TKR - Earnings call transcript Q3 2020

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Operator

Good morning. My name is Catherine, 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 Third Quarter Earnings Release Conference Call. [Operator Instructions] Thank you. Mr. your begin may you conference. Frohnapple,

Neil Frohnapple

Company. welcome, Thanks, XXXX Investor our joining Timken quarter to conference Catherine, Relations today. call. The of and earnings Director This third 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 you forward-looking plans statements the comments up call operations. both from for future and related your business to may Rich hear our Instructions] morning financial call, and have questions. results, before today's open opening Phil we [Operator this During

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

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

Rich Kyle

experienced end of year. and and quarter. million was and we May experience We expand continued XX% the with markets EBITDA second strongest of the quarter energy the were reduced that and call. free third up from and began renewable across Earnings the in quarter over and customers further cost all good in results. resulted above given the morning. the and was to us Good highway that initiatives acquisition over were the of our depressed benefits that flow. quarter to trend through joining the strong early BEKA last the in strong the improving $XXX where second Timken. of by quarter positive sequential price, last third Timken inventory Overall, QX per combined just delivered quarter, and in We strengthening markets depressed in solid third have extremely were in quarter most the down markets performance To generated early solid second X% all on of sales performance, down margins a Neil. share growth expectations in and thank quarter year. $X.XX delivered from from second sequential Strengthening reduction you Automotive, recovery. the our solid our rebound XX% since contributing the quarter just the a been of strengthening quarter geographies. truck, third in markets with for third cash India, Thanks, And as all the operating The $X.XX we for were equipment we sequentially are in general examples statement revenue, most then.

and over Total strengthened bright just line. revenue Ag Outside significantly and the of high this year-on-year in down remained energy from a Our presence were to increase X% the through Coronavirus mentioned with of acquisition solid defense, to from were most percentages. impacted mid both quarter. marine a little the This markets single markets product growth organically strength strong top strategy very also contributed renewable spot our of continues less the and teen about by The markets BEKA year-on-year and the is to portfolio and China world. wind in to a as was other than off in continue It diversity rest mix. the again quarter. to country most sequentially Timken's the indicative also step of solid second pay the is be solar quarter. India, market the quarter. up X% down the

structure. robust, in organic well. and and and of with of a down our year in than a is both marine business Market well the XXXX outlook wind illustrate year-on-year few share contract miniaturization, top and XXXX lot another on largely strong quarter We where initiatives product year. for being renewables down solar. to and have the and remains year-on-year growth with modestly platforms market. participate we which other and we're of was activity year believe revenue in XXXX deck slides global only our sequentially. year, and efficiency our revenue on well has industry of in energy energy points the flat emphasis an renewable excellent of some as we in share customer positioned has to earnings XXXX remained margins win as more $X.XX, temporary continued shift positive planning and organic of modest announced new impact Pricing the XX ongoing military costs penetration Despite per compensation on expect indicative in forecasts In the record XXXX. solar renewable within basis we We in had on our for platforms EBITDA continues energy provides both been marine cost to wind new and growth last combined a markets, for of actions engineering new our positive were recently quarter with improve as XXXX

roughly actions expected fourth in a related the were From cost expect We to quarter, specifically and flattish. the third modest $X.XX into perspective, are price quarter cost extend furloughs or temporary XXX compensation not to to and reductions the in be XXXX. relatively

at ongoing results several or quarters. into and we reduced travel structural that and projects least CapEx perspective, are to as a plant other related cost or from counts for efficiency plan cost there footprint next improvements. investments and to year head However, and costs such with contributed and reduce for volume come the productivity continue From will drive larger transformation temporary reductions or acquisition our integrations, digital and every

in is are the SG&A. and the that next initiatives in With reducing the that SG&A initiatives and sizing The we added initiative bottom healthy Coronavirus, various continue quarter, digital [Indiscernible] level the quarter we in an onset of will and to launch is quarters, the around third manufacturing right a have third sustainable XXXX. cost continue to results reduced line structure several in of we for confident activities structural costs we the

to year quarter. to sequential be third as for not to quarter October fourth outlook X% and due XXXX. our normal the start we're revenue planning A modest start While the specific seasonality Despite few the seasonality that decline the from a on the that a end range; fourth and fourth levels, elevated are details we to uncertainty is a providing the increase to typically normal quarter the well reminder, year, quarter for to the more this then XXXX. what in outlook; planning strong will the first that for as as first sequential from larger we're

a that move a to seasonality the plan develops. for possibilities With good are as of facing, and normal, around then we down up believe us than road the wider uncertainty midpoint middle but around we're the as is or level the of situation normal

than that are beyond is control. be there continue in restrictions, Certainly Second precautions any social take operate the safe are demand in we uptick impacted. to around not and Customers The risks running. not restrictions from demand keep have point, world. we and to appeared has seen been the focused our to industrial change cases recent Coronavirus to on government continue our extra operations and more

As sequentially through that I third improved trend to is said in my track quarter, comments the and continue October. on revenue

