TKR - Earnings call 4 2023 | The Timken Company

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone. My name is Bruno and I'll be your conference operator today. At this time, I would like to welcome everyone to Timken's Fourth Quarter Earnings Release Conference Call. [Operator Instructions] Mr. Frohnapple, you may begin your conference.

Neil Frohnapple

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

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

webcast also download feature earnings call the this on through link. material access You can the

Phil Fracassa, With CEO, and me today Rich Company's The Chief and President our are Timken Officer. Financial Kyle;

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

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

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

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

information have the its between reconciliations non-GAAP and included release financial and GAAP press equivalent presentation We materials. in

The is written we transmission without any and Today's copyrighted consent, or of Timken of use, expressed recording the portion call prohibit any call. by Company,

to would that, With over now I in Company. your the interest turn The Rich. you Timken call for like to thank will And I

Richard Kyle

a record offsetting with decline and X% which acquisitions morning, thank up X% the more our quarter, and Timken you fourth revenue. Good slightly . than of Neil. delivered an joining currency benefit Thanks, quarter in Revenue organic excellent for concluded the for was a year. call.

prior the wind XX% down revenue more in revenue, expected, organic from energy headwinds As largest in were than wind China year. with

well wind Given and across responded solid other decline and the in industrial the quarter. situation delivered markets, very we softening to a many significant demand

versus sequential last the increases continued basis XX lower moderate. and positive year, to cost levels. Price-cost We remained expanded despite margins points volume

production and normalized levels as softer inventory chain performance our as adjust to well supply both down continued We to demand.

quarter for year. We capital record closed Earnings we a over middle of per was purchased fourth share was we our of for divestiture $X.XX ended in up active the and X very a shares. Despite the year acquisitions XXX,XXX and allocation, year near on and X the quarter, debt-to-EBITDA also $X.XX targeted last range. the

I The on the acquisitions Timken's completed operating Before the line let that expands business comment the with industry-leading on we United to in product the will bearings focused niche position expand full and in beyond portfolio quarter. the are in U.S. turn sells conditions process industries. to bearing almost engineered of me in States, year, our product iMECH exclusively leverage a extreme global X channels their

the are to Europe. We Motion sealing the products leader in global their here margins acquired Lagersmit cross-selling of 'XX. and the of a Both systems expanding is will marine earnings the our Synergies Lagersmit in in Lagersmit bearing iMECH position other in market. Lagersmit near year, and outside end and be European in accretive and Industrial channels

industrial Revenue record recent margins and up X% revenue, our up share record earnings in For highest were delivered the full per and despite returned XX supply operating pressures, inflationary were deep X%, was largest demand year, year, the as a margins year chains continued through times. share per we was points. and earnings for up basis and normal. This achieved sudden demand market, our energy, to a softening renewable decline in the in general

full the positive inflationary can that price-cost of declining, demonstrated for our diversity We portfolio its through we to years and the and last perform conditions. or of to have market grow strength and profitably year flat ability a over wide demonstrate and perform the through Timken continued cost variety several environments. achieved

and we organically customer Organically, X service. both focus Inorganically, our drive inorganically. channel outstanding acquisitions leadership on engineering, solutions, continue advanced in and through strategic to completed innovative excellence we initiatives, our during product outgrowth We year. the

Our and and us the like like scale Bearing inorganic acquisitions Sistemi, of into American Rosa and Roller continue expand in us markets new and Des-Case Lagersmit. markets acquisitions growth existing to products of and both products the

in on efficiency subsequent production supply focus operational lowered Our and place end of staffing X% most drive of down taking over levels our in We the operations levels the second productivity that have the excellence plants the returned and costs year, pre-COVID the quality, and year. course of 'XX, from start half. have by with to chains. results our our the And we ramped the safety, the by capital we of as through across

investment advance the to with the in X and continue manufacturing $XXX into capital of existing the our manufacturing consolidation plants. million footprint facilities over of projects We

purchased we the dividend shares year. annual the increased the of payout consecutive Additionally, and we over the outstanding X% during year, tenth for

variety to a third perform and And as macroeconomic of employer our choice The level citizen, addition for an our performance, a full was several team our again financial respond by demonstrated through as an recognized to in leadership corporate high at our responsible year strong of Timken and to parties conditions. as innovator. once ability a

XXXX. to Turning

year over the are at We for revenue down to midpoint. over full X% for planning be X% and the organically

then half energy markets. wind strong rest the first outlook wind We of our year. in steep a rest from the separate the had a decline of and faced of 'XX very for the me Let

in 'XX to then half, sequentially half and slightly from not first imminent any firm in demand fourth not we in We for this the half. but the expect point, are be seeing China. in the the quarter down catalyst second do level rebound more off a second We at to visibility to demand of have

planning, on flattish out in half, plays XX% we're over as down be first year-over-year comps. the If second demand much will it wind and lower half the the then be in

this in to cyclical a but we of in decline the with significantly believe Longer that outlook 'XX on moderate expect is the long-term the expect start half remain we just second energy to and sizable growth for headwind, year. wind a also So bullish renewable term, we energy. we headwind

broad relatively The of continue expectation channels. softening outlook roughly to markets demand that inventory of slightly range down the a be will reduced we XX%. our rest a markets. up across normal wind, are includes many This our range the for to from industrial currently Beyond of of across experiencing

most only In visibility have firm we demand. markets, few our of months of a to

And in be While half we on we forecasting it strengthening the of will second not a possible. ready so, certainly to is it. are capitalize year, if the

margins being decline of the over inflationary to than price be the to driver. per planning a share full and earnings year for year modest primary modestly through guiding of in We're the We're mid-teens, X%. in for XX% course pressures lower volumes less the the and positive, with

step-up a flow of XXX%. cash with We in free over expect from conversion to 'XX generate

have The margin add good pipeline expected X be in completed self-help We top and initiatives a over and both to to to margins and impact. X we divestiture 'XX earnings. of revenue X% intended accretive the to acquisitions and mitigate are line the

