AZZ - Earnings call transcript Q2 2018

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Operator

Good morning. And welcome to the AZZ Inc.

Second Quarter of Fiscal Year 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. is event this note being recorded. Please now Joe Dorame would like to to over conference the of turn I Lytham Partners. Please go ahead, sir.

Joe Dorame

Good review of Denise. us year XXXX second you, morning XX, you fiscal thank Thank XXXX. August for quarter today of to Inc. the AZZ results ended financial for the and joining

the name firm consulting for Inc. my is with indicated, Relations Dorame. Denise I’m Partners Investor Lytham As Joe and we are AZZ

question-and-answer Fehlman, representing or session. can the we anyone Officer; company on other numerous you are company’s Financial retrieve Ferguson, copy conclusion text not Tom the Executive today’s Paul call will call the If for remarks, financial call a Mr. and websites. a Chief full of have release, Mr. the Chief participating the it azz.com the press at of prepared from After Officer. On does website today’s open

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Tom Ferguson

second and Joe. our welcome morning Good quarter of Thanks XXXX. call year to fiscal earnings

we improvement opportunities. While market new second of quarter some signs the and entered seeing

plant the tough of leadership our we to made those Beaumont Houston four bankruptcy. We events, closure are quarter pulled areas. the in impacted Westinghouse and closed Summer by proud the Hurricane by the in I'm assist of together changes Harvey also our that impacted disruptive quarter. team our supported the VC Hurricane people the depth these despite facilities a during from and And and We of leadership announcement impact quickly with the of of the the Nuclear the impact then and out

have new outlook significantly guidance in fall platform. period As recent for industrial in noted season our which the turnaround our strong normally hurricane release, disrupted for is fiscal our a XXXX, we our for the year

for strong fiscal we over realigned a the our functions of to for spring take next our did anticipate evaluation the we businesses year industrial While better quarters. complete the XXXX, support our reflect and season a domestic demand opportunity thorough business few to

our to key are As the commitment continue by our see closure. nuclear sluggish well international we the VC Westinghouse quarter sales negatively horizon. both sector. support was But continued activity bankruptcy effort This as the the in coverage level platform the executive impacted nuclear Summer during project. ensure opportunities see customers We the strengthened and on Vogtle to and to we pleased among

We opportunities positioned XXXX. significant are year well industrial platform confident to growth realize is our for fiscal

coatings metal half improve to contribute highly integrated. business in has continued Powder Enhanced volumes focused on performing margins been and showed improvement operating well second of driving fully remained The QX, should acquisition a the nicely Our The is fiscal Coatings and year. to margins. we this

we facility also Our year coating and are Crowley recently in traction. opened new powder facility gaining the last Reno opened

with as Pendley as galvanizing the strengthen as added as support during well challenges both commodity rebar efforts. operation on resources metal solar team some of core level hurricane. the new pleased and activity an initiatives. from senior significant market made increased so We now fiscal and has this The growth petrochemical quarter pursuing the Gulf in simultaneously to Tim year not to ensure the created development we've improvement and improve are along fiscal into leadership real and XXXX. a area focused rising changes balance procurement seen year also business the the as a alternative activity is this both impacted by opportunities we've galvanize of the an Coast, the zinc our cost see for continue our of positive Unfortunately, well to coating

to is customer Summer absorb closure. and out pushed been which projects for of normally several stable third delivery have scheduled that performer platform VC Electrical legacy quarter. projects the Westinghouse to disruption struggle on Our impact has bankruptcy other impacted service QX The now were and a the

for change issues Manager a a new as to so General Additionally, more we and for these Lavelle quickly a year, Ken consultant was we and working other operational had than was Ken to platform. recently the developed move businesses. Electrical appointed able AZZ leadership of reinvigorate President made so he as previously

Additional, that changes and other and operating performance platform brings new the switchgear that reselling opportunities The leadership Electrical grid the returns normal will had recent growth. its and made to solid their levels from power this effort ensure with some products of progress benefit the strong market quickly acquisition systems to the should table. Ken ensure customer the platform backlog and to

XXXX see operating normal We to a contribution we fiscal levels are year. we'll and as return enter confident the

need financials. to fiscal we With talk active results importantly cash the on year the of second we XXXX. a over and we'll quickly it positive projects on focus into going believe the pushed flow the as will regain leaders XXXX. and with who from half disappointed new impact and to has reacted note fiscal Furthermore, The our quarter, momentum provide turn and traction finish effectively more for a leadership continue pipeline. will that the our positive the Paul are of of we QX second QX, While M&A pursuing to to the newly very as about that year I'll improving strong the acquired position possible us into a businesses

