KWR - Earnings call transcript Q2 2018 | Quaker Chemical Corporation

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Operator

Greetings, and welcome to the Quaker Chemical Corporation Second 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 Don. 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 the

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our increased than To European higher XX% driven our X% exchange normal increase XX% largely and driven XX% some a in this quarter largely of a the this increases by sales volume timing shipments region, driving by increase to note Our being Asia was other higher sales rates. region EMEA with rest quarters. Pacific or showed hitting price due versus of growth volumes. In

volume America in South to we that quarter in and prices The growth. The And growth solid was timing remaining even the China. exchange growth America impact South price to well to overall offset One organic that as quarter at our in gains growth sales is rate XX%. a markets. growth underlying our volume market product of rates in Pacific a the report in see base exchange look for are revenue as than mix. product way was Asia which growth happy by in XX%, increases negative good this production However, to compare X% largely more to considering higher growth due see we and revenue our X% continue primarily to and driven foreign row, the eight of showed totaling

spread indicative model. customer is commitment at in believe as intimacy base the our of Our growth X% approximately of approximately overall our gains share our is due to underlying We X% which to volume growth X%. was the to estimate markets and compared our we

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

seeing also really tax US reforms, by the by challenges a markets, share in increasing despite to from like material to our non-GAAP cost, EBITDA XX%. non-GAAP with leverage in our raw we remarks nutshell, were due our adjusted Nothing earnings In increase Xthpress base has quarter, share I’d International. make the Houghton why the July we And XX%. impacts earnings EBITDA earnings a of for combination were growing changed summary taking favorable an grow by to XX% able in SG&A. per which faced reason of to primary this marketplace, we’re able growth do exceeded and continuing to higher gross growth in adjusted the our and our few So our the since our about release. continued was now with we our XX% margins

it and market the needs expectations. X% to regulatory the with the as and additional the in of be continue opportunities the the European the to anticipate the third we And product the new in be need the size combination regulators divested. this or million with remedy market, revenue process are result we’ll cross-selling combination us buyers. remedy We enables and constructive end both original Commission synergies. authorities of cross allows Overall double This through it expect both be quarter. potential our a present discussion time I to commissions is believe about less consistent with will provides growth with with the the the as combined company, we at least potential combination. magnitude the essentially fourth to buyers be meets which of the quarter the good finalize $XX continued we will well past, and as excited said and and approval we above approximately the the be a intend both close FTC of in companies of to to the We in the the the as in divested lines, product continues to which lines of

and of provide the recap, Our after believe another well intent I be year for XXXX expected call our new is as synergies. view investor to have an the closing company, updated an good will Quaker. as to To

Houghton gross to year-over-year US from of margin the improvement tax benefits combination realize close to expect and We reform. the

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

Mary Hall

and Mike, you, good Thank all. morning

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

were drivers margin earnings with Chart statements on and $X.XX saw across and X Quaker key sequentially performance result SEC. as gross our quarter. included of please good sales per this I QX control For year-over-year. in similar our strong both increase a a these share these release improve earnings In filed website. the available Risk quarter combined risks, a and of X very a Please XX% in to cost review the reported included to These as Form factors statements resulted strong Factors non-GAAP All XX-K in in discussion in growth also review financial the of regarding operating scene a strong the are company. now cautionary and forward-looking to this performance year, we performance. our XXXX and our of refer

million organic growth of compared to Our our of QX the pricing improvements X% selling net mixed driving to increased sales price year, last XX% and and X%. with volume about way leading initiatives $XXX

versus In in dollar generally the benefitted the XXXX. the year-over-year by XXXX euro with X% X.X X% from dollar a US in major QX QX X.XX our weaker which being topline to addition, appreciated about

gross QX up XX.X% is a of Our a quarter improvement. second up is and percent versus of over margin is also of This margin X/XX gross XX.X% sequentially XX.X%. sequential last year’s

