PKOH - Earnings call transcript Q2 2022 | Park-Ohio Holdings Corp.

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Operator

Good morning. Welcome to the Park-Ohio Second Quarter 2022 Results Conference Call. [Operator Instructions] 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 XX, 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 Crawford. Matthew to Crawford, recent conference Please earnings to EPS attributable Park-Ohio Mr. for reconciliation common now CEO. proceed, over Mr. release. shareholders to I the a company's will as adjusted turn refer and reconciliation to the Chairman, of please income EPS of and net EBITDA President to defined,

Matthew Crawford

joining Good call for morning, quarter and XXXX today. thank you our second

most mentioned the all in horizon. aerospace, the year. business. As in across night, and well this on notably the nature of well until business and with broad gas, a the oil bit, which out Zooming struggling been as acceleration the balance have additional our X showed signs positive growth pleased that as recently, last bodes I resurgence of revenue results the The new the press improved markets rail, release contribution for of we see we're

restock our any time. demand restocking demand our our base the this to their at year reduction not an supply Fed over improving most should by at be recession for seek the next We the First, case But a from end a do we as chain level. some so believe end markets inventories. by of cycle tightening benefit will believe deep in offset that or markets environment customers caused is regardless,

which legislation federal infrastructure close targets watching investments. eye with government's Secondly, of the we businesses are the and

too A early number foretell supply the to customers. benefit in specifics, of benefit of all include: ways. we increased few will it's investment may variety a technology production While first, directly our in a semiconductor

customer and will the fell most related ACG and energy a three, Components infrastructure benefit electric every record grid segment. to consolidated fulfill turbine bridges significantly significant to day de-carbonization sector continued short logistics and incremental these active supplier day our of Inflation, of expectations. business. industrial challenges our this XXX,XXX over green particularly every broad energy the earnings cars, inventory relationships investments of touch and and battle Supply strong business. leverage be and also reach our continuing in and the challenge challenges part roads, revenue has to our be and for to to SKUs, whose Second, Engineered wind momentum, continue labor will wide portion And well Despite investment numbers a rail, Technologies, demand. in

Engineered complete Products manage secure hard worked record to and group materials important to backlogs jobs. Our similarly has

We're we addressing pricing of the many X to lower inflation Since take Assembly us reflect to affected or significant our where and challenges auto volatility will chain. these in actions our X impact half. impacted increased second from has these most. profitability, months market customers anticipate improvement and the due Components challenges has a of most supply with structure been which restructuring, unique the cost

happy we're closed recently. acquisitions on X have Lastly, to

and and also successful will smart our challenges, to grown the and to long-term line to you years as only we accretive the of years with of our opportunity where have that, and through These teammates. the we pay fit Patrick of be the our cover fruits over believe effort. couple have last for to bottom our well been results. work Thank hard most these you to this of over it filled but transactions know, and significantly see margin I'll of gross immediately. I attention vigorous the mold not With all turn most As do most appreciate deals Park-Ohio

Patrick Fogarty

you, Thank Matt.

quarter Supply I review I XX. strategic X second discuss want which to June our segment, completed for acquisitions Technologies to the results, Before subsequent were our

in acquisition which first throughout Southern North United The of supplies fasteners States. supplies Fasteners the and based commercial Carolina industrial

of customers its programs Southern markets. specializes customized for in the several end design management in inventory

growth to centered our OEM Southern delivering is our MRO and around great products base. our accelerate Supply supply complement customer Technologies a is business initiative, will industrial to which

in manufacturer U.S. The location OEM accelerate manufacturing business of is is auto China purchase includes global fastener production and technology immediately million customer a the of share. throughout to China. that the second vehicle the will years. The and combined acquisition Charter Automotive, and $XX is will our acquisitions be be [indiscernible] accretive components X electric growth in these help price of base $XX operating strategic growth our of to and and our to approximately approximately is deferred Charter proprietary combined its both paid which region. revenues annually, over million margins and per are The will payments earnings our

for Now results the to quarter. our

market quarter by were and aftermarket product Engineered demand, increased highlighted pricing operational strong improvements. Supply results and solid second implemented Products segments by performance our driven Our strengthening backlogs, capital both in Technologies and end equipment

