TKR - Earnings call transcript Q4 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 Fourth Quarter Earnings Release Conference Call. [Operator Instructions]

Mr. your begin may you conference. Frohnapple,

Neil Frohnapple

the and Thank quarter President to appreciate for fourth everyone, earnings you, of joining conference today. Relations Vice operator, XXXX Frohnapple, call. our Neil We welcome, This us Company. Timken Investor you is

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

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

me today Timken the Chief are Tarak Mehta; Company's CEO, With Financial President and our and Phil Fracassa, Officer.

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

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 Company, the that, like turn With I in the for to you Tarak. interest now thank call your

Tarak Mehta

a stakeholders. I as perspectives Thank results share bit outlook priorities engaging will well with quarter begin morning, also and of year Thanks, with I from the our Neil, Then our XXXX. and you different as for more everyone. us. joining for good for fourth will

European Organically, the fourth our Let's start was weak year. down The Overall, quarter. X.X% decreased a revenue X.X%. main was last of demand. versus look driver revenue revenue with at

XX.X%, continued Americas decline and from XX last was and was Pacific points easier. margins respect to share $X.XX, year. XX% as last got third down comps at India modestly was its up With Asia moderating Adjusted growth profitability, from from EBITDA the XXX points quarter. slightly down per earnings path. in down basis basis adjusted with China year came

quarter from favorable a fourth mix along margins both actions cost Our benefited with segments. in

In CGI well in performed its full margins of very as first Timken. addition, part accretive with quarter

Finally, the fourth which took we cash for in about full generated us $XXX $XXX of million year. flow free the million quarter,

the initial Now at XXXX. outlook let's take a look for

organic for of current taking We anticipate uncertainty, in demand the be Given to slightly lower the continued cautious for XXXX. economic the sales we're Europe. the weakness a on and due will outlook level view year

of industrial our impact remain we expect market tariffs conditions the and organic we start our lower also year-on-year and current the have guidance as incorporated in challenging guidance. the We assumes half, first to year, into sales China

midpoint. our This On Mexico more to in guiding overall tariffs, the have at impacts tariff sourcing mainly into impact later. are Canada go did from actions outlook. cautious be cost the mitigate we the XXXX adjusted modestly Phil currency and will we to we demand XXXX. down EPS and like unfavorable Overall, and reflects specifics price

We that challenges the ahead. offset to expect savings see some our cost we partially of

generate free outlook XXXX. lower the million SG&A. CapEx net organic flattish and savings and is in least will actions, management it comes deliver incremental match when operative savings introductions a million working inflation tactics, footprint chain cash currency despite margin to is $XXX with capital, cost driving are at supply cost along in accelerating which discretionary reduced in offset with input sizable of This expected in $XX expect The demand, We headwind. our around should our and softer lower of sales to XXXX. by Improvements initiatives to spending flow accomplished headcount, combined

addition, investing in best the potential. will returns In highest services product prioritize with the lines growth and and we

on We to continue approach capital allocation. our disciplined plan

increase accretive our growing look in M&A and markets at option will current presence We remain share in the environment. to an buybacks attractive also

to would look to opportunities in like observations, performance Timken's a XXXX improve a and few priorities summary moments future, take I the to with high-level ahead. our for we provide As lie that on the you

and partners. Since also visit States, I United China. Phil I've our met of had meetings had with also and with I meetings, going some experience, today along and to and perspective and summary on with you started and been personal throughout share those of with short expectations you get with Timken from has XX a It chance in I your many other very India with the a own shareholders their September, my I'll Europe, perspective XX customers forward. locations observations. channel our informative engaging and us to performance and a an

strengths, customers solve are with those products Timken's many. Beginning who help who our there problems. technical Let's complex people start and services, deliver with our quality

positive a I've team's to help and During better customers my very on got feedback visits, our our products design ability solutions.

our But We has can our capital importantly, allocation returns. portfolio more also diversified approach to financial what lifted improving by margins and we better? to do performance faster us a challenge have over and for grow which The disciplined is the years.

