AZZ - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the AZZ, Inc.

First Quarter Financial Year 2020 Financial Results Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded.

would Dorame, to Managing I over the time, Joe to Partner, this now turn like conference At Lytham Partners. proceed. Please

Joe Dorame

review Good fiscal of Chris. May us AZZ morning thank for the to Inc. you of financial first year XXXX. XXXX Thanks the results for and XX, today quarter joining ended

open Paul a Company today’s Officer. at Financial After on www.azz.com. session. conclusion of representing under On Tom page there slide Chief Chief the the is call Financial for Executive Investor AZZ’s call, presentation Fehlman, Ferguson, remarks, the we Please note, for will prepared Information Relations Mr. found question-and-answer which are, Officer; call and Mr. a be can the today’s

made call may the by this historical Litigation management AZZ begin during forward-looking Private of XXXX. of constitute Except the we XXXX. that call by forward-looking statements from United ended for for statements prepared with like in with to statements Report the Before documents team Form Commission, conference the on within I’d and Act of Securities are XX, which fiscal Annual States involve the of detailed the remarks, the statements including contain February uncertainties, AZZ Reform and meaning this remind certain filed of XX-K fact, everyone, Exchange time-to-time conference some Securities year risks

currency serves, employees in Company’s that rates; the and stability adequate material and and hot-dip political of economic growth the the zinc of in and acquisition delays Those customer costs but availability to financing raw industrial by which are not requested demand AZZ and domestic, including coatings implement demand the customer natural opportunities; markets; changes and management strategies. shipments; the and of various to in gas, the risks distribution response electrical include, prices and power experienced process, to, markets, transmission markets, uncertainties exchange conditions galvanizing offered Company changes and markets limited generation including by products services foreign used are and metal markets, the

assurance correct. based such hereof statements of information, of update otherwise. no The no be the Company future forward-looking whether statements a prove are give statements assumes AZZ result forward-looking as to to will new can obligation and that any on events information date or as These

said, Chief call turn that Officer With let the to over Tom me Tom? AZZ. Mr. Ferguson, of Executive

Thomas Ferguson

our quarter call, earnings year Thanks, us and first joining to for Joe. XXXX thank Welcome fiscal this morning. you

in year. We income and are revenue fiscal start growth pleased net with generated the XX% prior We the versus solid XX% XXXX. year growth

spring traction portion the segment a and most Bus turnaround normal a quarter, regained Our pushed high-voltage season, in of that Energy shipped fairly businesses. of had the order operational Chinese last out

and KX segment revenue we Coatings increased in in markets Overall, of galvanizing over and System is XX% efficiencies growth of which Tennessee contribution in team acquisition Partners. grow the year usage our versus petrochemical the experienced to million Galvanizing Metal from Digital Galvanizing continues fiscal Metal demand and $XXX DGS operational improved generated as is QX our XXXX. which plants. Coatings The the The solar

first $XX.X income We tight. also rise to contribution costs to million. cost improved the value XX% experienced able on net emphasis last zinc labor as of Technologies over our Service craft through up labor we quarter continued kettles, pricing. experienced We market from although year our drive continued to were remains and flowing versus lower Overall,

million also quarter half as we bookings international quarter welding year during of solutions. first the the last for large XX% the compared in consolidated in had two large $XX million first second to XXXX were very and order quarter it down our While Chinese of and important fiscal is year, the booked first orders note, $XX a to worth

a drive strong into to growth more Metal key through the the with the on while both business build set than stage acquisitions. Energy solid million. Coatings This $XXX positive of in backlog to We our year, half the organically continues performance initiatives from to and of continue back traction momentum our segment for the gain

Coatings quarter. from through margins the XX.X% year. of contributions segment the first from in X% acquisitions to Operating the in Metal value lower increased quarter The two last kettles, pricing, to zinc first revenue our is immediate This compared to costs of quarter XXXX. made fiscal and the XX.X% increased flowing due our