of of The completion of revenues results achieved For and record results in one Higher of rubber raw our half second businesses and ongoing quarter the segment year. plants quarter our Engineered we by Supply of have we in we in and revenue the segment positively are in results downsizing material consolidated with second net all of of products sales and in negatively the products and the Technologies quarter, the increasing fuel level first our expect affected most Products, highest Components were our levels price million, last increases which positive were row, In the and our pricing product other plant and production primarily were during X the driven charges Technologies improved levels compared the restructuring Products end segments of aluminum Engineered negotiating one across fuel Assembly to consolidation in and equipment XXXX. sales year. industrial charges were business. costs. quarter our relate their Despite our Also, a onetime restructuring in Supply quarter the since in XX% second at demand finalized by price $XXX to key increased in facilities. up negotiations customers the several to customer our impact markets, our several in increases second

adjusted year. a XX.X% which points quarter, the $XX costs to XX.X% in to in our margins each the were quarter expenses to were second On XX.X% margins were the basis, improvement gross of of of to general compared the an compared has XXX increase higher XXXX. in gross our from quarter an the in Our expenses and due of quarter last year second million the with $XX segments. impacted levels ago, SG&A inflation, higher selling compared million basis sales

sales, percentage ago were down SG&A a to year of XX.X%. expenses As a XX.X% from net

on for During sold the Products of the second segment, consolidation million operation and a approximately gain quarter, by the our Interest per real in recorded higher capital related equipment $X connection ago average with totaled from we increase in proceeds adjusted borrowings of sale of $X $X.X net by estate driven in levels. to threading our the the Engineered the is to million increases higher a compared million expense driven $X.X support share. earnings sales which working excluded pipe with million year

diluted higher per Our was be sale the the $X EPS gain was caused approximately Adjusted the $X.XX was share. than onetime charges for estate rate XX%, per share $X.XX discrete expected which the which year excludes rate expense and of quarter. million of to quarter effective the in item on rate EPS, the of GAAP in the tax quarter the a which real included full XX%.

a In fluctuations addition, impacted per the reduced ago, in in currency share. aggregate, $X.XX results the to EPS negatively were by year which, by diluted quarter our compared

During capital sales segment. used driven million $XX cash in by the levels of growth quarter, fund the we working operating each higher to flow

net cash to the to to million We flow million is more working expect decrease be half of than EBITDA a current and begin year-to-date ago. days compared from second capital defined year-over-year $XX the improved free in doubled year levels. year positive as $XX to

focus CapEx $XX.X in acquisitions. to business cash approximate units free expect in half to flows X of first debt million the increasing our net each the continue completed balances million considering the and year and on current $X We of levels after totaled respectively.

We be year continue CapEx $XX expect million. to to approximately full

of quarter suppressed $XXX unused was end liquidity consisted hand which on availability. million under million, million arrangements, at million which of and Our included of banking $XX our $XX various $XXX borrowing cash the capacity of of second the

strength the $XXX our revolving increased base. During from the based collateral second credit our quarter, $XXX million million on to facility current we of

XX. Our as this totaled $XXX agreement million June outstanding under borrowings of

supply year-over-year to the X% in over which $XX our Technologies, record last XX% Average most chain XX% results. markets end our million up net In the increased driving sales by sales segment our of United to up daily were million, Europe were and of impacted record. in business quarter throughout quarter sales States year's previous of overall Supply sales spite $XXX compared headwinds, set in segment sales and record last second Sales million. the currency quarter. strong the now approximately across second Turning $XXX a

civilian heavy-duty aerospace. truck, significant semiconductor, year-over-year significant saw with we and industrial quarter, and the During equipment in sales agricultural growth increases

were our inventory higher in of products and around our higher million customer with Operating year segment. as addition, is levels of the margins a the pricing continues segment ago, gain flow-through seeing points a operating increase business increased costs Operating sales OEMs profit acceptance increasing customers this million self-piercing strategies from in customer by we as fastener $X.X continue totaled and and driven to continue an proprietary income to manufacturing recover the approximately strong to this well the high In $XX.X basis with of traction perform in year-over-year. world. margins our quarter, current the percentage successful than sales XX and clinch

