TKR - Earnings call transcript Q2 2024

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Operator

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

Neil Frohnapple

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

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

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

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

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

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

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

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

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

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

Richard Kyle

line our quarter revenue a second morning, Good with expectations. call. for and in Timken profits Neil. thank delivered joining Thanks, you and solid with

distribution flat of China a strategy and and from strength last the quarter. decline year. leader. Revenue and down diversified energy to last record decline, renewable The year X% and the the demonstrate Renewable first helped build to weak the successful environment. of driver both strength XX% over diversity and helping of the continue are roughly orders. quarter wind, for from the into and is through quarter the did up energy. the revenue mitigate our from second second industrial a down results in year's navigate prior drove was stabilize which us market portfolio was sequentially renewable from diversity the industrial over call Timken and organically sequentially portfolio our execution impact aerospace the of which Our Rail,

XX.X% and improve higher rate as per of well tax share negatively year-over-year. $X.XX to by higher a Price earnings were strong. costs of interest continued were and impacted revenue the modestly positive modestly costs. Margins remained as

demand, volume initiatives. We costs expansion down ramping to Mexico reflect the scale positive to have our integration contributing into is will we year-over-year plant facilities. up of variable with recently favorably currently The operation results. structure to our results, softening headwind and began the The plant in be is also ramped and footprint, our a year. productivity the improve and in consolidate cost bearing as and belt we through The production continue a belts next but will XXXX

business the in relatively in to we continued quarter, performance integration see roll-on Nadella The and good despite environment. the market margin the and continue soft a

contributing We and Timken both also results. bearings the bearing steps roller favorably to organization, lines into American took GGB product further and are integrate to

operating well, initiatives long-term delivering metrics both Our will results in yield excellent XXXX. in improvement focus as operations short-term very on investing have well are that we as running results and our and

final our India quarter purchased capital a sell-down XXX,XXX completed From standpoint, Timken the in allocation and Limited. nearly position in of shares we the

to expect cash with capital contributor over next we Our bias range. a advance strengthen remains CapEx to as our would After flow, the the targets. to months. an financial industrial to strong second strategy our achieve and be continue dividend, net slightly the the to position long-term leader to results portfolio, to leverage debt our stands of M&A XX and allocation below meaningful the weighted combined targeted half scale midpoint bolt-on When

the Turning to forecast.

sequential quarters. plan the We declines third for are and fourth revenue seasonal in continuing to

our in quarters. the due is revenue comps the China results significantly second energy. revenue on in drag wind been primarily to last expect half, We improve that has primary year-over-year the renewable particularly easing but for to X our

July the and As the I to markets said year second earlier, now have the revenue half have view our results markets that broad materially strengthening we unlikely. assumptions. to backlog and guide. Most our The stabilized, revenue changed trends full share alter our support support China in outlook. revenue wind second orders is quarter industrial customers a guidance half in and second Nothing and

of guide our XX% the just midpoint margins. for line, the EBITDA $X.XX under and is On bottom

are for they to typically margins decline half to normal seasonality. as do. for of We up in guiding to good position margins we second in structurally, a quarter account in the But first XXXX a are EBITDA step

that XXXX confident markets that look will we're to our and to we rebound beyond, As return and growth. will

proven Tarak's our future to also September. by soon, is remain track CEO well talented achieving we committed are transition, and Tarak joining tenured remains early a Timken leadership. to We Timken team. committed on XX,XXX under growth is transition smooth success financial positioned Mehta for to the finally, and targets. And and supported for employees and long-term looking leadership a forward

I'll Phil. now to it over turn

Philip Fracassa

and morning, Rich, everyone. Okay. you, Thank good

of adjusted revenue. in coming billion, with all-time X% and in EBITDA Slide of at from For We just in our under down for came per of about the quarter to delivered the Revenue quarter materials second adjusted $X.XX. line review. I'm financial share expectations record $X.X results. earnings margins going our with with XX.X%, solid year's at the summary presentation last a start XX on

Turning to XX. Slide

have at lower the down decline China would revenue second look we exclude last our as sales down energy, our we expected. performance. closer of from a take year. less in been year. were by sales energy than Let's from Organically, X% with demand last significantly wind wind driven organic If most quarter X.X%

of rest the Looking walk. at revenue the

we quarter, translation currency the see net year, divestiture was acquisitions line of to a the that closed headwind X.X% foreign last contributed growth X of while of in roughly can X%. the top You the

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

me region, comment long-term solid about several was across of each and while auto we were on lower. Let the contracts. the year's impacted our growth saw under In programs industry were military the Americas, sectors including by against down on-highway second distribution, briefly and aerospace, We marine Marine marine, largest timing last heavy X% and truck region. strong quarter. off-highway sectors,

programs lumpy at quarter grow to times, last be for sector comp. in the the but year second expect and marine the We military a of difficult full was year, can

Excluding XX%, the quarter, higher been the EMEA general that And Marine, as wind up slightly the by saw Pacific, industrial posting Asia the roughly and in Western flat finally, we India distribution, region, were energy. in China down industrial weakness growth Americas revenue. year-over-year was demand declines. in mainly down in were energy China. continued excluding in in XX% off-highway the wind region industrial lower double-digit Europe. was on the Note largest we driven In in partially lower rail This by would with and sectors have we offset were quarter. Most