We will new outgrowth and business also pipeline of good that a have activities support long-term cross-selling objectives. our opportunities

operational momentum From excellent our and excellence good focus a perspective, have cost initiatives. we on

for last this from benefit the planned We year. completed and plant closures year the actions will and additional CapEx

the We it productivity have 'XX and been X is in underway our has more plant best currently for years. several consolidations

also will We from benefit integration synergies.

both global further further at 'XX results to organization. in As the second deliver so will and steps improved half do business These our this, into GGB of took and cost an levels. integrate Roller example of American Bearing actions bearing lower we

was The quarter few up sequentially the revenue on toughest years, our XX% first quarter first line. comp. expect We last to the top be the over

and single high to We per due quarter, in primarily mid- are the margins to still not this expecting sequential us that to up be share first to step but and headwinds. digits expect in China in 'XX wind back levels. the a to enough get We earnings year,

market which Before Since reference been I And I share in last challenging records XXXX, diverse. is our per our resilient we're last we've new the margins Timken and results margin to to revenue X highs X revenue, We've per it for X new share XX, grow and ability in Phil, earnings demonstrating of and X of want demand earnings to the X starting the through financial 'XX portfolio in and set perform a variety highlights strong, the over conditions. of turn the and years over years. last environment, profitably wide business a while years. Slide

solid, confident execution The our and that have that return position of have of We're allocators business of capital. the we levels quickly to proven and the our strategy put new in to is cash flow a us excellent performance. setting

portfolio made cyclical, Our diverse, growth. the higher more acquisitions and margin higher less have

scale diversified and Timken grow to earnings the industrial power We leader. positioned advance are well to to a as and of the company continue

Phil?

Philip Fracassa

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

which fourth XX Slide on record of start to materials off capped going I'm a strong the review, results with our summary financial for year the For Timken. of presentation another quarter

just in billion under the We X% up posted $X.X revenue quarter, last from year. of about

Our last from EBITDA delivered XX year. came fourth and share up X% earnings XX.X%, quarter we in basis about adjusted adjusted points, $X.XX, at of up margin per

XX. Turning Slide to

across take sales offset our lower sales Let's a more continued several look performance. from down X% around than Organically, was volumes quarter as sectors. last at closer by pricing fourth positive were industrial year

wind As quarter. expected, off-highway largest we energy saw in and declines the the during

to line. currency contributed acquisitions, to rest divestitures, the translation of foreign in the revenue at growth point added roughly of the from X impact the walk, net quarter. Looking points revenue top another of percentage the And

On the you the both region, slide, of the and side can see and which growth net by excludes impact currency right-hand divestitures. of organic acquisitions

region. me briefly each Let on comment

year's lower shipments. partially down off-highway rail the In digits, sizable growth modestly in entirely in decline wind very by In the driven in down shipments and fourth industrial almost Pacific, China, last Americas, were driven we by services. Asia we and quarter, against offset the mainly by general energy double were including strong industrial sectors,

On growth see continue the positive we in side, to India. strong

industries. to lower flat we as was EMEA other sectors, in energy by in finally, offset growth close demand almost heavy were And industrial including fully and renewable

of to XX. to was XX.X% Turning Slide sales $XXX compared fourth sales, year. XX.X% million of EBITDA last quarter $XXX or million or in Adjusted the

offset increase was quarter. from improvement X%, about a in Adjusted operating EBITDA lower only in X% was of which quarter, margin sales and currency the so, leverage. around and more positive million volume price-cost, Our or driven than up impact by strong unfavorable that's $X the on the

at increase dollars. Looking the in

and costs. the material price quite the in Manufacturing while. lower SG&A quarter lower than performance continue offset the and logistics to positives You was can slightly time costs, volume, a that currency more other see favorable from favorable first of higher also acquisitions. benefit for These impact recent and mix, in we unfavorable

was Mix a price to compared positive segments realization last key a profitability additional our quarter. With secure me quarter. on further also continued price the comment to as in was year little respect pricing of to with both in again customers. drivers Let the some slight mix, in the higher we

costs. moderate levels material last were to in off expectations our and globally. Moving Both line continue logistics as lower with year's to and costs largely

the of execution On recoveries, ongoing and modest was the line, year-over-year lower our cost which team, the benefit supplier targeted by actions volume improved by and operational cost inflation. driven offset than reduction more production manufacturing impact

Looking demand levels. last at were to driven discretionary the SG&A than other we line. better lower reduce year, but our efforts versus with spending expected, to Costs by up align

respect currency, saw respective the in sizable driven transaction gains periods. with finally, impact in a quarter, And unfavorable to the and mainly year-on-year we losses of by headwind the

charges, mark-to-market of some can million year. amortization an quarter on charges, $X.XX of offset share The basis. see per the a income share pension GAAP last per On earned $X.XX net $XX from $X.XX partially including share, you fourth posted items, and period basis, $X.XX special from tax by we benefits. per that adjusted discrete for net current XX, up acquisition-related Slide net includes expense, we deal diluted expense On or

came Our rate of the our or end rate a in for low resulted adjusted in guidance, quarter prior fourth which XX.X% the tax tax year of at XX.X%.