Paul Fehlman

Thanks Tom.

fiscal second of second less X.X% sales was last and million to the Net $X.XX of less $X.X X.X% to X.X Reported we diluted our $XXX.X EPS as backlog decrease year, fell than of ratio $X.X of than million, compared the the or second a orXX.X% For second XX.X% a year. book-to-bill the income year. second of million $X.X last $XXX.X fiscal quarter of quarter finished net quarter for down fiscal X.XX million, the XXXX the million, quarter year XXXX. in our prior reported XXXX, the second quarter finished decrease at quarter at versus

XX% $X.X XX.X% primarily realignment sales cost to to sold in U.S. expect the rose year-over-year outside please quarter charges good charges the year, of And into $X.X the quarter of quarter ship the last quarter X.X% last coating. the year. driving of purposes, primarily included a realignment last the to XX.X% backlog metal from second to operating second SG&A for year the second in We of compared to to second X.X% included charges Gross of million. for the of comparative that XXXX. XX.X% second in million same the XX.X% year at also total realignment compared from second margin of $X to million in quarter which remember in taken the in last XX% quarter fiscal margins finished quarter of compared

was last performance charges our net second to operations tax compared XX.X% year of last taken course fell reducing from was XXXX effective rate XX.X% second flow for realignment working of quarter rate the in in year fiscal the quarter rate in a second tax higher Our year, income to of and the compared effected by $XX.X the quarter second which for Cash lower on the quarter. the capital. by quarter the million ago

income compared charges million period. all to year, segment XX.X% the on first quarter the basis in last the for Operating finished quarter XXX the the million while In compared to this also was XX.X% up X% segment XX to in quarter a sequential the the basis the operating fell the second X.X% of to to segment, formally quarter to second $XX.X year, operating second to same our fell for prior rose last to revenue compared year year. the rose last period of down margins XX.X% compared up million year. the margins the and in segment year. XX.X% to our million within As $X.X AZZ the as to X.X% operating charges second X QX second in Energy year, of quarter to were Metal second revenues in prior last prior segment, on gross Galvanizing revenues XX.X% prior were quarter quarter margins compared at margins the primarily in last quarter second second compared in year our segment to compared $XX.X $X.X the for in X.X% year X.X%, basis, compared was Services year On income $XX in realignment the taken second the Operating up points operating fiscal improved quarter, effective quarter while million points results, the Coatings taken income the quarter XXXX.

although had the forward, quarter taking in we’re the quarter the flow the cash actions improvement for of necessary first year, the a half we in second and quarters. Looking challenging coming

As in these fundamentals. have continuing have swings we last the overcome past, to seen flow call, cash working in the shortfalls we in capital seasonal by I operating quarter's on conference stated the focus

growing we’ll strong remains and sheet platform. to balance continue Our support our operating

the range per in our $X.XX revenue last $XXX of week, adjusted be and the annual to million. fiscal with to share guidance announced $X.XX EPS of in to be we XXXX As million year to range $XXX diluted

the quarterly XXXX. our With Lastly, Board record business in per has is back XX, dividend Directors November on Tom? Xst, close the I’ll it The cash of of Tom XXXX $X.XX for the share. shareholders October to amount of payable turn concluding to of approved that, of on as divided remarks.

Tom Ferguson

Thanks Paul. excellence to remain operational the we driving committed reiterate, throughout To company.

have next operational cost longer initiatives positioned growth few fully believe anticipated to both and are the better years While for improvement our excellence and our executed. industrial organic as we growth we market develop, rebound are becoming and even than initiatives taken

you. adding capital acquisitions flow, value on up open focused and it for questions. now our more are And and effectively your our driving initiative We deployment improving Thank completing cash aggressively. more we'll

Operator

Ferguson. [Operator be Sidoti go will you, Instructions] your Please And first of ahead. John from Mr. Company. Franzreb question Thank &

John Franzreb

kind Can give do of if hurting to come the which coating This walk items start volume And of things guys. week. of activity all? a magnitude turnaround to timing is spending Good when expect back want the maybe one of through morning, you a the last most? hurricane I that litany with project us impact, to here is relative Saudi us P&L you low in Arabia nuke guidance from guess low revised are I to the impacting at turnaround these sense to of from markets, activity. you and

Paul Fehlman

Sure.