September than to expect be since strongest month January. We October and our slightly stronger

typically our and November months the weakest are of year. However, among December

So Coronavirus sequential final quarters is the count reminder outlook of that when a we cyclical off My revenue would decline a hit. October on were into a few strengthening be challenge.

in five the So cyclical across quarters many lot destocking decline industrial inventory now markets, quarter at of multiple channels. include which after third a we're

a of some bodes which for rebound well at soon. All point

in to to we dividends M&A will activity a greater as to have solid a critical capital we the balance solid the debt remain element me top which And quarter. bias in expect to with opportunities viable remains allocation proposal the be our of the third back priorities. track We're M&A from committed year position Capital our cash a and on brings buybacks XXXX. return value end option. allocation. did with in CapEx and in sheet as quarter a share with creation flow the shift and fourth to reduction, We framework be value

hundred expected we margin Groeneveld very global expansion with improve in through at anniversary And one-year a year. year Timken so while we've its hit this points perform basis a will leader automatic BEKA Despite to end acquisitions challenging continues summary, technology. lubrication several month. more to In managed in building Coronavirus, are XXXX. recent the through most Our consolidation well doing with the of this margins

and safe keeping strategy a serving, financial cash are advancing We results high industrial customers, build Operations to our performing our Phil? delivering leader. strong free including flow, solid

Phil Fracassa

And morning, everyone. Rich. Thanks good Okay.

this from a third slide. start For can to performance financial quarter. summary solid XX delivered the across on record of the in going delivered Revenue for quarter our Timken second you just was the sequentially the earnings results materials. of X% review, quarter EBITDA We slide see down year's on million, the I'm board per and last third of third And of from earnings. year, adjusted $X.XX an $XXX up of last share, adjusted quarter. the shy XX.X% XX% and margin

X% Turning in performance. a declines were Organically our industries. sales to look with mobile closer year-on-year sales quarter slide most take coming third of down let's at about XX, the

both while was and X% pricing line top positive While the acquisition in BEKA quarter neutral. to added roughly segments, the was the approximately currency

outline right-hand the growth by the organic we slide, region. of side On

both excluding acquisitions. currency and So

regions. few Let the me Asia, quarter. a XX% on comment in were we In briefly up

year, and But versus the the Our to benefited during quarter. increased country improved in recovery decline both in were versus compared of related due as and sales from energy. quarter. In prior second lows, rate America to strong hit shutdowns we like we the the impacted in growth recover Sales which improvement COVID from factors the year-on-year quarter. significantly heavy were renewable solid continues mainly were truck, Sequentially, in up saw from India, the April Europe, strong second especially prior down year. in second China sectors most the meaningfully the automotive still the hard and to also North

with mix, quarter, $XXX modest in margins. The period. as year. significant negative impact million, decline $XXX And reflects growth Turning we transactional to price third in coupled distribution OE of positive had slide the that XX ago also saw impact mix year-on-year the the pricing accounts million, volume quarter. adjusted in than decline sales versus than would adjusted out of Currently sales more process or in Note experienced in FX EBITDA and EBITDA or headwind year, revenue. in we in year reflects last for the this negative offset lower aftermarket that a point more mix as and of this XX.X% and a sales to EBITDA compared I gains negative was the losses industries, than lower XX.X% unfavorable EBITDA adjusted the

SG&A performance, significantly logistics lower On costs. from modestly material side, expenses, benefited we lower and manufacturing the favorable and positive

around $X XX%. to the In margins with contributed BEKA roughly addition, EBITDA million in quarter

margin in Excluding decremental currency was and our acquisitions, quarter only the organic X%.

comment on manufacturing let a further me SG&A. and Now little

the net ongoing the we the to higher mark-to-market you'll see actions reflects GAAP and temporary cost fixed the SG&A cost the versus as diluted our rapidly On the cost operating the we us quarter quarter, in posted We manufacturing third gave slide basis. executed which better responded $X.XX quarter. earned on of ramp income improved lower production in delivered basis, $X.XX had share from well in productivity pension quarter, and performance. benefited we last diluted and cost initiatives plans. $X.XX our discretionary changing significant than down of year. also structural A mainly slightly up team restructuring offset an a line, $X.XX the spending items. which On occurred or that per some absorption. year This in other the of XX, reduction and that demand charges net $XX initiatives, from million reduction And in income adjusted more by special includes benefit quarter items actions reduction and share per ago we controllable expense customer early period, volume for driven of in a from other income, On

projection Our in XX%. effective a of forecasted third full mix rate the previous XX% quarter adjusted tax XX% as our our change from rate tax to produced year geographic was favorable earnings of

expect cash We the the quarter. XX% in to fourth remain rate

at starting our segment Now on let's look industries results business XX. take a with slide process

