HAYN - Earnings call transcript Q2 2019 | Haynes International Inc

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Operator

Good day, ladies and gentlemen, and welcome to the Haynes International Second Quarter Fiscal 2019 Earnings Call. All lines have been placed on a listen-only mode, and the floor will be opened for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host for today, Mr. David Van Bibber, Controller and Chief Accounting Officer. Sir, the floor is yours.

David Van Bibber

for today. much very you joining us Thank With of Vice Haynes are Mike President and CEO Shor, President International; Chief Officer. me Financial today and and Dan Maudlin,

The brief would forward-looking Before XXXX started, statements and believe, Act the are Private that words the of This like Securities cautionary within contains note Securities forward-looking Section Act of to to conference we intended XXE and call statements. regarding I of plan and of read similar meaning get are Litigation statements. forward-looking Reform XXXX. a anticipate, Exchange the and expressions identify

Although and can are our risks intentions reasonable, provide in such plans, no or and expectations a fiscal regarding statements are we as detail to publicly the or statements the Form revise company's risks that, believe to assurance Securities of obligation With particular, to forward-looking Exchange update in September the be future these subject information, that over and by of new turn expectations company or result no achieved. let otherwise. Many such The number are intentions Mike. whether statements ended call with XXXX. forward-looking we any year plans, will in me filings undertakes Commission, the and a such discussed of suggested or for uncertainties, events XX-K XX,

Michael Shor

everyone. morning, Good Dave. Thanks,

focused our of continue enthusiasm to opportunities areas improvement business. of XX the Our fuel potential my for

identified believe and into We business discuss initiatives of. the gross improvement is solid However, our have today. we that we'll not this and our this issues we them believe the did revenue margins that quarter translate capable

the I'd have that, made. we like progress Before to talk about doing

level Order our $XXX averaging is putting has on been our at with focus follows. million, hold last in backlog highest taking exciting be company our XXXX. strong as order $XX details and since to current is improvements of. The part our million three entry, Our entry months and are very emphasis throughout

have increased the our Our phase QX. successful pounds believe to shipped transitioned from X.X to million in We volume talking-about-it that volumes increase to efforts execution.

reduction million improving above impacted produced Our signs Kokomo pounds with X.X initiatives that operations flat X positive very ship our cold-finish month. produced of our tubing seeing line and three Kokomo our We're efficiency when million approximately in at taking furnace customers. operations our begin to the should every involved our pounds, March; month outage in pounds average cost hold orders well and bottom and are our impact to

for high-value our this We of are second aerospace sell now orders the a see the new quarter. of our mix, in differentiated mainly began portion products realizing we market. impact on price bottom-line for increases the We to into

efforts our growth. sustained are Wire in excellent related We seeing and our facilities profitable business to distribution worldwide meaningful and

business below gross interest engine in momentum additional the of. now of platform believe has into a our the introduction thermal proceeding of also for low was has extensive two are be high Finally, has oxidation focus with many in sales quarter now applications. we new strong been with our for patented we development what Despite and positive engine will strong degrees expansion HAYNES strength for and and X,XXX alloys: interest areas, developed and of XXX application. capable HAYNES of which an resistance. and HAYNES newest aero HAYNES Fahrenheit; XXX, speced testing our creep XX.X% XXX, XXX combination the this excellent is an to margin of its for strength

components the the to to our for levers continue business We key analyze improvement. of understand

are for as impacted the the our They Our gross key four findings major in quarter. that from QX of identification follows. margin resulted issues

successfully complete our issues January. with We late in encountered First, a this few however. significant we did upgrade furnace

quarter. a had we during delayed versus previously, discussed As startup this plan

and down volume caused now and taking with temporary cost behind higher and yields, processing These be a of issues associated restarting issues view. from margin lower which us headwind. addition, costs this represented of production point should both furnace In a

next rest cost goods moderately of quarter's sold of ships. However, as the product these higher this may costs impact

special in were shipments weak Next, this project alloys revenue our shipped. of in and both quarter, mix

