HAYN - Earnings call transcript Q2 2022 | Haynes International Inc

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Haynes International, Inc.

Second Quarter Fiscal 2022 Financial Results. [Operator Instructions]. to Chief call Bibber. Accounting like host, to now and Controller Officer, would turn over the your I David Van go ahead. Please

David Van Bibber

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

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

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

Michael Shor

everyone. Thank Haynes an you, had Dave. Good excellent morning, quarter.

XX.X% million, up for required year-on-year. position and company $XXX.X future. take the Revenue actions the team sequentially was to to continues Our XX.X% the

points XXX year-on-year. basis points and this Our quarter gross with XXX its margin at sequentially XX%, up continued basis climb

by with differentiated volumes the high-value our million, across regarding our year-on-year. team variable provide; increasing material to that application together our income sequentially supply improving products $XX.X of the alloy pursuit production raw we were development; innovative working chain along and X.X net ongoing the million our Our our our ramp following: and excellent result on of and navigate continued reductions, each and challenges; prices work of strategy $X.X markets. and was relentless services improvements key up cost demand These improving

our also of area addition, significant be safety management for communication I'm the the to of why continues leadership us. behind performance. with In improving performance and thrilled an our that all focus intensity, is ongoing

As far quarter. net as balance cash, million was our by over reduced cash $XX.X the

experienced. in was part material cash in the of use raw significant in order the increases prices Our that driven Order by we in and including was QX. entry, toll large entry, backlog conversion million quarter $XXX

per $XX are nearly In nickel, material increase of driven price $XX.X increases. our by rapid well for shipping addition, accomplishments. use million moly is of and cobalt, backlog we the orders our proud very cost innovation am and volumes. approximately our continued and our back, initiatives. received, I'll I total anticipated was in team cash, monthly of future to X/X margin leading obviously than of Today, which on gross increase improvement, million the significantly in Because highlight to we inventory, quarter. recent but their increased cost step application a are the increase chrome the ESG in rising alloy more our melting inventory, our shipped inventory of the the a pound for of currently due Therefore, a Taking bodes of by basis, very growth, raw

margin continues to climb. gross Our

resulted reduction improvement in margin breakeven of gross a on in work XX%. our volume initial Our

across in and all variable formula the costs our relentlessly pursue working, services, Our provide for is high-value, innovative, price operations. products provided and reductions differentiated value

we the excellent continue is, our to core also service that X in due markets, our due and backlog but Our it's to of the growth provide customers. to growing technical course, to sales

Our backlog numbers book-to-bill are excellent. and

overall Our XX% Aerospace a or in second the $XX.X XX% backlog. led our by in by or million million increase quarter, $XX.X backlog grew

Our IGT at overall X.X book-to-bill with X.X. Aerospace CPI and was X.X in quarter, at at X.X, the second

believe is in best development among our the industry. application in we Next, alloy the

HR-XXX development CPI Our very with is XXXX, under alloys HASTELLOY alloy for very HYBRID-BCX flow alloys corrosion-resistant marketplace. steady highly dusting had and HAYNES HAYNES HAYNES for Haynes unique alloy, technologies alloy potential development has HAYNES-XXX alloy for HAYNES and for a of gas combination oxidation an markets. pipeline industrial a in alloy turbine introduction of of resistant strength a XXX alloy for promising alloy, and oxidation a introduced alloy coefficient the metal has Haynes thermal market; alloy, high resistance. resistant with emerging successful expansion HR-XXX new into applications; low alloy applications; the introduced alloy, applications; a the a XXX alloy, the of multiple Since petrochemical

currently considered alloy aerospace testing is for and advanced application. engine being Our the HAYNES-XXX for an stages is in of

alloys industry, generation. is team for high-potential multiple research technologies and industrial markets. include of our the a Innovation next and emerging process on next strength our for principles nuclear the aerospace the our for of generation one and working core for turbines, cornerstone for generation of chemical is In addition, alloys company. of truly gas They power

related progress We are also ESG. making to significant

solar posted numerous now Carolina. team field sustainability on nearing X-megawatt and Our North completion web has are of our occasions, page our in updated we additional disclosures,

manager in enterprise the In is metric-driven will and process a of on addition, hiring strategy. goals an ESG Haynes who focus sustainability program

investment determining with our teams Finally, priority our in currently carbon high be will what a engineering CapEx for next on reduction steps operations. emission are our

a significantly in resulted this of All has healthier company. becoming work Haynes

back look hold to at the to look may company. end our comforting stage, we need look and future performance markets. key in it's first for the now expectations what To at forward to to set like our our I'd recent accomplishments, While

First, Aerospace.

