TKR - Earnings call transcript Q3 2021

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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 Third Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After [Operator Instructions]. Thank you. Mr. begin may your you conference. Frohnapple,

Neil Frohnapple

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

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

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

your We from will up Rich morning questions. have and for both comments we Phil, opening this before call open the

ask please to you Q&A, During to limit follow at would the question one everyone a I participate. questions allow to up time one and chance your a that

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

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

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

Richard Kyle

joining and quarter everyone, third call. morning, Good earnings Timken's Neil. you thank for Thanks,

a as arise. also market. ability our a the variety the and the issues results wide navigate strength as to very also Our to of of they business our strong was demonstrate third to conditions market successfully well unpredictable respond through reflect as industrial but resiliency of team Results quarter their

revenue revenue XX% XX% third up third last from The record and $X.XX Our than of quarter was set the of higher previous new year. a record set the billion XXXX. was quarter in

pace be to year. order the a to remains chain positive than continued we and normal more continued very delays, a the Additionally, battling with freight one we that erratic to backlog. issues demand next healthy at through multiple very Demand but global due input continue shortage, quarter as customers such chip through a situation and supply international expect strong ended

sequentially a that to From but XXX Earnings everyone our of for last supply at last I quarter over also we very a increases through $X.XX each June comps year pleased up include come price QX meet and basis hires XX.X%. did chain at cost onboarding from to cost normalized the basis and the respectable still pandemic-related want continue the remind to of quarter steel, of to year-over-year perspective, included the in fourth a comps to EBITDA that changes, XXXX record. realization we in our and was from it volatile lag temporary of year-to-date revenue from demand took increased year material issues significant sequentially points variety margins year-on-year, second Given quarter. and declined challenges, month pandemic. the QX was cost significant up of per cost were freight height schedules are has temporary cost premium. this and and demand. for supply plants year. absenteeism the a third quarter gain actions a own the prior share the record the with year Labor XX% the prior was by $X.XX up all points and purchase the but from September. Sequentially, our significantly margin. XXX from continues also plant a suffer due to Pricing new other increased over increased efficiency from to

Our for the the lead flow chains. within build supply cash performance extended reflects account and customer to continued times increased to inventory serve demand

earnings providing also not I additional through uncertainties, steadily remains due support to to year, the of the for are strength year. we up are on has supply but specific guidance supply the next the demand geographies. elevated. Timken ability costs and ramped We revenue to the chain around Channel and but continue seeing. uncertainty across market or into well the to total color our provide inventories supply Demand in strong what will are markets favorable remains provide course

us Some chip holiday of were continue outages plants leveled moving they year have such as our The anytime ones shortage ago stabilize have are worse at logistics China and and but rise. shipping of at We're addressing that surface near future. issues delays but to forecasted is Logistics and expected much virus costs Romania. to recent the intermittent soonest, down. the after well remained gotten continue have some issues to in improved, new not a very higher to in impacted have not are resurgence season arisen. appear the the labor a quarter the inefficiencies, doing improve in third in the new cost to until the some Fuel off not than our internal and power

still in to price from we pricing QX, expect to but QX QX. increase expect be We to cost sequentially negative

still sequential revenue single fourth, revenue high mid Our and quarter the solid range. low to recent expect to declines to mid than it in third a in modestly be digit digits, we single This slightly to greater this growth typically year call year-on-year the decline from would result history.

caution the as the sequentially is And margins EBITDA very expect that do. the than to dynamic, they fourth normally We again I wider remains in range quarter outcomes chain possible supply situation decline of normal. so

enter higher production order levels. 'XX, levels year out to start remain higher start the will next and of situation a Comparing the look we're higher we strong. much we planning As 'XX, to input for to demand the with 'XX of backlog,

the We time we and help self the 'XX, more expect initiatives. price of up as in for will recovery a pricing in from benefit step from well Keep fourth at shipment pricing which both open year to will operational gain mechanisms. price annual at from as of start agreements also other at we continue in repricing including end, the price material actions mind quarter. and year We our predominantly expect traction, the many

do our more in production operate or We to as the price in material, to expect efficiently also expect relief and we longer cost labor ease. we ramp issues logistics deeper contributor near-term sequential the labor, get we We very expect planning into pandemic quarter also specific our strong first improve 'XX, and no and internal expect in the a a much fourth. 'XX labor efficiencies. larger to to to step be from We're the margins in revenue start margins with up but to for a

to We capital year results 'XX also from our contribution expect allocation. full

linear we has and for offering, in has expand for continue in customer with to the portfolio. We in to factory our two linear motion. bias our acquisitions, small for Intelligent applications to is Rollon range a us Solutions want and a unique a bolt-on the greater and of Machine strong systems range technical product and This was engineered growing The share market. space markets acquired or wide linear team, excellent size gives a addition strong factory last have robotic developing take U.S. of their acquisition Rollon scale business space the in step iMS. full linear systems an proposition us a the value a but an a management to a applications. To automation. iMS. as been gives has position of The leader buyback Rollon Rollon quarter moment M&A I attractive highlight to option. first Timken

