TKR - Earnings call transcript Q1 2022

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Operator

Good morning. My name is, Christina, 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 First 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 Christina. Relations today. call. The of And earnings Director This first Frohnapple, you everyone, is appreciate We for us Neil

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

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

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

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

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

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

of presentation included portion copyrighted without the information equivalent, financial We press consent, any call. between we call written by expressed recording Today's and GAAP transmission release of use, its reconciliations have The or non-GAAP Timken and and materials. is in Company, any prohibit the

host are in to we Finally, New that an Day, I City. on would to like September York planning Investor Wednesday, XX, announce

I Rich. call in The to With will I and like interest you for thank for details. more please Company, the your over now turn tuned that, stay So, to Timken would

Richard Kyle

excellent we supply lingering Timken, with you us the today. pressures, first revenue, and results COVID earnings margins the and XX% chain morning for and record continued delivered challenges thank of inflationary issues. delivered Thanks, share Neil. per quarter, in face Good EBITDA record joining an and

track of to demand to year's record markets over Despite price many on by challenges, of and XX% we EBITDA the cycles revenue quarter. the across re-priced strong of incoming market quarter, improved all continued cost and results the strong almost was annual Even and quarter. and fourth to through achieved We first revenue, persistent through and very industrial dynamic We delivering the demonstrates and the continued of driver with quarter neutral the chain quarter, continued orders year last the performance outpace financial be company pricing of grew, by start the contracts the increased geographies. in supply XX% we to sequentially. the Our compared and move backlog COVID spot shipments strong our primary which and the build the almost resiliency margins. In at conditions. aftermarket

in greater achieve fourth to Earlier at quarter year. track and on began. after X% are year, We price levels what quarter Russia-Ukraine tick higher largely we cost until our the the than late the forecasted happened that cost in war saw we and is this hold would that

the offset significant month progressed. increases improved quarter, quarter both the were COVID chain and logistics from through and costs financially. Sequentially, result, but a costs persisted, year-on-year supply year. manufacturing in the each completely flat as operationally strengthened material price quarter prior realization performance of As and the and issues essentially

quarter a did that the on become results. the in are not bigger in the until we have a Russia-Ukraine assuming on they and However, disruptions second and More moment. will the issues war late impact quarter both China COVID

The robotics systems. is package On sector. announced comes for our Spinea together, of and automation factory And to consecutive of leader repurchased business margins technology in of leading to a performer, the capital automation the XXXth is customers of allocation, terms In the dividend. provide excellent solutions factory of we a Friday, technology million their Drive. Spinea. XX%. particularly shares approximately shares. we in Spinea stock an solid X.X the serving we around complement X% businesses or quarter the paid automation outstanding EBITDA pre-synergy OEMs, Cone Timken will And, in a with financial as acquisition

to inflationary geopolitical inflation to the for in established Europe. are environment. now have Timken it Timken excited deliver unfortunately We and results ability economic an a in an soon perform and welcome employees excellent has all Overall, of in was varying to its conditions, it Spinea portfolio including to Timken. and year. war will well start sorts the

may that the last of is last in of first costs that experienced in in last recover and significantly any short-term, year we've we have input recover in at And input couple we seen more remain those will ability. the market pronounced can demonstrated like in we commodity cost decades, time. the they in rising we with did While inflation the market year, pinch pricing the through our while margins and end quarter prices the confident the costs the

of the for environment fourth pricing in remainder of to modestly the or and outlook the lowered rest Turning slightly products the not the for revenue of was we and remains range The continue current about to increase our to of outlook, year quarter a the outlook year. sales. wider supply. from the full of for demand the for revenue remains from the remains and of due possibilities than the to headwinds supply revenue end year a Russia-Ukraine elevated uncertainty possibility no first near normal. We in assuming strong. through through quarter The operations QX continuation suspended took and Demand issues. in expect of Timken, step our for Pricing the the Last continue Russia is the are and products our ability change to We grow remainder reflection up it chain currency positive. the the of war, QX, the very year. guide is also our Russia we year, for our X% to of Russia very

levels productivity increases and adds, continued staffing through capacity in have increased through gains. We production

We that course customers the that stronger with all supply no be our roughly at and assumes, good assume Across XX% full year. we is revenue year. despite to organic various the to demand outlook year. Russia. a any slowdown as pace is from our revenue in supply China significant will at in COVID continued the Overall, situation improvement revenue suppliers the continue of are through the deal chain not the position revenue And in full forecast there restrictions an performance the in issues chain deliver April and the and shipments than that March, company, the our in we, for to the for level elevated that continue

I April As restrictions. from revenue was our China mentioned, impacted in COVID

as are running and well significantly exports down plants impacted, as customers customer as but been not networks Our shipments are logistics have been both, and have impacted.

the will have are that We half, not $X.XX, in issue also be quarter perspective, of $X uncertain. of which holding guidance that will level remains but and uncertainty range higher the reflects assumed end facing. an the From we that the are second improve we prior to by this second of earnings an the

