TKR - Earnings call transcript Q2 2020

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Operator

Good morning. My name is Anna, and I will be your conference operator today.

As a reminder, this call is being recorded. At this time, I would like to welcome everyone to Timken's Second quarter Earnings Release Conference Call. [Operator Instructions]. you. Thank Mr. begin may conference. your you Frohnapple,

Neil Frohnapple

Company. welcome, Thanks, XXXX Investor our joining Timken quarter to conference Anna, Relations today. call. The of and earnings Director This second Frohnapple, you everyone, is appreciate We for us Neil

quarterly morning, as Before want out review part presentation on of to posted that website the I the we today's have remarks company's we results. we point our materials begin this that will of reference

call webcast download CEO, You earnings can Fracassa, feature material The Officer. are the access Rich Financial Phil and With also on link. Timken this through and our President today Chief me the Company's Kyle;

will We the remarks up call both from for your Rich Instructions]. morning and have questions. before open opening Phil we [Operator this

related and results, future During today's to call, our business you plans statements financial may operations. forward-looking hear

results the which may describe which factors, implied release and reports from variety website. those in in press materially on we a to differ today's SEC, projected our due are with Our available or the of timken.com in detail greater actual filed

call consent, between included Timken and release prohibit GAAP its in equivalent call have information expressed and non-GAAP press We materials. without written and copyrighted any by the Today's Company is The presentation that, financial we reconciliations of to of any the recording for use, transmission Rich. or like the I call. to interest The over portion will Timken turn I now With in would your you thank Company, and

Richard Kyle

joining today. for Thanks, thanks Neil. Good everyone, morning, us and

delivered pandemic the pleased very year second I'm environment, Timken we responded the the how in this Given has to and how with global quarter.

authorities, the strong set products reliable to facilities by to and customers with of the guidelines a and through responded served we've our we've global places quickly kept have kept pandemic. financially safe our We government the company and health supply restrictions work,

that XXXX's of our May we anticipated than slightly On the prior last quarter that revenue billion. XX% up will the April better is it sequentially we April XX% held was on in projection. improved X and call, business record be better we down $X as when that This than through down from our quarter. did bottomed from We about Our in quarter projected call year.

improved and the faced then restrictions. and customers in minimal end we May quarter, business again June. By our of government the Our in further

the spots there a so let sectors provide and of country in Within and three over three moving performing our All two lot The in parts our decline heavy also perspective results. the bright and were XX%, were driver up of the China XX% in energy. of globally renewable markets. May. business much of are entire on quarter our pieces, lowest me India. for the were and some strong of automotive China The of down OEMs revenue the were truck April and idled Renewables

from from organically April for through progressed, there, cycles. performed recently for been difference markets. quarter in as revenue us more in commercial the space hardest quarter were of than quarter. solidly in but and were renewable India. our mix and a strengthening in last May, the the the automotive markets like XX% down through held exceptions prior diverse There other sequential geographies weakened which as made prior year-to-date, in This by that aerospace, market sequential But expansion decade were markets led complemented built quarter our was essentially, well as us has hit demonstrating results June the more and strengthening Defense position Our acquisitions. the over like all for than some year. a also the material most for

customer react margins. and a Through XX% we including of were demand. variety compensation. reductions cost significant furloughs to discretionary reductions reduction spending, per of quarter in EBITDA share The to over the the temporary, quarter from majority took cost profits, cuts of in in decline in the measures in revenue $X.XX Moving course we and the the made the quarter, to

We in the a moment. also $XXX to of focused when in more to accelerate forward, generation We flow inventory million for EBITDA, than cash with took less with on heavily produce which talk free inventory cash in resulted reduction revenue. actions generated and combined an in the Receivables demand, $XX efforts reduction about quarter. down reduce over significant going and I more which the came will in million quarter. structural quarter And than costs we

through to very on continue second a strong with strong half. quarter cash the flow As generate that we will cash expectation the

target bolster We the end Phil above the levels steps company to quarter, acquisition the elaborate year line results pre-acquisition top EBITDA sheet, through continued on to from the margins, XX% X% and The at average COVID, later. let and which BEKA COVID-XX. balance liquidity further also about but contributed the helping our has margin to impact from below took also integration of we The by the I at expansion despite by again be will next expect BEKA XXXX. as we the

improved are some we stability remains are revenue or providing we on the and since While the half not of guidance short second earnings has call I will seeing color and markets significantly our elevated, what term. our in on year. for provide uncertainty May July X,

years, quarter quarter decline we a sequential the of third organic to our reminder fourth. a third from X% from revenue the have another seasonality. to then last in and X% the averaged just X the First, The normal second

this half. second not see second or third at the many second the of half. was scenario we quarter though even weak, At So our particularly still snapback in headwinds the do a of 'XX we seasonality look normal as point, quarter the exist

the holding step than like we levels, is June. the of for to also below levels not normal year. revenue rest better be but June in planning revenue another are XXXX for in seasonality, We roughly is sequential which is change the July saw at growth