Timken. we continue Corporate excellent financial corporate is corporation the report. has Responsibility recently Rollon more years want of being and for to core iMS. than an citizen for also our will all acquisition highlight us drive We to at released and XXXX our and to of a Sustainability products the I XXX through for Social businesses been value like priority strategic that

developing energy diverse back a also communities corporation the practices. strong to ethically our leading of sources with the reduce and work are impact. giving global proud in committed employer to taking a we governance our We’re We're and and to top renewable our environmental workforce, own with actions being

earnings with while Before events those I turn last the our it record the record onset couple with stakeholders. close early that years me demonstrated in the and in turned to XXXX, upside 'XX of of world for unplanned After have per the over down been filled saying to with the Phil, revenue of resiliency response let our pandemic. has share events, and company strength really all delivering was

financial detrimental input strategy, in excellent of delivering with labor track challenges. well as many breakout Bearing. downturn the progressed, with our acquisition business while the managed results, been As and continue And increase Aurora XXXX flow delivered advance has earnings, we including and to dividend. in for we well cash the company year dealt renewables the of year completing strong good key of another and excellence also and advance an on strategy the per across chain record we deliver surge a the continue to earnings costs initiatives. once we revenue market capital our to challenges, and supply as as the operational these year outgrowth, our and allocation with unexpected inflation Despite are share, we again company's margins

and can We're perform earnings 'XX, Phil? a record Looking if of will while persists. diversified environment and great revenue the are in long-term company's the grow the levels well to company to XXXX, all in continuing that industrial as we advance leader. inflationary to strategy position deliver new at confident again

Philip Fracassa

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

share of the Both an XX $X.XX, was For year materials X% earnings share from and adjusted per the of going summary billion, adjusted third from up Revenue up for to year. records presentation the XX.X% of last more and of XX% the a than delivered We up from third financial in on EBITDA and third margin were results. quarter our last Slide I'm XX% revenue Timken quarter quarter. earnings adjusted the start with review, X.XX per XXXX. of

third look take were our Turning to Organically, XX% delivered both up a Slide digit at double led segments last Process XX, performance. versus let's sales Industries. as sales by quarter year growth closer

the continue across lines. in portfolio. across product We and was double the implement bearings saw power price our transmission growth both Pricing we digit also increases quarter as to positive

line, to currency of top and year X%. from In iMS the the acquisition, contributed last almost addition, recent added including Aurora while acquisitions, Bearing X% close

region. across broad-based On slide, most by and quarter ago sectors. the acquisitions. by currency year organic up were Latin side period, led can excludes both see Europe, with America regions the this growth you in and versus right-hand the growth of This All

gains. mainly In America, Let Latin industrial. off-highway, XX%, strong most on we In driven by in posting each lower gains and with industrial In sectors, me broad and partially marine sectors, general finally were we driven we off-highway, in was the growth offset and North off-highway up strongest in by shipments. And strong we up off-highway, X% region, Europe, comment region. further largest America, up and distribution, a led across quarter, sectors which delivered XX% by were down. Asia, by general were the while our distribution in general growth were up industrial the distribution with growth XX% the bit distribution automotive automotive

mix manufacturing and price utilization, logistics reflects last to significantly these you prior XX, to favorable increase of to of EBITDA XX.X% or quarter items compared adjusted offset along costs. the currency. and almost with in by But in fully the compared sales XX.X% favorable related The are XXX Slide year million and adjusted million or positive XXX the of impact EBITDA material, higher see, Turning was dollars other as third sales volume can year. higher

little on manufacturing the comment Let performance a me expense further operating in and our quarter.

other manufacturing higher mostly plant in the line, bearing Italy. offset in continues standpoint, our serve our increased From new this in closing we and the higher costs to process production labor but the a from of benefited plant are Mexico footprint the quarter, demand. ramp volume and bearing by in to On was we

in year Moving logistics, in through last costs. pressures compared increase and inflationary saw significant quarter, freight costs and reflecting the international higher material we to

up slightly $X.XX we actions of levels, in cost year-on-year Slide an share, per a period. partially And amount the year. year quarter we see basis, be up includes at the to this GAAP that were million the we last did change, the repeat. from believe as in per a third higher the small the net lower temporary items. compensation income last for quarter on spending by which year-on-year, earned net incentive the $X.XX basis, line, that special we year. And support quarterly sales higher recall expense you'll that On of diluted XX, share finally Looking largest headwind On of of offset posted we had will had charges on X% of or the SG&A/other not adjusted XX $X.XX from costs

tax our the quarter third impact year-to-date initiatives. This XX.X%, tax rate mix adjusted our geographic Our rate reflects XX.X%. earnings adjusted planning was and of bringing tax to of

Slide let's a segments, business look on Process take XX. Industries Next, at starting our with

For wins. last new XX% Organically, industrial gains. also up up business by were distribution from million, driven the across XXX was and up were and year-on-year, sectors third quarter, activity Process driven sales Marine most growth sales roughly Industries strongest general with XX.X% by posting the year. increased

We pricing also benefited from higher the quarter. in

quarter last adjusted impact benefit partially EBITDA mix of logistics Industries X%. currency XX.X% higher XXX price of third EBITDA manufacturing translation about In of top favorable the million X.X% XX.X% of increase added the Process currency, while nearly higher The reflects addition, or by compared sales volume, million utilization, the in the and XXX was of in material to related sales to line, and or added acquisitions costs. positive adjusted offset year. impact the