in of and was markets the most may quarter $XXX second certain fuel demand and related $XXX segment, last We from in our impact operations compared an to was and this operating in schedules. in current adjusted as loss primarily the business customer in second improvement the key costs. loss our launched an year. included the sales which compared $X year of in in this ago. quarter ago, were costs businesses, year-over-year. due The plant the aluminum throughout quarter ongoing XX% customer chain million operating were to the On to of onetime XXXX a of a Sales adjusted costs. the an of supply in primarily impact material raw Assembly loss a negative and segment increasing basis, increase material In the our for end half from increased million in compounds expect pass-through production million loss which current volumes the segment continued challenges, operating result fuel-related quarter strong million, were well year excluding Components Operating used year $X.X spite $X.X to higher of charges sales an of million several ongoing adjusted pricing, restructuring products increased new products operating losses million $X rubber raw on of inflation most the general as a of higher

up In $XX from For operating income capital ago as second and by continues to third our In equipment business, take reduced customer which a level driven resulting to Engineered million compared XXXX. price be we $XX since activities. segment, their positive first operating costs XX% equipment upon the agreed year year, ago the sales a demand our were highest sales remainder this customer quarter restructuring and for robust. quarter XX% were at of quarter the year generate to Products our in compared segment, of million, the effect to increases, up our expect in

the New products compared million The months sales the $XXX compared Machine the including in the trend year-over-year, higher and oil their first at at to In year second in of highest $XXX half key the the million half we year. XX%. totaled million June equipment business, of quarter expect in Equipment the were to and this were to Forged continue and an level of $XXX end rail end bookings our orders increase XXXX. backlogs several since end first of million also up $XX of X totaled their gas, aerospace. recovery, the and of Sales in commercial to markets and military quarter XX% XXXX as at first XXXX, continue

driven year loss income million initiatives. a levels, by The ago. to year-over-year the operating implemented quarter, was the in During improvements profitability million improvement segment this higher $X operational was product an compared of $X operating pricing and sales

significant includes crop facility actions seeing into consolidation taken Arkansas. benefits from are Drop improvements our the our quarters Forge which in reduction cost of the Canton in in prior plant forging operation operational the We clearly forge and our

approximately $X.X year higher million to continued of personnel in finally, And fees a into revenues income costs XXXX for the sales our we expenses remainder our professional our $X.X year convert incremental key with XX%. and revenue products in continue business. to we in compared quarter growth driven the operating capital year-over-year year-over-year respect expect XXXX, For the current of full be higher improvement sales totaled current to forged to the as strong year record expect in at equipment the during markets ago, from with period. segment million finally, and in guidance, the machine end recovery the in backlog levels and corporate by were And expenses and this we certain

improvement profitability net second last quarter. And addition, we compared for to we to improve quarter the year. compared income year fourth In sequentially expect third significant in and adjusted XXXX expect full the our to also

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

Matthew Crawford

you, Thank Great. Pat.

can long-term and about trends around revenue. see, short-term the we're As you excited

to been of the With already some in that, to expect a earnings ask the half some Our we'll for taken the start we've and questions. up have and actions playing we performance catch little that, enhanced but yield second trajectory benefit. like

Operator

line with Capital Instructions] is [Operator of first Barger Our from question Markets. Steve the KeyBanc

Steve Barger

to on How better how maybe said, real restocking about up saying based your restocking think you what for Matt, next or remarks. over parts you the broad X is do your customers XX prepared need what in they are trend months? brought the

Matthew Crawford

think I No, broader that yes. we're some beginning issue. Steve, on to news Great. that see cycle

discussion terms think So in what in documented auto seen broadly, that of industry pretty we've certainly, restocking. they well regarding I the a expect

one think I So that that, well documented and fairly is understood.

the see of from I rest the think think we of early expectations rates and I terms in build around out to going year. business, continue the our of the rest customers strong year next very their into even through

of Some continuing of that, on is around based but demand, is related. expectations that also of course, some

dealer don't to do lots key a to besides Some customers, that have of our empty. you much are their drive lot a notice by

evidence other rest holding in So information customer whether be relative year, the specific we inventories out see the it of from to build looking rates, they're anecdotal industries. and through auto

feel I some get think product so that more pretty their to confident shelves, they're speak. anxious on we to