an half pay second revenue, margins and furloughs an shutdown. being From best I in than digits the would up for quarter, profitability recover, from in second to normal will more margins inventories. markets for quarter. except Temporary continuing From to well in narrows our that and impact seasonality their specific in standpoint, expected in markets down in be the projection, the down when first is second continue And standpoint, significantly company would restocks in, cost gap are Mobile a first, solid, COVID-XX. be of will solid XXXX. to As Mix which quarter third by EBITDA after again, seeing would less as be are say result stronger below and impacted only first by and would the second half adjust September, factors from this projection than half be we there automotive, our helped a from be expect modestly imply quarter margins. were quarter a channel is several the extended Mobile or customers in changes as being There revenue markets are I between second in and July be to as the cuts normal remains in that being the third Process the second the to form which decline August to market and any add, estimate remain we from look much quarter mid-single revenue plans factored reductions sequential revenues but including that U.S. recover. EBITDA the major seasonality, operating this variability we at but flat half June, not end year's demand

and in spending be discretionary managing began still are moving were smaller reductions second quarter, actions. took temporary to tightly, from but in the by will are We July, actions they realities the demand. of offset actions structural further furloughs and quarter. to the partially of targeted we second more cost than reflect in the cost new ramp-up of the Moderating actions we Late workforce temporary

employment reduced has year over by expected X,XXX this been since of with company-wide quarter. of XXX the the reduction Xst more about a Our

$XX also in rightsizing accelerating of million staffing many measures of include are plant accelerating benefit are and X cost million this generate $XX few to cost productivity actions rationalizations consolidation initiatives, improved second measures. year-over-year half several smaller including and the A examples between consolidation levels footprint expected operations and These Drives year. sales and in We already BEKA geographic to Chain. our of leverage business continue along productivity. across Acquisition Diamond footprint. between synergies, force the we and platforms And large our plant for to with consolidation digital Groeneveld underway, lubrication and other our

our Bearing system, adding ERP further to simplify ABC acquisition This the we enterprise. systems business our across are our which quarter, will

realities new million directly demand. have $XX already in pulled ahead, reduction the in were these some in initiatives some actions, cost million being some launched been are to process, response of the and $XX Within to of

the deliver in Finally, year strong how the to the the From will demand a standpoint, half rest inventory through to below actual first under of the the impacting cash expect year. depends cash but operations of flow half, the from The second underproduce to the plan wide revenue we demand a on magnitude we we we margins half. margins, continue flow of balance of second solid scenarios. for range reduce be through develops, Again, that to year. plan but remainder

outlook. allocation the priority debt. for reduce capital after to the One year the final for the be Our will and CapEx of dividend remainder comment

but base. to have be in what to in and solid that to small of we go the and the Relative environment, virus will And of minimal kept The has the the with second continue long-term remains times our the will the shutdowns pandemic customer quarters, extremely drag for the our results on the gatherings that large from on executed will a a and demand. could for proposition post-pandemic current took it company the better the arise dynamic impact uncertainty think quarter global Timken focus we grow. that, Phil. care And safe, will and many While come. governments directions strong with and entertainment will through that products, well. the summary, the to for extremely and regards on across We inevitably travel, changes was of challenging, deliver company longer-term In endure to relatively government responded. relatively believe the In operations on world we impact while we turn value kept our coming elevated, us continue different I hospitality, cash is outlook short-term industrial and customers over Timken our continue Timken could to We financially while markets we repeating earnings widespread do it risk employees low. demand reactions strong flow. advancing

Philip Fracassa

good Okay. morning, Rich, and everyone. Thanks,

EBITDA can of second economic our see a going results We the in strong $XXX down at million, delivered start just were review, earnings adjusted up Timken from from materials. from the quarter on came slowdown points I'm XX% with per For slide. strong and year. you the broad COVID-XX. down financial caused was XX% quarter for by this basis delivered the under Margins year's decremental XX.X%, record sequentially, XX to performance. despite share last margin the of of last Revenue Slide for about summary second on second for margin up And last results XX $X.XX, adjusted quarter year, also an the quarter.

to Turning XX. Slide

versus quarter. take positive. ago our second sales price Organically, in while was period, down sales volume lower the year Let's segments closer performance. about saw Both look at a sales quarter realization XX% were the

to improved the the May June compared Rich highlighted, revenue As point. months in April low of and

headwind, to began revenue we while year, subsided, as by top sectors Acquisitions demand X% automotive. quarter in acquisition like of completed interruption the we last in COVID-XX approximately underlying negatively from was BEKA the the currency line some see added improve sizable impacting As X%. almost a benefited

we side the On currency by excluding outlined of so the acquisitions. and growth region, right-hand slide, both organic

few comment up In Let me we're briefly regions. Asia, on X%. a

regions from X down China In as mainly America were in increased in were year down mid-XXs the Europe, across sectors growth quarter which both due negative sales most the being India North impact and from strong energy, to April Our for in last percentage we offset significantly and of points, renewable the in down the quarter. more most those than shut May. in virtually