And higher posting ago in was year. Now In commercial with did sales while Industries Slide versus year last automotive and on Mobile let's the heavy quarter, down. Organically, turn the quarter were the up XX.X% in see the was XXX XX% third to nearly Industries flat million, period. while truck relatively off-highway sales XX. increased Mobile revenue total, gains, from strongest aerospace we

to the pricing translation X% added utilization Mobile costs, positive line. Industries and the about adjusted year. and from third XX% adjusted XX volume, impact million last price decrease currency EBITDA operating sales of The the higher or XX.X% by EBITDA in of related offset and mix. last quarter, compared top benefited for each XX in other also logistics acquisitions the positive partially We was million to and quarter material, manufacturing or higher year of versus sales reflects

Looking two during disruptions segments, at Industries manufacturing the resulted relatively chain impacted Industries the Mobile These higher customer quarter. and costs Mobile operating and versus operating by greater supply efficiencies our more in was disruptions Process. and temporary in negatively

XX, cash working higher XXX support The impact supply Slide after see Turning flow operating you'll of growth, quarter reflects generated XX chain serve the the disruptions the period. to decline sales in we and and in for in flow million free CapEx, cash demand. third our free flow was to cash compensate of million capital customer

From XXXth with and We CapEx its also capital had higher to paid quarter. fuel at our structure, Timken during allocation balance quarterly dividend we look sheet. the a closer a capital repurchased shares our initiatives. a third ended quarter Taking consecutive growth XXX,XXX standpoint, the strong

including to puts allocation and XX, M&A by net near position measured our was as forward, leverage great which drive low continue end to is the buyback. moving at debt and adjusted September range. to of targeted This Our capital EBITDA strategies growth in X.Xx our a us share

provided so other to on in for on on his additional touch I'll items. outlook turn XX Rick the let's the outlook. a commentary remarks, color few Slide just Now

equal which the of the XXX full For to and we growth we year, We renewable million of in XX the to tax XX.X%. marine. year-to-date ongoing expect full spending includes continue anticipate and rate areas the of expect around for net CapEx around like expense currently rate interest year investments energy million,

indicated, excellence price headwinds. headwinds. we we cost lower by initiatives supply expecting and other third to revenue Finally, are continue and for anticipated lower fourth margins and the driven quarter, to enterprise to the as Note increases operational the Rich across the quarter than that be offset the chain implement EBITDA adjusted persistent

price impacts significant expect initiatives. next positive we from ongoing We year expect our and footprint also manufacturing realization

our focus XXXX. So formal advancing summarize, solid and line delivered our we will to the ability while challenging in This for to environment. the on headwinds strategy. we generate confident open We'll questions. and strong to revenue concludes Operator? And serving very performance we're in of performance levels quarter despite in customers the cost higher mitigating remarks, now and operating the continue our

Operator

now you. first from our [Operator We'll take Thank Instructions]. with question Stephen Yes, Volkmann Jefferies. sir.

Stephen Volkmann

taking Hi. question. guys. Good Thanks morning, for the

Richard Kyle

morning. Good

Philip Fracassa

Good morning, Steve.

Stephen Volkmann

talk thing only a surprises about had I’m so is I talking you is, mid I revenue pushing just significant you more. guess this bit sort single that the sort the And adjustable little into said just X% wrong you if sort know keeping key And question think should little quarter. of sort that. aggressively? guess are I digits. industrial what's from of or of like price guess follow It I in guess me of quickly. can But be only surprised we of most I maybe 'XX, companies that feels a dive kind I situation. in you when I'm price about think more your this of don't more the that I base you But more

Richard Kyle

the hit late -- the to it I started last we us in anything coming think aggressively keeping looking small. there's to and up more don't maybe I of months. for the in we're too But that certainly little pushing hindsight, Well, from exception with a think one, started make certainly

in to X%. So the X%, back maybe portfolio, comment which move the half greater started price, than And the we to point where is going was roughly on can we that your second that your quarter. late

each June, and As October. our September I pricing from it through and July in June will said, improved to improved again May month to improve

So that happening. is

if it's to price a we be would had to cost would 'XX. that specific X% certainly material us our third look you our land quarter, financial as to see in the in quite at make look bit And next million logistics you a to increases the walk cover early little where we objective, for think date today. in think expect have on and if our price negative as that and happen. positive is to of with year, I But very probably on wouldn't to you certainly look get I XX discussion Slide we've at get cost $XX the that to in that X%

numbers So that single while above/below digit make not getting range too happen. be to need specific, the to certainly

been. make anticipated other and the we be of a more I these costs logistics that what comment they things than would [indiscernible], would little more think had little have transitory a I being on

now. we're So that up to with moving catch

Stephen Volkmann

you Okay, some that's increases. But is in able customers, great with I'm price color. the not those exit And I type 'XX, non-profitable know excited contracts. that contracts past, lines they're big again thinking as be about you've willing big and just follow have on write this? quick to up and a guessing in actually we try to been along Should some probably we

Richard Kyle

think I don't No, so.

side business term risk next farther going from 'XX there's year. think your we little. the on very in term, think pricing net I us the of is slim. that, losing you To than short -- question, of keeps first what share your point very from I And will positive short

I from -- timeframe. cetera buy produce customers think time in us et that cost that a position in they a anything and a generally they with tough have available our capacity, would moving a at timeframe

and have. move material of flow up. of the we to we move intend but So short-term the exception a pricing also we to as throughs you that to price it had know don't lot price, We we with back look look

isn't cost, quite to spot that said, looking the we're of also right us but markets to I start for anyways. that the there's level positive us walk think, direction we're room a something when move that in find And So off bit gives that that to price covers I having as year. back to in cost,

Stephen Volkmann

on. it pass I'll Thanks. Great.