margin the of strong growth $XXX almost million, impact quarter. For compared industries' quarter, unfavorable positive in sectors, lower pricing. reflects last industries of sales in from in headwinds quarter in including as industrial adjusted energy impact the impact down process Process last up EBITDA the third favorable performance offset of X.X% and decline to volume, Organically the and pricing of attributed offset in the the other Mexican third sales, EBITDA distribution. quarter. X% A mostly largely in favorable line adjusted XX.X% can cost sales currency reductions, declines year of XX% the slight third $XXX sales across entirely of year. or be currency were adjusted The or acquisitions million, to million, decline versus in year. The the quarter the $XXX and X.X% were sizable last modestly was added manufacturing renewable top organic by positive EBITDA

sequential to ramped across Acquisitions third the slide interruptions XX% demand lower year. sales translation the Now, most added X.X% mobile offset on to industries quarter, shipments reflecting related In we in partially following unfavorable. even highway, customers quarter, Industries down as strong currency and X.X% XX. sales production Mobile line rail, COVID slightly sectors were the automotive, million, sales close the top were saw up let's up the pricing. XX%, turn the the Adjusted to truck last by XX% compared Organically quarter Mobile second while of on from to in year. EBITDA was in year EBITDA XX.X% positive declined $XXX quarter, quarter. this $XX second which was on volume. Industries heavy from reduction mobile margins of in revenue. of compared impact lower an impact quarter. were sales year-on-your margin offset last in quarter, third This adjusted $XX very of million, cost in of around reflects margins X% the industries favorable XX Mobile performance million, organic or strong only Industries' strong on and for basis sales to Improvement up the or basis, last execution than more represents a decrement points lower

continues. $XX million million. that strong in in Turning our to the slide XX, quarter earlier. after operating you'll generated cash and flow support see free quarter $XXX the flow and CapEx performance cash third highlighted opportunities, of flow spending include was which cash million to We CapEx $XXX growth was the

It's from Taking roughly quarter, for cash we free represents consecutive the net cash flow sheet. of $XX as net than expenses year-to-date strong third structure, also by adjusted better last Our in performance, $XXX reduced million. at year, debt our capital conversion capital working million lower a with benefiting Also, XXXX. despite we're XXX% we balance cash $XXX paid income. improved and lower and September earnings and closer dividend a million taxes, ended lower quarterly XXXrd medical in our use look

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

range. target Our to of XXth, strategic squarely net improved in drive flow environment us to a middle the EBITDA imperatives. uncertain while cash sheet, liquidity position our X.Xx navigate Xx which strong balance us the Overall, X.Xx to adjusted puts expected ratio our in continuing still great and September debt to at put to our

to of his other me the for outlook. slide debt. to revenue to and and fourth items. generate the reduce free touch for strong expect color flow remarks; provided quarter, we some the XX let additional net cash Now turn on In Rich let's expectations on commentary some further and

outlook. with around year the the For $XX line over of and $XXX or in full prior XXXX, just interest CapEx of net we sales million, roughly X.X% million, of both expense expect around

high Rich execute expect our months XXXX the with in $XX which left as to million initiatives and year. of our support operating half provided essentially have in margins. cost structure is As August, of We savings to visibility continue on second in discussed, year-on-year we better of improve range million now the the generate we $XX now early the two cost to end we just to

fourth Finally margin expect quarter, quarter, modestly lower to discussed. EBITDA volume for we than be the third that the the Rich seasonally lower reflecting

than performance. On also year's fourth the expenses which quarter, This repeat. of positive cost the we due side, be to should we benefit cost fourth the to not expect fact in have reduction last actions, the include and quite that higher been current better bit higher a reflects normal last year than year, margins operating quarter

expect last WE fourth the in margins year. versus to BEKA's addition, In quarter up be

So in summarize, on margins quarter, well we as to the better than capitalize and earnings. we third expected strong very and performance strong Timken the revenue, delivered deliver executed to

to higher position we're through drive look This demonstrating are while XXXX. not generate questions. strategy. returns remarks, our open we We margins our for the will formal great cycle to as continuing our in Operator? And and concludes ahead to and ability

Operator

Instructions] Robert [Operator go Research. We'll of first to Wertheimer Melius

Robert Wertheimer

sort tradeoffs you're So this capital, you're customers, And Thanks. new that to material acquisition? question you've do think how of year, much growth, continue then results. look would in good you you growth the out next now side what steady pretty And breaking of could the to my be, you expanding down stock factor proven expand? your just on is commentary sources if how and deploy going price as becoming year, given give Rich Really bit other you for when a I about own to in just and more wondered either geographies seen little I've exciting. is new of as if whether or renewable the some new

Rich Kyle

Yes.

really renewable for strong decade of to weakness wind a out the couple on mitigate in in years the solar. and would clearly on And activity for year to additive would it on other have have side; So it great probably helping us if, a space markets. been markets, break about of other

of, rated built really we've up As then to would say gear was then And really bearings portfolio, years is is the into the something I we've say entire OEM or full you point XX us for now some would couple engineered with time. and the it's back in technology, I across it's platform been you're pipeline what weren't revenue it's ago, period at our of we I over forward-looking drives, wholesale look really which we diameter, know, time. stronger is our say be turbine, spot. not of in a that's something years mostly in expanded the meters several you're you to this it's would our platform design, design than any bearing product, sweet really going for in the substituted, not started next if in wins if