May, and heavy Our demand, COVID-XX, which negative of operations impact like on most truck. impacted end-market in automotive severely April Europe in North had sectors especially were especially America a by and in and

represents Adjusted $XXX XX. negative inventory reflects was quarter of a in impact $XXX million effect an on million XX.X% This XX.X% had last of decline around adjusted related on basis. sales second reduction. XX% lower the organic the Slide including margin volume sales the of The to of in manufacturing quarter. performance, the also to in EBITDA or all EBITDA XX% Currency compared of a year. or or and impact Turning decremental EBITDA in

offset significant these reduction were positive in by partially side, the expenses. headwinds On SG&A a

costs. favorable had lower price/mix also We and logistics and material

the addition, nearly team acquisition integrate contributed to our $X and million In this to continues synergies. quarter drive BEKA EBITDA in as

mainly an Let a furloughs cost The COVID-XX. incentive was by and expense quarter. reductions further compensation the actions, nature, to manufacturing in in while work and in had impact the to actions, along took response including comment in and with on cost in temporary quarter action me we SG&A as little on These significant SG&A expense. salary reduction positive swift driven our lower immediate reduce reduction mainly results

fixed inventory. lower actions, most volume delivered manufacturing due quarter the demand to in net production of the On Unabsorbed reduction negative cost the reduce in our line, of we quarter. despite lower the drove and variance strong to costs, efforts execution

acted labor and that net the and mark-to-market, an pension for earned items. basis, XX, in $X.XX inventory Slide and to for we around $X.XX GAAP reduce restructuring tax diluted flex net costs posted adjusted down quarter, basis. special $XX This from to variable teams of share includes in Our we COVID-XX. down diluted per XX% you'll a quarter the share the million year. $X.XX response world or per charges on On income last quickly of On discrete see

remain rate prior range tax reflecting mix in year. XX% earnings now, second Our to as geographic through our expect and was Right this the adjusted tax we the the in line quarter, with rate we move in our expectations. of

segment Now let's business our XX. with take look on Slide a starting Process results, at Industries

in energy top were quarter. by line lower million double-digit second to hold distribution, material favorable and X.X% flat Industries' or currency. by impact X.X%, adjusted cost partially by in sales the compensation while EBITDA the unfavorable second sales logistics XX.X% For impact renewable quarter were was almost growth translation despite to X% strong of as lower compared quarter, from added down down $XXX of lower $XXX unfavorable of reductions, able sales EBITDA Currency Process in pricing. the sales sectors, X% year. positive fully lower of expense, last and the including Industries' the adjusted $XXX offset declines in We million, including driven year. sales or XX.X% million Organically, most acquisitions offset last and was costs, relatively almost the industrial were to volume Process and

while the costs, was logistics $XX lower or material the compensation the in most to Mobile $XX by roughly cost compared volume currency unfavorable X.X%. or sales offset EBITDA in of a of EBITDA shutdowns the let's down around for lower basis. pricing performance represents as sales. the benefit while revenue The on last and customer higher year. in year. down the expense, lower adversely impacted X.X% organic offset favorable the This the last heavy and XX.X% to These truck, to commented margin and million Acquisitions also aerospace including second were translation in quarter. was positive defense digits, and of significantly currency, manufacturing XX. lower Note Mobile second impact added as acquisitions. was Now restrictions million, was shipments double government unfavorable and sales were reductions, quarter, automotive XX% and rail quarter turn from the of reflecting commercial by line Industries of Industries' Slide million that positive. were Off-highway by and roughly on an decrease flat sectors partially $XXX XX.X% In sales were second decremental related on price/mix quarter, Rich earlier. Organically, of XX%, XX.X% top adjusted Mobile Industries' adjusted lower down reflects impact sales

So very Mobile in all operating performance Industries, good considered. things

XX. Turning to Slide

than million cash the strong generated almost support initiatives. in million We $XXX the CapEx $XX capital we year flow $XX and of quarter earnings. operational improved quarter, cash second of to flow actions cost see taxes You'll spent in We $XXX on quarter the working from of lower lower as reduction growth free more and in long-term last of impact up excellence lower cash performance, million generated volume. operating the million on impact offset the

We any nearly balance debt also that net paid our June back at reduced million. structure. dividend second investment-grade not shares capital sheet. our and in we Taking by quarterly strong quarter. Note with consecutive XXXnd buy $XXX a did ended the look closer a We

includes committed $XXX of hand than availability of $XXX cash of on We which million, plus greater lines. under $XXX have over credit million million liquidity

at June to compared adjusted to X.Xx the debt net EBITDA XX ratio March. improved end at X.Xx to of Our

certain amended significant expected additional the enhances environment. Overall, provide and of to covenant flow flexibility balance financial any headroom, proactively before position also don't that strong great in keep during And put maturities we uncertainty. navigate to in us have We XXXX. period current quarter sheet, debt the our long-term a this agreements mind bank which cash during our liquidity