to performance, market when our need of margins. reduce especially We also to it comes cycles the on impact

their performance very them in local markets. our was the cost customers to clear go of faster U.S., shall core we being product-centric. and want for the can of it capabilities versus we Europe the product customers own value technical by and development. believe met our China, to When putting I with needs how help being innovation this? means Timken and This So expertise customer-centric and more design do meet I and engineering

of footprint, and Given growth and we portfolio an our local of evaluating our in product also applications, need our with manufacturing become We're with their lines our incorporate needs local. for combined their to eye understanding services more products, profitability. entire towards

and level vertical reduce across integration growth the We better portfolio entire organic our capital and return of also going to We're R&D, higher portfolio. parts will of the prioritize forward. our for looking resources

It's a recently visited investment our good India our bearings plant which additional in will gains production. industrial for I support later the with and Bharuch, market new open in It's this will Indian expansion share which grown year I business. past the and significantly impressed [indiscernible] customers. the over team's to manufacturing with decade, has facility, and for technology the world-class a was more the as offering portfolio enthusiasm bringing

We with segments, accelerate equipment and also the and to Motion original general Bearings potential between Industrial have cross-selling both manufacturers. Engineered partners

look Commercial a take let's for is attractive example, which an growth us. the Marine segment, an at market As

package have lubrication the With recent of more. full a to marine customers with and addition Solutions, now bearings, we couplings, offer Sealing systems Lagersmit our

portfolio partners shared the a Lagersmit of thanks for of well location business Marine of Lagersmit as relationships rest during few opening our interesting plants from bearings with also our doors my go-to-market broader portfolio. in relationship The visit to the see to The that our of back. in Timken's together and segment. customer the the wins weeks Lagersmit Timken's the Lagersmit. deep they segments team already as here broader benefiting for and are We Rotterdam see is that channel Asia presence good U.S., many opportunities Motion Industrial in for

opportunities such company. We throughout have the many

harness more have business the today. that but year. headwinds later sell cash Timken, many the in in improvements the generate also of as we wanted to look cost priorities want I have that opportunities portfolio. plans for So mind the the just few we strength on, to this Timken's we still profitable we this will share provided forward today is a guidance. learning continuously and We improve details that see early The and on work in It's ways year. a of higher company. challenges sharing the And we million part of more savings for about in and can this the our will and process most that have I'm our $XX of I counter level action to

marketplace. passionate, is firmly who value services have because colleagues in this in customers. we team, to the ability believe to our I years are innovated for Timken XXX delight than products win and proposition deliver more our successful quality our that and dedicated

planned of in will our Motions want someone been proposition. acknowledge advancing leader after I the Industrial a their career to to Finally, of who's value retire retirement Chris the Timken. Coughlin, XX-year instrumental business,

transition. With qualified in for has Timken's business the diversifying profitability and initiatives, strategic the innovation, Motion years. ensure product a M&A personally candidates. pivotal for important the continue leader role thank externally, outlook. to find of review that businesses, success. the I and have Motion him process call job. company's business we would and will over and the stable Organic and and seamless a that, to played like year, detailed Phil contributions numbers leadership very Industrial and launched of the let the capable improving Industrial for advance to at the Chris Chris turn more Both growth most a Phil? have many to to a to allowing this search end me Chris to internally good the we of over the retire growing his We've the

Philip Fracassa

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

in X.X% of review, were quarter Revenue at For down start earnings presentation the billion, XX.X% I'm from financial results. on the a came fourth margins at of share adjusted per came $X.XX materials summary quarter the going for year. EBITDA to $X.XX. for the in Adjusted last XX Slide with our and quarter

XX. to Slide Turning

pricing sales remained were sales down at positive. look closer a while X.X%. performance. Volumes take Let's quarter lower, our were Organically, fourth

the a while at in rest quarter, line. namely to of CGI X.X% Lagersmit the and currency the of translation Looking foreign modest headwind acquisitions, recent net walk, top the revenue growth contributed was

region, and net of side by the the On you right-hand currency can organic acquisition excluding see growth impacts. slide,

We in good marine, mainly the growth continued due Europe. Pacific, we as EMEA region. general comment due XXXX. rate briefly were off-highway. heading the saw lower slowdown were industrial sectors. and lower moderated. revenue post industrial, our in weakest down rest again region expected. X% distribution by the year. distribution into largest Asia we sectors automation renewable the to X%. we decline in the higher rail of last was heavy quarter China of region, and to but me Most was continued off-highway the continued from and Let and Europe Western solid we solid with finally, about up lower, XX% In show led energy Americas, and sector were to to in demand, in down has rail down growth were the region And while as The on each our resiliency India remains