XX labor driving with We operational our productivity improve seeing in Galvanizing Digital plants. North industry have efficiencies leader greater and are productivity. remain the taken steps System galvanizing and America to We

be and This plating surface the group. gives new We that confidence in positive gaining to are will years financial growing traction in our galvanized make rebar. up These technologies business investments us coating, meaningful performance pleased AZZ's our come. businesses, yield powder to our

continue executing segment's quarter first business Our to fiscal year. throughout Energy shipped Chinese high-voltage our other along with a bus on will in strong China had be contracts contract this that large

of some patch improvement seeing served our electrical our oil to displayed prior are While demand. compared year, businesses reduced somewhat markets

our investments Chinese and pleased solutions cautions positioned us in have Canada the and Europe, demand internationally, both participate on for tariffs the to in as to We domestically uncertainty specialty and We situation, these to our particularly Brazil U.S. for dependence especially the and labor are locations. reduced well nuclear the our due in with U.S. somewhat of welding opportunities the as trade market. market as many tighter remain our related

the $XXX share previously issued of per to range and range XXXX we share, fiscal reaffirming earnings are to forward, Looking $X.XX of sales guidance million billion. diluted per of $X.XX in $X.XX the our annual in

it Fehlman. And Paul? Paul over turn that, to I'll with

Paul Fehlman

Thanks Tom.

million, the income XXXX to than year XXXX fiscal the fiscal million than net a year prior year year $XX.X $X.XX $XX.X in prior XX.X% or we first greater was quarter. an Reported rose XXXX. greater For XX.X% quarter $X.XX million $X.X revenue of EPS or increase to million, diluted of of XX% quarter. first quarter increase fiscal first the for compared of quarter reported of first the first the $XXX.X Net

Coatings margins XXXX Quarter segment. fiscal from strong basis XX.X% one the performance on to year-over-year XX.X% a gross Metal in primarily on market improved

XXXX the in for grew Operating XXX to quarter fiscal current in year XX.X% the compared million the prior of profit $XX margins basis $XX.X increase. points the XX.X% first in of X% Operating a prior year increased million representing to from year.

Our to effective tax for of rate the was last rate XX.X% year's quarter compared XX%.

$XXX prior revenues compared to by revenues very increase refinery lower to As quarter. shipments our can somewhat quarter of be million offset results, China turnaround as for attributed year market, in Much year first and stable to the international lapped sales million. segment high-voltage $XXX a good were refinery up the segment our XX.X% in of to bus domestic a prior we Energy

year. gross $XX.X profit operating improved to year. in million segment XX% Energy segment increased prior in was in year prior quarter fiscal in XXXX quarter. year to the the slightly the to XX.X% to in X.X% prior for income million year. compared million to in $XX.X This $XX compared $XX.X this the prior margin to the Gross the X.X% first to first year pushes compared down however on compared XX.X% Operating margins million

compared $XX.X Coatings operating the $XX.X the XXXX the prior XXX million compared to quarter at costs Metal to million income same segment, an at and the lower points while fiscal X% million million our XX.X% year Operating $XXX.X in period to year. revenues compared rose quarter increase XX.X% XX.X% In finished first grew $XXX.X up the increase The due margins prior in the for basis for last was primarily zinc year. to production. to to

negative despite first million as the to Cash $X.X quarter a year flow year the no see prior and normally different. quarter We compared from QX for operations higher the quarter cash in fell income business year-over-year. this by net was first

operating of contributing with Metal the quarter. segment the to business the in part and to the We now acquisitions line as first bottom continued the invest already quarter in Coatings first in two

properly more We to like our Coatings will opportunities offerings. to to continue Metal grow these seek continue

risks XXXX as We the still season. we in did materialize of for but China a the that most and year firming turnaround the the exists last for first indeed The did part the the bus fiscal for not orders Metal high-voltage as year to Coatings increased. earnings margins whole, call described ship received quarter year we ducts fall to in

turn Tom? I'll Tom. that, With to back it

Thomas Ferguson

indication Thanks range market Paul. believe and consistent adapt served is to operating efficiency margins XX%. and productivity We remain going markets. back to our have positioned our an quarter on we committed XX% and new Coatings emerged are our for generate we continuing throughout performance opportunities consistently that Energy to to to products the much company, driving to to stronger improving the better above XX% early our to forward. margins focused Metal first In develop our and closing, results innovative We solutions operating

open we'll some up to it now, questions. And

Operator

from John come will Today's & Instructions] Please of first proceed. Company. [Operator question Franzreb Sidoti

John Franzreb

doing? Paul, but how Tom good morning John, you It’s and are

Thomas Ferguson

John. good Hey,

Paul Fehlman

Hi John.

