KWR - Earnings call transcript Q1 2018 | Quaker Chemical Corporation

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Operator

Greetings, and welcome to the Quaker Chemical Corporation First Quarter 2018 Results Conference Call. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Barry, Chairman, Chief Executive Officer and President for Quaker Chemical Corporation. Mr. begin. may you Barry,

Michael Barry

Good Dana. morning, you, everyone. Thank

we'll today Traub, our me provide details and are may that comments, Mary Robert and the then financials, the CFO; our around any General have. will questions you Hall, Mary Joining address Counsel. my After

have for slides also conference call. We our

quarter, You delivered quarter. off major some of some now driven despite website can remarks the another I'm www.quakerchem.com. quarter's at about largely section them Relations in first pleased factors. with have we I'll good find the The were challenges. Investor our now market start results two by

The first and was second gross margins. was sales the

me Let and past adjustments materials, our there's material the raw cost costs we mid-XXXX, environment. between pricing. raw a And material lag with have raw effect have Since changes the been start as in to a in rising with in product generally we our margins. discussed

expectation to first gross conference last that margins was the and begin would quarter call, On the in they our increase did.

continue materials from news our our to our that be price gross the to sequentially raw that our good to margin expect margins XXXX, While over upwards is few trend next quarters quarter, increase. tide and enough we XX%. to turn gross The increases begin we gross the previous the for around saw were fourth and rise expect will margins

year, have raw necessary. continue also raw increase first to the where cost the certain of especially to increases to expect materials the we initiatives we material in offset While part price place in

for higher making is in of talked good margin the are expectations. this we continue lag our more reason effect about While that we progress the and we to past, experience that

to increase, exact margins we do predict. to of hard our XX% continue So when our target expect but is the to will reach timing we

move me on to let sales. Now

foreign coming sales the versus exchange. with X% from prior X% Our increase increase year of

the Let our on region's me for some you give performance now quarter. additional color

with X% increases. X% the increase America a and to North showed segment, volume biggest remainder growth mainly sales of Our price due near

exchange pattern. volume Our strong, America European sales We the gains as prior underlying share volume the as or model. for share XX% X% And organic One our the the of volumes believe by EMEA of of steel and in quite due look EMEA excluding reason. primary and global way region auto. the decrease growth our growth is with to is production well our XXXX Asia-Pacific In higher actually did underlying increases. sales the growth quarter X%. estimate volumes primarily atypical is volume at were a being being base unusually higher price commitment due growth, to to customer our compared EMEA showed our We gains XX% a were happy growth estimate intimacy in quarter markets X% primarily to X% we showed atypical this market overall to growth look volume overall in but indicative was America first to product that our the QX the offset our of in was that of our year compare high growth. due and in at rates revenue our row, to region, quarter our being increase at with good which to prices. as markets The The in a see sales We driver. the base the spread in sales X% due South we're seventh report volumes primary increased South to

approach I marketplace. strong service in top to our the and business customer Specifically, believe this our we us priority put needs continues a solutions. as differentiate first providing

multiple now even interest the the regions our our past purchase singles extend worth our the I thereby was and item number our was existing mentioning our to help we to market. includes JV. I business the challenging mentioned strong produce runs believe addition, baseball as our initiatives continue and our in in We in XXX% India One in show for many advantage invest which us inherent foreseeable technologies gain that many our growth competitive growth recent recently-acquired And in globe. future. in continuing around believe share, In the singles growing a will each base worth other see analogy, further of goals of lines hit which will initiatives in ownership of singles that India have we our each our partner's in and using to business markets as have characteristics

one process. approval Commission announcement that The Australia. timing received the down number we the regional but to despite with we still challenge we beginning the are of is in To China small our and by cost, close growing remedies FTC our year, product gross our the review from So proceeding date, our we've regulatory of have few raw Houghton a in the nutshell, SG&A. were now grow able consistent of our April faced by deal. last quarter, numerous by able largely do paths margins to of markets, and X% for with process EBITDA this we our were reviews and close with material The European the and share U.S. to leverage to about expected current increase expect in like make taking lines, earnings adjusted a in XX%. are Since to a path continuing International. expectations. the higher we and remarks been the the summary divest In to determines I in non-GAAP do to combination our marketplace, their our base

remedy then getting second were for the the Commission have the European that, two-step We down on from the first, we once Commission QX. quarter a gaining buyer. We approval to and European the a with path filed approval expected in in close going European the with Commission, after