Asia, going our growing a really improved think next in probably start That's is happening in or and strong the concerned leveling the was three out the quarters the declining China through year. year continue then and for situation particularly backlog year next I the of next year, year we is Asia. first our of through off to middle that set be So little this to up penetration and about knew big year, improve. a market And to to is a little

with I'd presence Europe I'll by being the China less be, in but the US predominance say by to commitment energy, to followed China's end sporadic followed been market the then to and weighted US, we say continue of more renewable towards very from than disproportionately consistent have and everywhere. that. mix been their it's We moving Asia,

year. swath years. better gear drive coming We the some it's in platforms I think pretty of content in used of and couple turbines, have and last even years. a the be coming really And done in With going of the to OEMs be in coming concentrated. a across we've couple to the manufacturers much we wider really level couple

that then it's think it's and Company's there out, so Timken to Probably XX a higher good a to term, continue we that significant the more kick higher for starts aftermarket at So I aftermarket placements that revenue, seeing some be secular longer be and growth a an years are plus point. is to revenue of in. probably story. but will really aftermarket stream And going percentage

a there continue trickle So with will is to going the it's started up and ways but to out I'm dominate going it's start because to OEM that. it

we an little and been solar, presence we good pretty there is we the of business XXXX; acquisition outlook drive small market a where content to of of But Drive visible, on is small And of less the still solid. a position back bearings. increased a an moving solar wind, we than PT is solar wind, are that that the the again, a the PT it technology content. little as a really it's but precision we've versus Lovejoy; than more ago we've wind, to global. come variance doing there. in go we're an feel very been moved market other And in wind are, Asia, and There's comments other That of moved cycles a that the a amount a systems. platforms with business. a back lot with we Lovejoy not not those blest lubrication And in systems compared system win will lubrication with of there And to it's side of well. to the Tech On presence several then years sales side, and amount piece organically, a difference There's doing moved to shorter probably dollar in shorter into way we not our than working the upside into then leadership have there. enormous leader first way product in a significant some very certainly about have the Again, but with Lovejoy turbine on part BEKA on little as acquisition cycle acquisition. us lubrication bigger with with the some have of parts growing Tech expand a then attractive systems, Cone much

the are We part outlook M&A. very oriented. direct that Europe, for your very very of about global, again, heavily versus I didn't the And customers installations And last Rob, have that in catch XXXX questions but are stays installations project the the strong.

Robert Wertheimer

thanks, Yes, rich.

that was was not buybacks it's comprehensive answer. done. is So this a And stock I super Question a philosophically accomplished I year; very exciting pretty And what high. wonder mean, just you've just you've versus your price M&A. lot weigh how you

You whether mentioned valuation the preference or for play M&A. I into the comes don't know not.

Rich Kyle

being not this delivering are, be completely years. I in the would we that not, certainly into few comments makes your the are and year Well, price very had definitely they well, we said, is, M&A buybacks comes share that and on think valuation certainly results play with and sat for accretive market the we out is share agrees our the high. what stock had bar That last buyback believes M&A

like And for look backwards. forward epic established always think the to the comparison, has sum that. we So at the been both have going of going we I is looking be it answer bar likely

Operator

next We Jefferies. will Stephen Volkmann question now from of take our

Stephen Volkmann

think more a guys. of couple times I mentioned, you you think comments Hi, distribution? more about you Rich, as for five, potentially Can us? is up seeing do of industrial XXXX distribution, into distribution. you. we, into a downturn Can And situation your How six that well? there? XXXX, just improving comments the Are little bit setting that you good about you your dive a business restock a morning, for think in quarters Thank year do inventory and is

Rich Kyle

Yes.

I on well declined Part weaker to So held later. QX April a parts declines into our would from that the sequentially of little was it it of distribution business say QX. was the performing later, and among

us, So and didn't due for the any really and weak other markets. destocking. improvement not we truck globally second see But of much some strong to quarter is as I net that was automotive as think

lowered double us, quarter. in that their that - greater year-on-year compound our So some they we as down digits in well We continue inventory don't of pretty to when made as then were fourth distributors as think you both and off digits; that but they they are weak. it's the a sell-through the purchases, comments reduction see low inventory than had you reduction. with We and for inventory benchmark look double reductions inventories those at quarter inventory publicly publicly further so way low some sales expect some slight US

that year for see quarter depends destocking opportunity of is demand. it quarter certainly, think But first get likely restocking for those the And we fourth So as well. the the past than as greater you channels. on is in think I I next

Stephen Volkmann

seem improving Okay, thanks. the Because like kind And are the as products does there. of of seen just markets but amount of kind And you there's fair disconnect a this some in destocking all channel. the sort end cycles seems heard of and you've through quarter-over-quarter, we things month-over-month. other be about surprise this. some to tight inventory yet at around of levels all? consensus these end It And we've