We have be steel the year recent in uptick point war on are not including if levels will prices of the say this know energy, first year, but being the hold than and the cost year. we costs of our and other transitory, that time, are We significantly at We in are This they last cautious that would for outlook cost be will assumed we hold or same higher assuming much higher I than and assuming year. stick. were to with the at it be commodity Last transitory. more logistics that will increase eased. saw we we the inflation the costs at quarter rest the our in the were don't second the to of start

also supply in costs. to tirelessly We higher and the these both, need are, are will through the that the realize both, also costs but and ease and of inflation offset of cost more net of possibility impact pricing the this to course, the the preparing balance mitigate working year chain we we XXXX, year, that there's to

cash working supply the growth improve challenges. chain to mitigate of remain year, We XXX% to is conversion. the This the flow to capital, well below and to due serve in increase expect seasonally rest but to

and enduring industrial of every rising market the capabilities portfolio, the our expect a I Timken cycles, over Timken demonstrating our mix want of through closing, Our margin lows business the strong. active and mid-to-high teen the market we that in and In allocate M&A reiterate remain first to continue really capital XXXX. performance balance to We years, sheet highs the to has our results, for remained That's a including decade. is Timken, share and EBITDA of year to remainder our at the deliver all recently pandemic been positive through several team. our continue special record the and earnings through last strength technology quarter for track of of swings, falling product those chain and time strategy Phil? grow while and tariffs, currency on for advance same war. we employees. to prices, leadership XXXX, inflation, supply the most to unprecedented demand for and for Through last conditions, of our remained In out and or of position. is challenges Company's grow and to and customers, continuing Timken negative, products commodity year deliver strong investors whether per revenue fourth the the the now industrial a five, diversity

Philip Fracassa

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

we see of review. the going start billion, record EBITDA to record Revenue across presentation of company. of new year from quarter with materials. financial $X.X a the per performance a in Slide was results the in strong financial on I'm first and margin you the about can delivered slide. share year, great last earnings on of the all-time adjusted $X.XX. the Timken board XX% We an to start For this our and XX% quarter XX, adjusted delivered and summary a over the for achieved up

XX. slide to Turning

sectors our sales last sales first across Let's Organically, closer most as pricing. higher performance. were from take well year, XX% look and reflects quarter a which growth markets broad up as at

currency right-hand can regions versus in Americas. excluding the were organic slide, quarter of the side up you acquisitions. by On All year-ago by the see the period, region the growth both, led and

In rail we most strong a We year-on-year with most Europe, me In distribution were industrial XX%, XX% and standpoint, in region, shipments. year, with in up quarter but up distribution, posting as general in gains. were was rail off-highway well, America, Latin lower as while sectors a the the up we as strongest there the our by color was energy Asia, XX%, little renewable region. lower. industrial. Russia notably first largest sales add from last Let sectors finally of were growth by up down on were and of America, and And were region. the rest we From solidly X% led with in was up, market were up up very This each automotive China off-highway rail and North offset marine. partially distribution up strong across

XX. EBITDA sizable or in basis was step EBITDA slide quarter compared was with the margins points up last sales Turning strong quarter. year's $XXX from XX up million XX% to or Adjusted Adjusted sales first XX% million margins XX.X% $XX the last of or quarter. up We first to a year. $XXX fourth million in from of delivered

offset in jumps of the which SG&A the quarter. price at each us organic the EBITDA, allowed capture This impact benefits adjusted than logistics other offset in growth, first mix costs our biggest volume and and fully expense. more strong out Looking of material is higher that thing to the that change the

Let few these of further items. on comment a me a little

also mentioned, our As by both, pricing quarter, strong driven Industries, the was distribution positive, recent pricing in higher Process mix reflecting in price actions. was Mobile and was Mix positive I sales. meaningfully

to Moving and logistics. material

cost these As that saw point line significantly driven quarter last costs largely quarter would chain in a to and expected, supply inflationary but by challenges, in were pressures first compared with we fourth I higher year, the levels. out

$XXX the cost I coming in as benefited but higher in we labor On related well the down the a slide and per year $X.XX as basis. you'll and on for impact productivity increases, million we per were of costs first COVID. quarter. In adjusted leverage chain from record supporting but and of This SG&A XX, on of includes to from the of annual dollars, see a largely of earned $X.XX for supply very And, SG&A expense was we special charges. fully percentage net want continued driven quarter, performance. manufacturing line, continue share, costs $X.XX by this XX% net as diluted the new improvements, as posted items, to volume and energy, quarter out last well reflecting higher any compensation inefficiencies. income that we finally, up On by structure basis, touch offset achieved GAAP Russia-related quarter an Timken the our sales, production was On other from a revenue up share higher or

You'll we in quarter our And reflecting first rate fewer the quarter average in last XX.X%, was line adjusted that on with our note year, had shares compared outstanding tax year. first buyback last to activity.