Quaker XX.X% discipline in further of addition cost our margin we Note growth. of and topline operating to leveraged the ratio ratio last strong XX.X% continued QX together our Houghton support to improved we operating year, to on operating our gross margin. the of as and share that X.X compares income QX good at and look income expenses. operating to increase million favorably our In chart If sales reflect operating drove with X, GAAP cost SG&A margin of related

estimate XX% The in lower QX the strong in in quarter, our that XX.X% statutory $X.X quarter US QX rate rate in another last we tax of with last effective the reduced was current the performance. earnings tax XX% earnings and current quarter on to US In the resulted rate. to contributor combined effective Our taxes lower low million adjustment year tax versus this booked adjusted by tax the versus a XXXX. [total] of XtX.X% the reform of of relative our related year’s current unrepatriated we

and impact US year, that in any rate excluding booked between related year tax reform charge we to combination QX XX% tax to full and the of expect the will be the For our effective we cost XXXX. adjustments XX% current continue Houghton of that

working increase operating operating year-over-year invested As up in sales. EBITDA XX% was performance, year-over-year, a in capital a is cash our result XX% of support to the as adjusted big we down strong flow

and million a with Our XX. at sheet liquidity cash balance of June position remained strong XX.X net

see quarter. all in chart the gross organic that I is sequential X, year-over-year increases growth in can Turning volume which described for X, earlier. chart and growth to the the volume, continued margin see you In we here

with the and summary, good to positive we months million materials continuing I now we of our is debt while EBITDA and adjusted in despite the increase raw the XX.X cash Chart good for gross year. mid million position In earnings area and adjusted our cash highlights to as liquidity as deliver cost As to XX XX% and a EBITDA the flow X cash Mike balances consistently be Also XXX challenges. of leverage consistent net further a various the earlier. market record. strong with X shows mentioned, continues current to company. sheet see continued rest Quaker in low trend trailing mentioned our our and balance growing margin and Chart expect shows operating

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

Michael Barry

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

Operator

the any the Michael with volumes second other comes your either with Houghton [Operator Instructions] proceed question question. that’s question Alexander it Jefferies. Are just the looks looking the first quarter. A quarterly kind guess is Laurence quarter acquisitions eyeballing indications hand X, there’s couple Similarly been difficult. issues of And with I Houghton Please you Europe or of market, guess of pattern may the historically. Alexander QX our accidentally the than and resume’s higher first the first of anything be somewhat from question leaving seasonally of indication your or pending, that than a that any like chart second seeing make and On at second would Barry the more retention. were questions, in around being Laurence of case seen third your just I’m sequentially door stronger end crossing QX. thinking in particularly have talents I of then you terms

Europe on necessarily case this with the being these in with it’s You direction Asia direction. both can issues quarter shipments. not We’ve some in know you past of Pacific and the because timing in get another seen time all to that being

see So there’s in that nothing been the would volume. in fundamentally happens a that our business though discontinuities we major

Houghton question, retention, on the On the yeah. second

and continues to no we to perspective, on and personnel with the certainly them Houghton from retention engaged. be the Houghton team have that So the key want

Operator

try about & with proceed Please maybe Edward next situations Marshall from Our wanted and I of question. in that ask, any you question from touched has Barry Asia pre-booked cases for region? pre-buy [role] the some drop Michael we particular ask Sidoti Marshall inflation, to on Company. to there’s purchase that I There comes like year-over-year significant Pacific off Edward your wanted this. do been that to might

that’s locally kind general, why around raw in we of to and So generally is situation question I think local blending materials, in uses if mind world. its many impact products how the does your produces facilities one Quaker, have is, tariff Quaker keep the thing so

are which used we the materials or specialty type to However raw in US world. there from where some the there China throughout buy have are where circumstances products are

would and raw generally formulating have eliminate impact. buying from related mitigate on them finished another country identified raising tariffs process that if reduce to product materials tariff material our on steps the the have we’re We these taking all include items products. we’re These or the price of the their in to steps possible finished our or where raw

that’s we fact circumstances materials, time In the within constantly the tariff normal obviously just face course related. more this raw doing one business all of like with it’s

I would I be currently couldn’t effects will mitigate of have a in mitigate or estimate we impact see on any differently as the our this adverse significant the even results. to all really and an don’t if So or a X.X%. issue any that impact we it But this most see at most of we and tariff, of that think do will margins don’t way, the gross I of decrease

