight business want in I our diversity Brian this seeing geographic addition significant team. Norris to experience benefit a market continue in of to Engineered equipment commercial of bookings. in brings from and the business President our perspective. from to

to possible some newer performance. by The Forge is business, enter our and rapidly. beginning beginning to execution markets the XXXX to make addressing energy, we're Segment need automotive, anticipate Returning negatively growing we have business. the track in from resurgence efficiencies energy high that is spending this with Engineered and by and We're lagged capital related of affected driven cycle we'll also the restructuring in business we're late alternative variances where a towards mostly accelerating also traditional which operational investing clear our are and the workload industrial daily While Product it focus spike that waste We within traditionally our the all important facilities. revenues Operating progress to labor industries turnover. to a is to availability shifting and seeing have challenges in note and aerospace been on these strong two are cost our raw materials. in as spending in rail Group footprint. improved is challenged in in included is to general It which historical related incredible recovery. benefit margin of that We're We're also improvements process by well. like variances

mechanism impacted a these the has to results. spike retrieve dramatic our have increases While we disproportionately some in many cases, of current automatically,

XXXX. the profitability We as impact. for will near-term results look Most significant importantly, increased costs address efficiencies business and not and should and improve pricing through growth continue to improved these mask our of expect we repositioning into our

approximately on $XX aimed and restructuring, which profile XXXX, million we've expense improve million have overhead. on optimizations. cost spent XXXX, Also $XX our under reduce our spent in savings over CapEx year-to-date we XXXX, will During specifically year-to-date in and absorbed business

return their at All of investments than less two-year target these a worst.

that, improvements highly business. I'll as very turn low. we still localized XXXX. over we moment, At are results And while these believe significant Pat. while With the is disappointing, they're it visibility see our within we to So enter

Pat Fogarty

and Thank morning. you, Matt good

Our in our higher up raw Engineered production Overall, our costs to improving production our base. affected our segment. sales for of of challenge the Supply in EPS, performance lower volatility continued inflation, results which labor the a be Assembly segment In and as the customer ago, material costs Tier-X and results quarterly was compared quarter segment closure million $X.XX, $X.XX. our net in were automotive and continue primarily Product and price strength supply segments. plant quarter consolidated occurring this year-over-year a with Technologies continued chain the business in which our our throughout year-over-year a OEM reflect ongoing of in Product challenges, was $XXX automotive have Technologies have loss a and assembly OEM improved caused in Components Engineered loss of result to quarter sales our Supply components segment. Sales a third excludes GAAP EPS for adjusted X% were and and segment consolidation challenges, the year

caused which production was the as OEM second quarter a the to on loss semiconductor the in quarter shortage loss Components $X.XX approximately platforms levels chip operating estimate resulting auto sales Our an of impact $XX our which low segment. share. operating net of was same be continues certain our EPS the in primarily impact per in on consolidated million, approximately affecting We the quarter our Assembly result

primarily $XX share. results inefficiencies labor ago. our compared labor impacted to million material raw shortages year in estimated $XX rubber million, an expenses significant were SG&A quarter increases by and the compounds $X.XX by caused a aluminum In and addition, per

expense to increase the at quarter during tax shutdowns. represented current XX% is level local SG&A million more million, $X.X taxes. rate U.S. to in driven the fund statutory inventory The ago, rate higher quarter X.X benefit which higher the tax when primarily quarter a to of during expenses levels. Interest significantly Our income than borrowings pandemic compared effective reduced SG&A million state a a of XX%, due the of year were $X.X ago, average by an and higher year normal were totaled versus the levels

an XXXX, effective For to XX%. the full of XX% rate estimate tax year we

Our and quarter last strong be on totaled borrowing million our to and to a and $XX of various capacity consisted as arrangements. unused and of September cash million $XXX compared million XX, under $XXX hand liquidity year million $XXX of of $XXX million continues borrowing ago,

the During was used by months operating cash of to demand. net year, million, first by higher constraints chain activities the caused supply primarily $XX increasing nine levels customer fund inventory and

levels quarter, third delays. freight supplier the caused demand levels continued in million carrier long times support customer During by our increased $XX inventory of lead and

material supply carrying of chain incremental and our September as million, XX. in enhancement inventory primarily as addition, our the affected inbound also estimate inventory We result were freight growth margin expenditures of challenges $XX the Capital global quarter million components segment higher for In approximately are of raw projects. costs we during and assembly levels. $XX a

to XXXX CapEx estimate full in continue to our will the million. be $XX We range year of $XX million