discussed processing is chains, highly this incoming dependent to our variation As in customer rates. leading previously, being on segment within our approved chemical unique projects supply order

on Our work smaller team to larger opportunities. and continues project both

these our of opportunities. technical make alloys qualified uniquely and pursue and marketing suite Our expertise types us to of

and during specialty and in in of of what the mix discussed, shipments, projects value was seen alloy mix quarter just well product represented below quarters. a I the due the levels we've Third, part lower lower to recent

our recent quarter issues high-value and significant to differentiated our price impact of products. fiscal this the the a be of had margins I cobalt second the decline unfavorable may would the just price half on this in on impact like in moderate that the of point Finally, to offset year. increases were headwind by also partially out continue a noted

for quarter at in fiscal sequentially the increase other of higher represents $XXX.X on quarter, revenues of pounds of $XX.XX from moving $XX fiscal This me fiscal million Now, volume XX.X% of of XXXX higher Net and on markets. was likely year. price to million that regarding about X.X% million optimistic volume quarterly significant per for saw as in MAX X% year's quarter largely have quarter, and XXXX. in company's than years. the pounds were price this the than represents demand shipped the dollars company highest in last our XXXX. quarter temporary of shipments. our combined second million for four as pound pound, in aerospace move X.X in fiscal a initiated QX accounted the results Volume record per expanded our were $XXX.X in of XXXX. was in backlog in during growth this selling same represents increase beyond XX.X% the the of remains XX.X% will Boeing's believe by fiscal a let key capacity remain $XX.XX rates average market market this not million the of XXX million same from fiscal the Demand With shipped production products. increases in X.X% an period the strong area, with our pound. volume XX.X% our to to the of the have The quarter in the continued aerospace to period increase over the Sales the aerospace record revenue and XXXX, XX% aerospace that of increase XXXX, XX% per and due for first impact to $XX.X period Average well quarter aerospace due We and the in second the a QX schedules reduction this was cold-finish fiscal aerospace we pounds. same the with We selling sequentially X.X production prices from in quarter is revenue, expected to quarter up increase that, inclusive shipping a even in the volume. quarter an we

Whitney product the alloys the and part engine our Pratt including XXXX proprietary platforms, & new series aircraft in new including Our major engine GEXX engines. of engines, specified specialty and niche is most

Volume million moving expected of XXXX. for at drive $XX.X for the an strength quarter in business into from of decrease levels Our XX% core fiscal million lower per to to is X.X% and increase was X.X% increase accounted This X% period of is XXXX, a price due quarter revenue, fiscal profitability us lower a the this in $XX.X our of application by average to volume. of in pound Sales same processing the offset pounds selling due forward. was aerospace XXX,XXX second represents market projects. and specialty chemical in partially primarily

of see to activity these continue development projects. We

However, proved to quarter below activity into this converting our shipments be expectations. this

CPI, base the strategies initiated our business increase plate On meaningfully side of intended to we've volumes.

volume to in the price inventory in to to pound the offset million was is the increased accounted for in volumes, selling results of per XXX,XXX QX XXXX rebound, increased million supply shipped from This decrease of partially average Sales just efforts turbines gas QX. represents $XX.X into of dollars sequentially by pounds. because backlog increase in have industrial period Volume XX% the a increase believe X.X%. due XX.X% the chain in volume turbine fiscal While of same Backlog XX.X% those quarter. XX.X%, of of by just of quarter the begun small our replenished. XX.X% We're XXXX. an the from being increase revenue $XX.X in see at for did in second CPI we industrial a we an seeing finally fiscal gas market drive

to inventory concern market demand large-frame below going for move the these regarding the comparison market market. by volume the to While The of been use these fiscal help and reduction, turbines are in and there significant share offset impacted years To forward, renewable for weaker growth increased remains in potentially technology. involving in do opportunities a second for the in growth smaller in we in levels meaningful supply recovery drivers chain shipped has turbines, potential see Haynes energy this previous the demand future. volume well this XXXX, quarter a has many factors of

period a in XX.X% our revenue that period represents our $XX.X Finally, markets. XX.X% in of primarily the numbers from same XXXX, increase our of volume for the mentioned, due detail per of other the to an this of in revenue in increase on oil million this selling markets to quarter With category's other in was at detail desulfurization of increase primarily second for other million an increase increases $XX.X with hand of fiscal an and price million XX% let other to more in due revenue of This due in in Also the XXXX, gas in XXXX, The combined fiscal and accounted conversion. the same markets now increased XXXX. million me $X.X in over quarter gas sales pound. of the from XX.X%, $X.X included to fiscal flue Dan XX% in volume toll markets, was fiscal same financials. increase average to just the