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

and acquisition impact impact the which offset to lower currency. in quarter margins of net reflect operational the volume price/cost, positive solid accretion, strong organic helped and of Our sales unfavorable execution, the

at Looking dollars. adjusted EBITDA the decrease in

offset acquisitions. was with benefit You partially currency volume, of lower can by favorable cost was operating the improved along driven it impact. unfavorable performance see that This mainly price mix, by and

comment quarter. relatively quarter. Industrial on this positive, Mix generally more pricing Let pricing in net a With Motion. largely industrial to was some of me OE with in also little was the drivers sectors price in outperformed further respect driven by quarter mix, distribution, once again which the positive the

we year-over-year quarter, including the more line, targeted inventory a continued improvement you delivered the that On can ongoing impact, offset better inflation change plant and in our cost than impact belts which productivity, the for favorable related Mexico. modest initiatives of expenses see to by expansion and footprint actions in driven manufacturing

the of EBITDA offset and as more targeted net overall Costs integrating million at And company acquisitions $X finally, line. as acquisitions last spending initiatives accretive year which quarter, margins impact expense. well. discretionary our in contributed than from the of adjusted very are other compensation Looking divestitures were SG&A higher to of the recent down performing lower was and

you second the mainly below-the-line quarter lower, quarter our buyback $X period XX, can interest share acquisition year-over-year, adjusted shares the million includes compared basis, GAAP that Slide XX special basis a year. last of the $X.XX share expense amortization. we from compared months. while year. on On current respect share in $X.XX With more to posted last higher or reflecting of $X.XX to the over was income earned per of some X% to per net past $X.XX net activity than an per items, $XX The were second expense for about million see On diluted diluted we net $X.XX items,

Timken geographic quarter the tax higher unfavorable by that of And XX%, last Note finally, expectations, the mix mostly year, at with in adjusted net India this driven year was Our NCI are our up slightly depreciation the rate quarter earnings. came line down. expense deduct our impact expecting but in from in of up in as the a to slightly was interest. we noncontrolling sell due

let's second China results, $XXX wind engineered significant with decline year. move sales XX. starting business were quarter, from X.X% driven energy. segment X%, down bearings the last Now Bearings engineered Slide to down were our in by sales In on a million, Organically,

roughly of in showed revenue Excluding would the organic wind, resilient as last rest compared quarter. flat the segment performance year. have to the been

up and rail year. versus were in Specifically, sectors distribution, the revenue all last aerospace

and million to Engineered was XX.X% industrial year. TWB a sectors the were of last net of while anticipated. off-highway in quarter slightly was headwind of of or the sales just lower acquisition was over Bearings sales $XXX as compared EBITDA While we million adjusted Currency of the and XX.X% divestiture, iMECH the $XXX unfavorable. X%, general or revenue heavy

price in impact improved margins unfavorable of lower operating mitigate currency. volume, impact solid helped the performance, of reflect costs cost the Our and the favorable higher and quarter which logistics mix

demand turn lower to X.X% from were let's last down Organically, Now declined marine lower and Drive partially our sales earlier. $XXX Systems declines. X.X% as offset noted with programs, impacted platforms by motion Industrial XX. second of Slide by timing Drive Industrial In on saw which million, Most Systems pricing. on linear largest was Motion quarter, the sales was revenue year. Motion posting higher the I year-over-year military

While of in XX% to top the sales Lubrication broad just currency were Western was services, for to last was down modestly, relatively chain by couplings or contributed and EBITDA while while and headwind weakness Europe. sales under the X% our was $XX platforms linear adjusted belts a impacted Acquisitions motion also million quarter compared Motion of or line year. Industrial $XX was XX.X% of X%. flat. million

the reflect by flat in to favorable performance net costs and performance Our which was solid offset and was in margins our quarter, the offset performance, as productivity SG&A plant largely expansion cost of lower quarter Mexico. impact increased organic accretion relatively for volume. the Manufacturing favorable acquisition related in ramp belts

Turning to XX. Slide

we year's operating see quarter. $XX level. that which CapEx, slightly second the below can flow You million, was cash flow And last in was cash free million generated after of $XXX

raised XXth and through straight of We of share be and million XXX,XXX expect returned annual dividends capital of a X% working shareholders cash the stock. improved dividend our we increases, quarter. dividend the May, step We in and half cash to of shares From company up quarterly second back repurchases year the up the to XXXX we seasonality performance. by during setting $XX year, flow bought standpoint, by driven allocation capital to in

the Looking balance we at net adjusted range. second sheet, to our at targeted well X.Xx, within with debt the ended EBITDA quarter

from reflects proceeds Our debt the sell-down completed Timken India the during of $X.X of quarter. reduced billion level net around the pretax

to the earnings the at debt. near-term Looking now in moving and debt flow other euro-denominated Timken maturities sheet debt, power shareholders. outlook, at an proceeds repay through maturities balance million all XXXX. significant the strong were grow our to interest bonds continuing of to our ability we while M&A, no until has to With both issued organically attractive continue The have XX-year cash we to cash $XXX and return used May and forward, rate. company