XX color turn the for remarks. let's some revenue to additional commentary Rich his on Slide provided Now outlook. in on

let So touch the margins. items more other our on a outlook color and little on provide me for

Over to the working which will spending and cash of performance other generate we strong reduction reflect initiatives. the impact favorable of XXXX, rest and free cost capital expect flow,

dividends continue it And we of free will flow to conversion While we the income cash XXX% be adjusted in half debt. than likely plan to first after cash exceed free second deploy our reduce expect net lower to half, to conversion. flow

back buyback year or strong conditions in as share XXXX to next on expect go warrant. M&A We position to a with end the offensive

for net in line provided we tax last XX% We an consistent around full long-term with around and adjusted $XX quarter. the million, the plans And growth both roughly prior supports of of outlook. year, expense $XXX our which expect our of expect rate we outlook interest million with CapEx is approximately and

As million million This underway. these discussed, to previously total year Collectively, and are longer of which $XX expanding align term. year-end cost margins demand accelerating savings expected half. improve the initiatives, $XX we intended are structural of to were our reduction are drive that near-term includes Rich and actions operating second structure cost initiatives to help the in impact our with

ramp second expect cost more second first actions and margins half below second timing XXXX in be factors EBIT half. to temporary cost and as we be well. from efforts inventory will the our However, reductions the subside continued normal EBITDA to the the manage quarter unfavorable seasonality, do continued of up, mix as half permanent

On we side, the significantly very margin believe where year. the decremental declines. And we we positive our margin good expect performance higher years than for that in will full demand XXXX experienced similar level past be

So in higher strategy. expanding to strong you. closing, initiatives to structural like a as strong while line focus returns enable for results. Anna, we're that, for summarize, we quarter costs. as our performance swiftly Timken It In continuing we end will on all global and our to second cycle, delivering the industrial acted quarter accelerating margins to advance now our continue to efforts I'd delivered through and remarks is second I'll And down global team to generating to dedication that through with and the open environment. this we formal unique their and execute cost questions. commend and Timken reduce And the back our as flex reduction growth leader

Operator

our question from first Volkmann we And Stephen take Jefferies. Instructions]. from [Operator

Stephen Volkmann

be margins what Let's thought -- they're sort to might think of eye-catching I most you about the they're me, I seem don't they and the of why to decremental see, half be. guess -- we start

think the Or more the turned of And obviously, thought? than cost-effective else there that how follow curious half? just so up then much Was then I'm how second. question better. out there impacts guess I drove sort that I'll that actions second was something and is that? a you short-term, had you So

Richard Kyle

think so for the didn't pertinent we decrementals, quarter, Well, the -- is but I question guide the still. your

believe the good that we on a year, would at and had decrementals the XX% deliver can have look and sure say, Certainly, would we we I the first we point confidence not you looking were If that with that magnitude. when less we -- down in at at last half good and sort our little of for that bottomed, decrementals. call

sequentially volume was, look I first the would the for Obviously, an first, have look in off significant think a actions. we would bottom the factor say, cost was will it, second improving And yes, we more be for part the full the say, and revenue play So been I then would year temporary decremental the year. have for And we the factor. to I in to close but the margins. pretty we objective revenue full what said,

Stephen Volkmann

Okay.

as think about be of just way theoretically all these So done year? And X/X, know, to end I things trajectory? it I is don't X/X, any the we the about half, think this of guess second will by that XQ; temporary kind XQ; of sort

Richard Kyle

end that as at think probably of with Definitely severely that's specific places size. would in are where to of to out be. the intend in quarter actions more But and remains continued July we my offset to -- looking the will year I pretty that. starting I significant said volume ones the cost will easing, what we pretty be temporary the targeted though, than the the other depressed. in stretch actions in We notes, we

you think to good as and full in not half second would at be good we second total, decrementals year as good I So to but quarter. again, as the look be decrementals expect

Operator

our We from question David Raso take next from Evercore.

David Raso

think in that's Can margin Obviously, we XQ. that strong margin strong question your But sales to margins And some relates flat that that? Mobile was high sequentially think about digit, comment down to or even you down? would very is maybe can I would Process. in perceive Process be The mid-single assume you company think in sequentially Process up in up give comes XQ. you sequentially, level. obviously or up I the us flat off stay very total sequential the should a how do but more to XQ guide?

process. sequential bump the of idea some Just

Philip Fracassa

in. then Phil. I'll and take can jump a is this crack, Rich David, Yes,

contribution single Rich that from So up greater Process sequentially quarter. More see, that we estimate Mobile from given is normal seasonality right that in expect more impacted less Mobile. flat was said, expect might so certainly second second. improve, the susceptible would I probably best in I the be sequentially, in we'd to to of fact markets now those mean that as digit the third the think to quarter as Process

So probably -- seasonally. the give best you up Process more color would -- would can then subjected up be sorry, Process I in Process and be more more in Mobile I'm in more normal-type to the

David Raso

And how to another the was digest margin question. related

Just XX% margin, that and get I'm for is savings not huge given business renewable repeat. helped it's for margin sure versus trying I'm the a don't how that, XQ Process. the obviously, EBITDA almost it in much sense EBITDA just maybe to