were both share quarter, expected. finally, year, higher benefited reflecting XXXX. we from as expense last in we interest count lower buybacks a versus and during the Depreciation And completed

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

both of divestitures several For Bearings sales the from down year. by currency X.X% were Acquisitions sectors, last volumes positive sales X.X%, million, Organically, and were Engineered partially in net $XXX by higher the quarter. offset fourth lower were down driven quarter, pricing. across

by performance and energy organic saw sector sector, largest renewable respect declines in quarter. With off-highway the the the revenue to

down and the and general relatively were heavy addition, while distribution flat. industry slightly, were In on-highway sectors industrial

higher saw we the quarter, Americas. was during side, in positive shipments as the aerospace rail driven On by and up the growth in well

price margin quarter currency. Engineered mix which impact the adjusted and and costs was at reflects Bearings lower The fourth from the unfavorable with impact margins favorable volume, logistics operating of up the organic EBITDA XX than in and of last segment $XXX higher down million, in improvement costs, coming year, lower basis slightly points. XX.X%, offset more in material

Now from sales fourth of Motion the and Acquisitions million, currency contributed Industrial let's Industrial $XXX last In added line XX. turn segment translation were to year. net XX% on just under to quarter, Motion Slide divestitures the up X% over X%. top

declined platform, systems motion X% to as drive the belt partially volumes pricing. industrial by general softer off-highway by With Organically, about by sales in higher linear demand. were respect driven performance and quarter organic were revenue chain, offset lower and lower and

business On significant were activity, by saw while systems strong relatively the automatic flat. from positive MRO lubrication we and driven side, our service growth couplings

quarter, expanded We sales, the higher capitalized XXX more the impact to benefit cost and was Industrial than by $XX adjusted compared XX.X% the price-cost, million points fourth EBITDA for basis of variances, Motion ongoing sales XX.X% the offset which or in driven million improvement lower year. of or of of organic positive quarter margins last volume. initiatives, $XX

to XX. Turning Slide

see operating cash can $XX flow flow of $XXX was CapEx, million. generated You after in quarter, we and free cash that the million

the up to sell-down $XXX the cash million, of The $XXX impact from offset higher working at full mainly driven cash more by Timken flow which taxes than the increase and flow was including India. improved free year. free last in million capital related earnings, of $XX higher of was adjusted tax paid Looking cash year, million

recent EBITDA acquisitions We Looking fourth includes the at at to sheet. the impact quarter. balance year the during debt of the the with completed This X.Xx. ended adjusted net

to $X.X towards acquisitions XX, a advance directed more XXXX. to summary In deployment than can profitable total, during capital our in we CapEx capital Turning you see our year, the of Slide allocated and growth over of billion XX% strategy. with

million achieving annual back fourth add million margins. $XXX cash forma dividends. during total more that of total, in to completed X%, over our also pro outstanding, of revenue bought straight of million dividend And than shares years million We $XXX at XX we In quarterly the year, annual quarter. we X% acquisitions the attractive more than and of higher raised X $XX or shareholders by collectively returned including X.X

keeps sheet of record position allocation. and the in us deployed we Timken continue near targeted a capital our a well amount our and strategy And This maintaining leverage XXXX this range. great to middle to while sets balance strong up capital of for execute through

Now level summary on demand on initial outlook outlook like wind a and environment, We're limited geographies taking to China. uncertainty, cautious like XX. with let's for our turn a Slide XXXX overall especially in the view of sectors current given the in visibility

the XXXX. the down X.X% last planning We're Organically, X.X% down the offset versus of pricing planning at revenue outlook. to X.X% to revenue by partially be we're be for year. lower versus sales to full range on Starting for midpoint, volumes, higher in reflecting slightly in total year

net and tailwind divestitures. impact around We a we're includes the of to the spot planning expect points based for be the current year for our basis full XXXX on to of And around which net year, to rates. X.X% currency acquisitions XX revenue for contribute acquisitions

easier, guidance. more Now organic implies range flatten then first half let that that pronounced the in expect or year the essentially sales levels especially the comps we recovery on to Note we little me declines see of as be energy. The no current than out seasonality. and more of other some second midpoint the comment through half year-on-year would demand acceleration a organic sales wind in get our

mid-XX% adjusted will $X.XX share the in adjusted expect line, bottom EBITDA range This implies be we outlook XXXX of in range. to margin that low $X.XX. earnings consolidated the earnings the to On our per

the inflation reflects and costs. outlook continued lower in and margin impact unfavorable labor from input volumes other Our

neutral On positive acquisitions the side, we price accretive largely cost for to from net the impact the expect be margins, and year. should to be

performance our which up and around mitigate resilient cost initiatives, us stepped reduction and in headwinds We've margin excellence efforts XXXX. operational should deliver the help

flow. cash free to Moving

expect million and around taxes, earnings. performance or capital offset than $XX XX% than the conversion GAAP on to net impact income. favorable cash XXX% We This the from working full lower approximately for to reflects are more generate expected and lower year which XXXX is million or over $XXX better

of We're margin planning growth support to our continuing spend footprint and with sales, for optimize CapEx and of our around the X% manufacturing objectives.