projections. are Now top updated let's on with Overall, outlook full unchanged reflect outlook EBITDA versus XXXX summary but a have turn margins our to and guide, updated prior XX. organic revenue our Slide we for year line for currency our M&A outlook sales relatively foreign to slightly adjusted and both reduced the

and our now our This We're no midpoint, of the for a there the change are driving with planning outlook minuses the So starting be sectors, of year through XXXX. sales X% recovery let's at versus X% points sales most range the in total half. at be XX outlook. Organically, to to versus for to prior is a go we down basis maintaining are in with the a it, outlook. and net full continues revenue few the or tighter renewable X% midpoint the the of organic second pluses assume decline, still and in down to energy among but inflection outlook around range

for to on compared acquisitions. our With basis our M&A points about current of current points full prior headwind our a exchange respect more And XX XXXX we rates, basis slightly to for which forecast year guidance is estimate. finally, planning reflect based outlook basis prior XX around currency, we're to our lowered now points for than by XX our the on

On the accretion and line, net earnings which down updated to per narrowed $X.XX, reflects the our guide. partially This at estimate revenue from our by transaction. in outlook modest TIL we've $X.XX is midpoint of our adjusted from prior expect offset range the now bottom $X share the

range XXXX outlook from adjusted the unchanged prior in Our margin XX% EBITDA be essentially outlook. will consolidated full our the that year our midpoint high implies at

sales the range the compared single in organic year. For digits quarter, to decline we to third expect last low

EBITDA moderating to sequentially per year-on-year environment. We also down be on margins cost expect adjusted earnings and lower share volume the and price and

than million. greater our Moving outlook full to cash year flow. We've $XXX to updated free

words, Timken cash of cash $XX million free activities. reflects most to second second of we net received transaction. to update accounts of financing be proceeds in for that prior pretax in from outlook. from the are the other the half paid reflected flow. taxes India the change related This Our In the in quarter our outside Note

We're over at cash manufacturing and CapEx we as outlook free as X% for finally, operational the for of Excluding income around most and of And the our the 'XX still incremental excellence net targeted conversion at initiatives. of flow estimated India, midpoint. expansions growth taxes, GAAP on other reflects spend XXX% Mexico footprint total with well in sales, planning net reflects along sell-down, rate forecast expense, the which XX% interest the of in our the million, $XXX cash benefit tax adjusted guide. another essentially to offset from an interest expect for the unchanged and one expense unchanged debt, respect both range for from full the year adjustments outlook a prior other year. of and TIL With with for

in formal line future. strategic the solid To performance We resiliency we'll the our strong delivering our solid further which differentiated second on the demonstrates company the results while summarize, Timken open in over our This concludes initiatives revenues of performance strengthen delivered quarter, questions. to with advancing remainder focused for that the year remarks, segments remain and line expectations, of both the in the portfolio. were our and margin now with for

Operator?

Operator

from comes with Jefferies. line question of Our first Instructions] the Volkmann [Operator Stephen

Stephen Volkmann

head just kind today. you do spending what you my of Can remind in is me Great.

you got get we kidding. I'm right sure So make company. the to

be each I it in up mouth, like said have that So for of a wind of next question one you. but little want you to bottom think renewables? you that I feels bit. your the of to put in sort don't I'm business that going China on for sort prepared reached to we words Can ask out. your flattening Do year? you pull comments

Richard Kyle

Yes, slightly definitely to -- and were from up up. QX. could were be it we win We QX flattish,

say from too the stay backlog this next There's but be usually year, for flattish to think a half, lead to rest longer to we've item. to half little tends of it's we bottomed. have early time call year. seasonality we first a So I'd the second certainly

levels going So we at. the to start as we definitely of up be just take It a operating peak have to ramp quarter's back up could should impossible at think be but get a to would probably those next up. we're good because I call, how the us least to level levels. feel to back year, we're while to It's

we or would that but for next 'XX fastest be be the probably up 'XX, So year. yes, could

Stephen Volkmann

then, Good. bunch a Good color. think I'm to there. -- going about on Okay. trying And Phil, stuff there's of

things side. the some doing You're on cost

You new have Mexico. the in facility

kind coming I of SG&A synergies, have some on the there's out, of some You think, M&A.

whatever of is volume, potential the volume? be are Just in of which are related XXXX buckets next will to it irrespective but year, what sort EBITDA of goodness that not

Philip Fracassa

question, good Yes. Steve. It's a

should still positive ahead inflation. of prices our north for between in -- pricing XX positive to predisposition as year, year, what in serve pricing this from on outlook India market standpoint, point during while where we're continue would this our obviously, one for I to highly keep next to about to belts operational always M&A again, but or Mexico allocation, on a will in be So dependent ramping continue actions buyback And probably Obviously, ahead. think look And with a price I'd execute customers whether to create continuing to terms be the year. with actions cost footprint on be of part both cost our targeted us. the segments. not we kind of move pricing through move continue targeted ought to environment. in be from but we'll those to excellence, accretion will will benefit keeping we probably just year, actions, ramp in year. change talked the line the expected the new looking capital obviously, we for still in no early controls focus and really around will to it's at of initiatives costs, generating plants that's cost footprint strategy somewhere bps as be to And the quarter, the last are XXX, Mexico. we be to to

be product been side that initiatives to. on our the the else we've obviously, around well point organic strategy So as vitality both M&A, would focused I earlier. something the then mentioned I'd as And with on as