to XX. with Industries let's results, business Slide starting our segment move Now, Process on

as adjusted or sales Industries' Pricing impact first compared first or $XXX XX% industries, positive the mix, increase The sales growth volume up, while also gains. higher were year. For operating of up last which were expected. XX% EBITDA the of the and higher across general with was to Process the energy distribution quarter. from mainly margins attributable Process renewable in $XXX in also positive by quarter. services costs Heavy more than offset quarter, year. XX.X% Organically, sectors was in the strongest and in up $XXX more was modestly segment than most industrial of million to quarter million the Industries' was were last sales price and million, industrial posting XX%, sales marine down driven

of slightly Now also let's the first year. and comp down against was year. strongest and In Mobile $XXX Industries' Industries' roughly quarter. million, last quarter, from were or a million for aerospace quarter up Industries off-highway positive Mobile nearly automotive were XX.X% on Organically, X% compared Pricing posting slide We turn or year. also to increased $XX XX. with to was difficult modestly XX.X% EBITDA last the while was rail sales sales in sales sales, first truck, of Mobile $XX the gains. adjusted up X% last heavy million in the

higher driven margins offset price of positive the were year-on-year. was segment mix. The EBITDA costs, roughly volume the flat by benefits So, operating dollars decline impact higher in of than more which and

that Mobile continued be more process, by headwinds XXX points I negatively in were improvement from to cost. and fourth quarter, Mobile margins price a out the in driven point While meaningful by impacted cost up over basis would

CapEx in operating see free the reflecting $XX of XX, slide sales flow quarter, to million, just to cash and that $XX After million. Turning was first you'll service. higher flow our was support cash capital our negative working growth slightly customer negative,

annual flow First quarter is March. normally needs capital compensation given the lowest quarter incentive seasonal payouts in working for our and cash

payment dividend. confidence The From shares of million of during expect back closer the more with X.X significant a net quarter ended the the stock quarterly capital the flow first step quarter our We but through we to the of the on a be our hand. Timken in up cash cash look in us business $XXX year, will over Taking for and and with a course the long-term of already to provides of in It half-weighted. rate at to XX-year allocation the X.XXX%. gross within demonstrates the at rest of capital range. repurchase capital step outlook the shareholders bond in includes share adjusted returned we that structure, it debt well acquisition also up quarter, issuance, buybacks financial will Note company and the additional our million times, million with commitment our debt Spinea This X.X at to consistent enable that's fund accretive allocation. March. standpoint, targeted our the us $XXX fixed attractive completed EBITDA an flexibility during

with outlook XX. Now slide let's turn to summary a on the

provided outlook relative three first full-year start months ago. was the to performance quarter Our we a earnings terrific

Russia-Ukraine with China. lockdowns months of level uncertainty past in conflict the the over the risen has COVID and ongoing couple However, of

flat last be uncertainty, Given to at full our is $X.XX earnings margins would to which it from of the outlook. outlook in earnings and per we per new our record Though to outlook last adjusted rest and through that earnings with which Timken. decided The our move be of the we hold implies year, this EBITDA share, our XXXX roughly better continue prior of $X year mid-point have full than for with range year. is modestly a share unchanged will up guidance midpoint evaluate as earnings the adjusted year year XX% the

extent remainder mitigate year step chain inflationary don't Our the in upside would the are be them, a in assumed outlook to compared assumes to up it inefficiencies supply we otherwise prior pressures headwinds of guidance. or To over these to the our as the guidance. the materialize transitory, extent can or

XXXX around versus Organically, in outlook. is to and to The Turning to reflects now the of XX% X% X% reduction chain revenue our we for to impact organic in XX%, up now mid-point our planning be This we're suspending operations comprised expect be the X% and outlook. the for disruptions. from currency. X% expectation in up compared a XX% outlook, at total be revenue to Russia, supply prior revenue prior change compared in the continued

solid and continue pricing. to outgrowth also see sectors, We across benefit markets and from we to most demand and positive initiatives expect

currencies note that rates, based which expected revenue any Spinea, Our include as of rates headwind This not And full a June expect does is timeframe. to year, prior spot reflect strengthening strong sentiments. the backlog from on our beginning incoming now the to top-line outlook order respect year. as our outlook. demand key April currency, on in for since from in outlook X% supported up of well the the close the is our the dollar US by which and X% we is With the versus customer please

the net which income, includes of projects X.X% to Moving conversion for of productivity we around and margins. growth-related year, expect the flow, initiatives cash other several full improve to estimate sales, to and in CapEx X% XX% range at free of we

net we $XX recent bond rate be higher the expense and rates for will and around we our that variable slightly adjusted estimate our issuance be to prior our with line XXXX, guidance. the from anticipate For up quarter, million, tax roughly but interest expectation first in interest reflecting and XX.X%,

delivered Timken summarize, year to achieve we remain So, XXXX. and the positioned for excellent to start an well results to record

focused and our this open changing the team for on profitable growth operator? This formal marketplace performing winning Our our environment. well the line strategy, remarks remains questions, now through and driving we'll in concludes ever

Operator

Research. question [Operator Instructions] Melius We'll take with Wertheimer from first our Rob

Rob Wertheimer

question the which could my actually, my acquisition, currently. pretty one Spinea the wonder question a So, Spinea I what to looks interesting. if with do and - strategic first you be going really of is technology compare just you to

but mentioned it You understand if know are don't I could a if acquisitions? TAM highly future branch Thanks. And, engineered. Does your also highly more it wonder markets, fits products? open expand nicely, does kind a engineered does of it represent you new it's advanced. growing it well into bit end I automation describe. which I avenues on up more for into growth?