John Franzreb

start as a Tom, the season. fall on spring question first you normal shaping of thoughts the year. spring? this is up your turnaround turnaround to relative how What initial Good My season the to are is characterized kind

Paul Fehlman

we're season Yes, we're up and the we're positive to engineering quoting both stacking and stronger seeing and to a case. It domestic be stuff get that's some of we this in is closer getting Paul. is signs lot fall already, bookings, international that as

John Franzreb

couple in little the much of there's it did Metal is one to much in things bit, so can actually contribute the Op revenue And of side quarter? line, the come sound income to and true? acquisitions, had Okay, business, great. the of guess beat they a Coatings they talk how the a from doesn't But Tennessee KX quarter the like contributed anything here, we the I that

Paul Fehlman

they Yes, relative. were

it's support just for given are contribute good how such significant. income, pleased bolt-on actually shows call there know, on and the we normal track did want that We and given we how break relatively size out are the and just giving [indiscernible] but that and were acquiring we're because can they a they teams contribute great to acquisitions, just the businesses. they it really needed good it operating company did their with teams us into some back quickly, they did job them You revenue. we're they integrated We just and not small really

John Franzreb

Okay, going you sure ask it to know, I'm immaterial I'm Tom; is this anyway.

Is base they the is a any provide normal for galvanizer, kind country. regional seems Just sounds a different Tennessee making reason It a there that is client that particular business? more are of but a throughout has KX more how of you like difference, the of it like characterize countrywide the they do services businesses in Q? that two

Thomas Ferguson

Yes, other we need to John. way, them flip the

John Franzreb

Okay.

Thomas Ferguson

KX Partners in is then Tampa. out close got a a power coater and by Texas it of in North and location plater over

from draw type north. see outside normally that from away you Southeast go they do picks and a attract business and Chattanooga, course lot Nashville they business. Tennessee have and up than of because powder they Galvez of a further coatings, as we they automated a in galvanizing facility that do you is further So of do, Tennessee market Tennessee Eastern from up

John Franzreb

enough. fair of they us Q last started just also settlement. the in was the business there stands? had just the one kind quarter mention and on And if where of and revenue in contribution wondering question, that the I'm energy Okay, update Westinghouse maybe all

Paul Fehlman

Yes, that side, so revenue the as a what in it somewhat XX-Q though, is. it's on contributor of call the out but on de do part out it, we minimis a big it's don’t we number call not that but the contribution

had deal of court. we of filed Westinghouse In bankruptcy items with deals the we've out the open entire the of representative into the with Westinghouse clear how that basically entered terms

So, getting a to it return. pretty favorable pretty was and end much the of it

John Franzreb

you I'll much. into get queue. very back Paul, Okay thank

Operator

next comes from Jon of Braatz Kansas proceed. Our Please Capital. question City

JonathanBraatz

Good morning Paul. and Tom

Thomas Ferguson

Hi Jon.

Paul Fehlman

morning. good Jon, Hi

Jonathan Braatz

of margins, and your and I'm you're better advantage the opposed maybe of out zinc these ability productivity some factors as better lower going to prices, idea real prices? in progress are on zinc On and taking couple called you of rising margins the the little sustainable retain a so making to efficiency, maybe that more trying costs, of items zinc go to are much zinc of to margins but get internal that give on down, some obviously face how contributed us coatings up you on. side color Can prices to the

Thomas Ferguson

Yes, question? Yes a question, that move that's zinc around. or costs great is a

over value in effort in to little and some getting we're sales, that's paid I so focused provide, think more provide sales I that transportation other and we for do more folks taken year where think one that others. of tended plants ago, effort we reorganized than because services technical the that we oriented bring the sales hand making on we really that do a leading and in we sure we cases in services