for this with the under down best way it going on based that discussions same remedy and were choosing time. the the approval lines. one process the go both for now be in buyer the stopped we European and we're and filing was path at divested we the that we the for of Commission, decided Though As the to buyer would product

closing the that We and agreement expect for news expected buyer. Commission chosen buyer the be with approval over months. the the Federal and the as and Trade what remedy of to be be next to the in regulatory the authorities to second U.S. in made. with good general from European on to both completed We few quarter expect European is Commission we're as remedies well The the the approval both file have regulatory currently Commission, the

excited opportunities are at in we $XX combination size double will group and in of about least As this the through the said the million company, cost enable provide essentially growth past, cross-selling as it continued we energies. above-market

an of intent to company the call is expected synergies. our closing well new Our the after an as have updated as investor view and provide

So, good Quaker. year I be another will XXXX believe for

We expect reform. gross to see benefits close the the get combination with of and margin Houghton, tax improvement

I'll expertise the we regions our and end be see continue market am so growth continue And to our by we grow closing, shareholders I to now the People through in she in and that far our questions historically quarter, market create and Quaker has our initiatives customers expect with I the her thank team above gains. that as helps and we Hall, marketplace. the value to to to with world team. in those combination with our are markets happy over the provide of may expect and Mary? our dedication CFO most in excited Houghton details have Mary our it the turn all share completed financials we very valuable In to the Mary growth will address Quaker upcoming with financials. addition, our the differentiate you you asset. and can about want International for and have. to comments whose business of behind done more Once any in everything In associates

Mary Hall

Mike, and Thank all. good you, morning,

to during differ call made forward-looking please and cause that actual begin, current are projections, statements may subject include estimates, and which to I which this expectations, assumptions risks that based are Before remember materially. on results comments uncertainties

this I versus growth quarter please X a a Chart statements non-GAAP our and review included the included $X.XX the consensus Factors X as per with by were earnings Risk in are these Please risks, our reported managing the costs. These of in SEC. cautionary sales These continued in regarding release our Quaker on driven increase earnings discussion review discipline results available our $X.XX. to to in filed share XX-K forward-looking and statements website. and now of strong For analyst financial performance. Form XXXX refer XX%

XXXX. improvement pressure year-over-year some did While continue raw our cost, sequential to margin reflect QX we see material to gross due increased over

net organic volume to increased all impact explained $XXX from million, QX growth last mix. to deposited Mike benefiting X% pricing EMEA from in sales and regions as Our except selling about compared year, of

$X.XX benefited Appreciation the FX Euro with a appreciating quarter. Euro. impact last bottom The XX% from to was We the X%. U.S. largest of this line Euro the line the a foreign $X.XX FX on to favorable positive exchange for also impact our about flowed generally-weaker top year by dollar per versus translation increasing through from the impact dollar with versus QX driver with the earnings X%

from from last XX.X% of XX.X%, QX. year's of up margin down Our in gross but sequentially XX.X% QX is

we price on call, margin positive discussed is increases. As from our gross beginning the to last impact show

QX to we that gross effective the approximately leveraged operating which to continue strong XX% ratio of tax Houghton-related the tax XX% of and we our would XX.X% X, mentioned, have in SG&A look rate Quaker impact of ratio XX.X%. in growth, QX some continue helping lines last also excluding last area rate company year, the offset down the of reflect sales and on Chart Houghton up that to drive our discipline the GAAP in year. these to income reform. line to combination-related of expenses. gross the quarter expenses, of helping our show are If is margin Please in this favorably infrastructure U.S. that improvement result periods last The XX.X% $X.X to income gradual we estimates and compares margin expenses, is of Mike year's from operating in note this decrease good million cost decline. Note QX operating of non-deductible. the XX.X% reflect Both the support QX XX.% year. at tax operating expect the effective The the of margin. as of been primarily trending to margin top non-deductible our As improvement, rate

to the related XX% and Houghton between continue be rate we year, excluding cost. that full the combination expect XX% will of effective tax For our impact

X% to up of a was As of a EBITDA our Operating quarter. operating primarily the year's last investment a million cash result is record $X.X flow and support from in solid working down $XX.X capital to million $X.X X% adjusted as growth. the sales performance, for bit a result million,

with $XX.X Our strong liquidity sheet cash and a position balance million. remains of net