Where effect with the to go remainder to John. the Okay, start? the hurricane of Let's the effect, year. hurricane

maintenance turnaround the of refineries happened effectively the many the back opened turning some up First all of -out, of also of in and running get their the done. very me sent they year needed the and advantage repairs up with crew and in whatever that prior pushed what them seen refinery to including from next all, as the with headwinds year, year Effectively are last turnaround you know, and we and be to earnings are into we've quickly to the to of guidance plant they the to getting hurricane what had them is down there shut-in, get spreads, to refer many time north plant do have we running in but market, would jobs spreads that to release the that that south take have they to flat turn the both crack effect had big refinery we out backlog is week. to in which be in

next be So have that's only and of a into but quarter year, end of first with second working turnaround many a the year. year remainder refiners next year. quarter business of would profound first got to the we expect of effect We the our season the also do on the first expect industrial stuff the quarter into quarter that fiscal on good And not year the of year. next of we at the scheduling the been for

and effect and of In VC waiting we be that work backlog issue to terms doing that particular had job of expect the not we received now Summer, cancelled on of that stop Summer, more cancellation of VC hear, a we to of were orders. did that's the Westinghouse has quickly, were we an

that seen no shop for as effect has a last to rest work has by the our some an primarily Westinghouse, spoke we year market would expect but nuclear the being were had year The bus so of gone. side work back work little VC to maybe stuff booking bus expecting bit We year the other for. Summer things we basically half versus that little didn't market we the that materialize the drag is the in a voltage the and the Summer floor really in the there. in the group the the the we -- we some East on rest and on on inefficiency executing of this about floor typically this the backlog I not longer tie with that items stuff that delayed in shortened see then and our being of will we've nuclear related part a of emergency probably effected effect it week bit Again so bit the second on actually one a where and up in possibly year of So be customers or on are wasn't the also shop Middle as so so high outcome on that had few on effect job. on a be expecting it in that floor voltage also also the work efficiency. lot of of some shop would VC little and we of VC terms total in we were part some help other Summer quarter of floor up shipping but But East get in areas done of the our of what last revenue the think side time done operational electrical as wasn't hoping quickly what be had only Middle

that? that in-charge You and anything actually to to going Lavelle add there electrical forward. got we've Ken made Tom, of change see a

Tom Ferguson

No.

a then affects refinery stay pushed about and that it and work. third in due related craft a of which do our the things impacted things we break third think and lot out as to kind it's I on nuclear operational just you in galvanizing related to covers related a VC the it going and turnaround some labor it, see nuclear got a third about but to on And lack we go QX, we'll of of that focused also being opportunities forward. petrochemical, to about of in improvement Summer, down if to Westinghouse probably us mostly to

So level. cut at it's of the rough kind high data a of

John Franzreb

helpful. was That Okay.

discuss had the management of the kind forward? Ken Now in problems the you could are going from there? they on The that impact Electrical, you to expect having change what you unit top what bringing and the just

Tom Ferguson

didn't for as XX% improving margins just of Yes, advantage and a to seeing and and side, either like the to steady feel think it on to organization committed drive sale able you EBIT performer I traction we flow getting Electrical nor particularly us. been it's improvement, get opportunities. cash we in market operational We've sustain know that be were operational side the domestic excellence the were operational take the we that,

least that's in were of -- we some at in selective. growth of terms the but very getting China So we -- expect and been international

is of traction He than some it expected particularly executive board just disruption So that business the also getting we like this so fixed comfort in in had the make we itself and we key manifested Ken would me the and this the kind that gaining across when getting in not that it's already seasoned making, we'll that us place. year the had bigger KPI, for had There level are traction progress are confidence improvement quickly frankly their quite past. some we seeing we give performance indicators that expected. a

John Franzreb

for into good for the question segment queue. these had last quantify pretty get profile One facilities Can will the that into the metal that there QX look be the the because even Okay. quarter? mean I spillover Switching on downtime the much coatings. downtime. How you any segment? to impacted with I'll EBIT outside And is and back margin

Tom Ferguson

I Yes. galvanizing in they though was It quarter. mean days few didn't site really a it the for down three even have impact. much

and were able we it sites we pretty are up extensive galvanizing up so three and lot are So know there we've all problem now, work move any of there related that All galvanizing a is on going Texas of rebuilding throughout network forward the the as on you has are metal after hurricane Louisiana facing so QX. of instead of impact seeing we a inconsequential impact while the in But was our us. were impacted that overall sites and half, running fairly not in region at more done. a actually week three terms the business of got lighting shipped of it's backlog in sites coating sucked and minimal the get the activity a QX they in is second labor of to The was than to all the the big impact probably -- bit last of in little metal things so for had really the quarter, scheme kind that coating. positive not us least impacted it's our