Richard Kyle

the But have temporary good good temporary very by not business would actions. performance, digit I was revenue we margins to type have the would strong would single contributed further cost without decrementals. to renewables been a Well, of delivered that think well look at have manufacturing actions was it continue. The decline, a would Process high aided and we

margin take So revenue by a quarter being on I would given the temporary that we the second as Process impacted Phil's look actions, think sequentially seasonality, peak. at comment cost out EBITDA

David Raso

was It the year-over-year, in down EBITDA the for more up. Okay. organics the if a inventory to this from up consistent quarter with difficult we the process? margins to XQ ability comparison match should year margins down be ago? Because with And down keep with obviously, would be

Philip Fracassa

Yes.

half point, is really at this in half. really really, will EBITDA David, seeing first this That's think all we're below all point. we're at the I be saying margins second

Operator

next The Stanley from question Elliott Stifel. comes from

Stanley Elliott

I'm would you distribution way you on How looking but I'm -- for how with bit is shelf that. your down some expect to Can space inventory mean, you thinking talk expanded at little a getting curious well. about perform in assuming just it's I assuming you're the portfolio, the down obviously all. as about portfolio you're out?

Richard Kyle

I Well, levels I said revenue where right about have that was the year for into coming was. the inventory think the would

generally slightly second still Company, Timken our inventory given to The than revenue at therefore, a our look say declined the quite you And come to quarter we'd our the up inventory. more would say As we most needs well. down. flattish bit And outlook, back as customers that I do a little comments coming say, I high. they demand would and expect of If true bit inventory not that's see underproduce, levels of are stronger, to our

expecting outlook channels. to inventory in generally of customers' out come our So our are we short-term for revenue,

Stanley Elliott

on about the have what interesting you're offensive of M&A what kind guess on hear would is on there? And can love to to shelved? kind seeing terms lot of you my what I how got a going of are the quickly on. back commentary you the expand of of conversations set environment, mean in But going that out guys thinking kind opportunity

Richard Kyle

Yes.

if between And cycles, the significantly with X% we through And with to we of but communications quarter. certainly, second sit down with have of early is active. have targets period a one inbound would the think That said, to market year -- being our the out slowed shorter net and, and EBITDA here good little in in woods I market, when we today, cash we get the a not debt higher in we significantly a costs. hunker the for past very cycle as remains down the as down our period, down, over performance the will, flow to you improve certainly certainly year long than I of as our back a steel say, again, flow we were has troughs and business offenses robust objectives coming, pensions, the uncontrolled with cash fixed on returned levels. work the prior to hunker was we're not at deep, had the not

cycles. fourth. and flow cash there the again I and down in perform position long we And We our expect that, that's we through thing than the of at the term think sit out how be think to want more get to pay do we right we in will to differentiator with prudent and back that have do to past And cycle X%. a do so how debt in third a now, but good the do possibly that quarter,

Operator

Ritchie question from comes Joe The Goldman next Sachs. from

Joseph Ritchie

like to to triangulating make I'd maybe out back this sure I I'm see correctly. all go to if the cost can

guys million $XX also to the down. half talked in half the you benefits So second about And the $XX million year. stepping of cost second

So second XXXX at that $XX And we back $XX about of this had, quarter in of how million, on is assume I comes know, through as think fair million to kind what the then benefits do think it I don't cost you in least? 'XX?

Richard Kyle

would that been number quarter Well, the second to half two. than second I think divided fair more the have say it's by

I yes, So -- there to the your we been is that to number temporary have more. it directionally the regards because expect would in think

we half second be the perform I happens as well from I think and capital And out. QX as it. preparing I -- between cash back about as comments comp in margin too our years 'XX, low of directionally. I look has will determined certainly and mean QX preparing year. and on to well what comp the answer really early as sit. And get 'XX well made much as the a moment based as EPS I margins So where will preparing comp, yes, the the But this for a dampen cyclicality the the you one be a working on years we 'XX, on haven't. on half say it's the I'd is to at we the both offensive add be half for but look that on first that, to second comp. I just still half getting think tough out spent is spent as that revenue think tough allocation, don't by through relatively looking And shorter flow have revenue think at you spent for. to that period the we But we're pandemic what because with through Timken to is comment that years our second we've -- as

a double-digit pandemic-induced spent on So years while revenue. quarter, in significant shutdowns we the better have through a decline we were government not with revenue decline for preparing planning in XX% performing in

and ready depth remain perform the on severe, was unique is So while cause to maybe and the we performing. focused we're

go to top third that's for going the through under confidence through line. being and think diverse starts XX%. us, a very revenue good We that's the stream going forward. Auto year of with us as that renewables. us that strength that that for And compared the that. a well industrial last I in cash half our on hurt the as Timken in can again, to a quarter. most to down a second -- in us second think in in did lot about quarter, with flow off the peers talked start but today of to did second We're year relative And help a in better say with has of we market. Company how The we I terrible Better it even it We're first We in XXX-year this market. half in a history, I range is to of performed wide the good part going do play we scenarios.