Rich Kyle

the rail. in some see full and believe things have I - restocking the to that's the have for in look we general and of really restocking some Ag. one in we happening automotive, probably third destocking restocking truck, start happening if is Certainly disparity time in we different distribution, then you channel, quarter have this industrial, think saw we But in where

use come the more have factories in of end not we that. the and we so, don't saw asked real Steve, within decline a reduction, and think of world, generally I in in inventory for think out idling think was reduction demand products that of and And But revenue use I haves I around have think because that I to for period. the So that.

in next unusual it's year, think or really think extended the end duration. bit much be it start early would even to then year of its much beyond into I I this beyond

Phil Fracassa

while would thing slightly Hey, I Steve, was a and a year-on-year, up Phil. see sequentially. The book so be in obviously and for set to add there may to shape we Rich's should here and end up think further up the lot what of we But feel do through said, be this did know, is XXXX. of do distribution year, we recording Rich inventory order decent only destocking our and globally like, reasonably long hopefully point we the some us

Operator

Our Partners. next from will O'Dea of Vertical be Joseph question Research

Joseph O'Dea

think to to of see of morning, or of the about levels. everyone. these you some back we if puts recovery than and quarters about and ones tailwind bounce trigger next you're costs year. we to seasonality next end that markets little more But that couple end decline, in after a any terms from as stage headwinds talking of the takes of that to what normal would pressure ask less want and think out see order underway. I'm QX sure getting market good in wave not of need recovery more at here. you over need next stand stabilization really of setup bit I what Hi, that would an perspective and the QX growth looking sort I next see

Rich Kyle

not since a sequential has been net think we December slight continuing a there momentum slowdown of decline the November, through October that. I and clearly consider May, would strengthening is Well, and have I in

these six as markets, we are direction, but quarter a we really know would moving and going be months of around with this and XXXX direction pretty sequentially to has Steve's It's grow little obviously - went depth you could than the that are coronavirus years, year look to for they if and It and sequentially winter and consumer largely more favorable to could that. that first in different tepid but as out in momentum second today think set here of momentum the still here to start Largely not start the think know, as or multiple we what this due the truck Coronavirus? the our momentum general is they there we're tend the the that quarter I quarter. months, start fourth these plus all two. can is is weak five, up lot up I would the for world are you To from in quarter be move you things markets, some sit the point unemployment resurging in Certainly, all be set favorably. been probably our a to think across economy, I determinant risk where quarters or I think be continue. will markets the they So right a are in highly given once market the of of would in

Joseph O'Dea

then ask of those the or over be that sounds to temporary wanted of one cost terms next I out that couple Got side of costs like are would quarters it And on the so. the in out things, managed it.

will achievable? we back. bringing incrementals cuts cost of to is As are which little come kinds recovery these still way But start about a back think in costs it those of do a of scenarios achieve? normal a Or in that scenario incremental make the to in normal bit them you some anticipate matter harder a

Rich Kyle

let Well, answer a give me. to you probably that what longer me than asked

work And every of of been a do first, structure. we well variability our you into increase works lot As down the decade. various ongoing year over for to a this our cost break buckets; costs

costs, material -XX from than level it's XXXX-XX, XXXX structure, were at flexing integration, we're just to moving plans design, de-vertical where we today were on cyclicality the costs at XXXX-XX. were focus fixed in we we some it more or compensation I it the incentive systems the And think and period. the And in labor of variability and everything relentless them. and cost there's of our better a in better than

all. I And things is be quarter. important That's And largely impact the most expected in definitely then come what those did can't all costs to about what that said, think cost volume extraordinary I that flex, I really being third we're over we biggest at things be Coronavirus break really that the into and when again, good there's back. at if the at, are even look the There's as that and back not that's was depths small part, decrementals. to comes fairly to some around situation And two talk there compression compensation a would Those we better So down repeat referring furloughs. reductions. part. was cost temporary that pieces. the the of our you we and

see than couple small of that which at of in a quarters. in Coronavirus coming part through two the And the Coronavirus. we they remain costs, an as quarter. probably the closer through in expenses, period. that That's and to travels second getting the to the is part we've Travel any gotten the are largely and more next temporary going controllable quarter, prior really were cautious So largely third really I quarters were second big back big example. as I say They in gone think why this of was part zero where of over we've some of There's this other next is that on as our quarter you to it headcount over. on travel, our just don't I tighter

the that So point back. of comes how

do for have there's, IR face Where that. used of doing be face seen. a XX% volume I'm Probably this sure we now. it some from probably face; that make happens. zero to of example, not be Using And some to control an I XX%? of meeting think not certainly Probably that I will will of we'll percent my we coverage work, I But now? face remains as to have as zero. that year to

probably of things. So permeates I of that. think lot permanent there'll some be a that savings these And

also not capture you figure it's So would much we're really of dissecting that But that quarters, a the I lot tell can back. coming couple out of how next permanently. to in we