best by and our Pratt year previously, and Whitney was monthly volumes This we've expect in at aero be fiscal we both Aerospace. 'XX, the being aero single-aisle LEAP engine fiscal end As by back & our builds. our monthly of from airframes our is year, to stated which average volumes driven

in addition, traffic to and service forecasting grow retirements. net to industry from In by in of that's XXXX, of the XX% annually to number grow approximately in is X% XXXX aircraft and air XX,XXX by XX,XXX the

also that supply and lean seeing both the are chains shipments reporting. leading we backlog in the limited with growth to inventory, are significant We

addition, In future engines. to growth calls, picture, as further paint the proprietary will past X of new demand on XXXX on noted have the and GEXX Haynes alloys

engine increased as nickel-based technology, emissions and term, alloys. drive require engine longer Finally, of hotter our new more efficiency will cores fuel reduced advanced

strategy. QX Our and results year-over-year for this growth support show

X.X% pandemic-related growing recovery, is just and previous well company with a but not QX sequentially record rapidly revenues XX% stated, beyond year-on-year. improved almost also Simply Aerospace business Our Aerospace growing levels. our

is also projected only in and U.S. significant seeing are account that production are today. enthusiasm We power Estimates XX% by market. of that down IGT to growth XXXX, from double the for about coal

renewables grow, over account over still projected turbines is forecasted power continue for real-world X,XXX estimated to are the years, that XX% U.S. an next built. to gas Putting However, production to natural in XXXX. XX terms, gas a while of in be

strong OEMs. we've parts As presence we very discussed, for have major in hot path gas a

specified another proprietary proprietary In of and in has is engines next-generation been consideration. under alloy alloys addition, our the one

growth this support monthly Our story. results

Our QX XX.X% year-on-year. IGT sequentially improved revenues XX% and almost

shutdowns. see due growth currently from large demand as to CPI part during market in subdued pent-up a We COVID-related also spending

share the industry. hasn't a States United and while, the access to industry to natural plentiful has growth industry increasing global allowing supplies investment. U.S. said recently in but gas is addition, of emerged an a affordable the been capture In chemical This chemical as

our XX.X% sequentially revenues results up are CPI it's with company. least, the say and time QX for encouraging QX exciting Our To year-on-year. XX.X% an

could our growth 'XX, to beyond be in 'XX highest year recent is year growth period to the exceeding net 'XX and over roughly XX% this fiscal with revenue, status 'XX. believe approximately Given of cash We estimated XX% enthusiasm year over revenue. fiscal our level for our driven performance prior projected sales, want Aerospace year for the XX%. compound and We margin, pension time flow time annual a fiscal view grow with 'XX. of from fiscal a Starting XXXX. could out to XX% annual that growth fiscal fiscal our the peak to the future, revenues by period, estimate rate excellent we rate compound year of provide revenue an funding Aerospace This to future year with gross 'XX

are stay XX% to that incremental estimated we and continue above are all We as gross and innovate of our margins improve growth show projecting to processes.

at incremental remain margin favorable be margin expected current relatively margins, levels. percentage are expected raw certain inflation net than offset that constant assumes Our revenue lower growth. incremental product average but by This is be drivers projection materials their to to the and at partially gross

as long provide of could 'XX. pension increasing very Wrapping comments, true service by point cost hand at change this of expect at we XXX% efforts additional the would liability and my And That's balance that plan the that, to approximate Dan sheet. from on for their beginning funding to even level our liability a fundamental business up potential be everyone the net Next, finally, business. in pension at levels. year flow performance. only U.S. continues, this funding fiscal relentless thank the with fiscal $XXX a sustainable 'XX growth. continuing thankful operating positive changes X I'll the on X I of to achieve revenue team Haynes and to I'm we our step at within year for cash With start perspective Haynes. years, Future for proud million and over our the pension, with cycle very that driven from earnings on see as a

Daniel Maudlin

was Mike. margin increase an income a sequential to and you, net XX% with million. $X.X Thank impressive Financially, gross an XX% in this quarter

higher see volumes material business by rising related a significant beginning with process breakeven profitability are driven price improvements We our along tailwinds. point, to raw lower to on

million million of meaningful the As to monthly We that to back resulted pounds to and struggle this this pounds. profitable in historically, run $X.X levels higher have volumes X.X year. quarters, losses. but income, volume the be expectation fiscal at Aerospace enables shipped be would we million in rates fiscal with made us 'XX by end in half given is in previously net the This would pre-pandemic projected of of profitable at I've X mentioned prior levels second

Rising roughly at a pre-pandemic FY I which a will raw average. As quarter the raw a impact. also high was recently, settled, month of has of nickel the of the quarter's still use levels from material in earlier provided but during the prices with have quarter fiscal margin More this this moment. volume nickel the volatile was increasing at liquidity year. comments XXXX roughly at the somewhat the this cash, prices my a price, price, nickel materials significant from of increase Aerospace level. This further XX% at we materials cover been to cobalt comparison, the third this high March. see below still an seems level and $XXX,XXX tailwind quarter about in extremely market Obviously, in last LME prices. Rising estimated will rising tailwinds continues current is fourth $XX be $X.X If market raw especially from the million a and of