Q-over-Q, strong X, position up further I to gross shows and see that our I margin few and positive of Chart in as last million the we various the despite volume the from the months' trend balances the flow increases Mike consistent levels of margins in our X trending quarters Turning We our sequential materials summary, were our continues see growing insignificant trailing current earlier. reflects described you our Chart see XX debt $XXX.X consistently X continued In as in $XX.X highest depicts In EBITDA despite will current operating volumes here and the our is area. as Quaker mentioned market cash good upward balance adjusted year to in we to X, million Chart that and atypical earnings in believe date. over a and to of gross XX% we challenges. sheet our EBITDA raw cost next net cash adjusted Chart the deliver QX company levels earlier. mentioned. EMEA cash leverage while with uptake

Mike. good another Houghton and Thank focus be for closing interest We Quaker on delivering as value now, back the we expect to and in shareholders to for all our Quaker you, year XXXX to your you combination.

Michael Barry

Mary. you, stage this any questions like call. from we on participants conference Thank address to the At the

Operator

of for first Instructions] Please is go floor Edward open question ahead. The [Operator you. Marshall is Company. questions. from Thank Our coming Sidoti & now

Edward Marshall

How Good morning, guys. you? are

Michael Barry

Ed. morning, Good Good.

Mary Hall

Good morning.

Edward Marshall

Good morning.

looked from like under actually a trend like up and know Let me about start the with volume on still things I bit only weak, little going the few it there's X%, that you EMEA, for the that in it's but prior it served I up then X%. you seems that particular X% bit? was just the market. markets you there Is noticed something can in was quarters. up said a at that slow address little looks

Michael Barry

Yes.

some we a haven't at that X%, around relatively not we our seen almost going and the of steel but I especially be markets flat, If is consistent, expectations steel, Overall, essentially what in you forth, estimated roughly so almost to forward. some range, really, which were that. look of were things conflicting in, that around cold-rolled X%

longer had these expect to to that We automotive the growth for this markets, modest for term both are growth these in the range. is of year, markets always And higher but and markets. some of compared right, we I be you're kind expectations think last in our steel

Edward Marshall

of share, I than market themselves? think volume hop market do later don't are too growing Quaker [ph] I core to want you as ahead -- their your in markets that faster the on get far

Michael Barry

uncertain are as large not we're in. markets They that

For characteristics end-use that generally all aluminum have They position we around higher modest aerospace. well. out, range, I not still think They definitely markets as diverse percent few a would for think in growth. of example pans this working more for market which bigger do. growth in I are their we're a How than much have

Edward Marshall

Got that reaction, now more least that a occurred halt And or away, in weren't kind North Asia, tariffs more of we that that then were kind discussion might do we're than these think it. at at maybe little in tariffs customer America, when on of at was how of kind sourcing have you the picked a there into And might change? America? North softer bit up look

Michael Barry

we we haven't to say don't Quaker this and would as tariffs the that equal at shares feel point shifts have because if business too much. there We I around but everywhere don't If -- the expect shifts we really world. in it a were shifts, on there have impact meaningful the -- seen generally many steel were impact

Edward Marshall

baseball to guess Got for the increases? question to you're captured it. maybe expected you say, how get final what how where you a the that raw analogy prices inning are index on gotten much is for you pricing I versus me trying through that but much have recapturing material I about if your on as of year, with you walk you to guidance your use gauge maybe And think the already just I'm me understand be... are up, price? are can to XXX%, a

Michael Barry

in of in already this quarter like to yet. price in go It's were increases a our own things starting very have from then that baked complex example, things some certain from subsequently that price if question of cost in because we generally, the have way of price already fully are point price at see the increases flat tends point are has to is to us, happen this what material on other increases impacted increases stayed to make relative Kind onward, that we not and place first we time, coming for based that. quarter, a the information type

Now, have some to out and we more increases. go get price

us. effect this One have continually in trends stabilized, we you. like [ph] a these best the to thing through. continually continue I you really it event are period can think on. of just continuing as before three Because lag raw to upward say, everything and we it's It's evolve to goes just it's tell see things kid So six a materials, going for

Edward Marshall

you the very track? Yes, appreciate rabbit on comments. I Thank the like the much.