Richard Kyle

Rob. hanks, Yes.

we towards developed but organically making solution applications smaller the complicated and drive, differences it - generally and So, which drive very towards Cone would lean in duty Drive Cone. weight subject, has lighter smaller what harmonic it lean joints torque Spinea's bigger applications, cycloidal - simpler, and applications robotic specialty call and Spinea is or would for the heavier

the market in position. to full And, fill organic, would it's time. we way we want a is complexity we now, into taken and just So, similar us of we're for and Cone's two, the case say significant this working a both. acquired since we're out. have two precision But products. things, But level now that some would I complement our

it been Cone's for it a has So, has access at XX and Spinea for customer years. at XX few. or been

actually guided in Spinea in beyond they question precision this still presence presence market there, vehicles Then European, we areas. moving bigger then don't your adjacent focus, are other applications. products very In in this. follow-up and small have of Asian other - other huge Asia. space specifically, some history, and drives, look similar automation a for terms a terms factory that in European have in into And of There also,

well. being can part them of there significantly Timken as So, we think a help family

months. for it's I acquisition, us. we exciting couple not So, the what's a look exciting it's get huge forward market a growth in in but one it of And very a think to very portfolio and here

Rob Wertheimer

if - stop periods backlog, Okay. just of just Thanks, feeling my can there. general And then, [indiscernible] the uncertainty your Rich. pipeline, in on right will I acquisition and now last I

Richard Kyle

one think, back lot our size we're last I that is us the would to getting And seen focused. spend to activity our then, that up talked we XXXX. small in you've it of would be to fully the about say active, the the cultivating it's XXX% But, a little level there. say, a closed possibilities, be time on also and We've X That's I pipeline would was obviously, to back X where that, the larger only hopeful times not would do, got either before some where on pre-pandemic. as mid-size Spinea I bit focused Spinea good. say factors that and we acquisition size. call and we're I of a or in lot

Operator

Bryan Go from with next question Oppenheimer. to our Blair

Bryan Blair

apologize this last But, and some the that organic you sales And few revise into have out price perhaps missed the one? volume I I now I more if or assuming that's a now I'm price to and quarter can X% to outlook? think, that waiting - XX% thereabout. X% or contribution we it's your balance break factored detail.

Philip Fracassa

Welcome Yes, Bryan. call. for up. the the to for Thanks Thanks question. picking us

remarks I in you heard talk thought. his On about pricing the outlook, sales Rich we in as think coming

will. expect for full We that you the be the if of rest would X% than then to greater achieve and pricing volume, year,

the So, specific getting more on we're than pricing that. not

You heard in from that QX expected. came Rich, the we as pricing

quarter. move through We pricing continue to spot the

and really pricing for aftermarket the exceed at good that our look target feel we'll year. X% to continue We

on So, in really geographies, can the sector board we talked looking was one be that flattish for flat strong very be sectors. the but slide rest The growth only for across renewable you that rest year, - as the about looking as the that would the the strong think materials. see as should markets anticipated markets, of across be you will in the across with year across can we volume energy

Richard Kyle

we And organic we just start to of FX. from a bit - as little with be clear, a also headwind it's XX%

Philip Fracassa

example. For

Bryan Blair

Yes. profile we the think on sequentially. you wondering detail segment more cost there color. no And that year? a offer if is about Understood. a could I that steps on I appreciate your how should surprise little front, was the up, you that a margin impacts outlook the cadence influences Mobile basis pressure mentioned how and and more little that for segment facing had understandably

Bryan Blair

I quarter. would would through say I - first say the

As steel, in war completely challenges dealing in I happening. our energy we went quarter or broke still back were reduced held. then, momentum would for in week in a mentioned, mostly direction we the we first our the And thought energy cost, Those Russia-Ukraine operational wouldn't Omicron performance a of globally, actually coming while positive some the going absenteeism cases, saw two that of Europe scrap progressed. away, down. front. They plants anything out, go those might US, when start that on you significant did But but costs, I I side, lot to up chain. so the almost clear persisted, see Logistics within go as instead supply say, say on a we delays in the chain prices January, the and high supply with in time

But, stay, of we're what assuming because taking we're is they've assuming prudent to rest increasing at the are here we're to we've be it the the more here. as and So, we here of end approach those quarters costs, they are so and certainly, are think been what approach that they are taken transitory whether or year well. than transitory - a being for now up they six could

Operator

next our David to Evercore ISI. question Raso Go from with

David Raso

it, a I with the help missed for you little give Can cadence that. margin but Maybe year. the us

a - cadence, a like help year, you Can Just margins the rest year-over-year. think the given you year-over-year implying flat are with provide the us of particularly quarter, easy you're XQ? but it the Thank fourth the relatively comp, should only bit would you. looks