that make I The we've scenarios. offensive pull would the a hit out off different woods. coming to be getting of we margins. mean, then sooner that on is we're the a trough can your back the not back a what third on focused we start. We're the but and good other to to through that variety levers happen, We're have of question, But in of executing And past. better already than one variety done very on, element I

to we have would whether spent focused comes on better 'XX that start we're targets through on still I and we long-term very we're again, 'XX, elements. years good tough say, our And We're about off it. in to doing perform fruition to or a those feel but will that. good And all So on working a market. preparing see,

Joseph Ritchie

market months? as the about to my aero over talk XXXX, That's has you months? a for surprise guess about XX this kind I your certainly I be bright follow-up clearly And you for have are early quarter color. year. touch again, for think the of growth, to but might was been end XX, would little it, about market thinking to flat. context you that helpful XX it next also like end next, on a how did some call spot it How then that this renewables too be over you helpful XX a conversely, to since one know

Richard Kyle

on very be in think year, to and So Long it level term, said, digits. the expect this market. offering bigger continue to to remains broader have part cyclicality expected half of there trend secular will second double a That wind, pauses that being strong. a expect and some of the up and and booms be that, growth to of become I continue the of to portfolio product

'XX, is not ready call top of growth. 'XX that. So an on But year line going excellent second the to to including be half,

commercial headwind of a sequentially last percent quarter. and forward, was few for is On coming us of at percent there. started side, was that the still mentioned, And a further few the through it aerospace company's is I going aerospace, us revenue sales declines it for year, which as of the probably already a X% again, some below softened that. But

So outlook there. pretty cautious

and side, commercial the good on remain year, are there and not one but us, mid-second on to a half side for the and bullish have good stable a outlook well. a a that, On market bigger as slightly we high-growth expect defense

Operator

O'Dea from Next Research. question comes from Vertical Joe

Joseph O'Dea

the And the on sounds it's quarter? First, if were million quarter. I million got $XX from that just second actions quarterly in run of million underway $XX $XX some the back like It of to already in all million to you you how about touch $XX rate, half much at savings. to contribution talk wanted could those

Philip Fracassa

into we of roughly say, come X% targeting revenue. years most Let's

target. we it, $XX this call So came into cost a million out year,

have delivered half would the the that have in that roughly first half. So we left and second in

million up the So -- million rest, year-over-year the hopper but $XX the the $XX as new expanded things have result either to off of a million things numbers. an But million, of initiated and/or run certainly is going look to $XX and were I to outlook again, million, take and done significantly in the $XX demand to situation as you have million. was rate, $XX then that to happen to we kind million if that accelerated, the to there $XX been the increase that million -- at the $XX would $XX some probably number to

Joseph O'Dea

And come how distribution right to it. give rating that through then experienced Got any be and can context on that understand now. I'm down you the run far may where just you quarter trying and July? saw

Philip Fracassa

U.S. level. would other it China, of in greater strong. than remains world. time pretty inventory significantly quarter say, still talk see than is XX% a business the did frame In a reduction market that that greater that. little Europe, be level in it would not we the And and with and throw later would inventory, and at case down. the group back impacted March, the earlier a another channel. a in parts was later of That question inventory little In I down as off about in the say, that impacted the April a weakened, on is be I within down reduction was to distribution, First, XX% distribution in July I has in rebounded to markets the in probably of is that be But a to in we would

Joseph O'Dea

tough just Obviously, then more degree it's the base? this generation so comments, lot it's in reflection of year next maybe to XXXX function we degree which think or that underlying a of of some much but kind a and that's -- cyclicality on the the if but horizon, happened year year, a that not sustainable the wanted not that you capability. in there's revenue ask and but this to to that about move that you're the seeing And saw which the Perfect. step strength the comp renewables being a

Richard Kyle

it underlying certainly you said, see XXXX of number. XXXX calling a is of I we back. certainly it continue grow is back do to and can the up But sustainable long-term tough being a number whether down I capability, to think a And it that build I'm and And is to back again, to not not the off or No, that off be will peak. off revenue that comp sustain of. recognition believe

Operator

Melius from from comes Wertheimer Robert question next Research. The

Robert Wertheimer

One differential trends So is I small progression questions. Or in have the stable real virus? just between but Europe one, America, the things two? different the are two you given relatively a seeing North of any versus are

Richard Kyle

European automotive and is weaker was definitely stronger May. in automotive U.S. than April and

went here they was element timing a today, X be think and went the that say, I after then virus relatively and at they've each issues So today. back the down levels would would back. and Europe and And down way caught outlier. worked say, there whereas I would came government world somewhat through came that and that, -- other -- they're earlier sit have as I more normalized, their But close

Robert Wertheimer

Process That's just helpful. acquisition. wanted about to I Richard, really And ask then a question and