our the includes for spend CapEx expansions and belts. of in bearings big XXXX Our some projects, plant completion India including for Mexico for in

finally, adjusted tax roughly And interest to full we and XX%. for XXXX be with anticipate approximately net year be the expense to flat rate

strong delivered sales EPS. in the fourth year quarter a Timken to summarize, straight to record adjusted So cap results off and of third

environment, advancing delivering is team and XXXX. on performance we're resilient in executing our in focused Our well this and strategy

concludes This for line remarks, questions. and now open the Operator? our we'll formal

Operator

Thank Instructions] Steve from have We Volkmann first from do our you. Jefferies. [Operator comes question,

Stephen Volkmann

these outlook number things to single I and negative visibility and guess I happening this I are sort end-markets to industries trying don't Great. and key on conservative sort X, of for feedback I changed second how have, Slide high understand of the here significantly. what's of And have pretty went I'm you services figure digits. your rail, into of is digits industrial people half. a wind, out sort that getting is, But like high heavy ton from a but the single positive in you of guide recognize think

visibility guess be? drivers I underlying of sort there just you how I'm and have might to So maybe destocking, of this those the trying sort much what out of much and tease how things is

Richard Kyle

of the had from didn't quite halves the few XXXX, Certainly, first than question, compared chart and second XXXX to as for a have halves. look stronger these Steve. you move at would Thanks them of most

is organic up. at made X-ish and we the fourth look finished end quarter what that our decline reflective we I in revenue So as year, you of this where with percent think of as more -- the

-- of some again, no assumption any and strengthening. that extrapolation of And then

So We and quarter example, assuming high we're actually been that year. negative. trend the it have as quarter We continue of be heavy down fourth consuming the grew heavy grew we last every industries we and industries second the digits. would quarters, will last an here have the But single last backlog in for year. half year

went demand X, then And least destocking we year, in last we've quarter quarter inverted a to of quarter we're phenomenon. seen our late of X X so from overshipping from inventory since that -- customers' we stocking second really as situation, maybe and probably also, at from or

are of -- X% to underselling huge And to or our what not selling. down we most these you customers them down X% were and but been customer So our or are numbers, markets our was X% have organically. sales organically, maybe it's X% they're off-highway see

So and would improvement laid the to of then it, quarter it. that? top no a want say, I'd it's, fourth reflection on on anything of really Phil, add with you to seasonality

Philip Fracassa

No, Rich. I you think it, captured

Stephen Volkmann

isn't probably expect then still do some And if business? the index Okay. positive lag this to might were to the follow-up, is what reasonable to a it point, for of fair. But business? turn ISM relative here quite if And you just way type you Rich, your at think so, forecast your

Richard Kyle

put a wouldn't high. certainly, that. I is But think that, the of right, exactly one. wouldn't not into the moving want I a predicting positive is But real too again, it's the directionally, when it's is accuracy it's -- I reasonable much to lag, timing for timing us. favorably, say and

Operator

Stanley Elliott from comes question Stifel. next from Our

Stanley Elliott

you kind on being of out. destocking mentioned the X, clarify, to X versus destocking of quarters question in kind X, of last end-markets, Just terms

as a to end-market So you're opposed these this of kind in really of move Just you end-markets -- clarify. destocking? demand to saying -- that's so lot

Richard Kyle

some if customers we've revenue yes, year. especially last third out, -- of price and of to quarters organic you say, take fourth in the would our I seen negative go

distributor to that's out little may Now our their destocking inventory, due negative revenue other go and then probably customer their slightly be things. again, negative seen they a in the to But we've us inventory saying throw destocking. more flatten

Philip Fracassa

Yes.

see some just do of we combination could is I started obviously, mean think add I quarter-by-quarter, like flat, And perspective. really a destocking last I if different be first I Stanley, be to would customers down. it -- at would little did both say. and think, feel our year. would we some from I bit, through the continue were inventories down least coming did half, sense would that net-net, But we that into a expect we XXXX,

last was organic is really the the really on It and right -- commented demand now. performance. the outlook our in question, was sales what Rich it's environment function as pretty soft the more And quarter markets industrial I the think fourth pretty soft a of with

don't certainly half, see here second sit we As the in first visibility today, really for half. limited a in acceleration, an the catalyst we

as better. demand or in pluses a no bit bit to with -- some of prudent we current one were on weaker, little jump ready in half it second get and of get maybe it. we'll said, the a the -- at some for net-net, said point, outlook, to if other But recovery certainly seasonality kind So maybe environment, Rich assume was markets accelerate minuses, the maybe be thought demand and and markets than environment, to current the in some other little

Stanley Elliott

that the market? And on Motion called Any I I services is portfolio strictly that part helpful. of activity. you all guess, color out more able there mean much have second margins, you in a function just the now of to that Are broader mix? be question offer then would you a MRO Industrial

Philip Fracassa

year. that were on, consolidation year structural doing the forward starting work facilities services the one. were would relatively kind some -- We as say see that's Certainly, of I and would to to last couple benefits improvement aftermarket would it's to mix the were it business that from the chain be, I we're of better things. standpoint. we speaking, a this is reflecting business, activities so say tends some our going margins move say Yes. of a we of

be volume perform probably from then better organic a little would Motion And did Industrial an point the bit standpoint. last

to more expect margins we'll resiliency down Industrial deal more we move versus next they volume little bit Bearings, is Motion with, probably of And work see forward obviously, do a bearings because year, we higher to relatively if will. a we in than with So there had to then to decline as or be you less little the obviously, wind bit in so more a do cost sensitive business. bearing the And more a volume base Motion year-on-year. situation business, of bit a Industrial organically a little fixed of because to the in have

a it's of step-up been we've as of those to both to just businesses, initiatives we do segments QX. nice were margin lot up. working on been But We get see XX% EBITDA north the in margins and view happy

Operator

question next David from comes Our Raso from Evercore.