Operator

question ISI. Raso next David Evercore with comes Our from

David Raso

broad of question. sort Just a

utilizing we core you flow allocation of and You seem a right were Or to your mean, capital a obviously something expect the more meaningful to cash to about point the XX signal is contributor I now, little given next really the sluggish the emphasize over function markets? that to sheet? months. balance a significant results end trying businesses be

Richard Kyle

the reinforcing No, generator I'd for moved a And anything signaling of -- very the I we're year high strong significant, below moved and with already of we've a cash active multiple quite XX years, bit not coming that to to in the year, end. back would been of say end we've low cash after leverage from months. next range last the say, our we've midpoint

anything or of probably And So except accretive not buyback. if hurdles the meet same, contributor. there signaling And in either we doesn't our M&A that is that continue meaningful more a M&A. be isn't I to case, than share financial and either think

David Raso

the can to historicals, half of quarter, what of you first sense benefit you out Obviously, into but bounce now, after referencing. normal And a get feels we as back look trying flattening just provide the we first what think about from right I get have Obviously, of to the first signaling down. sequential at on seasonal being could like get about close envision to sure to that of -- year. just you comment the XQ, want back sequential When were the the make the I'm on mean, follow-up balance work understood quarter the you to do right. quarter the heard earnings? a I 'XX getting I it the you're if year-over-year in I All correctly. expect been earnings XQ that to

Richard Kyle

Yes. us first, it's certainly XXXX. I too would to for early call say,

the QX flat, it. and and year, and this nice was I the around [ really X a sequential from not were QX share. QX a about precise have guide, QX think that's ], per single XX high back in QX to ], margins both is with plus your hit earnings to ] saying weak number, organically up from there's reasons and believe, to [ years look last But X year, obviously plus back from if QX I which get QX getting be But there have X% I've to [ plus To or to plus we got assuming at up me in on you be guide, to revenue And front a about bump weak of optimistic prior to there. question to [ what's flat. typically our we'd X earnings our digits XX even years, QX, we ]. was to specific the XX minus

we as of So is to next certainly, back getting year growth sit quarter here line today, the top attainable. in first

be And per so also it would earnings share.

Operator

comes from Wertheimer Research. next question with Melius The Robert

Robert Wertheimer

Just to on of continue theme. kind that

just core, said is which you X think were down you ex I of wind, kind muted. fairly

If moment, that. on businesses there. you are those out I the rail bit there? for or from What little you you give local? in up around a that sense could there. falling rising customers railcar orders and any mix context of indications wonder moved think and And distribution orders the I flattish Is if went look at then or leave

Philip Fracassa

This Thanks. Phil. Rob. is Sure, Yes.

the say out, I now, down flattish we're we if mean, pull on right way but sort year-on-year, I would of orders QX. orders, QX the to orders seeing wind So sequentially energy certainly the the

take supportive you you ]. the in we little than a there, our renewable of less if ]. [ ] we down indicate I it at And organic, nothing it's look year if the been have guide So pulled actually we're [ bit would less [ X the got mean, said, the of full that out than overall inflect the renewable minus X half, of we if down X certainly as you to second but in out, outlook. would going right. quarter,

And in the bucket, we move program as QX, just late one right. business right, and heavy the move driving did it sectors of order over right. given It's for And the updated then we is been you, rail, just it to we rail then that I it you in bit rest to the U.S. I that's kind the outlook. physically of us. really So expectations bulk in Europe activity would over Americas, that been oil got saw India in say, activity, but move lean have the sectors it certainly we of we for MRO either then business. metals, the of but little over guide, adjust would quarter fully It's of the flat, And over but Marine the to in project marine the that's left, global the probably the through of it's has left the did big OE And only outgrowing, real reasons we've Americas. the was for moved would our year. ag, given we're up car terms very like say, to And both a kind off-highway, left intellectually quarter, kind just and the relatively the marine we activity been of or North full builds moved activity say, doing would that in well. surprise of really not -- and the military moved has a course up for of is a I just the in current the stayed tell gas order year. outgrowing and we the left the bulk book lean to the would that or those been And performer saw. loop, column, freight little cycle, we did moved sectors the OE build over overall. the that was just then but industries in close outside we be left the spend. a service activity, far the was then the strong a I would also pleasant America, as and that in rail

Richard Kyle

I'd The question -- first part only add of add that to on your orders.

percent of minus X%, than a per guide the out But chain little the sequential again, supply had than 'XX, significant it'd Our But QX and similar, better be pretty coming a we there, off last in is which softer significantly X-ish sequential. was 'XX. year's minus saw slowdown. what little we quarter, issues

at So normal I'd looking say, again, seasonality. we're

As in softer there. some Phil and areas some offsetting. and are some then some some that wins in highlighted strength pockets,