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

in down While than in due cost the favorable mix quarter performance. and expected margins improved better came year-on-year, to

and manufacturing dollars in of partially Looking quarter, benefit for was versus and last decrease the the of logistics that mix, SG&A driven favorable lower currency offset the closely see the costs. change more sales acquisitions lower price the adjusted volume can at higher expense. impact year by EBITDA you and and mainly by

me was both this continues generally on also well as price the to quarter respect positive comment net environment. With the outperformed in as hold in both in further key OE segments was sectors Let positive of a fourth quarter. some mix, pricing in drivers. again pricing the up Mix little distribution to segments in

which benefited addition, from at a project quarter, revenue drove higher mix. we favorable marine In sizable in the

at and we lower. last were higher as costs. Looking material Logistics material costs while were expected, logistics costs modestly year versus

the Mexico. of ramp with capacity On was in continued the associated driven manufacturing year-over-year quarter impact belts line, costs the in by new unfavorable our and inflation performance

year a these and last quarter. In than initiatives repeat. a recovery note cost offset supplier we addition, impact reduction favorable of warranty more did the Collectively, settlement that the in had items that favorable not

recent wage and Looking Currency positive tactics $X million actions to to cost year at accretive that inflation. which line. losses of down than the adjusted transaction last company quarter, some prior EBITDA finally, contributing our as repeat. was had were the in year-on-year acquisitions $X margins. period SG&A And perform well, other did offset more the Expenses not from million as continue other was

items, adjusted special year, per reflecting above but GAAP net On benefit items share XX. $X includes our line the an the We $X.XX other flow. year-over-year, net current expense charges. Moving cash million of basis, basis. the debt of income net down period million from of on quarter diluted per which earned $X.XX pay amortization and share, down in expectations. With the fourth we from respect a is expense to for acquisition quarter comprised posted XX% $X.XX lower to The last or Slide below interest from of some was $XX

flat, interest Our came while the were from depreciation in the and adjusted earnings. at XX% based in tax shares slightly roughly our diluted but geographic finally, up quarter noncontrolling rate with last line And in for up expense mix year of on quarter. expectations was

starting sales In X.X%, the lines truck Slide lower Engineered were slightly by sales Bearings move fourth were on results, world. the of million, last or in year. XX. from were $XXX Europe, Organically, demand energy, Engineered rest Now year, market X.X% with Bearings market driven expecting. partially last across the industrial down quarter, Among sales less by and down segment let's to were heavy business offset sectors, general renewable auto we higher but the the and more lower what of along versus off-highway, and end

compared $XXX quarter On of headwind positive quarter, $XXX aerospace and was last year. Currency sales aftermarket. or was impact revenue the divestitures year-over-year. Engineered which in acquisitions industrial more or growth sales the of million sector net we the of side, up the XX.X% Rail delivered was the strong is were the a adjusted favorable. and of in slightly to XX.X% while Bearings than distribution to in also EBITDA million X%,

Our and of higher segment margin lower reflects volume costs, offset manufacturing favorable the price/mix. partially by and impact logistics

Now was Motion let's $XXX saw Organically, X.X% sales demand America. by revenue XX. in that Europe. & with sales by lower higher lower, Western offset business Motion down platforms year-over-year. was motion but in Services continued Belts of multiyear were last demand year a partially highs, was also Slide ag linear turn slightly a at Industrial the quarter, and down from pricing. Lubrication to Most Chain declined In backlog ended slightly year. and million, impacted the lower North Industrial fourth as lower our on weakness were

or the was was Motion of Industrial On year, platform adjusted the XX.X% slightly the significantly organic sales million sales the last in on offsetting up sales positive a lower X.X% currency marine revenue comp. Acquisitions contributed our Drive higher the of XX.X% System side, line, to while $XX compared quarter military of million EBITDA quarter. for or top $XX tough negative. was completely

our volume lower margin costs, was the ramp segment to including year, impacted last belt in Our capacity new impact and capitalized manufacturing of higher by and Mexico. related higher variances costs

was recent I quarter, that On the mentioned the including price mix accretive to favorable also side, marine and benefited the from positive were from in earlier. mix, lower. acquisitions we margins expense SG&A