David Raso

When I X.X%, look acquisitions at the I given, on but had told down margins that happening, a favorable and drag, if obviously would have neutral are relatively you it's come being price-cost while margins, me probably then organic in the decremental margins see XX% price-cost, figured XX% there be there decrementals. must I you have And implied is thought I told isn't. negative so. me or nearly some would but guidance if you're maybe saying XX%, But

think. it's us mix, help large assume a something renewables neutral? if than maybe with And is you price-cost be little I understand that more would we Can why decremental the profitable

the then And the first if decrementals. I think of more of follow-up, I half, the cadence the Like thinking the in versus think are the how the about year-over-year year half year. when cadence, I'm margins about low second that, for

why would decrementals? that So the weak is trying price-cost neutral? again, how front a sense, decrementals And weakness it on get just year-over-year, be the half I'm the to with much loaded,

Philip Fracassa

there. David. sure, first at This the part Yes, I'll is Phil. take least

all, are currency then got But of and and terms guidance first of what observation negative. mean, positively, contributing in acquisitions I we've obviously, decrementals, the the great the on volume implies. declines So

decrementals if of margins to each of are sort the organic actually, So you closer to the XX%. assign components,

or kind closer call if will. of slowdown, So you'd of you it, in, year to a a expect what X

acquisitions was incremental higher decremental will margins. net net just -- the than a as will EBITDA be modest, more right the pointed that's it out, of to positively But bit in it. should and our around or XX%, sort probably but you than adjusted closer embedded in, Currency of organic speaking, what's sort our come -- be little

volumes. of combination a organic really it's And lower

in But that. pricing We still that to year, overcome have organic positive and slightly XX% the talked or as with cost some kind price-cost decrementals that got seeing kind the around volume of kind inflation, other costs outlook, well. moderating, we'll minus. You've about the range, seeing for plus overcome we'll input inflation still of see to labor but of neutral net-net,

the quarter, mid would -- XXX by, any board. wouldn't And the a say as of will the then which expect magnitude through we say, the as year we some as close down margins of fourth but of I an be as in would for I to quarter, I the about, year, quarters to we XXX performance pretty see, progression on XX% what expect be lower for sort the XXX, I we margin certainly, order and year. and mean, down think of probably be first full year, XXXX, across think, move bit would far low than the probably the be talked we'd or sort do similar little of I better in

David Raso

That's interesting.

in the margin year-over-year in off It's flatten the of drag of the similar as guide decline. saying out, think you're revenues renewables would would pressure a But that's case. common not the that year, the You the back the throughout bit half take the margin year. a and

Philip Fracassa

think I -- and it half as Well, be think certainly it quarter. the I bit fourth the back move into better quarter, little the I in we think a fourth in should yes,

than and at look to it. then more a so the it probably half kind of first little good a with second as little that maybe full year half, line the that at implied way in Q, in in is you less look guide, And probably a

Operator

Barger KeyBanc from Steve from Markets. comes question Capital next Our

Steve Barger

of kind worse the and pandemic The XX% recession XXXX. industrial than the guide EPS of down is line in with in

have confidence level half question are understanding scenarios? that first to back confident great covers profitability? how this half modeling visibility, wind that relative is, your you in So worst-case XX% don't in what's decline guidance you the my And

Richard Kyle

somewhat I think up got the would in quarter. company in the the first obviously and on fourth the impact results, of our fourth step to which being seasonal in wind, we depressed of quarter, quarter. in expect It's we in the the rest were there margin then down same ballpark the

more have some get but in So half of enormous I where we pretty for modeled was one revenue have perform have think the it's I think year, that the better, upside and decline a average, there. we where cost pretty have visibility we if out of we accurately. amount can more which maybe this quarter slight feel -- the in of fourth backlog And first not some markets we an and upside about, again, we good than

I the would margins lands we've got don't improvement second second again, really volume second any would to in contribution depend the and since we flattish, on on say that the or out. that half. modeled first EPS deterioration it half half have the half the in from And -- where largely

sorry, cut And you on off your I follow-up.