So that's engineering good the don't coming about order I again, some Marine, which throw part fairly Phil in that in. well. initiatives occasionally wins most the is something because then supporting. with platform $XX,XXX We hit there, put say normal, of had really I would of we've really line last wins application releases that, outgrowth is over the years. good to in our talk and our some self-help a form and what lot on pattern some other would years we $XXX,XXX several And $X get good we've pipeline up come press here, out the is platform them there million. But as got really a the

So well. that as feel good about

Operator

The Blair question from Bryan comes with Oppenheimer. next

Bryan Blair

little we on more trends. hoping seasonality? demand does to fluid distribution bit was very a choppy through the backdrop. What sounds It was within like And compared that relatively monthly order into drill cadence a typical progression how down supportive could industrial early and QX? QX I and

Philip Fracassa

industrial relatively saw. much little the a say, would right, we up the much of bit, We the the quarter. little and I relatively in were but but would performance distribution of bit looking pretty I at with in and I It the Bryan. range, progression quarter, a be -- Americas, Latin up say, quarter seasonality, everywhere both the mid-single in But digit-ish last talked was in I we call a it, in quarter, up terms in terms Europe. would globally year. in and say, you're pretty through would then of surprise overall, Asia, full once was that pleasant up in probably America. and say, again, would Thanks, stable normal this line Yes. about North

broad OEM big is down, and along. continued pretty distribution and driven being activity, about kind But gas, served activity. OE that's I through support, markets. the MRO continued heavy of of oil been the it's to the other talked industries metals, kind So all which by side of industrial continues generally roll get side, MRO --

So do to of for good appear believe relative for inventory, levels do and to at we this then level we be -- demand. this inventories

So moving this the we've for for feel relatively year. demand inventories it but level through in shape about several the talked quarters, of are of last like the inventory good does rest

Bryan Blair

of And follow-up helpful to in managing date, the cost in very to some should to incremental as pretty color. a keep so has Steve's streamlining -- your structural demand should there costs level we cost active achieved hear we about footprint. in question. XXXX? and that good team is out the the How rate of run what's recent back pressure, manufacturing half, Obviously, then well mind savings been and as think through That's a for

Philip Fracassa

-- is Yes, cases, way more higher a cases, with enable take countries. efficient expansions, an excellence, lot I this us, talk environment I right obviously, is in operational think is, about like about we the most big of facilities -- best-cost for to mean, small think low-cost particularly cost it facilities which out some initiatives, in more countries other to the us or in in and cost-effective, replaced plant the

that continues, mean, initiatives lot well. as also a of smaller I So but it's

been we're really are and business pockets down call we we focused on our footprint, continue ago it's -- eye down -- in from, with weaker. the say We've going continue these So recover. in over head a it, towards, year markets to where levels hey, of an to our operative count for adjusting as been hiring, example, XX% would I be been we've

sure synergies, integration come been to folks considering the an integration, that even if specifically live lower But of Not you're to Timken we on opportunity also in we acquisition keep That's given step we've so really on starting think to isolate, which I through. around acquisition but performance gas, as acquisition demand, you aligning well. make see this deal the side kind the only let's accelerating So that thing. that and we we didn't critical done the -- with far drive a especially us year. haven't

I smaller a say, facilities we've the got months, dozen when over you benefits, would XX half number number which of then are would to big And a facilities, the all consolidated incremental a talk if last We've say smaller I facilities. we XX will. of about

material amounts to manufacturing volume there's savings that bucket, need question because of those and even to no you a tend offset at you offset the the on savings material you provide of we've not you will, But inflation, bucket, look done you some if we tactics. have. -- lot need dollar offset other work headwinds So when the declines

good accretive move really should supportive seeing be could which think margin And in into as XXXX XXXX. accretive I benefit, been we margin be XXXX. next You're in has or it year, margin

Richard Kyle

the at down year think were half and there, Yes. really said, smaller few And motion for million. or consolidating XX% XX% do have It's at start little the I long $XX of as Again, as margins facilities significantly quite $XX I add, a now. probably revenue. EBITDA embedded our we when been wasn't said, necessarily the We into from in it's to Phil just you year, margin shooting a industrial we've look revenue a margins million pretty targets. lot a to would a standpoint. don't It right we it's more a peak north say of that there. of Phil ago weighted activity first

embedded to financial indicative it's our So goals expansion it's -- targets. long-term and those our of in targets, and key margin it's

Operator

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

Steve Barger

ago X quarters. to basically business, organic but X meant reclassification growthier stuff the Motion or control the segment this the as process think maybe show I the of decline old was quarters side Industrial track surprised And is the segments X those expect industrial revenue you? or how the do motion bearings kind trends you Has over tracked will in of X recovery? past to a

Philip Fracassa

of Marine Yes. for Marine why ordinarily. larger to motion, and down marine was really was for the industrial organic it decline X-ish minus but Steve. Maybe business we would contributor called of again, certainly, that the sits would think, decline significantly. the a we you have in organic out was full that quarter. kind And up we expected I'd would year, a I be tell significant. significant the start, you, than expect probably that item, -- expected. It's it And I was But marine we

more to probably you're the landscape. maybe industrial [ If closer line you or seeing out, organic, with rest across [ the ] what you're marine in ] take down of X the X the

the point is that The own other European some well. extremely that we of Linear motion we have a large businesses do are does running in particular, have exposure.