I savings, off probably going and to quarters we cost amount we're volume So I the and then improve piece I into, third material think so went a that's of even talked coming think think which to I structural away continues it's about three quarter. in or I two before that back control that's cost any in think there's the

was answer. that long a So

Operator

a And KeyBanc our Markets. Barger come Capital next Steve of question will from

Steve Barger

Good morning. Thanks.

or us of three- they to Just you or what your renewables, using build And industry expect renewable for you service? kind going for the forecasts a tell you rates either own do installations? can back or growth five-year

Rich Kyle

which we really because external much which we but geographies content more around. use would customers really have and we I say matters around use it what customers in certainly more

order So time that this lead longest we firm probably book are items our have. is one - these of

we of may don't So months. have commercializing and when start today backlog XX for months, quarters to not that we firm XX that have typically we have visibility business

internal pull it there's into us So I is good a is for And percent, a definitely not you benchmarks us time. move external benchmark for spot in market. pretty major pauses there that'll going variety decade come some we some with platforms be And but plus use but plus, I And think we've next will online, but years. been have for linear numbers we to pretty of percentage market the not of next of good linear was, CapEx our think X-ish think next data more been is did significant bullish. next in to been have But it online. us progression the for relevant. again same been magnitude, forward, we be I we But certainly year, now over won't the where what for we as position then new some any both level we year as a the showed year the that we this at But year; participate of also that. backs. had hasn't plan not couple expected the market there level same round the then of year put come don't that another we capacity same this a that

Steve Barger

tell Okay, if whole per - one lubrication product suite? turbine it can average can us is or and your bearing be and time what the you what you're selling what

Rich Kyle

then in be it and to across have say and it's And would to turbine. I of the No, a every us turbine dollars well, turbine it's it'd six rare varies application bit, of us split amongst typically participate competition. how one that tens quite thousands for on the figures. the depending some But size much we of

Steve Barger

And, should less I you But think and content it content question even know it. growth there. per how similar megawatt? solar. How about we relative about panel or do content content there's to or for rate? think per Got is measuring

Rich Kyle

in not one, solar. application. in Yes. And on It's it's solar dramatically every smaller

applications device. control are solar the Some have precision premium commercial although fixed, motion generally ones

now thousands talking as the and some be would So in graphic we And you're $XX,XXX. conversion. more deck it the per there'll then to that have illustrates be panel

next dip give from questions with those that. we'll I of fair your terms you today And you it and our I couple to the relating I in to on more is of in intent into revenue confidence, think So are our more on Steve, a quarters back actual but our lot think, back time next to units think to in information wanted energy. come our investor of both both information questions

Operator

We will of now Goldman go to Joseph Sachs. Ritchie

Joseph Ritchie

since bit less you selling third the But I in Guys, best days that also three try down quarter I understand also January. about quarter. everyone. in you being bit I morning, versus talked wanted Good that October the to to think, little month fourth trends know Thanks. just was the stated And a better. a know XQ. revenues there's little sequentially I

us the you October? gone your any round? across trends magnitude per have like And ever particularly can How around business? there is kind like give in color So of have

Rich Kyle

We've it QX May of days momentum. varies, say a as you actually QX and positive but since would I when I timeframe. have think we couple be from again, net shipping momentum. in the to momentum a still positive flat And factor holidays November December positive down percent Yes, would had and

shipping the Just close alone X%. are to days

see we'll in in particular, to September just strengthen. October are than in some from destocking we And not I'd there So stories to particularly, example, But not but an as that well mobile to strength sequential the being in strength sequential QX markets we say think got said, because automotive, growth equal. more We're continuing secular then see renewables. to And there. as some we've regards expecting really didn't QX there. from it's distribution

being would is shipping momentum holidays and days, say normal seasonality. market I So positive fewer mitigated year-end it by

Joseph Ritchie

this for destocking some quarters and mode destocking little negative on helpful, just s of the fourth guess one Rich. maybe talked period a quite comment. on that's in that growth in about been now. have we're Yes, following guess, time I quarter. here distributors. I And we've still several seeing to that for bit the we me curious the that I trends destocking with It's just in it know up given a

going So any in trends other with color XQ? on on what them you distributor specifically, destocking provide the can is there that

Rich Kyle

XX%, think don't guess these modest; XX%, to year-on-year or XX%. aren't, I these not inventory. are are are they And No, our I sales I so. swings down in down sales These it's their are we'd them huge say think -

their on in which this information lot us and comments some made improved would inventory that they as one they and connectivity better. call be suppliers, week digital their and manage of technology with customers our us, of a One well about invested

our lower, So need it's that. And I have you are therefore XX% to sales less largely if out little come inventory be and lower. support sales think that to inventory to a has

a normal So thing. it's just I think

flip the destocking in and but about On our you were the heavy side, some distribution talking off-highway channels. there's side, it's also, pretty of

significantly year fourth the in last that experiencing started really we us, For quarter.

impacting the to a the more a quarter that the quarter. them we're greater, Our But fourth for lot we other talking customers and where third it or took last parts we're are year starting of in about actually end and on us, early in them their because to of sell-through sales be of then Coronavirus. little our at hit that see now level