Daniel Maudlin

with shipped the pounds one-third We this quarter, quarter. even Mike. for cold-finishing our outage you, of nearly X.X Thank continuing million

QX above mentioned, this revenue line was aerospace Mike This $XXX XX.X% in up from last year As record volume sequentially XX.X% and a second in quarterly up top company four volumes. drove years quarter. to year's the million, this highest and

of outlined, But each a was forward sales XX.X%, Mike as as our mentioned. on a below percentage and allow frustration, Gross headwinds into of view. Mike percentage to address that which was comment expectations. gross me margin this was our solid many a translating margin Our as one sales net included net that top-line

this inefficiencies impacts type of and to start-up cold-finishing related are These caused including costs additional yield First, outage. costs by the the scrap quarter. impacted upgrade margins in

but inventory, through our the third third of in expected quarter. still Some impact our of margins. also expected are these this are the to quarter end products Therefore, gross financials is by flush to

specialty was QX. application million and in $X.X impacted quarter project margins. as last million lower level Second, to only $X.X compared $X.X our this overall year's in million our revenue QX This

Looking sales of projects of forward, forecast for the second a moderately the half improving special year. we expect in

than project due into to year. looking it of delayed our original at fiscal forecast forward projects beginning forecast than lower This However, pool is in our We XXXX. project primarily many favorable rather the fiscal approvals still lower see opportunities being set lost. the potential is

special product business. mix lower saw projects is primarily in But type of even shipped. to base just less that, is as related mentioned. result a QX, favorable it This the we I generally partially our included alloy the of Third, beyond in

material expect Cobalt we cobalt. pounds. our going decline headwind of forward, the forward. and is typically only dramatic moves normalize the to overall of alleviate content roughly of raw shipped needle this that the mix not the as in represents it Looking a product price Fourth, X%

risk. structured attempt our pricing price customer minimize Our agreements to to commodity are

moderate our However, and our magnitude is assuming with margin The mill rebound shipments cobalt percentage. compression we an no when and continue increase, or and the service this margins raw velocity cobalt this decline margins are caused If gross rapid Overall, of QX, we with decline should in cycles margin inventory. and prices. out as gross or longer there may production QX, stabilize forward, can be on a a compression costs, in center of possibly look our both projecting to be quarter increase timing for a experienced products material, dollars especially recent this misalignment in impact transactional cobalt in alleviated. prices with

alleviate as to favorably volumes As strategic initiatives additional our continue improve, impact these and P&L. headwinds

same is SG&A, in quarter allowance XXXX. year's period down $XX.X This debts than last including SG&A for Moving the a technical research on costs an P&L. and bad lower were foreign the year. fiscal account. included the in million $X.X of second million our increase Last

compared foreign foreign currency had same gain quarter the loss to as a this for last currency addition, In year. period a

half including of we second SG&A, retiree standard per out reclassifying line implemented Non-operating the approximately fiscal to average created when costs pension XXXX retirement We costs operating in technical to quarter. this on expect million all expense $XX benefit non-service P&L. the was income healthcare new related the of research accounting new and the and to P&L

is the side a that the last reduction year's periods As operating it primarily QX, income impact, reclassified to change P&L, of subtotals. retirement on September it been our income note, XX, No was prior In million. MD&A valuation to to $XXX,XXX but favorable related margin and remember $X.X be expense tables. the does moving XXXX. gross the margins This have compared in and in comparable all QX at period consistent presented non-operating gross both prior P&L net and just