Steve Barger

what what progressed, going really year guess, the is, handicapping primary I to I as you're just was this -- the guiding? more wind surprised XQ you concentration to, as of trying this how do how I'm of part and Or being in you as you slowdown? view both broad-based or to early get a China are driver

Richard Kyle

had year in wind it. the a first That the first sentiment half, negative No, X.X% in X% down negative the actual that in earlier we've think full -- the organically. Steve, wind from the a quarter. -- got for and organically pretty we I were wind question in to got same We've actual fourth

where in get a you line been versus the even been in factor Probably than that more a on. all and easier when little last the So we've half. slightly wind worse comps in the quarter we've lot outlook the worse second trend

it's what that's on, based quarter fourth really the actual. So is

Steve Barger

Okay.

is specific end are Or do help mitigation where quick mitigate opportunity a you of the this? see What to strategy you one. targeting? Part outgrowth. Just markets

Richard Kyle

off-highway like heard we think same industrial, and we're Aerospace, we've in. obviously, smaller I side Certainly, well to more defense, as some quarter to about, but a to of had general tends marine off-highway the rail which that side. been passenger beverage, et But historically, fourth markets, cetera, swings. mute a weighted in we're the time into for on the you know, commercial business. Yes. markets and ones cyclical our you've heavily looking We outgrow good We automation, do that food -- moving talking lot in us there, things

and the the still all that -- we're So in slightly. to that renewable of as was second bottoming repeat, down continue and significantly. was market and for 'XX, first ready But energy, actually solar, in believers half the and growth term renewable be us energy, I well. half including in return see grew And long you'll again,

Philip Fracassa

than we around ahead Yes. the building there, do being have we I'd the Industrial to being But Motion Steve, the linear other doing a the the a the a the Industrial about too. better, worse, midpoint automation been to and business in some motion as would in X.X% bit Industrial XXXX, of we time, point the guide reflection there, better talked have as expect wind Motion China down that make, Motion Bearings little organic that, segments, little business, in be do business. particular. bit business for Bearings the by portfolio, impacted services diversity business in look really we of We've Maybe it's would at the

of portfolio, the forward. So as move be to you if us should the evolution will, -- I we think well as beneficial has

Richard Kyle

been and our market on-highway and so of I you know, of markets chart inorganically, a been hold organically on-highway, look with of it of looking there, portfolio. across There's shrinking more have the others which, the and outgrowth. our other outgrow a exception elements the targeted our ones the position you as as growth we've part to part think As that and

have of it's the in now, X, XX in it. these middle But of the portfolio, leading and years, when way we've last China, X our we're quite last in both a And for linearly, momentum frames. the significant across market renewable to that they grow in X few look good with you significantly look see right ups And got on a this energy the X-year time digit grow hit for renewable and the as year. of all mid-single some But Don't there's other don't of China usually our ones issues and markets usually down you contributed normal over in downs. pretty pause and share -- any markets,

Operator

from question Blair Our from Bryan next Oppenheimer. comes

Bryan Blair

on end-market and dynamics the there. all appreciate I some of the color volatility

can long quarters destocking navigate linger. us destock, pressure that, but destocking to relative and norm? many right how and noted typically sorry to the major underlying there's belabor I now demand point continues have to You remind to on on consistently you how that guess, markets I'm average And you in your we where are

Richard Kyle

if and we're, price you been I'd X X in. quarters. probably the think fourth typically quarters quarter, it to the have would destocking put I take out, And demand X both in

first most probably but on and in forecasting be in not invert either we're the half go the something the second and start half, the negative the to the versus to of anything So XXXX -- restocking. seeing or you'd back likely imminent positive again,

Bryan Blair

Appreciate influence and of very if on and we're going your solutions mispronouncing or That's that terms Lagersmit, Okay. how potential those offer in that. maybe those. I portfolio active But of and apologize particularly new by they touch strategy. I'm organic fair. either Des-Case XXXX forward. inorganic with your Obviously, growth And M&A the intrigued synergies platforms

Richard Kyle

Your pronunciation mine. fine. good at probably least as as It's was

you U.S.-centric On goes bearing So the in there. did distributors. Des-Case, U.S. well through business, primarily

share the customer same the the of in base. So much U.S.,

we like of do things as them hundreds there from had play and it we I -- to distributors, they have pull-through there's so an have be channel increase we in a people and some And certainly much would XX. that it's not more can their end-markets, upsell. of think really all but the

the through cross-sell U.S., pull so is our in the And that distribution, ability I to significant. think,

channels, enthusiasm think distributor and of into I then is them that from bigger from partners. a our distribution our play And lot early global the global taking

and marine very that, not OEM Lagersmit, much capturing industry, emphasis around very and on as in focused historically side world. on put focused of energy the Nordic the have European, the aftermarket

opportunities also of their a to as the us sell into world marine around world base that aftermarket job capturing X but and well the well. of bearings as the other products, around So Nordic the Industrial more much do to better there then market some OEM very Motion for as penetrating

X. but both cases different on in pretty So of side in revenue those very light base case the operational the synergy both,

Bryan Blair

the Appreciate detail. Understood.

Richard Kyle

well. next really our product I'd go we their leadership portfolio too, within good technical the markets, Product the a to with names innovation, Timken question, positions, strong fit add really both and portfolio. fit brand before niche

Operator

Our next DA comes Davidson. from from question Shlisky Mike

Michael Shlisky

taken you have think about mentioned I had reductions in your take already remarks count head place to place. or that some

to Just hourly I'm give are And you us some more people? around kind trying with little those that. just salaried kind environment? the just curious if of could they Are or of more there. or a permanent bit current flex detail give color

Richard Kyle

hire, X.X, It last so first our quarter market would is be of then the into and -- year cetera. demand leveling to hiring X the after years off et started difficult

been years. had reductions -- challenge workforce us turnover the for attract been It was while reduce and for workforce it had higher, So a couple turnover a year. last forced quicker our enabled us running without those our of to

in the we capturing largely So year started last of a second stopped cases, lot of hiring and quarter in attrition.

hourly operative I The X%. quoted workers answer question is was factory what down to your