Steve Barger

That's good in like have great. of Products lot know And you it's serve backlogs industries really and up to Engineered margin. big heavy see aerospace. a step a I railcar

For that is casting much incremental margin production picks does or consolidated that, operating how you since side as in there? up like what specifically, business leverage the look

Matthew Crawford

may but that's business new company the haven't be Yes. that traction went, has that Products I'd seen are highest do some margin question comment been we performance. of of the who segment. equipment Engineered first, the I traditionally in in group know appreciate level Those where the our your not to

there. a put restructuring but of have see we're complete, amount effort of is it. benefits It tremendous the We to not beginning into

profile restructuring businesses excited, of So around between to anticipate I the services. return think, position. tremendous that Park-Ohio. where have to the margin It's I quite think a also and margin aftermarket highest an one loyalty backlogs, brand the that we area That's leadership our we're throughout the we

as not the leadership benefit I'm affected business position. that will seeing no, rail and Clearly, aerospace stabilization surprised a there oil by So most some gas see and been well. to and take it that's

to surprise So anxious to it. albeit see we've that a us, is not been

not to next year year that as just going show this but expect continue well. into We traction, to

of terms in that. So yes,

general the of take Pat, on want incremental leverage In do terms operating you to question. aluminum,

Patrick Fogarty

to expect from Sure. our and income our all we've Steve, business historic that to I'd the flow-through back levels. operating restructuring done put the impact margins

Now would next business. they've see year, move we pricing this other restructuring past. our the segment into The being more year business to of we than in as we to any expect back that where of this been don't finalized. get as material raw course margins affected to the the But on is expect throughout

We be We're this stabilize negotiate into business. positive XXXX, and see prices price expected starting come enter effort that. for never is increases. been We've That begin to to as will done. to we able hopefully aluminum down which

customers not than would us We any us that continue levels. and pricing, with and to is which process X%. through only pricing improved casting we we're products historic work each also longer that with improve on but get like, side, customer, fuel lot of in so the we to expect takes the our the aluminum a This the rubber get would -- but of north on working back to returns business, this can to side.

Steve Barger

probably asked then forgings Products Drop consolidated and my off I I met Matt, about game Forge. actually I because Yes. Canada threw you've know said question casting. I Engineered you into your as crop

Matthew Crawford

Yes.

Sorry.

You why had me different going I to asked Pat to it. That's answer direct.

we've consolidation. significant there's investment And a listen, learning made curve. in that Forgings, a

can in the not to Chicago from center doesn't and be people excellence there's learning large parts are to mean Forge going Drop some that Canton. some relative transferred to That think of I down of a we've the forgings. these

their pay mid that off, that until think meat, beginning I return in exploding of won't good on their I So next business. but probably think, order The be year. the traditional book we news is is is investment to

see see -- particularly I think to there, some we're also So business, but from Arkansas forging leadership steel. real to begin going our

increased affected will which railcar be the think by meaningfully I builds.

as Canton profitable they're on-board So level. momentum to next the we'll to from some Chicago their leverage execute over significant to no, I people, think I X really transferred a meaningfully X we've start against at able backlog there then And make begin parts and months. at more the see we'll nice operating think see to

Patrick Fogarty

addition One we're consolidation the press at in the time and point the there that last line we Arkansas. hit. significant making in for the is, new investment a production in and of right crop made the occurred pandemic [indiscernible] hydraulic in investment that completion of to gearing a up The

We're effect turnaround X big investments. the a new suffered rates years these for turnaround rail done on to year have railcar see we're we the ago this in without that. so to to year orders million And as takes of to with starting as that volume And segment real into loss escalate. a operationally in And and build see be line. huge benefit that operating work a that well income that's from $X is been the starting

Steve Barger

Yes. you And like couple of visibility have you a years that must of line now, feel on right?