quarter of was rate this normalized more year, related realized in tax vested last a stock we options by that XX%, quarter. Our positive impacted this QX tax quarter, were rate which to recent for this item quarters discrete The have income than forfeited. was is pre-tax as

income diluted year's last million U.S. tax And share. to P&L, finish the the impacted In tax this addition, laws. or expense net by was per off $X.XX $X.X was quarter new reform

notable, March our backlog, increase after additional XXXX. in QX X.X% increase shipments backlog given in Turning to million $XXX increased backlog This is XX.X% this at to in quarter. an in the QX, increasing XX,

was As cold-finishing a backlog solid for fiscal half order new during level higher this levels year. XXXX. our its putting to customer With the of operating solid, business Mike year the increasing capability at quarter. backlog Outlook been since a full mentioned, next have of highest than support this and fiscal our in quarter third million million during higher due XX, increasing fiscal with activities of offsetting at levels, XXXX. quarter $XX.X second and the of payable quarter be first of of million million. $XX.X in which the and XXXX increase a cash XXXX, Controllable the representing revenue increased we expect XXXX. the first to of earnings by accounts accrued $X March the $X.X Liquidity, decreasing first million months Net capital $X.X fiscal million increased $X.X includes receivable XXXX, to first provided working cash $X during million by half six expenses sales. accounts million by was and the inventory of months Partially refund by was tax $X.X six a

the better to capital We strategic half The XXXX. was continue which in to revenue to spending allocation of previously with initiatives in These approximately discussion down shareholder million production to million I on have and in Mike, in $XX XXXX even managing fiscal to related been pace Capital a rising striving thoughtful our spending over from for you. a execution period the improvement manage inventory are lowered first fiscal forecast our $X.X now align as expected are levels. spending. is capital up initiatives. turn of strategy we growth focus conclusion, we back $XX reported drive levels and actual meaningful to to In committed value. of profitably the will we million,

Michael Shor

Thanks, Dan.

the to questions. of our With move customers. of the call let's optimistic of impact of that, open translation our hard Thank has employees of remain margins strategic team shareholders, Jess, stronger profitability we're see you. to initiatives. and to committed the benefit as but our The focus lack forward. to been successfully successful Our beginning working the frustrating, Haynes is this business We gross the we we're growing at execution and in

Operator

We'll Thank Sidoti Edward you. [Operator at to Instructions] & first Marshall go Company.

Edward Marshall

How Dan. Hi, Mike. Good Hi, are you? morning.

Michael Shor

Hi, Ed. How are you?

Edward Marshall

Good.

wanted impact ask of about equipment I to the the So downtime.

and yield You yields. you that and might did talked quantify be? processing Can costs you what you about - thought lower impact measure,

Daniel Maudlin

the outage as items this, four, an But we to of issue. I will headwinds quantification if of Well, that them. of third Maybe maybe we these top four of would margin the at was a impacting all our these looked mentioned the it's put difficult kind I cold-finish and certainly list. I accurate the ranked at say of get

projects, say it's value the mix I be and lower then, maybe a special the combined last maybe third. is two, issue. would cobalt issue Second another And the of the would third

that start-up of of kind still So the mentioned, the next in cold-finish outage through of outage flush phase. shipped to some cost some we it quarter product kind through impacted certainly the had in this margins. an And through impact. rest we we And inventory, the impacted so and as of still expect that quarter. that's have what the the and And

So margins next quarter bit but of be as flush forward. as will a a it through go we well, squeeze then on

Michael Shor

source a great saw, of take as limping as frustration. furnaces us is which came the per significant this often. don't looking of like orders it the Obviously, to we pound out, and ship the But And And we truly to and into obviously something got very the down and us. we outage that we forward cost yield issues were behind for there. rest out actual were we're we putting

Daniel Maudlin

point And cost view, of back batches, as in to so. yields the mentioned, are of and normalized from production seeing levels we Mike a

Edward Marshall

Got it.

what So, not representative you said believe of margin, the your margin you it's what this is. for gross gross business

type you basis? where this you gross secondly, you should look this longer-term, trading gross think have you've can if be, business margin in didn't then a issues. been, quarter, of what underlying I when have kind the margin you maybe the what talk on do should about think So seen particularly And