Richard Kyle

Thanks, Steve.

Philip Fracassa

Steve. Thanks,

Operator

Wertheimer We'll now Research. from Melius with a take Bob question

Robert Wertheimer

Hi.

have and I was Sorry one helpful. about next the price that also, but

pace changing Just if you at is which curious, look now. the right at Rich, pricing

inflationary faster bit was have things new or like You I felt to could mentioned if changed if on structurally swifter don't in just was a make assume entirely environment decisions. and that's you behind. have did were cost, you Thanks. the your and a you agreements the to in curiosity, work kind know it of responded little almost organization how the whether was behind then balanced, curve? and And it surprise it contribute I was more that out quarter, of be or transit the

Richard Kyle

Yes.

pricing least is On material up the of design sometimes typically by a a two then say, big our agreements. price, late, on part amount I late. we quarter through that being behind also price fair business us tied quarters price would pass we And XX-month a have increases at of on

second time So up material as costs and XX only the quickly. gone in would it’s only have 'XX this -- been The of timeframe. costs the material years other in have probably time

last it's So as fourth we in started But us. typically, it it's us to again, up. the quarters have that caught in lag. not a couple of real year, definitely Actually make deal But the big beginning first to quarter catch that well. of

then happens by to elevated pricing And customers you back better But costs business. general nature to way So the And one is it hold we time the that I have and opposite there's the the now, think time the is right an contracts. it's expect happens gives comes go as generally material, material the part commit generally shorter And costs that. before other year. we to of us design. that When for rule our do it it better because down. where a again, where other lag way, that a extended

and So now I the just with power right we've cover got price forward, start costs. you think we to that as of a sure got is fair year to to we're we again, got in -- pricing position amount make look land the a enough where we've

things quarter the but and from us that. cost, in of curve International where from a container one curve, the So next. came doubling had cost bit freight the to price pretty part, I a certainly last unique how the to quickly like probably India would faster the is little and this this cost we move Europe opportunity, think at

bit landed a little be of and So critical there. too of I again, lag there's where usually we would

there. be think I we'll So okay

Philip Fracassa

Yes, is Rob, Phil. this

the question of the the freight Certainly in But terms then I part of changed ocean the expectations was the what that worse, supply quarter. board, international terms been the got a broadly but big second shocker the of in inefficiencies one of to some the that sort and the some was rates across of rates, would the inflation probably question, relative chain across in quarter. logistics say disruptions your Regarding bit board. no the logistics a from the of would beyond and that little in freight emanate have big

Richard Kyle

pandemic would more a we productivity. came the transitory the parts And I Phil the the quite of of say, of in would we the that ease. this up. again, of We as quarter And booked And thinking said, our would some went pandemic some just in plants was logistics our specifics southern the -- thought some world and third quarter, in other the U.S. plants. absenteeism had were around and during bit through ease --

better. be months, back that will didn't things go some happen. thought we four or five And So

that. automotive all on was then say affected obviously side chip by would well, issues. I significantly demand So revenue as And the the

Robert Wertheimer

you. Thank Okay.

Richard Kyle

Thanks, Bob.

Operator

We'll now our from Loop with Dankert Capital. next Chris question take

Chris Dankert

guys. morning, Hi. Good

Richard Kyle

Good morning.

Chris Dankert

of move we here, a into as XQ upper into type execution I on out just mid color should of given guess XXX move SG&A just kind of logistics, move bit kind that to million pretty little any range? think expect I quarter Just back to how about new a year here? we we et Should the incentive cetera. move base the guess as on wage inflation, to impressive quarter. we down comp, SG&A

Richard Kyle

Yes, an certainly dollars. in absolute

going will we were I I soon can where think I next there. a think I but pretty ago as we percentage couple pressure touch anytime it years think us from looking there mix a don't you be look aside, some up, sales. a maybe year, a keep to we're standpoint, of -- of leverage But see back -- as

Chris Dankert

but get kind some still on from notable is costs you Is else there back keep should obviously -- [indiscernible] we any had bit. should last Hey, “normal”? were measurable that additional that other lapping in Again, actions little as anything to it we a mind year in I guess. mind down, or things keep temporary that cost touched of we

Richard Kyle

be where a of the it well travel Certainly, don't go a believe would forward. I below in come to I dollars that's needed a used travel international from as and we're increases know be. certainly but dollars But Again, merits XXX. you there that some was. I It's to what be lot tend could down expect in still But it and only a look if of incentive to significantly next being up remains in bit, will that do XX% certainly it comp little And headwind. that's again, growing headwind to year. be it

you'll So leverage. leverage from general, from pretty percentage, think whatnot, a expect think But some shape. initiatives a I would headcount I necessarily And next in growth that I back see And to we're some year. to case. our standpoint, then that probably and the be with wouldn't coming think again, good of in the business