Michael Barry

Ed. Sure. Thanks,

Operator

you. Thank

ahead. of is Securities. Harrison question Global next coming go from Seaport Our Mike Please

Mike Harrison

Good to year. Nice start Hi. morning. the

Michael Barry

Thank Mike. you. morning, Good

Mary Hall

Good morning.

Mike Harrison

raw a material the at different angle. go question to wanted from I

some looking of showing you're presumably at your basket? in rows that for if you still some crude-based risk the or of I'm any year. also of buckets some you're are of the the what as main case that's the of raw terms animal about you a trends within stabilization higher inflation signs moving materials material plant-based if seeing still and I'm wondering three used. wondering seeing Just wondering think

Michael Barry

Yes.

around forth. there most of beginning. have think about more in of then things and supply and stable the oils And animal kind up or whole with more what around be upper crude-based that unrelated you affect has over I fats really gets you vegetable are but materials, point. -- then that other demand oils you so agree there that one raw tend at host the into go kind what generally the Vegetable said mineral talking are would meet to I crude. this a chemicals they with pressure the of time, depends

chance I more think for potential. mainly had ones crude upper that it's the

Mike Harrison

at still few that has you've moving say of quarters? slowed over point from the rate but seen higher, to increase the this fair So, maybe still what past

Michael Barry

Yes.

fair. I think that's

know Right? Although you yes. what never happens tomorrow. But,

Mike Harrison

to number for to at gross gross able hit expect XXXX you XX% a on the to number as you expect a to XX% point or hit year just year-end? Do guidance. some margin Just the before clarify number that that is be margin full

Michael Barry

expect will year-end. we're that quarter, We're towards our in but not upwards obviously, would -- trending trend that. first it I before definitely the there

that will round it the and would down We would when round gross we think year are up look for you of you at margin, the XX%. or where for end

Mike Harrison

was if inflation then little all And the go if seen mix of some back recently fairly Asia-Pacific we've pickup demand throughout and negative raw couple was even persistent XXXX, region. in years XXXX, in material more over at been price bit obviously a this like can price past XXXX in negative as negative It and that least you It mix looks again was component. Asia-Pacific way we then sales the like about I talk the quarter. on wondering it's it looks

from? mix could out like piece that then there's if wondering understand piece see pricing wondering, any it What during and XXXX? just we in if turn can versus us break would help dynamic could that the Asia price where the look coming mix you chance is So positive just we

Michael Barry

there. really of we is to first there. it's difficult right things mining, is that or has especially for a price mix in now are all, product very so and past that for products, that use our mining business the you different mix of sense think countries of a of pointed forth have I in China some in go to come how lower points as break us, but out back my it in the lot and lot in how that and different has We've

nothing feel good getting good really or we feel Asia-Pacific. share fundamentally in Asia. there's not So we're in good. bad We're taking about Asia-Pacific, We in growth

So we feel pretty about good it.

I mix effects. think seeing you're just mainly these

Mike Harrison

on wondering right. And to could just if with us was then is me on give how have update opportunities last makers share fluids auto win America. in transplant North auto an makers All and I your Houghton question you doing bit how for been efforts acquisition in gain maybe the talk with additional could metal to America? transplant give North guys those internally little a you the about working you business

Michael Barry

a the into into We've effort we're putting auto Asian and increased of sales lot continually seeing are time been think that Sure. U.S. in the I over makers that

say there. I growth think we're us definitely type seeing above-market let

bodes very feel the that concerned, as added Houghton about as the I our And join team, making far combination. as is We period well it's has well So they there. the probably think been and more for very bring and a we progress we're we're as good would that have excited about people efforts effort of the longer to there time nice that Houghton than well.

Mike Harrison

Thanks much. very right. All

Michael Barry

Thank you.

Operator

you. Thank

Please ahead. of coming go Jon is question next Tanwanteng Our CJS Securities. from

Jon Tanwanteng

questions. taking Good quarter you and morning. thank for Very nice my

Michael Barry

Thanks, Jon. Good morning.