Fortunately, that's what about QX. was that in what part are talking shipping backlog -- we is

Operator

be question from Noelle go Stifel. your And of Please next will ahead. Dilts

Noelle Dilts

Thanks good guys, morning.

to and a little into guidance the guidance Can guidance you some what more. of coming wanted versus just provided of thoughts how that would you be lead are higher the dig Just bit more end in range low your you the you result at to about thinking at sort end? on give to

Paul Fehlman

pretty month, these not making. any out that quarter biggest the mean Well, our also if out slide stuff say customers for to were that have say look whatever. that more wait probably to projects taken this our low be week, at by making and you to Noelle the operational jobs have and or the getting but look if by everything pushed out with a about deal from work take would reason our year planning very own wide we of we balance this into look, risk of and I'd primarily a year out we've I end. on down issues are by getting I'd or we that our own continue that would we next

might think very the eye Westinghouse also the be downturn possibility to keeping coating side, if don't we something lot can negative be add so it close look sudden on likely. look are a the on to on we us You downside we though an whole effect will then that's that you figures on we --our all seemed big of we inside I and very going it, if lot metal have that of to be would take forward a on risk. rosy going -- that believe would looking happen but Tom, have on downside? have down that careful And anything everything the more there there

Tom Ferguson

at projects, downside. things am my differently I Yes. Paul. probably view to we've how and I nuclear Westinghouse the factor that's still of some I the I it little guess on bankruptcy than looking the got receivables related the

I a the those true, by or mentioned, think as the we solar are handle and some better we we generally hurricane slip, our been the we Gulf think either lot week folks they week leadership their while related huge through infrastructure that's made as projects been have move do but in it's impact though about I though tracking in coatings factored again. are got more And agree things get the year even backlog Course of they there operational closer would on Paul still traction could fairly I are But those know still sites in to will things That's that opportunities. just volume feeling the the you in suddenly for our the seeing there or they find up always like then to half and they on some of the I the reviews. as positive while are positive no that's monthly metal but spent back see potential market. changes coatings don't think certain or are I optimistic not has being so are they dry think the month, metal

now our to got stay we've we far we too kind better how then going for and we out tightly sure with of on got on So receivables don't what to more and make to I that. so we handle in that focus manage -- I can collect got am that right my we and balanced and forward than Vogtle make SKUs will we think sure but view -- on how projects looking we the confident is I manage me am I just really am the that have get we

Noelle Dilts

at And a think your exposure then think also as substantial about mean I this electrical business? of just more is or NLI a is what still legacy pretty it being nuclear it point reminding should I concentrated we is around I piece guess of of there

Paul Fehlman

and It's those the business; our a mostly work -- it's sites. NLI had per bus it quite of for two nuclear bus bit

Noelle Dilts

the And then significantly of obviously strength has historically Okay. quarter more the your quarter been than fourth seasonality stronger third given normally turnaround activity.

With the flatter push give out that now remainder kind of a we are you for there? can the are trend the looking thoughts we maybe us at of year looking just at some

Paul Fehlman

-- mean I from got WSI. we comes because actually even there am quarter sure are the not than Well, fourth seasonally the in strength the things pushing quarter a bit. given so third we is I sale more that typically flatter expect much We

going there. should much You am not from call still depressed there, where to but maybe see was in I too it little bit that seasonality it's

Operator

& And ahead. we Company. up Franzreb question go Please follow have Sidoti from John of

John Franzreb

Yes. press and something invested bit mentioned the whys at targets In did and talk WSI. WSI those restructuring recall, Can you quarter the you there? you about also the in a the little in items about at and some selling release, organization if I

Tom Ferguson

Yes.

steps than we've volume for more year last But function to XX% WSI. business what that in do for direction. we of it were in -- things back One, still terms I about they think support some support made how to some streamline call currently have. structured going they office forward and done they I'll

of fairly fine we've a big yet of kind So that to meetings -- the the this things we office been on booked knowing we've back coming the so. out point bring spring orders the take walking confident at of having we've line are projects already either wanting because a and we've or headcount major spring a got or some customer

amount kind XXX-- of that people, business decent of a line, that has or So XX-ish XXX above kind people. talking you in XXX are fine well walk so we

what part? terms was -- I and think other in then of that's the --

Paul Fehlman

the of size the of thing terms small, realignment you fairly In -- the invested other selling the group in