Philip Fracassa

I year, in incentive a we're also favorability the add rest Phil in as the slight higher we of compensation. -- Yes. when bit had of Chris, spending only would the quarter, at looking this the we is -- said, little

As we probably incentive fourth comp to you'll back the spending with we the I think accruals. ahead fourth more and normal half first quarter, rate, be to move some occurring you if see us quarter increased revert we as line with look into will, in as the

Chris Dankert

but a 'XX, just any Thank That Got expectations past, quite it talked the this for very, in it. at energy, just then a alternative can on very given I you. And if about see up backlog point? what helpful, we could just we've bit follow guys. the in

Richard Kyle

moderate more for planning we're of year Certainly, right Yes. now. growth a

remain we double So and as at we the digits. in we're be looking digits said, this year track on to double

at going to of a next here not But start China. we're pretty is end that the there. just little platforms slowing We're for off well certainly the wind a industry not we've shot They’re little China We slower. publicized. bit but year. The new a year, it’s have down just wind, some going again, got

would but say our no So we a the next as I today. here to forecast, expect growth long-term rate sit change would on more year moderate bullishness

Chris Dankert

much, guys. so Thanks Understood.

Richard Kyle

Thanks, Chris.

Operator

with from next take David We'll Raso Evercore. our question

David Raso

Thank Hi. you.

Richard Kyle

Good David. morning,

David Raso

I Without we here. XX, at mix just sense last came kind first having was then and in XX of year, quarter guidance, sure you of a XX. parameters of look quarter When just to price at the have make wanted little third negative negative logistics, quarter material now negative the cadence versus

the For sales off a lower of base. fourth it's quarter,

about versus So of to sense you And now when negotiating would price would down third about some be expect how For for pricing? I you quarter? then the just Can sequentially. it think that of cadence, thinking price alone, think sort you -- right would fourth would you you're from neutral? expect how the quarter the costs be cost give when in

Philip Fracassa

I'll Phil. It’s the David. start with quarter fourth Hi, commentary. Maybe

So we quarter be expect the the to third largest headwind. do sort quarterly of year-on-your we said, as

So about when see the we you was fourth as last -- material That move up, we the much to year, get more in quarter. start think quite quarter did last in in of year, the did 'XX. fourth logistics see by actually didn't hit

I look to as to we'll continue think the quarter, So we ahead fourth get price.

the from material would we than And more expect probably in we're price quarter did moderate side total. to in moderate and to that in indicated, headwind As on material then logistics than the the going get to year-on-year more fourth the we but third. Rich on side, logistics

Richard Kyle

QX. that ready realization price sure. it expect that of objective for to say our to next not happens But from say to enough positive. is No, done pricing the year. But I'd say I'm in QX we price when not up step with goes cost We're to certainly we're sure

David Raso

negotiated in price quick it's pricing costs versus from Well, maybe for year logistics year, us what been on sense of so your much follow percent trying then maybe I X, front costs of pricing had a to for if percent And of characterize maybe just of a been your months six-month percent visibility how a just mostly on sort negotiated, next of generally a your know to The just hard your comment. know what X, negotiation? if curious, of already on I'm it's visibility get to But on now. up only that's the side? cost, you you then. I that sense do has you. it's of that next could still have XX Thank we're

Richard Kyle

then year, half And that are implemented the in to another any during happen. that have a Well, have make implementing time that range. XX% I'd I'd the reasonable we I able of XX% probably call say negotiated sight going good pretty we where are land within throw either move at actions or line to to we're that to that to would price tight we

being able So final I on months two a number. provide I from solid think specifics it'd But to away think be that. pretty we're

don't price I it that's think cost the on to just side, on undershoot we sure make I more that that continue cost we the is escalate. where to think got risk the side

some that the material, to were generally the So increases we've have months to third we've And Phil continued three up. of freight. particular talked in rate visibility with got pretty side we're good the quarter surprised six international on, we to go seen out, the about in things material already but

So that in big out to flips how positive. think and when factor is plays that a that I curve

David Raso

appreciate the color. I you. Thank

Richard Kyle

Thanks, David.

Philip Fracassa

Thanks, David.

Operator

Our Steve KeyBanc next with from will question Markets. Barger come Capital

Steve Barger

Hi. morning. Thanks. Good

Richard Kyle

Steve. morning, Good

Philip Fracassa

Hi, Steve.