markets mix believe good, has had we'll up, mix say I you have it would indexed we a is And from hard we've the plant the Industrial you'll in business the Europe. a the where bit the with that Military And is bearing know. is faster I standpoint, volume headwinds really markets say, is to ability Marine got ramp decline. going grow the business do industrial think little -- see we of as to. But the then say. business We over time, it's to, overcome Mexico So that the margin than, the should motion indexed I on. Motion probably large would overall, to

down, have do relatively think markets So But with margins time, to when ability impact. Motion over Industrial as that's higher it relatively higher generate I can indexed to growth is well. the an

Richard Kyle

a growth Europe little Motion are highlighted, slightly us. is We in Motion growth and rate and it the to Industrial geography Bearings, to to to Yes. that Phil tends slightly in mix and to -- the targeting weighted at achieve more both looking higher certainly looking in a addition tougher but be, moment, -- Industrial for certainly issue

diversified a capital little diversification more well the the as business off-highway organic temporary a bearing we've ARB we to and a equipment headwind. certainly continue and bearing in also strong. the of market cyclical, I'd mix of bit still significant was diversify that's Then revenue aftermarket. is So into for critical put but been the a business has is GGB us. for --

side positives as to some the within there to well. point bearing So

Steve Barger

first long-term And Industrial Motion. basis about commentary. the points the averaged EBITDA margin Yes. Bearings to half, XXX above Engineered margin In

half, mix and half? IM back back view have expected you in revenue how the Given margin does that does relationship in the higher Or hold?

Philip Fracassa

Yes.

year belt full or happening But what's tighter you but the have a may -- be would year, at for a Industrial think in what another. QX IM lower, with, think QX. a above call bit to be would little would one be seen the it, I expansion, they'd would expect et segments than delta I for we little to or given would the I Motion with XX% both be cetera, -- probably in very close certainly

Operator

Raymond from with Thein comes question next Our James. Tim

Timothy Thein

half EBITDA the of think year. Phil, we as bridge, the the maybe about just back on

I think directionally, in I full earlier I -- the pricing on Just heard believe year. the comments for

I seeing manufacturing of think and you how transpired XXX you the think to couple to of through kind said points you guys given I'm to price. that side, have just maintained what of are gotten interplay what's the comps with the all trying on the think basis XX the quarters. just cost in past of then screwy

So how of kind relationship X and the to just back of half between the year. think the about the

Philip Fracassa

start welcome Tim, Sure, and back. with. I should Sure.

going I to And the we'll with the we a seasonality. the keep lower I things volume. we our of lower as typically from look this no is sequential a in bit would half normal to be half, back a be think half, But would little mind in continue little are different. just margins year, couple of second see first I sort say margins, On at the

So you We're first move flat on half were inventory through did year. first we a going little of -- a ramp second can the of Still the to a belts expansion take headwind to the to lower up bit -- you half, We go got half, as seeing second half, inventory in as costs line. continues be ramp. to the volume bit we little sequentially. on out the which the have look we'll manufacturing

in sales, that India would to second would of in production as we bit that probably margins the point to kind for you'll ramp be costs headwind particular, rate. next will I quarter, the third ongoing to held be probably and really It's to couple we on see more We'll can. the the operational the say the kind sequential offset we're by run have margins beginning for look half, of then about execute similar EBITDA I in get first to And much of as down year. We'll continue second volume, pricing, the lower -- launched But overall there, some too. trend you And I of of as you and be half early a sequentially. look think us we pricing, say as try situation that's year-on-year a excellence fourth to started to quarter. lower But a do well. But guide third talked half the We I And to quarter, a hit then there. that as continue have revenue. continue kind first of would weighted. look initiatives things to in logistics the quarter going expect down as little of but

Timothy Thein

the kind the as kind a I'm of that? a from at impact -- reset -- thinking, there all challenging is think, there. come that will potential should just in a kind that like standpoint, helpful. and little just looks just is terms we of of business. bottom That's that then in it incrementals Or about -- what bearings the been volatility in of decline? not of that just Should what on the we more -- that of -- the of of has given expect out some, given margins thinking the recovery you that Okay. about like -- the wind just structural of business, will amplitude kind just that impact hopefully segment, as business out thinking the bit I And on and pricing China

Richard Kyle

certainly other an in mix markets market I'd as and mix well, the to the in penetrated market was it by the as OEM long, and we're geographic call aftermarket we're side. chose of volume, served last for come well. we because we were because better to that existing reset haven't between there's to versus then opportunity the in this -- open up this China Well, the better a really And disproportionately a markets players, the out a but been right? said And with ago of at looking decade the participate as say I been those we weighted primarily a think OEM also this I

into will mix as China put and market to coming a rebound well. more it that emphasis expect the we remain optimistic better So geographic out of still

As at done wind drop a have the we cost, costs wouldn't that. still associated -- think of good but with through line We've it's company the no to fair amount job a of incrementals and normal-ish were that, of reason in incrementals levels. expect kind we the we out the still good after said before, variable with margins coming average getting fixed

Philip Fracassa

I And -- about at that you this add, we've Tim, look is the bearing would it before, business, talked capital when only more Yes. is it intensive.