But salaried of we've the predominance in count would well, of attrition the we things the on integration some be is captured brought X% demand workers. well, some have We softened. wind factory flex the as and other done as restructuring that side some of The I the head as mentioned, businesses. the as and down ranks salaried that have

the had count structural. piece planned predominance that for and we it last as consolidations it year I plant year. that head And of a demand. then But about happening this the be as have is there would flexing well of our that the is workforce through we those talked

been most And weighted. have second would that of half

the bit down first up the and and significantly little the fourth, a in in first probably down little down a second head quarter. and maybe in second, first really -- be little expect pretty flat the a I more third none end quarter, or the the the So in bit quarter, at count we'll in of

Michael Shlisky

beyond? got then maybe pipeline, I And ] kind my for touched X China maybe think, just year. the [ in said Can 'XX Great. 'XX impact for once might us, that you and are of and there you the you've potential annualized bucket these cash follow-up, consolidations on onetime for make need the the all full done, this and in year or save it's also, EBITDA the for [indiscernible]? to And perhaps any you needs

Richard Kyle

the in that Was to consolidations? plant regards

Michael Shlisky

Correct.

Richard Kyle

this year. We are Okay. year Nothing cash little doing every little We had year. on or side. the bit in some a restructuring more this significant generally a last of bit

targets last I out . And what we is years. those. line few nothing would talk the with of about don't cost-out say some the exact generally but done So there of we've

and our to but to wouldn't cycle. to get up we last it. margin year in more in have margins a but And We objective few exact XX% of what all number to it's part them, and it we last margins of through certainly, contribute embed margins the target, years contributor on our us did XX.X%, give would it our was XXXX,

Philip Fracassa

to of I $X.XX other the And between do around year. guide, the about. given deal is year $X.XX. do normal is and would we with GAAP a the already what Mike, $X.XX and Rich of type for that plant to incur typically that add, would adjusted in amortization the delta our is kind on only thing roughly talked would the in we would that's the And need restructuring be expenses rationalizations line

Operator

Our from next Joe Sachs. from question Ritchie comes Goldman

Joseph Ritchie

just organic I make year. want for to cadence the growth the sure heard I

I that. you on that as maybe said visibility little for And do just renewables, misheard you So in to business curious, bit year think being progresses? longer When business cycle I it you think have think second of flattish the but half, relates as guys as I'm the that I a you.

Richard Kyle

not can little close double a bit We that half order second second first. Difficulty] remains to going outlook be have would and to the to to the it's of you first X take pretty visibility for [Technical open I'll Yes, of the certainly, usually and better. but year, within go digits favorably, certainly. do wind, months part the better, our But half

Philip Fracassa

the half down progression, would I first the just the worse And out the Think midpoint Joe, little is so on flatten guide say in the quarter, would year. organic and And Yes. move then quarter into back X.X% the being in half year. probably of the as with of double both quarter digits, down the quarterly, we for comps. we the the as a of second first first

Joseph Ritchie

follow-up little bit P&L. from Phil, have cadence just then clear. in before need maybe commodities aware to a see but you a some standpoint play, takes it of to anything Like started That's commentary. the it. that the price-cost of be a year on just your Got Okay. progresses? Is see usually there as you time to And we

price just on commentary cost as any So progresses? the year

Philip Fracassa

No. were in X% would any X% quarter. would may in be fourth north anticipated the year pricing XXXX, 'XX, that pricing we of say for have in I really give. do for have the positive slight We We strong north of and to year. we or a finished of givebacks index pass-through net

still We we'll net think pricing. slightly positive

the us X commodity pricing our of would channels. to would significantly, pricing a be obviously, dynamics to a of Bearings in XX if about were because markets be and little now. positive first slightly in would net for Motion Industrial just probably the quarter but pretty bit the and the to in, decline bit little the the of I in just . And But where put work that risk are than that there cost benefit think north -- a prices positive, us Motion mechanisms already bps, example, more the more our way typically pricing So we've in that good feel of Industrial some on segments. probably there, of through be outweigh some side working

did story. logistics favorable and 'XX 'XX more positivity than material We moderating. the significant a 'XX. flatter So cost a it's with price-cost good pricing up, in It's environment, see

anticipating. cost be the 'XX, do helping to not but in it us to I a expect positive, to we're of slightly -- we price mean, we I flatter flat would some negative. think see volume offset declines we'll curve

Operator

comes Stanley. Morgan Angel Castillo question from Our next from

Angel Castillo Malpica

maybe wanted back go half, to more. unpack the to little commentary -- I just wanted the Just a just bit to first on that

you well. improvement suggest I there's think totally you've seeing think any that in But as guidance. off-highway catalyst maybe I limited heavy unpacked about talked and And I an not wind maybe here customers on kind you your some given think to visibility. focusing about industries understand earlier pretty of your of

are little the to doing there underlying in I destocking bit destocking dynamic half just kind your guess, demand of step-up own Just not why in kind half a same maybe the to to you what versus they're XQ you that that's as their those is segments, a -- customers your And not are here of some customers? what been moving second frame, kind weak maybe -- extent first from maybe have of time the the the seeing in of but done and degree? XQ, not

Richard Kyle

it's I as wind -- I again, would question in would be, probably customer would and that a you put think would I X.X% say our Yes. say X% good sentiment did, in total probably But not first down our little order optimism of next just I bullish aside seeing the couple we're is what a more is flow, were that And comp looking a the quarter. fourth at there. we months. quarter, heavier in a the little reversed where in there's tougher than

aren't we start see we that to So in it. optimism baking until

Philip Fracassa

see as year say well. in or as I particular, the second second would as kind And off-highway Angel entered opposed know, big I'd you it'd be in be typically -- little and acceleration it in the quarter. would in to fourth say, that not it's, unusual third a early off-highway in the into of in historically, half, -- would that have But normally in it in historically, particular, to the it's a half,

Angel Castillo Malpica

free to just talk with XXXX kind and that's cash allocation. about shaping your Could a ability how and M&A And switching you to bit you of how that your maybe very do more pipeline That's then capital little repurchases maybe maybe out see your impacting for higher helpful. flow?