Philip Fracassa

half expect I The would still Yes. tell that some assume Thanks, improvement would the David. would year-over-year. you. second we margins in guidance

holding approach. of bit costs of which tick we As would costs for said, the being up guide. the rest to to bit. We prudent kind in think tick up again by to said Rich we as - We QX, sustain we're admittedly a year. earnings guidance, and the a a the expect for conservative it's The did then planning relative

we expect second margins So, the full-year the up the would would year-on-year. then imply roughly I half to think, still guidance with would full And be be for XXXX. year, flat margins

David Raso

Just level XX.X%. were quarter, the margins ago year second EBITDA set, we so on

a margin And the cost I Just it then... or to to give XQ just I all little that think us does it some framework down? much trying bit. How for here bps is go mean, the XXX negative lower up we're year-over-year, XQ. square price in again drive to

Richard Kyle

the ranged half last go quarter to our and But the obviously, think what to a little to I has outlook. the of specifics margins I earnings said, the Phil in have EPS you don't XX% first it four we half. first the more mean, I'll color second per David, revenue and maybe want switch years to into think to - But, our share. in Yes. add from outlook. XX% I last

in the imply I the so, on cost little it think always a of And heavier higher would guide of 'XX we easing the 'XX, And mean, bit that. weighting do there. but 'XX year it's almost Last I seasonal a in, 'XXs. little volume, parts the rising then mid-point a was was both our was business, have and of

of similar first level. the performance basically to year So, what quarter we full saw for year the last off

David Raso

thoughts outlook, you from have based the you helpful. original seeing? in just more increases since to And So, very does when in to it increase? your the original further ready go have the cost your That's market, seen gone you're have it the you or back even comes what price already currently case having the cost on that where than up

Richard Kyle

mid-quarter. But up that step global With QX. from went of some distribution up of some a QX to we our - - prices have

all was in that not run So, rate. the

mid-year. We some that are up other opening contracts have

commercial So, as what planning point in of be assuming probably we've year, more quarter-to-quarter the said, this to modestly through saw this I would progression we a we is increasingly, last the contracts or structuring say the going of this the end I guide through flexibility. year in this for That rest think from I'll being are will up this is what last where said have the year, year which prices similar and for we our we gone as year. negotiations

indexes, pricing quotes had As you of had say know, we gone I et But, that and/or lot as of trying coverage don't we lot more and cetera. get in index a contract whereas we we're some and/or had pricing a a we've we have through. and may our have material we're have just deals we shorter we mechanisms, spot would contract index generally, before we than have putting a where have cases, through indexed to anymore pricing, inflationary now or a scrap contract

some this year. to you think still see we I can have limits as So, what

the situation, year for the that's new will position positioned if norm, step-up, for in a a more we in it another this will cost in the than case year be year. X% year Our or position if ago. but if And, better and better even next a we are better we be took today we're pricing were it still a is

David Raso

we X than the months had that, the you for if just months ago. flexibility same summarize to more conversation have And XX next

Just clear that... so I'm

Richard Kyle

covering. a flexibility better coverage better the what Yes. or - of or coverage more flexibility That index is it's

Operator

And from next take with we'll Jefferies. Stephen Volkmann our question

Stephen Volkmann

somewhere know sales. couple of X% questions was you your I demand if I Russia of A around could. said

your for large I some competitors. more mistaken I'm if actually think of it not was

So, on that? the backfill curious any opportunity based of an some there's of I'm other just type there if shortfalls to

Richard Kyle

Yes.

for itself by that direct there's getting constraints, and we possibility make gone Russia But, other I market business capacity think, Russia, point. et take and share historical Russia the is served capacity sold outside places. certainly The constraints, into produced Russia parts. business up in into The sold That that market - can non-rail and us the revenue two is at this business Russia, others. supply cetera, that into probably Russia, with produced gone. in business of rail

Philip Fracassa

I the competitors have other be footprints. Steve, - - is, some be may might larger I our of point, referencing do maybe And you may

heard Russia serve outside you Russia. footprint the from we in rest So, rail, mainly the our from is business, Rich, of

in extent continue remainder So, it our footprint broadly does us of have some markets to give larger folks that impacted, the ability - the from are to region serve the European the footprint. serve to

Stephen Volkmann

Right. was... what That's I

Richard Kyle

some of in and I'll competitors We're say market in not - then those were and markets, positions have rail well. mining, and really automotive, I metals historically, as industries in our clear not truck in market think commodity the we

Stephen Volkmann

on then, one of flipside, the increases. is obviously destruction, And everybody Okay. not seeing cost you're watching only the signs demand for because

is doesn't market end if there relative price is any on - so you're curious demand your I'm there but forth? kind chart, of it anything demand destruction on and that like So look based of it about to worried and

Richard Kyle

No.