We think up very lower if see point make impact. it little back it helped China bit manufacturing down, of bit investments way kind footprint. volumes manufacturing incrementals. cost, China on a us and then So stronger helped And it some on did which in on the fight incrementals some improve our see we've a do have can generate well. investment way while we we But that can last up are to think managed of does on think to bearing wind on maybe through the of next mitigate year -- I and little as tend the side should has really house I to side, steeper the I we're down has have. And that decrementals good the the

Richard Kyle

relatively technology, it's been cost, been producing in as at we've others the wind, come but the largely get and a since maturity technology. so Has you they've the mentioned, downward and products, the have But of trajectory better volume, prices as the market. at product new down we the gradual on in

we'd optimistic come the we that be So and back say to able incremental well. leverage be volume would

Operator

& Mike Shlisky comes Davidson from Co. with question D.A. The next

Michael Shlisky

on to touch I quickly for -- wanted off-highway further.

lot still their quarter? about be by have off-highway do what they bring to XXXX? the fourth back to on to OEMs hearing year, down in quarter. have on touch through of you of get trying half them the to some the looking take to you to fourth in inventory the told think ability What do Just out I've want What part you -- a a that moment. first think for the the to focus inventories folks more been where of are they

Richard Kyle

but here on Yes. but be would one press that's more the varies lately has market, certainly It ag and been got down.

For us, agent down year. last

correction feeling started we earlier game. the inventory of that for our part with So

the comps So year better probably our as of than we what are the head into theirs second are. half

But of year. United to heavier and little more in a and a the little well States. numbers the suppliers headline ag the weighted in some there's that better the going ag than a with global versus little So maybe Construction, of Mining rest to little the a a bit certainly, X parts industry across as it. probably for the probably us ag is level worse dealing presence is of those caution markets

I'd down. So it's overall, say

that We have say high it year. way as we'll for to for at next the year where too the full early digits well. be down in single

Michael Shlisky

in then look here there a you come tokens with Okay. the about size Give seems and And targets just ask just targets M&A today. to any it deals for of pipeline. are late-stage that good any view a I us Got broad like like as out some thoughts decent to the year. it. wanted couple what valuations or Obviously, some are

Richard Kyle

Yes.

X out. year, last X year we So had very active a deals and

optimistic a year, also since XX again, engaged would came something deals, divestiture X, closed consistent again, last with you as last level, so in a XX business be We certainly nothing the pretty a doing from us, would anything. to months, medium-sized see certainly we've that that. X next strategy higher year very X It'd prohibit quarters a leaders active you little that small debt the the in to us X, but with very said, remain and in bring made in year into year,

over next the see the continue don't expect certainly year the with active and in any I of the to next to either that this we or CEO be rest pause transition, to reason So year.

Operator

Castillo The Next Stanley. question comes Morgan from with Angel

Angel Castillo Malpica

comment go to wanted to Just a about costs. earlier logistics back

of discussion talk and lot great the could but So been expecting side, cost you what just half a of you're your in kind those self-help evolution? the kind about maybe second if basket here costs generally of on there's on

Philip Fracassa

versus are this rates we say, of and on. quite second continue to about able have the we expecting favorable rest coming for material that cost all flattish rest worse, the the more self-help logistics it's Yes, year. was would sure. starting the come material into where logistics and when for the to would the play operational likely because But targeted outlook in flat of in of point, frankly, we expect for cost we've year, and integration actions, the presently Angel. out favorable, we seen offset of quarter of -- second do especially with that And entered I certainly been given that for we the has through excellence April, that but year the of year. material again, while believe we probably working bit, be in gotten unfavorable acquisition the where do believe that the things the for that's one do we'll kind to the talk I And the logistics year, to initiatives sort quite and at China. just container going some are a the Thanks, say yes, in be logistics, quarter. the

Angel Castillo Malpica

where generation strong maybe bit. little little then second and of about inventories in kind of cash helpful? capital all little down Very work bit maybe so a point. to talk here about cash help you color just working the and next be maybe bit potentially renewable a helpful. recover cash the Can that? would you're think talked quantify a And year a half. generation back but need And you energy of a just flow year that free you on -- a kind just about then flow, turning flow And Could just you more very seeing as

Richard Kyle

Phil a cash level. the full to the me it on let little take flow inventory, Let start and with bit just I'll

certainly QX from revenue. step-up to looking a we're mentioned, as -- look QX we at in As

of modest So the between a now right year. the now, and inventory end targeting reduction fairly we're

the a might You see see December, but need see we get a cash aggressive to more little year more a really get next November, of year, the feel start inventory is bullish of expecting QX. for flow, progresses, little if on step-up you get a to more would the start again, significant on the year inventory. year, us we the you from the year on on as start the now, more we if it year right the next start pessimistic little year might more the more as be next little as we us cautious to this which a to the about And

Philip Fracassa

Yes.