XX or XX about different got services we've that offer. So we we consider

paid is So team's I delivering. pricing, to good ability are get that's the that focused about value they the on value taking root. for really feel

the the low focus efficiencies, I how on the galvanizing XXX we've to, laid we're will. And with you taking our on had plants. obviously keep get about a plants And if office things labor from think out sensors, and then get DGS of to that paper you out, drive, have, are more have other putted. But you getting DGS away productivity, them them we're yards routers a lot XXX on side, think instrumentation, zinc scrap plant, when of you when can to in in bring to more

coming last of truly using play. efficiencies digital driving that's labor tools and me the into working a for couple now been the productivity we're to where we've are we're years better So because finally that job doing on

scrambling to So we’ve like a I they and I done that parts labor feel great lot be in there now for country to got of and to we've possible. motivation of much sustain the to we the to a caveat as that's allow direct and recruiting, going on ease are view business. try to get only the retention, like able productivity that – demand to efficiency the what's and with labor that that things handle some new team the But work being as to going as are

Jonathan Braatz

zinc If headwind levels, have still a current the bit forward? stays little of a assuming at looking you

Thomas Ferguson

actually, we’ve pretty good… No, in we're

Jonathan Braatz

meant tailwind. tailwind, I mean I

Thomas Ferguson

little tailwind the a than a more that. along go we of okay. Yes, with I’d - do have Yes,

Jonathan Braatz

Okay.

Thomas Ferguson

direction Yes, we the predicting cost have hard a commodity like of time zinc.

our But good. kind last There’s feel wrong look we put supply it. predictable, to, in have are we’d guess If few things and the guess. I you the so we zinc be and to probably I’d done if of know some had - over back the keep the have way - would you you years demand made pretty range rocking zinc we a be know, we a like

months So, year, in six of zinc look the for as forward we about have inventory kettles. we our

So that by where our this we’re quarter close in end pretty the zinc to the of the cost getting much is point anyways. bag of

Jonathan Braatz

talked your work to the customers? it your and little reflecting you've a to uncertainty Tom, and is or and about on concerns those hence around or is Okay. issues exactly Are bit it? concerns that uncertainty business China tariffs. ability your maybe uncertainties What confront customers bid your surrounding the ability new with

Thomas Ferguson

customers they know, as we couple - so, China lot manufacturing we’re to going or out not with that in two, one, venture and you having technicians us those to tariffs back tariffs. of allows China that go be know You subject things joint weren’t over manufacture the into that’s of having a better. and that which from these date have U.S. contracts XX% it with to But capability to what facility anticipating can combination and tariffs a in-country mentioned in stuff country for before we coming of a control years on having is know, wholly-owned of managing negotiating the we’ve the switched and and of so with a through like you

I team keep at there managing of it’s chunk forefront So very our it's, our feel this effectively, big like just a is the backlog. we because but it

Jonathan Braatz

Okay.

Thomas Ferguson

commitments estimated had deliveries margins in get that up generate get we for sure not abide making we’re we customs. the So the that and can to hung by going contractual and

working in folks they’re Medway, and in quite China China really while. We’ve some they've the for and in been they’re doing resources helping us added So on a business then the team good. our good that in facility

feel feel it – call for we here you. we we should feel while comfortable, out also So we

Jonathan Braatz

you very thank Okay, much.

Operator

next Noelle Stifel. Our comes of Instructions] from Please [Operator Dilts question proceed.

Noelle Dilts

congratulations and morning good nice Hi, on a quarter.

Thomas Ferguson

Thanks Noelle.

Paul Fehlman

Good morning.

Noelle Dilts

Good morning.

the So expand just a on Coatings want on - I to bit just question margins. Jon’s Metal

quarter from labor? quarter there us versus is the about first from from way maybe how pricing zinc the of walk much headwind know, again the and kind then the think You improvement can any fourth you incorporate through of to how came to

can then the on any you to the these and the thinking And us of - kettle around and year zinc you cost through about XX% level are think if think you just how are clarity the sustainable? give there is how about margins

Paul Fehlman

in don’t certain we’ve price some markets. - too gone of chosen gone close we’ve pricing would While just level typically from pricing that it’s on how them of and and pricing to events into deep go costs pretty going I we off with - in our more action detail zinc. have to say that and it’s into we’re for the

market. So blanket overall about we’re definitely the making not statements

here one basis should last know I'd that on goes, forward do and comparative positive it's zinc different basically come learned be far you the can as a a and earlier, for every to as you comparison amount that a been say the it market is the expect months, to But where in down zinc year the to way up pricing down. just bit last on going moves markets it for we the Tom another we little months through of nine a be of six majority As different things zinc quarter out of from and Noelle, from year. the alluded those because

predictable. couple we’re blips I a and pretty here but there, been have I of There think think well

see I the for nine supports to Tom, exactly where six Let’s is months. which the next think use right to