We anything point haven't seen to. you could

nothing can been there's The today lockdowns. nervous, that's in that in more demand lot what were. - you switch sentiment when with certainly lockdowns locked back there to. down will 'XX. I they included, the to a a back And the to things not are but makes ourselves happened they largely general a think and when that affecting that's of people There's is, early could the restricted that China point where you point country that one war turn right little right

happened negative and and that's very the seen strong. think sooner that war rather good impact - demand very negative those but But, it from from demand certainly from if than I is be situation for no, pricing, demand were certainly would impact we no So, later a no the on lifted. we've plausible, could restrictions us

Philip Fracassa

even up. of heavier which Yes. sequentially, then oil on anecdotal year-on-year latest was When Maybe typically gas. that's and follow at up a Steve. a - coming to markets that and points aggregates of just pulp couple significantly industries, heavy out like metals, up in OEM markets and paper, Process, look demand significantly, couple you moves like

momentum the year-on-year, of were up impact, good there, in Russia good on energy, flat expected outside up of Russia up the despite Process of So, Russia full Mobile impacts some we're we're pretty we which seeing portfolio saw rail, the sequentially, renewable with step the momentum year. exception momentum would or we this the seeing And and a be for across side, the strong we - the solidly rest then, sequentially year. despite

So, I couple the seeing in think the sectors. - that the we're and strong Mobile, momentum's of give that markets other other that those confidence are a in us within And again there. momentum - continues off-highway

positive. I So, very are signs think, all still

Operator

question Capital. Loop Chris from with to Dankert Go next

Chris Dankert

about portfolio here? both? thinking guess, machine then, of just quarter business Is you can end automation healthy on mix give any first rates users? the a it in is principally first kind that during now, And growth builders? us off, I comments More serving that the of

Richard Kyle

Yes.

would lubrication. lubrication market go So, really is of serve that us diverse but manual the would biggest for - which the automatic into is systems, markets, replacing part

moving actually So, the automated Spinea be the market be our biggest that's systems. end second you're Then before solution would in would markets, itself. when warehouse

factory market, other nice So, along actually position in you Cone, units get other housed lines. Rollon Timken there with And and products. into with with that product a of has automation a some Rollon, from then, couple

reduce the automation putting out labor more it's other think only, markets. a coming quarter get if of shortages. lubrication like think the we've want I has trend ability then in more a but the need and single-digit emerging go into first the we're then, don't positive, ago without weren't in for. of confidence So, India the would market rate, this. need I that. you've countries or output six And where been what And increase in the also again, belief run pandemic, to But, high to automatic to for years and seen growth intensity overall mix. I and we the than because and sub-X% been that type back China go markets, these have of is company, that systems seen anything the five it's The what development - labor into

equipment, energy, it's very cyclicality because to strong. the bullish capital markets, market outlook we're it's for the like a tied it over on of most renewable to solar current a it's So, long-term. But our quite It does have

Chris Dankert

you. here. I mean, of market Got you. energy. kind And key talked drivers then, another Thank we've follow really up you really, helpful. about And that's on renewable

deal within got that I the this in get in business that you've flattish think market the guess be feel like year, I back should to understands, everyone it's growth why that order pretty but do and some - that's rate we comps able interest XXXX, specifically? massive business, again to to and of you kind

Richard Kyle

Yes.

other that markets. really question, at last benefit mean I our look our to when XXXX end in the energy other I think and carried year up carried in China during --back first see diversity pandemic, pandemic. the starting So, the Renewable going think, us. of are the parts I geographies, specific the us us you of few markets years, in This revenue really of the the to of parts carry

to ended Now a renewable the on little coming rate a your energy question. specifically last We year lower year.

world half - the support to So, growth. story, again second in I quarter energy dependence we In the orders cetera. the on countries, first with we other similar That happened come then, start automation second what's et expected to the really think, the to And needed quarter, happened. out to in down.

there, the of it's capital is whether going I market into those geography. regardless be going to think what

in So, end the And years, and a transpired started into situation the that but would year to backlog market. we sentiment has probably grown, year to pretty quickly, be next - think months year three this only increased if is going risk the growing. resolve orders then are China customer this is itself say, for slow building. And and needs I this of that and I the couple around anything last of I what's belief is last think is what's our growth

Operator

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

Joe Ritchie

what's be it's been the seeing a on has guys? fluid, of the on Could about mid-teen China? And you of particularly for you're I What more the little end sales percentage elaborate happening? in just bit very quarter. since ground know the you environment may

end the guys what you any on markets So, like are specifically ground? color seeing and on

Richard Kyle

Yes.

whether I - - your site factories. factories depends it's your our are, think on factories or it where very So your customers'

in in Beijing, factories have not been people not a some the to to our So, have an get but have Shanghai office lockdown and Shanghai. were operate. We're the of were able able been in or minimally to leave their lot - where - impacted. time, for homes, our not we very We're office

significantly So, been impacted. our factories have not

either impacted been some they're trucking's some having their depending impacted, or been on trouble have are and our ports where are, impacted of However, customers, locations material. getting

down in say, in as decline in a, I'll April double-digit We'd did well. expect from be see March. to China we May So, revenue

is uncertainty but certainly it we through the been looking is, to the case a And, normal. is And going to around the industry way as has end I today. we're probably back impacted there, this over sure. at its - this think, XX%-XX% think, for here normal sit some it and our is it, team feels not generally I work month, optimistic by of quickly. quite system But, not still it's - there's running not but drops it's

Joe Ritchie

point? impacting Got at so Process it market this And more Mobile than then, your your it. market is That's helpful.