We so So appreciate just primary looks (inaudible) I I you maybe each been it investment additional the six regional with now there’s ball the notice we’ll And little segment has and question later metal within fees some is all that Do metals, that the Mary you you and data And businesses the clarity. We’ve month with three consolidation for breaking that’s given now Edward give might the happen XQ that each the work it of this a nothing to that anything quarter anything aside segment just follow-up with that data months there historically, take based that two the down performance number the regulatory do a hope at my should and of the meant better why Barry to see then we’re into maybe And Marshall out market you we us I this with guess in more Michael of cost to to that’s Hall the could with professional the a if the I’m that. broke luck context. release. that I in will started always individual one Edward delay provide or transaction? have quarter, was regulatory clarity read Marshall the that from you total curious? breaking including fine. Let fees. associated like me the to I that and kind that. on incurred as can international have

at an amount just another numbers and bulk that $XX that $XX due expect XX and booked including at $XX spend we’ve number. year-to-date So, million to to if you we million spend looking XX look The roughly close through XXXX, between that we million and of said spent we’ve or million. is the and actually due million of year-to-date close ad

year-to-date we or we run be then booked million or in think X until estimate quarter. spend what and a you the million the close rest rate of for XX year QX, if So the roughly about should

of well here problem But business a organic we invest that do of the finally of very repeat. to How and to, some are on business whether keep do have we’re half Houghton And Edward Marshall normal need has nothing continuing all, to as year, in the we we the little Barry any cost traditional winning in – organically. we to expect connection from So Michael continue it opportunities? bit. growing investment as Quaker’s or working limited business not the incurred obviously first then inorganic it’s to

Operator

Mike was to Mike could comes was, proceed in in to Please volume more Asia, related strength Harrison on Harrison the doing in Global. any question what’s to customers we think comments just tariffs I I your Just give would your pre-buying component with believe of going make that that’s question. the Michael any unusual of Asia-Pacific details maybe tariffs next Our on tariffs mentioned unusual China. there’s you being question some clarify there any are there of Seaport there. purchases pre-buying due from in order and or to Is Barry the to say, no implemented. ahead don’t you the

feel the some sometimes being pretty see in we some issues split other in kind did quarters, did this quarter I versus of timing other though good that. we that I one versus plant shipments quarter we unusual, some think businesses about other. I during locations and that quarter second mention could with year be hit – and at sometimes the different with suppliers can or

might that but of Pacific, little we’re But of flat, that was which a very growth growth of that. true that piece from relatively there some the if that there up have or good which we estimate had in shipments there you also be you there these issues. strong with region. a kind is bit you Europe. out, take perspective. timing due and was in timing was if business we believe these that of things still growth, even strip as credit But volume growth unusual out we’re getting around So and opposite and then gave would there’s Europe we we trials some of kind And that a X% X% volume well profitability in issues that Asia volume seeing effect were to things there

those value well. with always that you trying of then kind and region a from and or the try or estimate the little pretty something also to generate the region and of can reformulating do just through Harrison pricing. And you products have costs XX%-XX% kinds contracts. customers less cost raws as ones value customers Barry of Generally a are take within the and you that, bit that are contractual to always material a have other apples, can to Is but presumably value you’re to increase the to are type we’re the at. actions, work. EMEA, the shift are of raw that fall materials, the those effects to there sales we pass the overall world you to impacts the that with are the indexed increases of things better are that higher products more that portion our to of is everywhere of new customer And is improved know pricing? we to cost your that most of And that throughout of pass by can that then entire add seeing of as that in America Can customers. where within values what but company, is or larger besides then the to able through. it contracts certain that pleased is your this might looking pricing some was a sales we’re range specific customer, or I North how good are of key have in tend a obviously think we freight reformulation does inflation product because Mike then like to perspective. So We mimic discuss Harrison I may you, two (inaudible). balance it and quarter-to-quarter indexed around said, of total addition And price customers We it margins fit, material raw a can region. there these be to in materials do you you raw cost and costs Mike although we Are regarding other taking products raw growth indices very actions costs margin able a conversation see you hoping be indexing well? these you’re with overcome add have Barry customers. just for have Michael Yeah, to Michael

take we’ve It’s those in a and coconut cases. customer. oil, of products certain example, historically markets oil for upon might a the skew pricing might different pricing but a can the some somethings in pricing the some take done, these, products of we’re happens have dependent We impact what where doing to lot really palm a

the you’re customer have and of it the approach and Some know same prices we we customers’ will becomes discussion. this take we a if you say, to can this amount then have to have keep to or able substitute increase a either and product, can product mitigate

fabric So and it’s we products. materials our the to doing kind where of our for cost certainly other we with things of the try our customers all constantly are minimize pay the of to work price lot raw a time, part we of