industrial heavy-duty quarter quarter during our most In during levels to up second $XXX sales and to XX% were Average the net end the end a markets. in we notably daily similar year-over-year. year and quarter, $XXX million the segment results. million Turning in second Technologies, quarter $XXX the most in equipment the semiconductor In saw markets, sales ago. agricultural were truck, Supply the to now strength compared quarter and million

ago. our up market in XX% XX% and civilian last demand from a was nearly compared quarter, aerospace addition, year In to

customers industrial by basis up customers segment and supply operating quarter the including with in over freight margin and in to and XX have supply over inbound mid-market higher ocean income Operating new expedited quarter. success X.X% both and Operating global income totaled markets. million new impacted freight XXX points around caused initiatives XX and the income were was third by domestic constraints. various to last business centered continue $XX.X compared totaled chain in Year-to-date costs, quarter our products margin in accounts. We including new end this

chain We of the continue to demand ongoing this customer for remainder expect our global year. supply to impact challenges the

price far has minimized year, strategy our and product active the margin So increasing of freight impact this costs. management

negatively to customer quarter the segment, and and minimize lower $XXX chains sales to $X with segment our OEM impacts. sales We again schedules million plant expect in issues million, and million a $XXX compared will were and in operating margin In in certain continue million stay year our $XX fluctuations affected million, quarter. these Weekly second base this respectively. shutdowns ahead our which approximately delays work team quarter diverse the production income chip Components of supply Assembly resulted plant the ongoing and and the in current shortage and by future Sales impacted were any demand to ago. $XXX of again

We likely OEM customers our remain expect the XXXX. and microchip most a shortage quarter challenge into throughout for fourth the will

quarter impact quarter levels. estimate in the full year impact will difficult similar this to be third is the project it that time, fourth the sales Although to we at

The continues loss by be factors. $X.X third to quarter driven in operating million segment of several this

continue plants, causing disruptions impact to aluminum chain key platforms, extreme production higher in automotive uncertain and significantly our fluctuations primarily supply costs. plant two operating production, of First, in

raw rising material businesses labor material the and by challenge alone year caused have plants. prices increased labor Rubber many beginning our Aluminum profitability. of our impacted for since in XX% is shortages and XX% raw prices Second, quarter. the costs a local Products our aluminum increased business our In during And of the finally,

of $XX compared operating year our segments ago. highest years. restructuring, were this to implement quarter bookings up the we aftermarket new chain million $XX implemented In increase Engineered XXXX. and the million relocated during and closure quarter last quarter, and costs. incurred labor sales third a automated capital ago, have costs, sales level operating scrap price Our the from production challenges one-time these to a supply results to Bookings higher equipment strong processes open training inefficiencies were wages, customer an in certain second impacted year of times and were facilities increases. resulting the equipment higher were levels compared sales million and and quarter, their consolidation XX% $XX third third capacity, related lower totaled Driven and million we manufacturing almost material of and business. by XX% will Also activities. than to response In new by shortages. compared costs charges production in the continue and and more our to recent $X.X in segment, $XX plant to increased recruiting labor capital and at million, In lower Product with equipment raw quarter, in margins in three quarter cost

performance gas, our our improving results continued demand sales rail. from partially business, and was commercial military, markets by oil business impacted including low by products be forged and where to end capital machine in and offset the aerospace in key Our equipment several

business also as are improving machine business In our and backlogs and close our addition to out the products we strong in year. to forged recent quarters, equipment in expected bookings increase the industrial to continue our

excluding to million, $XX.X an totaled $XX to range With totaled of growth for $XX $X.X $XXX,XXX of income communicated sales operating a consolidation. to and outlook, XXXX of to $XX.X be corporate the closure year-to-date in XX% to year-over-year $XXX,XXX. of during adjusted million had This be charges financial million expect last million basis the million compared improvement to was XX% expenditures the in XXXX a $X.X range loss million segment the and the quarter organic XXXX quarters previously corporate costs On of our this period. compared quarter million. we in to of And capital respect last the expenses within and million quarter $X.X ago. During plant operating adjusted $X.X year finally

expect for approximate we the We year. million million use expect in for full up to cash year, the to flow as EBITDA X% free and margins $XX $XX to to defined

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

Matt Crawford

Thank you, Pat.

floor We will open questions. now for the

Operator

Thank you.

a KeyBanc. [Operator with now from Steve session. We question-and-answer will Our coming the Barger Instructions] line question conducting first be is