Richard Kyle

No. more I for energy. there. tends because of --it of It's renewable to probably Industries' there's say be correlation would Process market real us, particularly, no a

markets but - it's impact a as the say and in wise, probably I'd Process. probably more between So, dollars even an percentage

Joe Ritchie

out in you seemed first Got then, break the And that Okay. impact quarter. the I versus guys it. to dollar other Yes. on one The decline on logistics my follow-up. basis. that quarter saw materials the fourth year-over-year

So, little on a less any just like you either - of pressure? and bit - just curious was - just seeing like are easing both, kind I you for where are seeing

Richard Kyle

dollars. you're to in not first I'm the the the from quarter referencing sure fourth decline

saw would commodity have and a alloy it cetera. - flattish. bit down in have think on was et it we after costs, material gone I go up a I little flattish cost said again, to costs as war But, a the was But basis. up, unit April

bit logistics, it globally. would dramatically been I a And have is then from would little where The happened ago. peak up that's say off a year peak. is So,

to and Europe So, in taking I we're cautious I be happened what's and that that's There Russia, not ease. think, some lot between that a easy going little And with China. a still forecast on up think more to assuming probably that's year-over-year. was outlook we're that, going was

Joe Ritchie

Got first. the quarter XX% headwind the it. in referring fourth like to $XX million was was Yes. I just in No, year-over-year and there

Operator

our next Barger with question KeyBanc go We'll from Markets. Steve to Capital

Steve Barger

across your better markets Rich, most in and orders suggest. a lot at pinch end the how for demand good to been know your going back the and production strong the in real rates? ability space. What customers are on points have We were is pretty XQ, guide than your supply sizable comments backlogs on of higher to

Richard Kyle

thousand the next I also I'd mean, customers, I the part right? are months need get and think, for another can it's first labor I what they they don't say, hey, a in have those cetera. I'd the and we step of conservatism say know et Well, or - then the problem,

So, as I doesn't still like. not is a would cadence - strong, is smooth demand and/or a say would while have what have the normally you

up year then we think us, manning for we I - our starts from a - ago were we're it's And So, and are upstream. there where plants. definitely is in

material. issues still to most We or mouth, we the but where have with staffing for our - globally. to We're hand adding part have materials enough are plants short either spot

but On electrical Rubber lubrication components, supply-side, we some tight actually and more quarter, That where also magnified in a with like commodity, having high we're I the absenteeism automatic it's systems and easing first would problems we've really specific China. had has February, in some in other have just got things say the that. had January extremely March, delays. still And now plants. the problem the you started then through we but been

get issues, supply efficiency chains. it's the just on the you're lid a that able say Steve, a I'd of through bit combination keeping the throughput little of to that's and So,

Steve Barger

terms take inability in Would your the internal it's of more customers' or to next ability electronic more that component say get whatever? your you to or piece

Richard Kyle

and it's there. both, both. would it leave And, probably just I I say it's yes, would say

Steve Barger

industrial integrators seen your on their public we've XX%-plus what or Is in strategy is the there? do there share high-teens for then out across verticals automation, position some some or you can And OEMs higher-growth and a to lot portfolios. Okay. in of areas, to for call market the anything - growth automation accelerating

Richard Kyle

and I is, organic certainly think, answer think, a of the product combination development I and yes. - it's inorganic,

systems out would certainly certainly business et is a that on I and but portfolio cetera. we put CAGR move know there, the significantly significantly like would feel don't - threw expect than one faster just GDP faster think we that I lubrication you than the grow to that a into industrial

addressing and it's it's Just equipment uptime again and labor shortages improving et and because equipment cycles, cetera. capital maintenance deferring

the with - when really we doing and well hit the business we now So, then quite the acquisition were pandemic. BEKA and

but of the really the to certainly industrial bounced would rate. automation, we markets. on rate a then year here, is again factory higher our growth back significantly last to in growth of expect than expect So, acquisition, core have the a Spinea just that the which And gist a high lot have we'd that

well development and a So, shortages happening, all our lot I squarely market. into to both, into position to that are of as and cost all in that product think that and and demographics I labor playing global say the would continue mix scale have M&A as pipeline we

Steve Barger

into also you space? pictures selling X you the bigger And and the X cobot on of industrial Are the robots. Yes. are have slides

Richard Kyle

robot it torque the which as on but the and the said as side the - Spinea joint, we often The joint to harmonic the again on just which we tend have yes. already drive acquired the cycloidal, depending would in Yes. the tend I be that larger the, weight, in be on quite smaller to portfolio, and and of both side would with

build position to a in Our objective both, is

Operator

Courtney question we'll next our Yakavonis Morgan Stanley. take with from And

Courtney Yakavonis

quarterly distribution. on North the disruption the in that little to America XQ. Any for the China through comment disruption progress also given cadence of out the about and year? the you Can XQ. should I COVID had then February, is just you the of similar on in how year? think, a thoughts from of cadence the some kind side in called revenue bit some But revenue usually pretty the you Appreciated color EPS on XQ the January,