We inventory are center service tailwind to creates rising margin agreements our pricing a so a nickel value. nickel, when cycle our increases long-term not large long in scrap associated and portion of

However, compression, be and turn a in causing tailwind to neutralize were fall mind keep margin significant. headwind would if this nickel could which into

of is and the All change of duration on of dependent the the speed elevated nickel. this

from results. about of the way the a Haynes continues very cost protection locked but some inflationary quarters. several will estimated around market issues. impact chain currently natural We navigate be of like We and have over in a escalating have delays, our supply every labor encountered costs our course on these of we buy the pressures, as to large business gas team the our transparent majority next successfully our tight continue has to

mill We our or inflation business. purchase type customer price -- escalators our business for index with also price combat direct producer contracts or in increases, price the spot including

pressures. inflationary Our continues offsetting to be goal

to continue. As cost reductions discussed, and improvements productivity are process improving have expected as we such yields, previously

increasing Regarding our is to this production rates, enable production our future have successful been and higher mill we headcount labor, at very beneficial volume to be growth. expected to

that We have have challenges materials encountered supply in forward. a proactive path been to with the chain diligence and very receiving find delays

higher rates invest inventory. higher production increase, enable us cash able and along As into earnings. the to future also This, to we to convert increasing to demand begin with into is revenue expected our backlog were

by was Moving represents and certain which of from fiscal currency was full longer expense pandemic quarter, million this in than down income impacted of $XXX,XXX. $X.X Operating to $XX.X million $X.X which second which $XX.X for was the in year's $X last is was on million foreign and by income income was second growth loss. largely growth operating basis year-over-year second place. measures P&L. retirement increase favorable million expense technical year's quarter, the SG&A with This quarter year, slightly quarter, cost was quarter research a expected improvement benefit year-to-date sequential million to by last last last no year's are the higher an quarterly and 'XX first million, to fiscal The $XX.X Nonoperating of operating $XX.X which $X.X year. by million million. a improvement savings

impressively recent mentioned, As significantly was sheet market percentage balance previously the even U.S. funding at reduced during liability volatility. Mike pension the the is net and holding XX.X%

rate XX% XX.X%. to Current XX.X% in, XX% increased quarter we tax would million pounds to backlog of company's earnings a a for was order effective net XX, XX.X entry. of level and second allocate during Order an growth when price of our the increases this per the XXXX, rate Backlog quarter million capital top grow XX.X% including Our each at line order which million over future this first to million XX%. All quarter $X.XX, and full With for of core XX/XX/XX. use decision quarter increased backlog. million $XX.X expected $XXX.X allocation us in or Backlog was which with experienced pounds sequential effective of This so revenue especially have months markets, entry income representing Aerospace, $X.X is backlog which quarters. diluted has drive history. increase. X in the enabled be March inventory, was is across the to is 'XX to to significantly. $XX.X of in share year estimates the EPS an fiscal had significant increase tax obviously of in growth, from our raw entry the materials our We continue highest cash, pounds, the past

$XX.X the dollar Our material increase Of material over cash remaining million, quarter. cash the by inventory increase net of $X $XX.X had that, inventory by at cash cash 'XX the company's usage the dollars meaning X/X cash in the on $XX increased investment the about This nearly balance the raw the million a increasing. prices prices million the million, was in facility. the increase X/X March pounds We change inventory XX, Liquidity. was the impacted credit million $XX.X raw sheet quarter inventory over and inventory $XX impacted and million, borrowed on pounds and of and quarter. to over represents of nearly equal

and in borrowings with at $XX.X half facility Our revolver liquidity spend year to with anticipated we $XX.X $XX.X million do million available strong of the fiscal 'XX, slightly depreciation first on the credit March at fiscal the XX% million XXXX. of XX, utilization our below planning remains XXXX, million the rate remain credit expect additional than are on lower full level. was year, Capital the the We for of maximum. second $X.X the in the half facility spending to

outlook As balance increase the for growth rates fiscal past quarters far next provides of order the optimism the in quarter, as entry year. the X for over over continued the significant

to anticipated the year. and inventory fiscal increase production efforts to successful with additions of is the drive investment in continued half second in shipments rates workforce Our increasing

with ongoing second in volume our and revenue margin cost We XXXX. pricing growing to tailwinds. at to recovery traction expect of gain and from quarter are rising our both the revenue earnings our to than and material raw and leverage includes we conclusion, excited higher XX% This additional and profitability. along be earnings third continuing quarter gross fiscal initiatives, the increases, In see

the to this 'XX. As fiscal to roughly our way 'XX with growth Mike revenue rate with of outlined, year leading annual growth 'XX solid highest FY projections 'XX out showed again, FY to XX%, fiscal growth a the from Aerospace XX% from over year compounded 'XX

over pension to operating shareholder this at plan, to last margins by beginning discussion nicely having $XXX earning a to year. strategies increase stay up years U.S. not are business down gross from back This projecting million beginning show X value our estimated X year, over set positive XX%, us Mike, then a All generate the for potentially but of designed is now only the I next to We and liability higher the than capital. future grow incremental within above of flow to return cash the with that, cost period. turn you. will net growth