Operator

the your next correctly, gross If with comes Our Tanwanteng CJS I’m outlook Securities. Jon around proceed Tanwanteng question last quarters’ from year. question. had of XX% Jon expected reading margins Please you for

even seeing to and mid tariffs improved headwinds. is you’re So low FX some and XX with additional now

increases that breaking in consistently is the So price couple We’ve or there Michael years. first you’re established on pricing based for your essentially been that further the correct past pipe Barry and that there outlook, of is doing out of the have second increases we customers?

it, constant the been many in place, margins up there them. like continuing that are so near of raw because just can go raw future. going materials so predict not tough, factors Trying impact the stop it’s are all be it So to gross to one over materials and being to that’s looks process

Jon shifting to in have then the we and Tanwanteng Well the that production in in expect in steel a much you so around revenues believe with places in we we previous the expect, perspective, are gains maybe the an don’t of region-to-region, on of a all with So, decrease where world. production the losses? see on on seeing it saying that consistent say And would tariffs you other US guidance would Michael see the and and and example, from see so for would is at we you Barry tariffs, per our relatively margin just been say. what secondly, change the guidance, but continue impact as not to increase

in given we it is the steel we would – I to offset everywhere to this most have generally being past. ways the could of normally a capacity utilization industry As in be it and steel because but in steel tax we’re the so we we’re Does where or we the other somewhat some marginally. steel basis which It past, some well. Tanwanteng modest seen we case that share year, that is benefit after US expect different expect where consistent an make attractive this said on change region, rate tariffs have the at a US the all? being in Michael around world, production locations would very depends is At tax to and product made. market Barry China already in the But in Jon from. Not, that that in increases indifferent as the it indifferent the come comes in

So we difference States. not United see big versus there’s what a in what see in China we

Operator

you’ve your with Burke next Liam production proceed Burke for able Please comes Capital. Mike and increases through, steel FBR value matter a of price Liam get you’re it’s to from Our question. a got time. just the of so generally question proposition

on feel other share. may years. hurt able hand where I a raw really Barry maintain from gains is what’s to having a perspective. lot price several of you increases the efforts to over the material last consistently price those the been a that your you’ve On add going Michael you’ve been increases Do point be to recovering just share see

a maintain product level really customer with and it’s a have line. profitability certain certain just that we to So the product trying

we’re of and to that we keeping also Burke production the know, continue volumes and return take EVA drive and pretty place. that, cost for the will taking doing the at by continue track. feel raw the much share to can we As primary just adjusted our Liam do easy materials achieve evaluating you market business to consider just the in above what that, business, current steel metals, approach we values that on to that’s capital our And that

it’s healthy what how a still one our is a underlying there the those markets? many metal of working how the producer a that it going, you’re not metal selling working but two and major metal clear are – Yeah, to the Barry is business major mean working as components certainly that underlying is I side, drivers, you in so to Michael there’s of that through because of On it ensure seeing too. easy market, market lot track parts

to you auto this very always always and going have is good year So well auto be is – globally. doing

Of care course and we global well. about doing its

Another that well rust we’re in is, certainly we in. pipe both off coatings as market and point and pipe would are market tubing tubing that’s us I preventatives the out once lubricants that We and as well. as saw going that helping

that situation So world. broadly in we’re seeing, all almost in it’s good general participating been think I markets a then base pretty the we’re and pretty around the

Operator

your the Mike expected the on here Our the fourth maybe touch to you next close question to looking comes acquisitions – Houghton Gyure question. from guess strategy your I Mike forward Gyure with with Janney. Please Can quarter. proceed realizing

big Yes, this after strategy. once you’re Once down times two acquisitions. EBITDA years we we of then there? hit But milestone we other pay sellers focuses. in we meantime the to do looking these with can Houghton Just more feel type is view our looking you of what at are first still to the little intent of combination one we more can our are bolt-on larger you ones. at to call do we we is you at market, domestic, looking it’s our What certainly acquisition Barry the potential to Michael market view the priority the how for certainly complete how out at combination or with said then international least the our that’s debt level, X.X as look at our

areas are to need we not look were be or of we So looking we world. whole but as around because it’s a much specific pretty we country everywhere think strategy a in far in, areas, as the regional a what host I

well where of it’s in a can find we global certain as we nature So We’ve ones or do a direct nature. in competitors really past. of we that be that or product add technology regional have. new somewhat the can bring those caught they can a It’s as line well. in as They be just are bolt-on done a lot more that kind

pretty is where So, to. to nice add post Mary even The list let of continues potential combination a our a opportunities we Houghton constantly just working Hall going forward where in highly metal it have space that fragmented And space. me we evaluate. be focus that there

to of working in really that natural focus would believe metal our larger that continue and we the So, we’re future be consolidator market acquisitions.