Richard Kyle

Yes.

a uptick year, given I X% first Russian peak we're start the the a well right? us. QX, per pretty decline little But and revenue QX mean QX, from that as the Russian X% the little China. to to immediate QX and then April a to and revenue more for on share. probably as still X% our cautious And, in is from typically direct we'd loss bit see QX I think, quarter an of or per of quarter typically revenue, second normal to peak This earnings of typically, X%, is quarter

time bandwidth those we're of cadence. And numbers on so, think within what are revenue a again, this looking at the I all

Courtney Yakavonis

helpful. what was called end can you just of Okay. of just Russia? out that percentage that one, the that the And bucket business sounded that on on took Great. of remind some and you only then That's out markets, Russia. And had that us to market assuming changes I think, lowered it is rail is higher was related well. that all that end really performing I the you was comment think ex-Russia growth the actually - quite

think more market. a you if that pulled on what the you just you're similarly, bit have end up, ex-Russia. on that then, look can if comments us color little So, so would can I seeing industrial in how got any services give And

Richard Kyle

say, preparing lagging. still excluding into market US the would globally, I really is Russia year. rail, probably XXXX. But is say that a was lagging I for and well I a performing run the good It would would US well. Yes. was rail through say market last into was

to say maybe would excluding your Russian revenue it rail I company comment and doing less. little globally the of rail Russia sales, a is So, well, X.X%, call market

come rail So all that segment. would the obviously out of

corporation-wide, big would but it a meaningfully, lower not So, deal.

Courtney Yakavonis

Got services? it. And then, industrial

Richard Kyle

pretty on a the mainly in mean would mainly business, in be activity Yes. but America. global America. comment in quarter, to solidly, just business First that industrial is I North it's say, it up I services, tends to tied to North industrial

full services an So, for business, the bookings that growth the business improvement as is of and an in that pretty example, than the services had position the business, some see our coming the that strong in in full an to of gas. sectors in. backlog we in - stronger improvement year, expect the did oil do tied for the across we so in sector some year we Because

So, lesser just world. Europe, to there been a around more we and the in degree. saw what's in happening some broadly even with the improved And industrial activity activity Americas,

bookings, in rest up itself of step saw expect expect in to a and year. step just So the We activity. in QX the the sustain up for that

Operator

next our Michael Go Feniger question America. to Bank with of from

Michael Feniger

you basis? number up, not pricing Filling QX flexibility it in for than Ross a pricing for or the kind than pricing here. contracts, if annual because Process does you your on ago. as more on remind flush If why I that a raising mechanism is that work have Maybe not X% side, the full competitors us year higher of were moving how Is could you appreciate X% on and are out of costs year pricing's in going us. aggressively?

Richard Kyle

Yes.

a Our exact parts of mix year-over-year pricing sold. metric for is comparison

And second zero. to probably the ticking in then, So, in close last the time, late our started year it up. at pricing second - this was quarter,

harder So, to today, we much half comp not the goes quarter, the more - fourth. get today X% the to gets we second have certainly in but pricing have the so of as have our the year, and in year so pricing third on, comp the in than the second because

more So, more. of than how detail more said probably getting much getting and we X% X% and go expecting we going go year more than we much are not the pricing are and into to into we're more we'd

Michael Feniger

business comments supply a the model permanently, it do Does critical of that the curious than Fair maybe your you the other it kind change about And is of if and raising shoring enough, run Does you in we And maybe even it's capacity? how where changes invest business than does - just indeed change of portion. just on pricing? footprint Rich. transitory, supplier. to comment Obviously just your forward. made have that kind you going see just there's other pricing, inflation more prices? inflation curious, can maybe outside you it change about I'm been guys Thanks. operate, we permanence comment chains if how it it - you way last permanent? I'm

Richard Kyle

Yes. on I certainly side. think labor the

efficient is of and As we a improving certainly and pure and/or percentage it labor into either CapEx spend conversion and said, would is our automation for annual and et-cetera. CapEx more assets efficiency, equipment material sizable that automation our state-of-the-art and play technology productivity

on so, up. you in because well, footprint's challenges that think, where do world where United could at the I you're certainly the you're as So, see step are more the around I depending in the country, different at labor the think world. And States. in relevant And then, the even

So, cases, now to you into attract we in things concern yourself, have some investment have that hire an I concerned smaller to too would many we concern think, the because a be labor in make markets. historically there have we to the reluctant able are do you in, have we been a been where to couldn't would you think people have are communities, I is real and where facility, to those going - particularly where

two factors. So, those be I would think the

support automation to labor the it is the to I parts assured. think, on impact there the within on footprint an where the an footprint, availability of capital going is the and impact

Operator

as go further there are Please And Frohnapple. questions. no ahead, Mr.

Neil Frohnapple

everyone, thank Christina, and Thanks, today. for Yes. us joining you,

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

Operator

call. for you today's concludes your Thank participation. This

You may disconnect. now

The Timken Company (TKR) 2 May 222022 Q1 Earnings call transcript