You've whether forth. talking things and and or some aggressive is the virus you're obviously and to right it's are curious due a mix good about I'm hindrance people pretty with now. and done flow, the so whether keeping otherwise, next whether with diligence getting things year, disruptive steady sellers deal active

and really of we questions robust to to have virus whether wait that Process can a the execute? continues pipeline, the be real Just before on you whether out the for or clear

Richard Kyle

No.

could we're I certainly to, the we but to if near the due with I with where anywhere aren't mean at, virus traveling think situation used that. degree active travel we the that have ability do stabilized and diligence. back get we

government -- do it I So of that. there's could more up those pause. think clearly, we could I risk of if a things, restrictions And on came sorts that but

go more approach market on the stable have back before I one we of environment, a cautious offensive. are making think to our today sure a we stable EBITDA comments

in because magnitude we X markets the of that seller feeling trailing when many challenge our other get of comfortable happened the looks revenue both and with the versus buyer or the into months. and X forward think the that's is of over back do like what disruption I last EBITDA

Operator

of question Ross Bank comes from next The Gilardi America. from

Ross Gilardi

you're given on Just Process said is what seeing another we the different with all question and total Where of markets? what's XXXX, year sales, XX% all on now? given done, mean renewables. renewables I going the do be XX% can for of when of finish end

Richard Kyle

over XX% would XX% within put think XX% close which I is range, Process. at for over -- slightly it to

Philip Fracassa

the selling X, in that's XX% company. And around grown long years half, a us. would obviously, and you've through But Ross, Mobile ago, markets covered as trajectory for the to for time, Yes. the remarkable you so first for quite from XX, being half, up sales down. first us know, renewables XX of have a growth

Richard Kyle

Cone came longer talk with strong is wind of solar the bigger. as and been because well. business we acquisition part portfolio our that But of it's really Okay, performed Drive more really will the very about a has side

Ross Gilardi

So opportunities be elaborate you comments. that Can talk you And further? just organic that those mentioned your that are little about product see acquired? or think a diversification you bit you in things I when opportunities, could

Richard Kyle

automatic But I certainly into with into systems at Cone put energy, put which the -- obviously mentioned mentioned acquisition acquisition we us in renewable the were lubrication us the solar, Drive time, not BEKA in. really

capabilities Obviously, we those beyond we initiatives products the of then within and we bit bearing we So have a that do bearings And the range addition. couple of I'll build to that longer. that's have out, that working we a organic a And little nice have then space. say, on. continue are the take

So all the of of above. combination a

Ross Gilardi

of maybe terms So very you exposure. elaborate you and, other end And renewables time less would them. dramatically I in add your food trying have mean cyclical the just end markets, like to of on some over market I obviously sense guys cyclicality changed just I too. that, cyclical to beverage you got when has in certainly, some, just get think, could less I'm have a mix mean, and

that given end the year, category? your cyclical that for of end of less what the all what Process portion so in else by And now? account you of But what would with seeing will put And you're markets.

Richard Kyle

close differently point scale portfolio impact that when again, indication to it sub-X% a and we is and collectively few that of portfolio. that very very and you equipment of different or for double renewables but cadence think, -- say, automotive, different cycle meaningful have they're us the could definitely to, the cadence a again, you And but equipment But and really would being digits, about offsetting mentioned a essentially half. small cycle those one probably a Marine truck at something good quarter a for for growing three pretty Phil yet other an had we been be but mining of would look India for has And the that get to second us that think first I double built of that -- feel a not than defense the several forward. digits that definitely defense I you softening. cycle. the a and parts one after the were side be for good the on the has in how good improved several already bearings, at renewables, market have Yes. impact. steadier having percent, at down is numbers rough we XX% then for has slower, years the a construction is, I which those, definitely is strength

Operator

The next Barger KeyBanc. from from question comes Steve

Robert Barger

company The right obviously well really operating now. is

levels there customers unusual or share? for it's to So design as service are you look across take product or any gains, competitors growth the opportunities with struggling changes lines whether share accelerating or geographies,

Richard Kyle

not would not our that on have the platform of these doing and I'd on answer time but been. event-driven. side, usually as largely has slowdown of of -- active as it is our I are side side are the is lot that period is to and things the it's application focused happening though, say, no customers say, that we over with we're and OEM that would slowdown, virtually, all positive say, are a I long there a gone and continued that, from

it's pandemic, anything. but I news the So really say good think slowed OEMs, by wouldn't been is if not I the

folks. in suppliers less probably interact there's travel being in able and think I with to impetus today's change to environment without person

small been availability, our But able say, minor for looking of product some side to or that's, the with think would certainly regions. answer In being to aftermarket, think no. world forward. is some point results get things the the I to too product it's on that around in there's always in I the probably So there's probably and disruptions I and us

as would disproportionate in business focused usual the and platforms share I much say our on winning of winning So parts and more market. aftermarket fragmented the the

Robert Barger

America? you and, about all Understood. sequential pick in talk activity Are some Can specifically, rail you rail traffic? given seeing at up North increases global