Steve Barger

thoughts I'm organization. couple to of from But Norris. data the or under going weeks. I with on leadership? his know strategy only start might very of been change execution any He how driven came it's Brian addition Grainger a

Matt Crawford

transition. retires Appreciate a I certainly, would John Florida. question. leader He down of was been business. the to highlight wonderful Chrzanowski it's that, to like that wonderful a

him Brian. a got nice well. and wish period we he So overlap We've between

observed think well. I use mentioned, me data Brian well. will that I very of extensive specific So strategies wonderful really around experience think that is that say he'll comment very yet, transition spent I We and commercial thoughts will he leadership amount also that experience bring we we've and can't expect him. that we go have. to particularly to time on with

-- core including great think strategic number our I MRO supply has aligned well. So continuing our missions, business. on our of a a for Certainly understands of as competencies we're core he strategic our strengths develop to industrial offering appreciation important outside and and

to early and view we But adjacent sort say, too industry understands if I who's a truly a of while do of tell. little someone a nice combination brings think field, really having what So bit you that in he the of will. broader

Steve Barger

Yes, thanks.

on, best between will thoughts your the XQ. just or get going be back is that is everything unlikely? make the revenue he breakeven arguably to Looking-forward line seasonality on how you going else I hearing So back Pat, better? assembly, to that flat said and operating that's Can his what business in sequentially and think on can you

Pat Fogarty

The fourth shutdowns to to the continue holiday to that chain that that supply quarter, Steve, challenge constraints not back some expect get you with and likely level business, mentioned. to we're we

if on that in was through look solely in Plus, loss our quarter, of the we million $X.X October, there. the material you happened to prices. that aluminum even some month very some lag may begin in But aluminum rate of although there very, operating During the have what's And to price one-time the significant. lessened still expect month, raw is items at are we the making high. aluminum of increase castings the and recover use of of

prices not will the recovery until year, in begin event to the drop. next and occur stabilize likely so And only

Matt Crawford

would learned one comments, our labor it. is visibility question on There's of We've is front. add, poor. the year. all this no well too I about Couple that

there addition the about significant think fairly of I country. this morning was of a jobs amount heard you some in

our work people think business workforce, there will work. not find game people we So waiting the moving significant I we're for In be where meantime, return can to and will we're stability, changer to do a that. that but continue the to any for will hope that

-- We're beginning takes see So just will I on that think sitting we're heels we not to time. benefit of our the here, it.

on by of visibility think So We through is what program going which program the trajectory in mentioned challenging week. demand is of the to is but week very, can right expect plant right little that is plant, I is direction The to the for the see volatility changing frightening, labor and the labor, by I've on release sort is. regardless a the very the holidays, trajectory direction. the reasons

for there. recapture making of seen yet, selling consumer trajectory mean, great part successful the our it's being to change you we've is I'm negotiations half materials, the that, think raw there about they wherever is But haven't the the in price. As cars I whether been just a the facing or money example, business, obviously just it it well. marketplace, as little a price is, it or cars aggressive harder twice that a little us The implemented ongoing good ones. are

lot fourth can moving but mentioned. we confidence on and with depends direction, rates the say as on things shutdowns, the and we're are the that in in So that a quarter right going build you

semiconductor relative right ball So, some not, this in though magic luckier, things to moving but be to that are waiting I leave to don't waiting for the there as going a meaningfully we're want wand get to We're the direction situation. get now. it we're to we're just doing not

Steve Barger

you can go Yes, we more conservatism this that you're in see things the quarters last XQ should of couple look the some changes year, next like into part XQ we seeing model from doing. that maybe step that But year. proactive being Understood. a of probably versus just are next standpoint, 'XX, 'XX, the probably you're

Pat Fogarty

to happen. that $X first think should quarter improvement. some of quarters That I XXXX. hate continue the to we say not see a I will in million lose two would we

Matt Crawford

I a I seen days, the agree give then, improvement high Pat, be to we next And with some the we've going into we us the a of think certain to as beginning guess, greater I'm ability I think I year. forecast careful I’m with saying I conviction end bottom. these the we'll see that'll go have year. believe that

Steve Barger

strategy many heavier thinking you what combustion. mix? internal OEMs What That's talking How that around on towards see I about to? to starting you just we're talk progressing? you're that's happier hear. good one us EV content your you look like? about. But And obviously Is ask to How are still Ultimately Can much is know, do Maybe how are people more. remind topic. shift. EVs? I'll a automotive that