Moving $XX the free favorable with $XXX higher shareholders than was in This our of flow our quarterly Slide generated payment CapEx and the through driven $XX to million, free cash We in cash capital brought XXXth From for cash buybacks guidance. the million flow quarter $XX quarter. operating million flow of by during million, returned $XXX performance. working after to $XXX a standpoint, XX. year, of year, fourth strong million full about line dividend. our most consecutive to million capital And the we recent share allocation last

our middle we range. net targeted year in reduced looking Xx, nearly And with sheet, balance during the net the quarter at million of right adjusted fourth the by at EBITDA ended debt debt $XXX the to and

Now with summary XXXX Slide let's on turn to our a initial XX. outlook for

a the for in we're at full for view limited a our past on CGI of U.S. for continued which overall under visibility. the given stronger midpoint As on of market outlook, current just down headwind reflect rates, to year to year this be The Starting on acquisition and for range X.X% Tarak currency completed X% year, softness September in uncertainty, revenue contribute to X% planning we're down a exchange the planning the full or economic to XXXX. dollar. based X% versus the global over our Europe, and be total, cautious down we're in revenue sales X% the mentioned, outlook, to taking

about to the be for first at down year and organic Excluding that organically be X% lower This slightly planning we're currency, guidance midpoint. the full And Europe, with for sales in our the year-over-year portfolio. lower in the reflects half. volumes will higher across revenue assumes acquisitions pricing

$X.XX to $X.XX. On the earnings adjusted range of bottom line, we share the in expect per

that XXXX outlook split EBITDA This of and the currency. the XX% sales half in at XX% to XX% think around For despite to a flat EPS in adjusted modeling year midpoint, organic outlook with XX% XXXX consolidated headwind half. to and from the implies will XX.X% first be purposes, sizable our margin adjusted earnings the full second roughly lower be

of total reflects outlook benefit costs. million labor savings earlier, margin cost are highlighted that $XX which the more continued the input than Our inflation in in other Tarak offsetting and

year. the that half We also in half accretive be guidance up actions our be to year-on-year expect in assumes the down CGI ramp second margins to tough year-on-year to be as the the through and comps of margins. midpoint on our Move first cost will then

Moving to cash free flow.

more $XXX We significant income. step-up CapEx or expect taxes, over conversion planning million of of around and as years This than winding less which larger XXXX full is We're least impact to XXX% and offset are recent year on X.X% projects to the This at net than working expected down performance, lower earnings. GAAP are capital of reflects for lower reduced the now. from for some generate favorable is sales. CapEx a

continue will dollars manufacturing growth optimizing and footprint, our margin on CapEx and supporting objectives. to We our focus our long-term

tax illustration various and drivers outlook. Finally, EPS XXXX million be XX%. to $XXX net interest in Slide And full of the to XX on expense we a anticipate included reference, the the as adjusted in to provide impact year we XXXX rate for net our a remain high-level of adjusted deck around the

Here, large a you'll from see expected currency. impact

note evaluate as impact to to guidance that from potential and please Mexico continue does Canada our tariffs, monitor any tariffs situation. include to we that related respect not With and

And to impact would be expect in the guidance tariffs we and include and we time on fairly the but pricing through mitigate tariff immaterial China, surcharges, incremental additional of supply the to chain initiatives our sourcing XX% over tactics. back we and does mitigation. impact after did China other expect as However, XXXX, that note

We will tariff as update clearer we the view a gain our guidance overall needed as situation. on

a the for and to the XXXX industrial execution their best on revenue year be in XXX-year and history our finish strong to it guidance, third Timken thank we're to stands summarize, occurs. posted of I'd for delivering To a earnings solid team our entire when the In company. environment. tough we'll an like year and EPS margin as the ready capitalize and XXXX, focused on recovery in

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

Operator

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

Stephen Volkmann

maybe picture, ISM now XXXX sort of inflect So of the kind with big we've the starting outlook seen off for just and...