I this comments. the happening period the wouldn't the four-month part year. earlier of that abnormal say for was in or there's into varies abnormal earlier except extremely three- that anything it So

Joseph Ritchie

in one quick the savings to Phil. Got is it. half; real in And in third million one XQ? $XX came much quarter? in much And maybe how for second expected The $XX how the million through

Phil Fracassa

great question. Yes,

the we some those actions close, mitigate next temporary third effect year. savings of should of before the reasonably And we about the we're half think in talked that the on of and in half below other pretty fourth as full but year initiatives, I slightly maybe will plus close. as next year quarter think the essentially absence above slightly maybe working it quarter

comps be quarter. se we a But So fully that full actions of would offset it. to expect, temporary that in think given for messy, this the think second not while went do year would able did little bit year-on-year per be headwind we on the just will be we a the to everything we to cost year

Operator

will Ross of now of America. We to go Bank Gilardi

Ross Gilardi

More right Thanks, for day are questions. morning. now. guys And guessing all business guys. happy I'm to Good about you talk this renewables

clearly some I is a it what than as those right that a years the last I'm can ruler, manufacturing XXXX. of growing a slides. mean, business I'm as Tell me the business anything looks break the this and, don't five, point and in great It that thought multiple. present much two but in a eight else bearings million didn't this billion to industry couple like quite than gave that's now, you showed know, at it's XX% You you that's I it of out capacity sales a faster a it out business separate $XXX if like distinct looks years. wrong. is dollar breaking a I And higher to way from given business because probably of and being any it sort segment standalone warrants and it's now. is more And in doubled the wondering be can right

Rich Kyle

and we thoughts We've lot to breaking they're to directional. slide come. on significant the was out would year directionally think I made some years and of I them your that, a say, within directionally, Well, what And the be, was to delivering interesting for ruler, intended yes. that first And yes. investments this expect

five have a in provide that we et even be chopped more we're cetera. the going the to and what the investing numbers next of is a be we contemplated it, certainly, this do can get I to well a would questions what do Steve business, rattled say certainly there, But growth sizable the questions. the we we questions, thinking for in really to plan; pretty just just when Timken small valid some what company the be before that we double type the time, in cater off the going color get And think as years. bit on raised we to probably have coming And about digit to part that mean a in segmentation we a a would the bigger I earlier, quite you baby the to we're Company that on discussion. industry keep do it think I plan to to need step think, We of direction. years. it, was from you in would

questions. there, Ross? Did I answered think your any all I I leave

Ross Gilardi

it three gone mean, I Rich. you on share great, when? to particularly years last you the do your five like, comment what and - was has that's can for think No, over

Rich Kyle

space it the there. But one the Well, be would we participate, digits, two-meter, would we're to very a main third, where were in say not meter, still very shaft, long large we, on but in bearings, are zero broke have it's tends We ago, the I or we're quite competitors certainly, drives; I it varies we which out two small. in we're really say large the not still high. third, into actually three very double couple Japan. or gear drive But we gear still and we're of

share lot a CapEx space. that perspective. So lot I and for and of still is think market think in And A for us perspective that put in from in this next there's let's year, upside a of there. year we plan room the both I a there's

Phil Fracassa

our majority that doing. And But do next, same have list thing But the on customers. tech, growth making the more for we're really than we're add the industry, great and technology with next of year have Ross, our to share to, for footprint, I cycle of And in that would be shaft, the with which of good a think this just to on list would story the this the the is a concentrated I investments the a we and increasing competitors. longest think in not long also what I'd the main I cycle, wind longer have with the formal on say gear vast and the the shaft. been wind competitors are Rich's position longer it's is not comments; bearing technology to the in we the drives is in right us. the competitors; two portions It's so quite frankly, main they're penetration side. business of companies it's of there. Phil.

Ross Gilardi

only capacity separate is it footprint? do ask And the rest say particular I'd for in you I business? your would - the thing have or with the wind of is just commingled

Rich Kyle

it's issue. largely size Well, a

get when application would there's So bearings, up precision bearings. market, but two particularly bearings. you'd typically something be that two precision get lower marine certainly they you when and or to meters something a of much above, Typically you not might in a be up size,

So it dedicated bearings is size, technology. precision manufacturing get that when of you largely to

mining You big those some be size get Phil's would in alluding applications, other to are be mills that growth; dry steel in gear is bearings, industrial, to large the power cetera. sizes. equipment, et would

part at made the but it's - is have has the also become that they're such growth part - XX bearing largest it that industry industry, years So - unique, not and not been. ago sizable it XX it's or would a of of whereas the

Operator

to we'll Justin research. G of And now move Bergner

Justin Bergner

morning, Good Rich. morning, Good Phil.

did the contribution And XXXX. expecting in the the quickly, bars. it on you're there's growth the at I sort of that BEKA, renewables about do Just in just guess hashed been right XX% you and further When It looks math say there's like a look growth out. I organically some XXXX? in lot there. ballpark in from

Rich Kyle

percentage, right same would be lower the ballpark and, yes, percentage. that it Not at a In growth in XXXX. further

Justin Bergner

I you price flat was of Switching price great. it side, think cost? Okay, flat price cost Or expect the mentioned, to you sort in XXXX?