Matt Crawford

think and will in that past, I I answered I've more me how time. question more the detail let that, conviction say with you and tell it this

product are Our automotive, is portfolio in our engine, agnostic. you on know work not lines. we internal of business the products of Steve, majority that focused that like completely combustion meaning And

our think about fuel products, you you just our that these So rubber now technology, all we discussing non-ICE when about When when we and extruded right applications not think think fastener about related. all I'm molded think are focus. the applications, products,

very, weighting suspension are and we chassis right our -- very is in light that more So area. businesses feel products now aluminum our the important, challenges

positions good be that I our injection direct powerful, while is or business engines the product, try portfolio. Ironically, reducing about Unquestionably, the So feel our emissions getting very we have whether the stronger, in a product these lot direct focus, we they see some injection do they're more business. make along as extruded way. of the to ICE

still adoption So but the space, buck the that in trend we think but because ICE will as an increases, application. it's ICE

been but to we as companies sell And at Tesla, are heavily into we our certainly people that's into of business. the our well. storyline companies talking So dollars, look sell in domestic Chinese we when into terms

always for up. what's we Right? to time the products where don't GM, not ship bolts, example. know, one every ends it's know easy We So of really these on going

are make, or depends They could are hybrid don't trying whether sells. communize want to that's is So among engine, know more of arm to to going how I aluminum quoting going be EV. we particular platforms. how stuff Much communize a now. parts to each they point the make trying that combustion think customers or with -- of a internal granularity the an where I control today to knuckle, particular it many cast, take a it's platform they're on product, We are steering

direction goes. would positioned that is I the whatever really it product argue adoption, well So for

that's our So strategy.

So in to we're the all of that the also in expansion. in them Tesla we're companies EV BEVP some servicing sense, and of terms talking in pure like And some [indiscernible] domestic of certainly also talking to their China. major

Operator

Thank you.

Our next line B. Riley. Sarkis is coming of question from with the Sherbetchyan

Sarkis Sherbetchyan

respond on rubber focus to to want what not can the to you higher also just sacrificed anymore? aluminum do so At your as point think, where prices. up production are pricing and the margins rising and pricing to catch initiatives Yes, costs, you the effectively

Matt Crawford

So business, let lot say engineered equipment in turn in me or be tend reprice a inflation to over about supply by business, reminding no those won't that forge that certainly I able is, example, signing for is those of there's risk begin quickly. fairly those products by everyone and a the itself. to what it whether deal. our when I a you're five-year naturally but chain saying and in quotes I jobs And group, and that think business mean is, not

is the the have indexing more remainder, chain is that And then, our customers let accounts in some smaller reality those reprice on that Much sense are long-term insulated large agreement, extent business The some but fairly engineered that of to to repriced anyone raw in these that either insulated, So doesn't areas, is appropriately. able products be spikes from material. business of be should it risks. some of often easily non the efficiently. some supply of of

be XX, surprisingly, tend challenged. it's not sector. percent business automotive that the we'll our it remaining in the of And disproportionately to is those So call

benefit material we losses. will that long-term to as that and that But it, still meaningfully of to to of Some from signed agreements there's we up chunk that pricing raw a the negotiate throughs need we've index. the and have aggressively catches pass stop

But less than what business we're within that's fairly of it's you less to our represses of within of and answer the So of kind that middle in want months your question. kind somewhat do hard to three XX% than or six remind months I itself.

in of upside all, that we reprice, the quarter, their ones think And the got of the down naturally naturally moment. a in right? think were some got I worst bit. were reprice that worst at little We the that that third I don't businesses

we material or So see will next, particularly think I four on five in the traction, months three, the sure. for meaningful

margins, the and a but of that always always labor I that we've I year. we momentum into recapturing, reprices new recapturing seen think challenging think is naturally our more into again, going business than build lot will recapturing see the

Sarkis Sherbetchyan

I particular about segments know, and other see the if end a is just any Okay, you That's market opportunity, understood. but today, to you the kind touch segments, business about different you of as helpful on suppose of there three that I then back I step talked end think well. kind the that's giving wanted excitement? discussion,

I engineered So looks or effects but oil mentioned industry challenging? that whether are maybe also, non-obvious And little that so. any it to you that, then a be what maybe know industries products rail, challenging. supply other bit gas and look

Matt Crawford

because I'll two to minute think be at this. Pat he'll And a I'll observations. quick give smart make