fourth that. given a the that just standpoint. about capital differently, the standpoint, in some little on bit back fourth of we quarter expecting this We're inventory in and second the see a a second I does unknown, in up business, an will, -- probably would not think half, typically expect seasonality see if we'll a be hinge We we'll tends out Rich with come add, half. that you and always quarter on of hit should the make typically the say, ended the it. fourth down quarter part seasonally working the and from particularly that Normally, see our second quarter see to Rich we'll higher I days I shorter of the seasonal quarter would in a the receivables liquidation, in little From cycle that second would is the come revenue should anything but come in quarter I so the standpoint, that fourth line year. lowest happening A inventory. from what's say, talked bit lot

taxes of the very really cash those for in a will the would have drivers to half up India guide second related year. But we'll that step pay have the half full to we'll we of offset supportive net-net, little to be and our that's see transaction, flow the So of million significantly which that $XXX in than the main that greater bit. second the offset will

Operator

Ritchie with Sachs. comes Goldman question next from The Joe

Joseph Ritchie

past. heavy on cycles the get I'm is ball, you and Rich, wish go if cuts apologize You couple My touched and know have biggest whatever curious, how already. I demand you your -- dark there. customers see so -- have standpoint? to don't this crystal playing your best that you guys for it several in do Obviously, first minutes. of I patterns some right? just take in a question, a of experienced industries from the out -- did have this business long but announced how going forward? prior timing to for I experience normal you utilizing could production a The

Philip Fracassa

left. to is both. gets sector project through distribution we rate, the is metals, see cement, Maybe industries, off-highway continues It's heavy us, respects. did aggregates, it similar we QX, activity we that's the last we big it markets. did to did usually were you, kind MRO moved little for we And the hard is Sure, revenue. a Yes. the predict. them heavy Joe. like because cycle, order they're recurring I'll the intake which industries tell that When to paper, debt softening -- markets it's why I many to along. I'll always hit OE some that, then But bit also those more gas, typically down and pulp hit talk the see spend some continues and all over hit and which late in in into -- about would slows served side generally of oil and That typically one roll of in than

activity in We side seeing metals, are the and on MRO gas, and aggregates, pulp markets like good continued paper, cement. oil

-- Rich revenue which kind started year. last Now the in to of said, is the on as middle of recurring more off-highway we off-highway, of decline

continue the destockings/lower particular, into X And the in normal, of end which sort of normal. So in second into would half. demand -- on then long will X levels. be down that been the we quarters, expecting maybe year the markets, probably year, of have We're pretty those we're by end to is arguably

some to next very interest economic but the we're been step these It's So markets and in up do we predict. on year. to quite for position, have time, situation, if overall rates feel I good dependent think, a will, like and it's you depressed hard

Joseph Ritchie

that lot year. around guess, this moving bit point, of just And helpful, pieces Phil. Got there it. question a we've this are look, impacting I That's danced year margins a are the because margin next for at little

get about we to would next say right it's off year above based from you the X%, this that's be -- on let's how normal environment do incrementals? growth expect incremental year, on Should Like X%, year to we everything X% on this more So a back like margins -- type transpired where your more the into normal? the think jumping point for you businesses.

Philip Fracassa

a committed It's But probably early. to little I bit Yes. targets. the think again, we're long-term still

cycle, make say to just to we're cycle, above average on us not So the XX we've of over to hold the at peak take and -- to that I to at think got that got ] step get which path if margin on or at a up we next the another a [ year, expect would we've would trough. be top

another to would but probably too expect step about I to So take up, specifically early it. talk

Operator

We one question. for have time more

with a final Dankert Capital. so Chris comes And Loop question today from

Christopher Dankert

there just of some there 'XX their maybe just would Or wind move risk 'XX, beyond of kind there's growth. India inside and one this is some I at year in that you of has markets into China as durability been India, beyond? guess legs guess, looking like I'll I expect there? you into of 'XX we India keep risk of kind the and as to impressive look terms it really conceptually, here. Again,

Richard Kyle

there's there. term, for reason there's optimism long-term think good momentum both and I term. longer short Short

think overweighted broad a the is any geography I have it's beneficiary fairly global to think I industrial to that other India a their -- markets. China not are of And beneficiary India based diversification with across that. and some supply of of in companies chains, looking is or

and future. So foreseeable there's optimism the think I reason for for

Operator

the for Sir, today. time or do we have you remarks? final all comments questions have any are Those

Richard Kyle

Yes. Emily. Thank you,

of achieved industrial to this transformation it XX me what couple leadership in of As my and for transition have witnessed in we've very also invested for a of confident thank call of tenure in proud very those be XXX-year-old years a company. this wanted you last quarterly decade. to It the for is my was investment the privilege decades have of time. the their company both to CEO, for followed that that last I a my I last over continue particular, have as role. after and community prosper And out will Timken part during the that over support the that of Those dramatic you company a

at We many of company and for both been employees consistent group have great has level The a years. around high performing world. a the

portfolio is and strong, to to. employees Thanks, employees the shareholders, Our achieve XX,XXX and and Tarak customers years the I and come. back to at forward for look in supporting Timken new heights

Neil. You,

Neil Frohnapple

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

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

Operator

in participating Second Release Earnings today's Thank you for Quarter Conference Timken's Call.

may now You disconnect.

The Timken Company (TKR) 31 Jul 242024 Q2 Earnings call transcript