Philip Fracassa

you Steve, this you is could speak difficulty having hearing little the could say Steve, you in We're Phil, -- bit? up room. a

Stephen Volkmann

Sure. Hold on about Sorry one Is second. that. better? this

Philip Fracassa

A Go little better. ahead.

Stephen Volkmann

if You want me you can back to to. come

Philip Fracassa

go No, can hear We you. ahead.

Stephen Volkmann

Okay.

Sorry.

wanted seem if holding picture you be I'm activity a shorter I about of seen your And of leading So good fairly business? to a for your as there's big kind we've things at conservative. usually because you outlook to of some for but obviously, that's anything indicators are nature the pretty just back has specifically the you, bit. ISM 'XX think wondering cycle better distributors. inflected on those the Both we

Tarak Mehta

down. I mean, are give the given we a And you can said, driven us. we where it segments. are bit market, as by most primarily demand for have uncertainty, Thanks, a the reason outlook comes sectors, Steve. we specific to perspective the being on maybe, overall -- when Phil, main And a see market. the cautious we And we that's on for the are cautious cautious we Europe,

Philip Fracassa

for cautious the I think take reasons the certainly right, a the that's Steve. Obviously, to but No, is see, ISM decide to turning mentioned. outlook Yes. did positive on Tarak view we nice

flat services. that we Europe being of sectors, is of then which the it down minus cost X. slightly, highlighted in getting of as and think And sectors aerospace to sort positive world slightly rest up, So the

did being The last the industries, bit strong of little negative I given had point, until heavy do the in to us markets a the think And expect later we what we you [indiscernible] cycle of which to not -- off-highway, down bit factor year for in down we're sectors year. tends or might one it. but be We is being recovery we comp, to But factor tough see stability, were the net-net, overall, it. a theme little hesitant this at going year-on-year. the

that the took on the outlook we So see. you view

Stephen Volkmann

got enough. magnitude, might Fair just your right. sounds then through All we like what tariffs, does of be so of sort think kind follow-up can COGS that happen? a play Maybe you Phil. give Okay. It Mexico, just China about of covered. you've how of can exposed part it the us But on to might order

Philip Fracassa

sure. Yes,

theme largest is think I the a as but is know, point footprint, the in manufacturing U.S. tariffs global footprint So you on we've the really, our -- got

relatively the Canada, think -- all I will been Mexico strength. for strength. take have stuff tariffs, speaking, be over a a effect. tactics -- it's short-term can So the it's to goods the headwind. do Relative to time be It a to It take mitigation we world. would continue obviously, flowing to

we we in that expect a would of employ. through source or we amount to other per So it all you of headwind over millions did X mid-single-digit might a relatively tactics near-term as time had if But XXXX, 'XX, tariffs, countries be not ways, or changes that with will, surcharges, chain huge, it, if call pricing all probably supply mitigate we plant month. the would short XX% to tune back

We of world, that's we're modeling of itself, still was the a it's import but the mitigation, so about from wasn't gist obviously, guide. resolves impact. of gist impacts premature the across but it the hopeful it. But fairly we're big kind on And also situation that's rest XX% And the those. don't it. the to that overall to China, a talk And then of China, lot the relative after material

Operator

from Our next question Evercore with comes ISI. Raso David

David Raso

question. on level? to have couple being a X% less of a book-to-bill picture maybe similar first that the with less of the you at the half dovetailing Do 'XX than wondering last into? bigger then quarter, backlog was fourth than X.X% sales And in the could the the we've follow-up if of us of seen you sort a organic quarters, little or size the decline I I help see recently

Philip Fracassa

Yes. can in. Maybe jump Tarak and I'll start

lead the today is than book ago. the down where supportive is year year, guide. being order you, like it what last were book certainly tell would times I we a shorter that versus But David, order of of where was in terms of where full some we to today it year-over-year, So quoting today it attributable it maybe year feel is the is

a bit to your that QX, up QX. way slightly order revenue to little terms that magnitude then little order As the second we through half, of in in second of question decline, an less be the would than kind the a with year. what quarter flat think the look think move best in first bit of have fourth we more organic as and decline I for the half then half, than to of about the the in of of saw the in the we And second on