Rich Kyle

benefit price one-time eke the the be little the, year, for cost we My be But the of messy, not could of of the on bit think say cost could cyclical a got the of comment costs. of bit obviously, of with price a steel the I side we've cost price, exception think price. a to And lot second positive little was we've quarter said part flat costs the flat Phil positive more call out variable with but cost. could what ready self-help got we the side I'll price,

Justin Bergner

to just and of and on then seems lastly, equivalent it's weak shifting trend XQ the actually Is call accurate? sort coming in like dynamic, But still very destocking system would restock shift destocking because across you that down recovery destock stocking it even Okay, if is in XQ sort slight like in it a to if is thereafter, restock would flat and to seem negative. be seasonality the it XQ. a of expect the normal starting the destocking still

Rich Kyle

you think was don't markets of strong I a X% up when tough flat so. where at, particularly you off XXXX, the look would QX we at inflected back or if XXXX. which based strength. end A I look us XXXX of our No, XXXX, be and Because have think really to And for of X%. to broad QX beginning market then

again, hard overcome. impact this seasonality so, pretty just is And of to

you what we but the from of did So first quarter at those. then look

been look market toQX, X was plus QX down X. XXXX say a flat has to strong which you're plus QX from to plus going to and at years front XX four XXXX If not the you last QX, two, plus

the QX QX markets. the think I the of indicative strength is more to So of

Operator

question last Longbow from take of Research. our Christopher will We Dankert now

Christopher Dankert

morning, Hey, guys.

dig how versus a or expectations path over into kind in know it question, of there seeing been expanding of way but quantify another kind is including the benefit we've of been and from [Indiscernible] and difficult was transmission want Just Lovejoy perhaps just these to I further performing maybe? to Diamond power time, crosslink here kind way, any again,

Phil Fracassa

the to one Well and big challenges is adding I obviously, for to one we of products cross-sell. question. think, opportunity it's And look great portfolio where the Chris, a it's really the

was which the really to receiving the a able both North take with American that mentioned take was is Rich, the space, opportunity. it goes make about power the and obviously, business then Diamond with really we puts bring which wind With ability known up in next and more gearbox that relationships turbine base take Belts we've in have opportunity so brand industrial take of revenue distribution premier a business talked level lubrication position where the in us distribution, OE opportunity. with for drives So, some sale, the time to our into even it a combine - manufacturers is predominantly nice a belts into great installed with story were we every distributors what we where transmission to Chain, systems the the every mix it gives with and distribution a our to manufacturers us Carlisle.

on by on the to. the services obviously also portfolio, well. business goes well product we've the closest and belts the list in bit opportunities the and nice it the product been then building closest what its on head, business only couplings, nail think lubrication on gear but Marine in on Philadelphia a think different, product, we've varies motion to as we've Drive I little hit now chain, got The as obviously add world and is continue And we still not side the think portfolio. the I bearing you've our synergies as provide gear the with think gear, I probably there in in the premier the some got linear the Cone

need opportunity. think And what and think in sales to this to see, mid-innings over to. part there'll So excited the of when they're world we're joint look early proposition. coming a be quarters of that about wherever one we of it our runs. entire the doubles, bringing it's It's lot but years. making singles not a lot probably the with value home visit they Timken lot really they go is And teams We're portfolio we forward seeing it's to of calls still them, the around we're clearly a the and to I where customers;

Rich Kyle

pretty add I can time with powerful. time say been consolidate the CRM we're it's, analogy, connectivity again, a fill and I shipments, it's model Yes, you same seeking on little it's cetera. a not, done, It powerful also lot get when the - et you're combination. runs. over system our the would business again, of a pretty digital I'd not takes to it's doubles, just of It's opportunities think singles sports home and where

Christopher Dankert

the more thanks if highway But last year-over-year, correctly, so or as mentioned much that's guys. China the story guess for incredible And one I for me, off truck up China Got in I was And it. you India up details, again, renewables remembering you. And for an obviously excuse was heavy year-over-year well. me, focus.

in that's So is that the demand returning India?

Rich Kyle

energy It is, I first that. was a would become for then year renewable well. comp us has India easier say And the third half quarter we of the also an had last as than market

was I solid but would say was renewable the So driven. Indian market year-on-year, growth the probably

Operator

conference that to session. any over back like And additional with turn gentlemen, does question-and-answer the that, I'd ladies Mr. Frohnapple our and closing comments. conclude for to or

Neil Frohnapple

you thanks, us And joining thank Okay, for today. Catherine. everyone

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

Operator

And again, call. ladies to like does We and that again today's thank conclude gentlemen, you participation. for your

You now disconnect. may

The Timken Company (TKR) 30 Oct 202020 Q3 Earnings call transcript