Michael Shor

you, Thank Dan.

our of and encouraged questions. interest business. progress team to all Thanks call your the for With to open the in that, continued Our continues let's potential Haynes. Kelly, both be for the by you to

Operator

Instructions]. [Operator

question is Markets. first from Your coming Leshock with KeyBanc Capital Michael

Michael Leshock

raw I outlook. dial supposed the longer-term as stable the to margins want just of or Mike, that we're through your other the comments. cycle. here? raw of above on on will material the kind comments nickel the your in whatever a And gross remain to is, I that appreciate materials if we margin pricing gross environment, price XX% in expectations interpret that Is are

Michael Shor

again, a It for followed believe and -- is. you've long We time. us

and are not some transparent. for here when high-value cost happens go offsets, continue with be forward. products We're There's be happens as materials from growth what to not puts we up. going but they we'll margin, incremental done look reduction. what are Dan differentiated know certainly And done looking said, absolutely. services. and and very gross go providing we We're to as as go And when more takes on forward, there we You down raw

Michael Leshock

that projects is called was are those chain that year. your year? and I year? or typically wondering pent-up next as inflation had into demand to wondering constraints is -- there the deferrals those business, it's what out projects And know supply CPI outlook but set the come if you larger happened and this already Or Great. has Okay. deferring on for growth has business, the any a

Michael Shor

We related and there's to to COVID, market. as in think definitely see we and going think market, a my capital CPI in I this occur that's there's said demand comments, as significant investment there's pent-up strength we growth real

the the about only throughout not see we improving market way side we So And on projects we than this, is the talked special this also general see And but a the the CPI natural frankly, the is increased different difference to investment general to today market's quite again, CPI plentiful affordable access market supplies year. here. of is the boost in and the of past. gas an the the capture U.S. allowing share

great value we feel great get we're we about price. that how meaning So more feel the we're We based also market. positioned on value and that about the providing, can

Daniel Maudlin

ago. $X.X And quantify million some was to related that we quarter, there the are one throw is year. than just than too, and on I'll a to than exciting last higher of little that $X were margins higher we about also million special about thing million about that revenue QX special That's projects. estimate better to the in seeing $X.X a referring is projects But Mike year this

So special in play. projects definitely

Michael Leshock

there recently? share to talked for take share if then you've on past, or have that within gains Aerospace turbines. to additional And business, I gains. wanted you you further about any had the see within the taken any the share share room also ask on you opportunities are And platforms then gas in of you some

Michael Shor

continued share I'll a still us. turbines of them them IGT, in smaller large the fairly we this talking side, we gains we think, but about then, lot that for nature, for call IGT are home run And significant X,XXX a when been share built, electrical And -- since have I with market generation. on had, the gain. On again, started

good opportunity market. We [Technical and going where where with we're a significant about we have are Difficulty] this

Michael Leshock

not lastly we years then just proprietary for commoditized I'm at the And if everything at in today? that versus being aerospace future. caught And you Aerospace on you sure X But the the look the that following Great. up if maybe is Okay. within split where me, to talk your of alloy, alloys Haynes side I end. there where could split see things.

Michael Shor

we I what the is say Aerospace, majority into think of differentiated I product. sell value would high and

what our has it's market think different little been. I historically CPI a than

this which considered now HAYNES for to right engines. and also, gas think in hot I for have XXX now in HAYNES great done addition also parts industry. being has path XXX, HAYNES We things XXX

us see So is I going bring continuing again, also. our won't this going GEXX minds, in GEXX up And help but we again, the force. forward to

positioned. We've that. value. cut thing, the system in how got feel the really side. I our And our to just me, and us parts And continue show than side more service distribution to one the So great alloy the own add and then to I'll for that, that's about customers we've got helps ability we're

Operator

[Operator questions any appear time. be floor for Shor this Mike like closing now There back turn queue Instructions]. to I the over to would at in further no to remarks.

Michael Shor

Thanks, company. Kelly. and Thank our you, time of thank today, everyone, you support for interest your for and your

We will talk again Thanks. to you quarter. next

Operator

Ladies and conclude conference call. gentlemen, you. does Thank today's this

this at a lines phone for your participation. disconnect your may day. wonderful you Thank time, and You have

Haynes International (HAYN) 1 May 222022 Q2 Earnings call transcript