Richard Kyle

No. us I like was market second That on the have we fairly would half. rough be to parts the being say, have that's second one to in expect that for of said, of rail was specifically that a India outlook better would some North good a in one other there's quarter -- the half. which world rail, rough and markets American we way down fairly second the a the

in that some there's XX% American greater no, category. So be rail than offsets. down But North us for would

Operator

comes The Courtney from from Morgan next Stanley. question Yakavonis

Courtney Yakavonis

quarter to quarter sales Just you quarter, for down, comment guidance maybe fall quarter given but give be be quarter? third quarter cost then can helpful. do sequentially to And cuts imply us second any typically seasonality any little through, EBITDA more give stronger permanent because rolling could you margins, a on because would third those expect conversely, second us color on in the bit more be to historically, be in there will fourth versus half margins fourth be line with than that of the those would just should we think I third tends

Philip Fracassa

EBITDA think about. may tell phenomenon will, mean as quarter. expect which as I third I the the limit got weighted more to than think it we're if think Phil. have half. third I is and of back quarter offsetting also they the be talked impact, fourth, got seasonality you weighted ramp you Rich as bit in, third half than cost actions, But little the be to you've would too, is reduction lower going second you've is you this a from of fourth than to Then Courtney, fourth, I I first what again, all about Yes, say half the to would it,

that. little to So be far But put on and a that's a you have as a bit go able we'll and there. -- probably as of about take

Courtney Yakavonis

on obviously that single And the though down first high but quarter, constant up it's being India. dragged was improved pretty think I then Understood. digits, APAC, kind Okay. by just from even of

Or So region? could we growth an seeing where China are that growth half? could comment area any in that we see digits Is in after, renewable obviously, plateauing you second double there? up on the just

Philip Fracassa

Yes.

up geographies, But I Australia, the India way would obviously, be, we the of frame but region. China take, are think for parts that and the also other you Asia China us, have by to and significantly biggest up was energy. renewable Asia if was led and

our mind the in else around it's but So anywhere a -- than more lot principally business than world. energy. Keep I -- the China is mean in of in renewable it's anywhere more commentary Asia global, in principally

kind was China China rest of clearly flattish benefited recovering ahead the would markets collectively, from that Rich by the from talking in about, China is So and that. of of timing else. everybody as of as I'd large, were economy, the COVID, say,

that minus of flattish sort in or kind plus which were obviously, impacted us impacted, the markets helped. May, being severely country the was April India for down of really range then of of rest absolutely the So significantly. shut most And very and

commentary will as about the to of So around be see from look into as to rest second the improvement. part renewables, quarter year. the half, some That's part will we move the third moving in at sequential think that market India Rich second of revenue I we ahead certainly. second India of talked improvement we

spot continue Timken. Asia be for the do to can so bright think I a And regions among

Operator

Dankert And Longbow our last question Chris comes Research. from from

Christopher Dankert

missed first if it's and assume? Americas the more more more But I sorry targeted permanent assume at I then off, guess, I'd I are also of Mobile, EU. a And and clarification, savings it.

Just point? at able any discuss to this details you're

Richard Kyle

the to on and Process of and probably I Mobile comment part it. geographic More want wouldn't

Christopher Dankert

Fair. Fair.

us often ask to is it it's a piece a serviced? big I a varies Any on a is there mean for of thinking to but what know another to be some details X-year X- I'm kind big is earnings. give of of more these then sorry on things here, are wind. main repetition about great. And frame, lot, one of the versus since guess, XX? still growth the time the bearings these just rotor a But how bearing, I such kind And content I lubrication? would it it sense what XX,

Richard Kyle

to there. digits, would X us are still opportunity double warranty than Yes, but X because periods years. I typically years not bearings, out for like other very heavy the small more categories, Definitely, so hopefully get product X the say, XX.

been that to very, for over I that aftermarket but a aftermarket mix sizable heavy mean, better of next probably So become to but now OEM, talking long, decades the haven't we're and it's because the in years mix from way. expect about before OEM it's a us, we the market X decade in still very X

Christopher Dankert

one for it. run it. about India, extremely If or early tough, exiting a could of in growth India, Got really guess, quarter rate That's really, obviously, April, just May, kind the When Got in. just thinking were last one what we're July, helpful. seeing I maybe we specifically? sneak but I

Richard Kyle

the year-on-year say, digits July June, down in time still double frame. I would

for but in to being year-on-year that sequentially, an to of not for per the the down India comments, upside some would year. the comments be improve the outlier rest of So continue to expect earlier

Operator

like additional would you. for Thank or any I call closing remarks. back to turn the

Neil Frohnapple

and Anna, you, thank for Thanks, joining us Okay. everyone, today.

XXX-XXX-XXXX. you you, and this name concludes any is my contact further today's Frohnapple, have number Neil me. is call. call, my our and Thank after questions Again, please If

Operator

gentlemen, participation. thank for Ladies your and you

You may now disconnect.

The Timken Company (TKR) 3 Aug 202020 Q2 Earnings call transcript