Steve Barger

your as grows ease? the Do of both revenue growth year-over-year do in positive question down? some Mobile think For expect then headwinds organic you be comments, And for same segment segments year-over-year you could or XQ EBIT. that

Richard Kyle

to Within quarter up for Steve? Process both expect second Mobile was We up. year-on-year, though for Mobile for what we're both the to be -- question, down are I'm and segments the looking we fourth automotive but sorry, looking to year-on-year. be be

Steve Barger

EBIT, think headwinds in Mobile? price the some as you ease better a little and realization, year-over-year of do specifically get that as can Segment grow you

Philip Fracassa

side, disruptions. on Mobile would be to Yes, say continue Steve, we’ll chain supply impacted by the I

As I even some negatively Mobile's indicated, more Process getting of from a cost bit the little than pressures. disruptions and supply chain the impacted

Mobile bit expect would be it challenging continue to to the on So side. little than more a the Process side

just third be As continued we be in quarter. like just from it and down revenue the more talked the about, kind headwinds. fourth Mobile likely on in for lower we expect then to impacted to the And the was the margins of third quarter

Richard Kyle

the plants, that bit bar I'll and add before and bit Steve, improve of going XX. a to well within There Slide that, and freight volume again XXXX. pretty on price that premium a manufacturing and the XX. levels your maybe David's as that to not of have maybe question, are look question in to looking cost at little in in little we're these certainly of that certainly would element volumes things positive some both at already the are the self would we're driven aspired which and but side we larger there we necessarily to an there's some X on There's have -- manufacturing, not as X, also cover have absenteeism are is with confident improved -- not favorable to parts a recover this of than of again, to looking inflicted, which, our we're looking

say, is sure an part. next and it's trying also there's part, what part year, as So this, increases. cyclicality inflationary cost bucket normal heightened really to these those we're probably we're think we There's a going been inefficiency And that’s I'll look make remain. then to covering we

Steve Barger

Got it. X.X guidance of drive an a you since acquisitions, picture, had to mix now and in And on largely billion XXXX to Mobile. couple and process you've cyclicality. reduce And withdraw into quarters just expansion, due bigger spent to better aftermarket

diversification improve general what So mobile, does require in or M&, to this Process or do more you more can in just visibility?

Philip Fracassa

we've Rich for obviously, M&A as tended be to Process sheet. Yes. has we We'll to doing the said, what balance the continue company. look the just And Steve, side. I M&A. would That say, do the focused like more to on is got

supply of across disproportionately challenges as chip the across the Mobile, comes enterprise. chain we inflation working indicated some business. bit it little and kind We're are a to Our other But shortages a you'll automotive facing pricing as Mobile and impacted. of through. great issues with get again, just we're Mobile the is that see the affecting Process was the in And around not business enterprise,

been, which enterprise, part the in years, neck we leverage the Mobile and to tilt much diversify then you in best we portfolio to think the we of about on the returns same, strategy like driving will our generate neck. and than Mobile, the have larger kind with very if went couple go be So emphasis segment that And participate, A an business And on Industries is Process both I back the a thoughtful were forward remain be and XX where toward very together. continuing of X, Process. we focused a they Industries. focus years the aftermarket on M&A ago,

continue. I do strategy. is M&A don't the move Now think Process that change and there's think certainly would forward. any But I will larger slightly some But to more we we to like as

Steve Barger

you. Thank it. Got

Richard Kyle

Steve. Thanks,

Operator

Ritchie our take with Joe next question We'll Sachs. from Goldman

Joe Ritchie

Good everybody. Thanks. morning,

Richard Kyle

morning. Good

Philip Fracassa

Good morning.

Joe Ritchie

I and pricing of get know I'm in into really sometimes wondering price. just industry get and about some to auto driven. just just provide us those talked like mostly your go maybe little as It's lot industry, just we XXXX. the customers that difficult the pricing. color if and increases suppliers really So specific with just to I'm could bit the customers the you a cover we've it's back curious to to truck platform a ability more

Richard Kyle

Yes.

share. with looking get ever and Mobile earlier we're concern, we a a be our to lot don't So price of are increase certainly have welcoming that recognize steel through also And a really commented price that going prices Joe, prices. happening they But increase. Industries not or for what's customers I to retain able

And their supply the with other issues So top I constraints, with reasonable facing progressing supply and in generally what's that think thing at issues think conversations not chain there. probably their own Timken own spin increase it XXX happening I with price on we on a the their chain is bearing look Company they're the are issues.

year. the get next will So we pricing

Philip Fracassa

ones in this as say both would a in to working our multi-year of of this operating it’s thing some deal, Joe, adjustment Phil, where that, much favor. Yes, you the renewing contracts I some is works think know, deals, of we in mechanism kind environment, when it's ways. But have OEMs, needless described. have you as multi-year this that even Rich about It renew, big only the in But to price a year, aren't add anytime the we there.

positive those mechanisms up are deals year. price multi-year are from So as for negotiation of getting -- we some the this automatically adjusting, getting frankly have aren't that we some

the in the as on from a So quarter bit well. when that's probably our or will our and lag -- that favor quarter. in expect And It fourth on lag go in in working third as We'll started a cost but a then worked little favor so operates more well. is it up, our that continue. quarter typically

Richard Kyle

more one comment. guess I And

the look don't at will be we I earlier there. I when what's But we over the will in to sourcing to price if of think et work, business win a point new think the lot box questions, trying thing. you one get it lose Timken platforms driven, go cetera, get engineering respond action I we to takes on your you to platform And we our of in short and structure. any price resource think of to the happening penalty business. of term, competitors, that fine work, we're one And or these is and our again, that. have the will to cost Typically, sort of first being the with

with In fact, cover the comes to year. I winner think if net happened But to with a need we structure will we next down what's cost pricing that, our XXXX. would we stick in be choice probably