Richard Kyle

there. continue to this on said, A bias bandwidth I management a what year, first, and 'XX. delivering being focus a at And our there. years. We're on executing really buyback. the as done said, have the sheet looking couple balance flow flow I'd of up and last we step the still That few M&A remains cash say, still over we've in our year to better is the comments cash and

slow market to the last X years. M&A relatively The X.X been years has

a have time. managed We than probably a a even do little We've longer well as Timken. there's going up that of optimism would to through back pick level say market, it's managed that, going to to I that COVID. not

outbound still So not more we increase side. -- on seen been but us It's inbound would I say in activity. have an the

able reason attractive to would acquisition And one should least remains market if this slow, at February, while that strategic to we to we no and year relatively something there's that for in believe done the every we're continue not be I we've So done would and even here year. financially be get both years. say able

Philip Fracassa

shares million our Yes. buyback, remaining the authorization. on have And on about we X.X

continue the have shares a us. but we But we'll standpoint. M&A out, back we bought Obviously, continues it do standpoint, we've And the and X% not is if X be it to ability of what back each a to bias certainly option for the have diversification plays of last for So to the remains with an years. an option, buyback see outstanding there. year the over our how a just for the buy M&A, portfolio from from can us

Operator

The question Dankert from Capital. next from comes Loop Chris

Christopher Dankert

assumed base decremental, kind the consolidations, Just The organic XX% facility correct? a I in quick is clarification, suppose. impact that of of

Richard Kyle

Yes. Correct.

Christopher Dankert

And then... Perfect. Okay.

Philip Fracassa

And we headwind the that we can with would with is savings talked achieve that a Chris, would those. of that be the of new about, a as expansion, then there some quick, of some ramp real well. the combination bit a facilities the Just consolidation. It associated be from

a a So through full ways, rate get little we run 'XX. you'll benefit probably and part both good have them bit into going as of XXXX,

Christopher Dankert

sense. I just XQ, to think SG&A of assume $XXX on of is comments starting to that there's makes then just efforts point about any year the That over I Or quickly it. is some kind for temp fair it million? on down, in year And of but know kind how Got the here? guess through SG&A. maybe the to

Philip Fracassa

mean, it's impacted -- probably by by the a say, I acquisition. would mean I I it, the generally been to at speaking, SG&A, good we've look way Yes. for

into in, from jumping Get go have the second SG&A of more But bit 'XX as increases off is as typically pretty So off we we the portfolio. mean, pay a little staying dollars brought you'll up kick there. that businesses level. move into be constant you've we'll just one 'XX, But of to so the quarter a annual think seen probably absolute I I headwind level. our

Operator

comes America. question next Feniger Our from of from Bank Michael

Michael Feniger

there's with was up covered on the bit the little know I'm down lot your this the inventories, a lot a I inventories. I sequentially. quarter-over-quarter. just inventories curious channel. know own of X% of on Revenue folks a Phil, was

how growing have big cash maybe inventories about tied know you're feeling curious your And that's flow in to a XXXX. year, Just you I it.

should through about Just think that XXXX? that of kind as we you work through how

Richard Kyle

Yes.

are quarters couple a say, would few of chains to a I our close supply pretty First, now, normal. quarters,

beyond there, but cetera, We response the have time, problems et Deliveries, good. here and all normal. nothing

really good we've comments, and my said So this we've in got a on couple of got -- a I have focus quarters. and as for

year, positive cash continue So we the decremental are factored through planning that levels see a revenue production outlook the some from little and than lower to is to the would to have revenue inventory. of course underproduce we our into generation that and

Michael Feniger

Great.

year-over-year was basis covered. you was organically. kind only And down quarter second X%. guys sorry if on this EMEA, the X% just But Europe It a of report where down

organic Europe data over seeing there, if economic the Europe? you're in we to when the that end-markets look you're feels with of some more growth kind curious of at relative Just reporting stable what there this

Richard Kyle

back us as It Yes, our little a for I down it. faster word softer faster would and say stable little good. point, a is little markets, bounced probably but a faster than good certainly, other is Germany probably little but well or a went been some to pretty softer still than a has stable, the been more headlines. And for your -- countries, than it's other

Now little what growth some comps in couple is of again, last comp geographies, some lower than particularly other with sizable the of years. our dealing a Asia very

Operator

no questions. currently We have further

remarks. to you. Mr. for back the Over So to closing I'd hand Neil Frohnapple like to call

Neil Frohnapple

for us Bruno. today. Thanks, joining you, everyone, Thank

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

Operator

you Ladies concludes and call. today's joining. Thank for gentlemen, this

your now disconnect you. may Thank You lines.

The Timken Company (TKR) 5 Feb 242023 Q4 Earnings call transcript