Daniel Maudlin

couple disclose our you at guidance of end last look targets Yes, margins. forward and can bit the on QX we quarters. is gross XX.X%. We year, mean, But what backwards I finished a our of what are typically don't

So, this being disappointed at post-cold-finish that. we're quarter in we XX.X%, - obviously, outage, certainly

at So But margin we in our be. would move targets to we forward. we're guidance incremental as haven't track margins on are looking get improvements disclosed or what what gross the back really

Michael Shor

me of a hit here. couple let Yeah, highlights

range. of Drever's been we Some talked believe, on the mix Special has what talked The my but issues. projects in a that some of numbers, mix, million not come was level what about concepts. projects We in will forward; review cobalt. about it's call We to four and out. average average will going $X of back our special thoughts

not to So But I million manufacturing is? but cleaning and and shipments? that hit in also areas, think forward to pounds, are: have happening thing; with that lot we we'll Kokomo, in And about by Drever. there. going to also the obviously will Tube. happened about on what's want of we're aerospace has X going up been done about over walk moving a impact issues was the quarter issues without good I with Where [thirdian] have cylinders only half really the and positive we past our in the But are existing cobalt mix to a backlog we're positives our have don't pricing, forward. The talk of on of the work our see talking a with that's what [ph] What moving these starting on forward. continue

and much, performance improved excellent shipped in of don't not me, our the wire that the underway We But whatever performance system. distribution they're those, of because talk have to great, worldwide and the cost customer. about but some impact course, particular, and We've so seen a they side. on continuing operations. initiatives see will out frustrate of significant in actually we We orders of the those

us are so by way, starting times cold-finish with yeah, So, come busier. happening. the our in getting good lead even And to down, products things

we'll all as move a that's give you forward. we good, directional So and idea

Edward Marshall

Got to want the me, one said I it. and make it it. you sure quick, understand And final for I just

you pounds what trying of means, You that in tell X.X said, and Thanks. talk about kind kind what there? of to you're you shipped previously that million million? - Kokomo was X was in Can us it March

Michael Shor

of large with is I for we volume Yeah. force, instead backlogs. cold-finish up need and it's that sales beginning about get obviously per where The produce we to are to some it aerospace okay, now open we've is approach And we be aren't beauty sales it's to has come cold-finish as where these and would furnace now I've These should flats pounds, our of our call push additional are out and way quite volumes started with on, us. are pounds, you X.X we sales to significantly. more terrific is mainly million forward. let's go beginning a and great averaging shipped X impacted what our that's to It's million struggling flats, remember, are our move mindset our - a in, frankly which confidence, pounds, orders. number of is, find for and an me change. What pounds we capacity, And real low truly our led force produced month get been a product. is up saying to got force this our this but pounds product shift

Daniel Maudlin

And that I on side might quoted we've produced just note a goals our as quick what pounds. are cold-finish add

with for XX.X recall, a or million year capital is additional we that were we at our pounds. that the XX were Cold-finish, our produced added confuse capacity here. if goal don't you investment, million pounds - before produce pounds quoting the total we and So

is per subset of our that's which million not pounds that referring but on X.X that We're month. to. So a goals about cold-finish, million the to Mike's pounds that's levels X yet,

Edward Marshall

Thanks guys your been comments It's helpful. it. Got appreciate I very today. much.

Michael Shor

Yeah.

Daniel Maudlin

Thank you, Ed.

Operator

no time. And Instructions] at further to be appear [Operator questions this there gentlemen,

for If I'll Mike back the remarks. you'd like, turn conference to Shor closing

Michael Shor

you for day. good to Have interest look quarter. again next support thank Haynes. you you your today, Thank your updating for forward Jess. of time Thanks, We everybody and and a

Operator

thank conclude this gentlemen, your Ladies you. for participation. Thank today's will you We conference. and

have may time at and a line You disconnect this great day. your

Haynes International (HAYN) 5 May 192019 Q2 Earnings call transcript