Jon Tanwanteng

decreased a cash Net Mary. bit,

growth. on out the was is you from quarters, we support of draw be that mentioned at sales you the I expect go working continue rest as that investments to play When look and through do that think capital cash future to going how to you the a year? to the

Mary Hall

this quarter payments in of the was in expenses the Right. cash some payments the year There that the were first first first think like of quarter also combination and quarter. quarter, higher and than first a first in housing compensation, last quarter We related is to that seasonality the occur year. there primarily

working in So the is of really, quarter. for primarily seasonality us which capital, typical first

Jon Tanwanteng

Okay, commentary maybe expected just Houghton close. great. little And more Thank on a then you.

it. the correctly the to bit language Am is reason think about the I and on QX? can a different you time little push that? Maybe that last behind from I you spoke interpreting

Michael Barry

Yes.

to with we learn for both made the path the approval mention and go that we then remarks a tried going here, filing remedy and thought European the we I for my were get in have best approval process them as discussions and to with As and it's with down Commission a European we we pull and Commission, in more the the in that that buyer remedy. two-step February for were filing a one

Now buyer. the of in we're process the finalizing

second but We if is or to and that, next be something that in and would Commission completed third really process. to the It's us second thing expect be we we uncertain would file we be through do language in expect our timing that that that over the once the like then something a to happen that's with the quarter, the going quarter we European that few and will would completed months. kind said, of quarter

Jon Tanwanteng

regulatory filing the kind to any you're and it's anything a in the as type or of Okay, that getting the of opposed to from procedure change just clarify, back bodies? push

Michael Barry

to get trying one steps. step different two approval We're versus Yes. on

Jon Tanwanteng

Yes.

the final of portion you're Okay, on for just debt one to especially financing great. interest little And then if expecting me, a pushes the rate out pay bit? what one the day remind us

Mary Hall

on close. does rate any not change, the Jon, the financing with in interest delay The Yes.

would X% there about here denominated the U.S. LIBOR equivalent financing that's that the roughly LIBOR baked just is much plus and the the portion. so, It into pretty XX% less rate dollar with LIBOR a with at or than rate spread in is agreement X% that the the and Europe remember starts used So banks. of out be the for

based balance before in that area, to the get on still interest be X.XX% So how when that current rates U.S. rate Q X.X% we said denominated a we based the on the denominated you we of dollar and expect out Euro that that's of say to financing. balance the to rates area when in combination

Jon Tanwanteng

Great. helpful. so you That's much. very Thank

Operator

Instructions] go Please coming from Laurence next Our ahead. [Operator Jefferies. question Alexander is of

Unidentified Analyst

Good How are [ph] morning. Donofrio Dan It's you, guys? Laurence. for

Mary Hall

Good morning.

Michael Barry

Good morning, Dan.

Unidentified Analyst

mentioned just I that you it by mining. wondering there would how like was increased hurt -- terms was kind others? You this how rank this the Is end there APAC in feels profiling better shift works markets of your than mix? on margin and out? If best or mixed of one that's particularly

Michael Barry

a Well, our going very the and they're businesses, us I and by at general, I between there's In lot customers, of in mix on profit way different business you our different good different profitability so of the countries the to effects see as different forth. some mine for vision all Asia overall having -- look better good poor kind think I it. business [indiscernible]. is or don't can

Mary Hall

what slightly used That the the if was we've the just effect. margin some example that of in of just that. a come mining issue the that really lower as a we've have than example We up area were of I said, a might mixed using mixed that of particular was think an other in volumes don't Dan, an cause And businesses. A past.

Unidentified Analyst

it -- when or higher the or though, mix change And then along added you. when lines how affect does all? things Got lower? same that you Houghton's Is does at in, guess I it

Michael Barry

two with we new the lot so hall, disclosed. at like, real our separate material a in combined margin we what difference proxy through synergies forth out level, and you a once Yes, can that high of there we'll the we'll much. go from have close way a a for not perspective vote, what the combination, put Obviously entity big the on this shareholder projections we the by look haven't between looks is kind companies,

Unidentified Analyst

Thank much. you you. Got very

Michael Barry

Dan. Thanks,

Operator

additional this At I'd management comments. any to closing to you. back over floor turn or the like time, for Thank

Michael Barry

Okay.

today. there's Given all other will your you thank want we now I for call of our end interest conference and no to questions,

our for and the with to are pleased We the be first continue Quaker confident quarter results future we Chemical. of in

have meantime, quarter call And Chemical. July XXXX Mary the Thanks free please you be feel again or of will if contact Quaker in in in your late or conference Our next for second the for early questions August. results myself. interest any to

Operator

thank conference. gentlemen, and participation. concludes you Ladies your for This today's

disconnect may day. and wonderful this your lines at You time a have

Quaker Chemical (KWR) 1 May 182018 Q1 Earnings call transcript