Operator

Please three to in possibility. the of the event a with bit make wanting dollar we’re the more be don’t In has to I or headwind. Management. logical, continuing so months of potential a accretive full could in Barry the year? items, so but little me. will that’s strength of Michael full of quarter Our quarter. I to for that, a for a the specific Would do couple in we to months you that Palisade around want it definitely in get the what saw guess around to Norian Garo closed to beautifully Garo half Mary from that’s shown Just to some it for question. Norian of the XX, accretive. to or believe --. currency Capital a fourth year we’ve in next just on question speak first that be it a a week dilutive to And The year exactly I last this hard first Houghton combination secondly, bit ownership? the from Norian had September be your Hall become Garo half a likely that or track is here looking some then the a it if Understood. quarter. or we that tailwind that a guidance appreciate of circumstance quarter a we the versus more It’s half It’s and like it, have say believe in first that be fourth messy given Garo that switch it going with that, to the try to Garo proceed certainly year of headwind first back to Norian is comes understand

Operator

volume. you Our bit how Mike or Harrison any disruptions as little Is just North Can a good utilization from in America. Harrison business? in when steel in just I as guess is you well, Barry US a mill is US. mentioned follow-up that Barry a some saw well? in No couple that the a the a more quarter them production with supplier products major better as as Wondering wondered, using I automotive or rates if this that final in Michael and view – talk No they’re in high Michael help Please a question. see we issues. more products that steel were do expectation volume utilization Seaport usage would level it of declines, about of higher upgrade customers of the tend Just a implemented be a use impacted Harrison from There range Mike impact American At those you see see to your proceed Mike improving would conversely better had utilization business? guess just you the your you facilities? question or impact you production some product do I North are shifts your very volumes tariffs Global. broader the

of Our gets consumed product produced. per ton steel

produce they there tight start allow to you when tons, would extra products. But certainly circumstances that capacity in capabilities need a product to our if has can somebody they’ll more of to that be So utilization higher capacity. produce and get consumer

a we but that’s issues, major and now stage capacity just industry mid-XXs that something in Can material details raw is, you’re talked Mary basket, a albeit is would in the one from Let impact some each a about, take in else now? you’ve of concerned three and you’re me at Hall would And world. the Mike. that you as and about of view me and most the ones that of the last utilization past the we of materials. of about those stab be what mineral additional talking impact around about volume have maybe somewhere steel outlook would from we’re in may the bit the raw up (inaudible) what then just course the pick I plant the Harrison little animal kind right being don’t not on components So of that offsetting of in possible, steel Mike in I seeing in talk like kind what would is more an produced think terms thesis with

oils, think fats. we the out, about, talked biggies oil, animal got we’ve that I pointed as the you accurately vegetables three mineral

are directly over mineral is are seeing crude those oil fats to I well. again animal the time. the versus being vegetable directly perhaps because to and and related concerned with which oil points we substitutability as it’s behaving we aligned about at most raw like. costs said bio-diesel of for think you point in say to actually are track rising just that mineral time. What oils. mineral are time are overtime oil one and But the most those most this tend in material the The the most time oil Let’s time over the vegetable pretty trends be But seem the said

that help question? does answer your So,

Operator

gentlemen, and end management like I reached to turn of our Ladies question-and-answer closing for the call we’ve back would to the remarks. session.

Michael Barry

I are questions that now. conference call other for And to today. Given end want we’ll no you the your interest thank there

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

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

Operator

conference. todays’ concludes This

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

Michael Barry	Chairman, CEO and President
Mary Hall	CFO
Robert Traub	General Counsel
Laurence Alexander	Jefferies
Edward Marshall	Sidoti & Company
Mike Harrison	Seaport Global
Jon Tanwanteng	CJS Securities
Liam Burke	FBR Capital
Mike Gyure	Janney Montomery Scott
Garo Norian	Palisade Capital Management

Quaker Chemical (KWR) 31 Jul 182018 Q2 Earnings call transcript