Joe Ritchie

guess costs you, helpful? some trying to perspective. through that quarter, the understand No, quarters, you whether freight hyper a obviously actually just also it. would both. Got environment color bit excess to And any up just eating this those that helpful. comes you're transport following end be that actually whether I'm in of around more experiencing little potentially like trying other Thank how because your a works, from follow a on, that in that's inflationary I surcharges the understand we're and

Richard Kyle

as steel definitely do be exposed that Phil to time. in for we not where, to variation want Typically prices said, in over agreement, multi-year a

mechanism So quarterly biannual forward. backwards that we have through a will then looks adjust going pass and

us. extended some next over the cost it offset as protection up well period environment we obviously price protection that to to I margin then up. a And a couple a typically if little right problem we ever it can base not not this have if become and we until opened the And that get went things again, the best had it's part that I first too this and year is 'XX within the expansive freight half some in this has not problem you're don't It's an second year, think not of in if and then still of the gets that's generally that a some any been Where making side one that, with because And the would contract some don't protection plus have getting for when there. at places eat But up say we start reprice and have you where X, make all price challenge So currency in they’re other of cost a sure months. definitely costs. been they’re I in there, exposure [ph] coverage margin cost we we in up any July first get at that – that in which part. year. certainly that. like will for the and have your on this compression of we and get trued think

Joe Ritchie

Thank Okay, you. great.

Richard Kyle

Joe. Thanks,

Operator

Gilardi Ross with from question next our take of Bank We'll America.

Ross Gilardi

guys. morning, Good Hi.

Richard Kyle

Good Ross. morning,

Philip Fracassa

Ross. Hi,

Ross Gilardi

business those amount there. I or got a lot think with to given at you Correct side. pushed this had investments now? of year. I The are the renewables just number of recall things fair does deal growth-related where any reinvestment me right if other my that into next all that just facts planned XX But a stand? I going over of on to you've the out wrong two, Have more ask, year you was want largely into the the million

Richard Kyle

little of one now facilities better has quarter that because more third of we’ll was issues the probably completed completed in We to you this little XX dust renewable bit go specifically if just We pushed modern that Yes, the in and Probably we we slipped it solar talking the the I We’ll have out. of the about, things second -- announced we from -- facility we're no, The overfilled incurring back move the slipped bit. quarter, the supposed on that a into would supply And facility but But big the of relocation. schedules that -- and now the when multi-year machine we've any a renewable investment. not say a made went build cost to three that the consolidated all moving. we benefit chain facility. year. and and finished really really kind dust larger there. start gaining having the start settled it, on of

well of as margin we for India a ultra in equipment in both couple in. couple and And that’s and a facilities of of little then progressing China Romania, expansions all expansions well equipment a diameter. large market for facility facility well progressing -- it's forward that's of So in project’s expansion a more well. as of And call some in China as well then a That coming meters as expansion expansion the and bricks as have bearings, as two for mortar the bit our capacity we going expansion. ones what us are other big underway

still investments. we're of And on the investment parts we continues. year So of Again, earlier, but in certainly there be next do what but and again the in double renewable. I long is year this up some it optimistic mentioned we'll term digits can market pullback world, pretty

Ross Gilardi

Thanks don’t 'XX. second and to what got you the it on Got just turn your pricing much the color, too not with speak about on you've Is earliest for on 'XX? half year-on-year [indiscernible] current until basis? then I you EBITDA a give just realistically and going based is on But Rich. margins want chain, know see could a everything positive I'll the again expectations shot. supply this And of that it. one

Richard Kyle

Yes.

Ross. Let on make come investment, one back and more renewables me the comment actually

delta by big third 'XX. quarter go You comment to was the that revenue back over Renewables a really the is XX% my record timeframe. in that

year, But of where markets I which do above we've 'XX has really company in got back or somewhere obviously. at automotives we a markets 'XX, given of in they into next another whole base back bigger much to you look other were were the have gotten as below and just think the if we business, level where scale 'XX. a some renewable of in industrial Some look

So to certainly say a probably first comp and bar. quarter ready the high not when is

it record growth first expansion, So to we the cash expect from the be I quarter, say our per share for year, better to and up But that would would year said, I'm XX.X. be quarter full meaningfully sure but not top or certainly step to above to I'm next would objective earnings and expect below line ready fourth conversion. margin

Ross Gilardi

Got it. Rich. guys. Thanks, Thanks,

Richard Kyle

Thanks, Ross.

Operator

with Thein Your next question come Tim Citigroup. will from

Tim Thein

morning. hi. Yes, Thanks. Good

Richard Kyle

morning, Good Tim.