Tom Ferguson

one one the talked got about the of are over with years last Yes, sales three in -- maintenance pretty They corrosion executive but solid really past, our we value. built engineers calling where we that they refining in we my of can force the relationship and selling we've cycle organization, our things those having demonstrate benefit where things in good former and level given when the the life, the used engineers, that sell WSI. we this comfortable to are this and was

couple September track in So we resources a with a great in record. very brought experienced of

this where huge sell sensitive value a but one of market the looking we for So the in at point. definitely this are and are not a kind we that us solution, shift that just priced helping cost because purchasing refining not it's low engineering more nature of has little sway than

have it's those going So forward good just to us relationships. for but also

able them helps market are get would that gives been us information, we that forecast activity haven't uncomfortable to level -- going the impact understand of are been to and the market is what's are the going going business. turnaround on WSI better what somewhat they to we shift, when it us we've when think because of I forward, turnaround, more our

that to but you are about resources. related a was talking it a So couple

John Franzreb

And Okay. forward of against half or line I takes the guess first? the the and be we second the in least SG&A how those relative year at puts about to thinking should going

Paul Fehlman

Yes.

in year the expect half some the the math full versus other the of that's a would that on positive effect equal all do line, that's have why part some first second SG&A improvement that guidance was of should being of because done the second half. things on so actually why So half on there work if you we the

John Franzreb

Okay

Paul Fehlman

reasons. of One the

Tom Ferguson

sales Yes, we I and leadership of call some it and of guess took of because the reinvestment out. some while we

John Franzreb

make I is to so or it sure got yes zero want positive, So it here. right just net net

Paul Fehlman

net in positive its SG&A, in reduction the or new across platform, that, yes, be -- it's will Well, a platform. everything across across the done

Operator

will Please of Dilts The question go be from up ahead. Noelle Stifel. next follow

Noelle Dilts

stay couldn't I away. Thanks.

ways struggling to XXXX, have more the full back how of turnaround levels we more some see kind pushed forecast out about being you of bit -- market, these refiners So confidence, certain figuring a certainly kind just why turnaround on you you turnaround. continue what's are are if you aren't to of the larger just your giving are to Can you thinking at through about thoughts talk you little of going will if acceptable of the of think some do on just you run these out believe scale refinery and going without that some some to comments alone. -- started on you

Tom Ferguson

Yes.

we I that confidence opportunities are think am are about of and pre typical get our it opportunities the lot kicked call of got having we spring. a mega to confident of meetings them year, start to March chasing are that these already off we projects in a in markup, got beginning gives we because -- news is going next but bill are got want we've for on these the planning are the the couple good what customers' of. highly We we really kind I feeling don't we public We of name. the that mention projects chasing. that me not

we at at we opportunities and own don't this not our know more domestic but confident significant are refinery counting we what meetings so gives are the turnaround of stuff. at what on general looking and confidence what that's international. in we looking cycle us just having and the are more are changing, we point it's -- I So trend and so both are

coker thing do cokers start what longer? bodes that to In a think drums, they It's the next given of fall. is of nature they that the just would the you of age think refining we seeing the are happening had us. for of not sophisticated experience run little drums, cracking in as as bigger look we the operations, how really start can to into but we around that the turnaround when and I indicate important look well frame us year for bit fray this into terms coker kind

we we and coker for repairs larger got to. their sign to which are is where and doing that So us, the look on seeing start drums cokers just

Noelle Dilts

really that's Okay, helpful.

some it to could the you are the some extent that electric touch of the But transmission terms business in relates to are business? the you seeing areas on about on and seeing talked Second, are I you you see you improvement know in terms volume. as the the galvanizing starting

Paul Fehlman

Yes.

and strength, voltage some switchgear, bus this read healthy opportunities to is work that think I voltage is that's there healthy. what's for before And bus we so our us mention I are more to up business, the managing is business and and back of in our still but are as can as have at can't pick board distribution transmission still I about as we the seeing of And business lot stop work you business very far are plodding looking is businesses, there. across We continuing health the down going area are we is specialty it that. that we much still show forward lining well our for get of really challenge lot some with doing on talked pretty switchgear the medium the they there applaud to are although run duct, well on and still and they duct. in plenty -- is happy demand international market high tubing a as Enclosure, is throughout coming

Operator

conference conclude closing his gentlemen, Ferguson session. And hand our I'd Tom ladies to for and back the remarks. question-and-answer to this will like

Tom Ferguson

Again, and in a QX. Thank thank of we you you is a We look for today's the what have at you forward to talking great better in conclusion participating day. call. hope again quarter

Operator

attending sir. gentlemen, you, and conference today's the Thank Thank for presentation. you concluded. Ladies has

You lines. now your disconnect may

AZZ (AZZ) 3 Oct 172018 Q2 Earnings call transcript