XX% is, margin but it on exactly making for Tom? a we’re what I zone committed forward and we’re cost, back back but a now that, be said an would Now, earlier eye into range XX% get having labor we’re XX%, not think may getting that in to this still that the that to while. had exactly that to while not keeping I statement that, say on looking we

Thomas Ferguson

continue as which start that we one as more same some Yes, are fairly we been points get with got ones get the we I've I acquire leverage to the have powder think so to say that thing like, acquired far we’ve galvanizing. we coaters to the of have

a and and couple beyond would we’re the margins to one bit building areas that’s at our little lower as so expanding in typically range coaters look rebar that’s platers So real states be a But to ability XX%. to and that. becomes of continuous XX% about galvanizing a those within do then trying we’re than margins that, of a good that galvanizing sales buying powder as and range. of of galvanizing’s part the bigger reasons be up our we But giving feel we certain of why

Noelle Dilts

the Okay additional great. in any field businesses And know electrical mentioned markets second, bit, you some the Energy quarters? that’s said timing improvements? project in helpful. of you’re on year two weakened oil but the you shifting can that little Then of China that the clarity over services provide might you drive across improving, variation that seeing segment, bit where a shipment on Thanks terms just are oil detail on can you us through One, give more the I the certain questions. patch has to the the a

Thomas Ferguson

taking feel customers, now focus some there and more operational coverage one I and care from activity, we like over the have because to up load Wisconsin. Oshkosh, excellence can of the good becoming, got Yes, than we about up we switchgear know, And and in it the to that's market now two other then so Kansas, we – sites outside extent. move enough enclosure of you Chattanooga, think around is feel we that the, Missouri in is and the plants is three Baltimore and that on

a cases become bit to. can of to share used part firing we We’re little able resources a we than up burden, some better at transportation be least a can in but the

market looking that’s type we opportunities. after and okay like we’ve transmission go say adapted seeing business the us. where So distribution things see I’d in those of doing on We that we’ve of the is and enclosures the activity for been to centers data some

those. going And feel but is so of targeting market good about business that’s a development internal the broad versus just lot our we niches on and

the enough where because and seen we of we business nuclear that’s and a Where with of to business available. that voltage is to from lot isn’t competition of still in portion anymore out my bus improvement perspective capacity bus hasn’t us lot demand there that's had that to at replaced haven't improved least there's to available medium norm, the traditional occupy

and small we’re of And patch, so call tubing, across relatively to bit those units seeing just of did those kind and but little of slowdown that’s patch seeing are which the range overall, then business oil the businesses. out related lighting oil we want the business a fact things they’re is

Noelle Dilts

very Great, much. thanks

Thomas Ferguson

right. All

Operator

concludes Tom question-and-answer AZZ like would This over session. Officer of Ferguson, our the conference any time, At Mr. closing Executive to turn this I Chief to for remarks.

Thomas Ferguson

you. thank Yes,

we this, are about first finished our You positioned. know good we feel We where teams feel quarter. about good now our how

We’re go ensure have a we bench leadership building the right forward. we capabilities to out that as

a away international We organizations. new of of to de-risk our good on development as we sales lot have international pursuing things and extent in going innovation and business more terms depend on and some opportunities, from opportunities and nuclear

We what and I them done those the pipeline our about acquisitions good get feel bolt-on of, to focus about feel effectively. and get them as and integrated ability call on good

that of which, for for this one the I And on caution with be which and tends is positive highlight then to and is get finishing next when to bit fall now that, so call. just look But you. a with talking a lower my forward to all season, lot that, us. turnaround right not out to I looks little So, QX outages the appreciate that, we in there's look forward QX then that season into I the you or

Operator

and you now presentation now you attending has may Thank conference for The concluded. disconnect. today's

AZZ (AZZ) 8 Jul 192020 Q1 Earnings call transcript