I I'll all, thrilled briefly you, a I'm pickup, know. in not gas, seeing mentioned and of that lagged rail. little you you first I aerospace anything and just certainly Those not in don't but So have tell telling oil we're am

been The we've an our a those margin Engineered has fair got overhead is, booming. highest So particularly in businesses, else in our often related is Group, problem which for us of everything while Products to investment amount business.

on markets, the see through So little wind extent be those a sales meaningful. we back incremental those to and on the significant will our at flow that

the benefit because return capital going revenue, gas it flow oil guess rail oil because to gas back lot as of So was, where and aerospace and going in And particularly think and with restructuring, rebuilds to think opinion. money while the investing is a where not terms I disproportionately they're it levels of that the never we then one, outsides the historic in restructuring, on our in benefit going sector. to to did and particularly business the that in incremental we're there, I see we investment we're what, also gas, do through. in of oil and heavy in that's on may lifting

our So business. to we right-size need

So industries the that This Supply strength some small and our those and account around Technologies. know midsize will new I briefly new, not excitement the are are speak enthusiasm, in of business. exciting, I kind traditional, and mentioned I is say in business But of itself pieces we for us large lends an end not of that all to accounts. exciting require it's our market area very do because well assemblers industries sales that organization, watching with parts. focused business really of a lot

So new a answer there not not idea seeing focus about and I'm new to market would to your lot of a we question talk about saying, I'm and that I'm a end lot new And going less of the talk you a there, call. million going logos, for names, account, we're into by $XXX,XXX to is very opportunity a a exciting. turning account. much go team likely I've that highly sales reorientation think, get And more dollar as future. And and million then account our can I of said dollar before, the out has

opening in very our So I is I of is new us particularly product comments, the exciting pretty out so Europe, my out of out the really seeing cool. and group not it a as in that and alternative positioning strength will from strength also perspective capital that's equipment exciting. energy, some well, mentioned but to say,

Pat Fogarty

of areas. actually will but comment to [indiscernible] cover I I an couple lot there. like a Matt think covered other a If on awful

how continues we're to in demand throughout and the manufacturing momentum will into fastener within product, aerospace side build different I many Within increases at of business exciting seeing the segment, our with decent to Technologies, spec OEMs is That's low because continue it's Asia XXXX. for margins. us Supply been. Europe think that penetrate applications our same hopefully

are on. In quarter, is XXXX. capital margins a the business the This high million head higher is that just very type us quarter. million capital to our yield new So on should into side, equipment as equipment a This that in you're following technology and second in. the add And historically, of level should is margins induction $XX new for on orders order we've specialize that in $XX equipment very not in. the assets up customers new exciting we hardening as much had of we that as yield type investing in

so And those addition Matt what said, the are me. in to are to things that, exciting

Sarkis Sherbetchyan

great, for me, final the outlook. thank the comments And one updated there. looking just I of kind at full you Now, guess, for one year

you high as year, maybe like it of if call should digit into kind What initial into look level? get the your consideration looked guess going modeling and below, the out kind call, seems say from that can, have be better the take are approximately the or margins single there, think to On to high X%? from we thoughts be EBITDA then maybe, than and EBITDA this margin it single to you today's of do first So that the the you 'XX of Would be digit fair we comments level thoughts? even I X%. you've historically all trends, half done, 'XX.

Matt Crawford

material going be at for journey. sustainably I but have as to I'm what earlier, mean, be need going -- a a going to Pat do. And to this there's be conversations, something business. paid need let you a we have pricing getting mentioned tell to where we're to we tough I is is I'm lot to answer we that of we

So personally. switch to it's a I be don't think it's light going

Pat Fogarty

a strong the And case, very it could demand are next then the unpredictability the that it will our at out As constraints you the forecast of if stabilize customers. the results. that's should year of try supply And read, by yield time. to situation that's there, half impact the when current and second even mid-year? various levels this to certain chain shortage chip stabilize? challenge at semiconductor this year, Will with But of next it's

Operator

you. Thank

We at have no this additional time. questions

the remarks. pass to floor back additional closing to like management I'd for any So

Matt Crawford

think thank we're do want But there's some good Well, is have a the portion of to you on And results too. questions the to lot had right to lifting we've not the today. on we for we path. of your the but call heavy We got going I I to business hope hoped and it. have. things emphasize, appreciate or This a

hope and I we Thank that patience. interest. you. appreciate appreciate everyone's through came So everyone's And investment we and

Operator

you gentlemen, and your and at Once may concludes we this lines disconnect again, this you your teleconference. thank participation time. Ladies for today's

Park-Ohio (PKOH) 7 Nov 212021 Q3 Earnings call transcript