Tim Thein

Good morning.

the think whole next some mix you the from we product have your observe maybe But talk picture. could year, we of kind Obviously, maybe various distill that and that tell of As even distribution? there. public customers about we into some about drivers further obviously can from that do doesn't data

front just So the just where could kind but a if lot just a distribution we restocking on mentioned on, see are? globally? terms of going whole say I few wouldn't of you what of you there's curious that's words in

Richard Kyle

OEM it Mobile that led. so. ago But of in months I pandemic, really the flip good. -- or last out very say much to coming started than Pretty more would recent now, we for has recovery started talked good some time XX quarter the that the was

referenced the couple applies more U.S. desire to is think parts able other right well you as do of than the some the Europe think probably what I now. and for a certainly they're I of that There large distributors, comment a as outlook world. restocking to

customers to commented them. for front and into on our that build that, Some next heading they own year their in see have revenue they're service opportunities of of inventory levels trying

don't the certainly short I So see mix term. in

bit. the it not if be ready but favorable, call No that to look little we that out I'm accepts a it's 'XX, I minus sure As timeframe. being is chip I'm some versus that headwind I it the for -- looking the for plus improved, came on it's be significantly one But to think mix a to don't it has obviously us see where if been. automotive overall, could down been should stronger, situation

Tim Thein

Got it.

issue of maybe meaning to structurally Okay. last to on are in if inventories if kind that cash is of chain from you whole any that -- there levels of have terms to conversion, Timken the overemphasize regional reverses. standpoint, period longevity debatable it in your But reverses? and thoughts does differently just supply a on and higher it And of is we or terms stocking then assume and lead just maybe you should don't just comment think just particular as I'm when this they it curious this this

Richard Kyle

today inventory for in think X yes. are quarters, transit more certainly XX least the and certainly because current and the X I things need than inventory, We state to think of that normal answer the to couple and is because next at have more of I taking for weeks carry weeks we take that. used

to then more we're And in demand warehouse So as itself. just having stock well. in the transit or also either the situation

look haven't think is been offsets say, year. hurt turns, to this, up would okay I generally has expect certainly slipped happened. turns more although wouldn’t year, the have than inventory as improve next another that the areas. come year, levels, So inventory like experienced that what But they looking been step what we up I higher up, in we've much. terms has this has we would our as the -- our revenue we're which really But some at that some to I inefficiency think in There's look would market us other this

Tim Thein

Thank it. All got right, you.

Richard Kyle

Thanks.

Philip Fracassa

Thanks, Tim.

Operator

Your Stanley. from with question Yakavonis next Courtney Morgan come will

Courtney Yakavonis

morning, guys. Thanks question. for Good Hi. the

Richard Kyle

Good morning, Courtney.

Courtney Yakavonis

expecting revenue. a just the bit the sequential comment step very XXXX can up more strong with a guys little on you to if comment about Maybe start in

premium you're freight, talked maybe fourth just is of more help think guess are think some quarter. the the going about little your the comments? should I higher be more costs viewing out how come us impacted just versus If then year, Obviously, into the could thinking about the us to what next system in to Process freight you structurally in what Mobile some you can next help structural especially increases can secondly, more inefficiencies, And versus just eventually you versus bit more a us is Mobile be of of about disaggregate we just after heading help year? about

Richard Kyle

Yes.

this both so on that But that of see year think market price if a would a I the I a probably on would segments be example, there look from 'XX, step margin in production. QX. a good as of question, change because and the that revenue revenue higher would in up better last back a think the there's some that margin of realization we standpoint pretty what in be pricing maybe as think both end first you factor kicks be usually above from be QX standpoint, typically, well years, in expecting the and not we period. volume normal from would to 'XX, step part And several I

higher well. then usually have as We levels production

have will at I up, high there's our would transitory, both of inefficiency with of factors to an back there's where if element the other we there's those -- just you history question, in the think on the some then of and of seen looking on that's about that And both end here an part everything seasonality. we're second now and/or there's element of I we've expect our that gone there, stay. And But be think costs market. your we look probably this element an element an if

could cost wouldn't -- wouldn't to them XXXX XXXX them certainly up. down but think I to I little expect steel come expect year, probably levels. I go to But down So a bit or next go

on cost a unit other typically when It direction. up only go up, labor one basis. doesn't have costs lot labor in the way. not Our moved it But a is goes

had the high unusual very disruptions. labor the flipside a inefficiency, and our amount from of again, in chain -- we've of amount On labor, supply

itself mandatory world, in causing with the some outage between we flow have power China don't from still some issues had good through just in productivity parts issues. the the You that's year, plants -- shutdowns going pandemic of some currently this

cost up this of So I on It's -- biggest those any better the et And definitely or it some the year, next that probably ocean definitely up I better regards third that perpetuity. wildcard was container some but not out is and quarter. cost, to how than and would you quarter is it today imagine expecting relief the settles We're cases look the that to be is start prices logistics hard gets XX%, sticking there XXX%. out. in charts in at just then think think it in cetera, cases that to level at

because to our in ourselves where a it's I customers then looking regards pretty significant wouldn't produce think and products, be changes of if were both we you to at potential rate that probably increase. some et stick, cetera,

in So with And some efficiency. stay, some price improve obviously then of coming over the top it.

Courtney Yakavonis

helpful. That's Thanks.

Richard Kyle

Thanks, Courtney.

Operator

for remarks. telephone closing presenters to further additional conference no I'd are or like turn there any the questions. appears back over our to it And

Richard Kyle

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

questions any you. further concludes please have you free to contact If Thank call, call. our after feel this today's And me.

Operator

that And conclude you for thank participation. conference. once does again, your all today's We

disconnect. now may You

The Timken Company (TKR) 1 Nov 212021 Q3 Earnings call transcript