Patrick Fogarty

we that think return have visibility been. have we to to where I

we're how excess rail which like we're business capacity. partners. little for diversify great working think and to long-term the envision I from at a and with We're to the other bit. products still through customers going We'd some looking

you was or demand if Steve, us to that we still the So terms down in some we the been. as rail made levels of of great in industry recall, opportunity find what partnerships view, never some will work to ag the take of tremendous think construction in the long-term backstop we've really to I I backlog investment have industry. that

Operator

Our next line from with Yilma Abebe the of JPMorgan. question comes

Yilma Abebe

the flow. mentioned year back putting color trying think context sales is I support working free there? to drivers of the this balance a to working of terms believe investment bit little first new key in growth My of year? that then you sort more the of capital of growth needed question the us and in to about half give in I'm capital that in And Can expect this down. on come cash you your

Patrick Fogarty

of free drive have working and This described on earnings the cash primarily a from more over in in in the we to year. we're that's improvement flow my is boat as of second higher are supplier as EBITDA inventory free result Asia. the going half Pat. I at Obviously, benefit the capital, cash days times, flow seen will Two our lead inventory script, the in coming things are because than levels historically, of elongated carrying

demand We've carried starting than we June. levels Some in scale to of we down have. in of that saw to and happening bring more expect support that historically back. inventory our of the We're we customers' month those

dollar our to Our levels working capital XX%. sales every about is generally

will of Some back higher, less. business free levels, the obviously cash business a is our for little a benefit get units our drive each But flow. to little to is some historical which

that the we're happen. year to hold the in half quite to We taking second expect that but than see a what, of had I little frankly, for, start longer hoped starting

Matthew Crawford

we to times for may right flows the that significant I back year, fairly are but is add longer business now take the some can recognize X the of One on cash XX, Supply of company, expecting, which is only little at I'd months. on are typical a product that think, dynamics that even Technologies Asia going in be from lead the harvest.

taking and of be rate some we're could customers over So the sure X on X a them that we're out. make now XXX,XXX months to SKUs considerably inventory protect difficult that's to manage to acceptable to our fulfilling at

think in business the I play challenging a as out longer have et will little piece Also, is high think the challenges waiting there's to it to business equipment out. So book, take levels, I that cetera. there, backlog very that those some in well. has equipment the chain some supply we'll numbers on been of also activity which The have get because to in play grown because order of in we're but principally components, a challenges

that that that to order manage our chain. inventory purchase have not we're to we're have we going a more So may like, little holding do we but for supply to

longer So a year-end. take little than may that

really So good but have expect a we the that's opportunity store balance year-end, on really the not we sheet. whole

Yilma Abebe

that. on follow-up quick a maybe guess I

next current year, on inventory. issues the levels? we capital, then in about holds constant forward in you what more of more picture assuming year the holding as trends relatively supply capital chains and working should look discussed next we How working to specifically of into think demand and go context to As and terms we

Matthew Crawford

for where But to depend just for on equates million. context and year. $XX about for the to that days shakes you, every out business will in put that it working unit demand X of next capital, think I

days So are to million if today. capital working of that $XX of capital, saying increased we're working we $XX million have where we volumes of $X have million excess

believe XXXX. capital we head of as out we into sales working that come the embedded system constant So could if remain

Yilma Abebe

one And final one. then

of and pipeline In M&A in capital debt, leverage your for allocation M&A debt think looking should at terms and we and and incremental the how acquisitions? about

Matthew Crawford

we you very have As know, acquisition. traditionally growing been by in interested

still services gross looks say and like think organizing sort interested what incrementally both we I in we XX one that that business. in of that. in are on operating years focuses I'd on the products business have over to our been strong terms of or that; success increasingly what either way number X, and the X focused to a also best margins leverage provides

So selective and done last as I more why do years. couple little we think much that's we're haven't a the of over

that the support you of of acquisitions to kinds for each our think inside continue initiatives appetite will those businesses. see I

continue we'll be to So selective.

will be continue I here, we the think which you that can to us is adhere thoughtful buyers. being to expect got that principles

that are the be near but going selective active, going I more to think be wouldn't to to you not suggest continue to horizon. So we I we're over are, we

Operator

back team this I'll you. At the for floor remarks. the closing to Thank time, turn management

Matthew Crawford

today. time an exciting very half. look forward much Well, We Have to and support second your your thank a great appreciate for you day. Great.

Operator

today's concludes conference. This

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

Park-Ohio (PKOH) 7 Aug 222022 Q2 Earnings call transcript