David Raso

now about can reduction to magnitude size? size, $XX give we taking, million actions just taken, some of actions magnitude, think taking. sense, already Obviously, That's you sense obviously larger the we've should gross trying just are things you've the savings customers. Just at thinking actions you're seen should when of of similar us talked of be the lot of it get of had of order a already. the But thinking sense just get of you're look a you're right. the helpful. of considering All And factories, to a lot a of we to that how headcount my that them, that follow-up, a

Tarak Mehta

we are on we about been mean, million, specifically the you clear clarification, details Just challenging, $XX I something Are the or million? case talking have key as buckets. it the see is in a the in addition where on $XX more

David Raso

that you mentioned we year. moving about that some hear million, actions of larger Not just $XX this thinking the might forward, later about you're

should the cost to further what Just thoughts? a thinking trying Just of that of or could curious portfolio some all savings we expect be other sense activity? some about from get be of actions you're might here,

Tarak Mehta

then the whether to come we've planning think specifics, other it's level the said. to more order of with it believe when of are And or do. comes year I whether appropriate what at the details next quite later we'll is as to performance, been it whether need time, move portfolio come cost, it's we that the clear back team to the we'll to you we will in with take in back the actions XXXX, business

Philip Fracassa

maybe guide this and really Yes. margin add, And just that if on year I out David, delivering focused we the put very focused we're on there. could margin

was designed So help just more margins on it. million the really us $XX to a protect and color maybe little

I ramp through going to move think it's the year. as we

the started run 'XX, exit number we'd in around XX% we implies And probably the Think the ramp. where mainly to equal, based as of all end year the of it run going rate just else equal, our rate, million all in of expect So fourth quarter, end, that's terms to first order we'll on continue it's second on $XX to half of if carryover the into of half. helpful. XXXX, that gain in in year probably the half, else first XX% in the the

Operator

with Blair The Oppenheimer next question comes from Co. Bryan &

Bryan Blair

and Can of detail split phasing break To for breakout there. $XX million helpful terms you a Bearings, respectively, benefits of COGS then across out or stay the Industrial Motion and SG&A, approximate Corporate? maybe on minute, the the in and

Philip Fracassa

Sure, Bryan. Happy to do it.

So of that. X/X a in Industrial Bearing, with to little deeper respect bit think and Bearings X/X dive around it as I'll and maybe Motion, Motion, Industrial around on

probably surprising. So not on Motion, Industrial it's

talked Some of items the what are before. you with about we've

to -- behind Mexico, to larger material new individual tell to tactics more be is other the consolidating a estimate, projects. it's well. have a if then chain thing, tactics, XX-XX-ish tactics, projects the as operative to it. Bearings, we would think had more would Europe. there SG&A. in you, efficiencies relative but some as facilities in COGS capacity the I it's we're I lot working your And belt on the biggest it's But and lubrication mean, last online headcount some the of SG&A than chain of coming probably component a it. well about got way do big Those we've the in right supply probably like. lot certainly COGS also So point, I of labor reduction it's as are some And

Tarak Mehta

to And component continuous mean, biggest said, is operational also, just what I Phil to the overall. add improvement of one the

So with the we to in emphasis good and improve. the from and we employees are support focus progress XXXX, saw increasing

Bryan Blair

you detail. organic across and where few had most for organic how Tarak, profitable see detail more more the going range the Perhaps a you and a opportunities the forward? strategy influence And Appreciate offer your months attractive portfolio, capital Timken on bit growth Understood. at the may you now. those deployment can insights

Tarak Mehta

there, Yes. go we take details absolutely already concrete profitable I to which are also But see view. of segments team for it specifics reasons. into take mean, very of both point a most I area lines, a forward, not and we product focusing of how where point the from to view, growth will new and the an look. but is about obvious on the opportunities starting customer are new

to portfolio be exposure of did as highlight going us as comes of action. will one and taking component, mention be are forward portfolio and the good when then based growth continue see side. focus well vertical to of in I on the we making and the it end our forward that's So as higher would that The exposed profitability some markets. to end already, growth well we specific will decisions start of and and of integration will portfolio then of when level the it push to And market to we like terms for to first it, we areas the results comes it, assessment focus,

Operator

from with comes Kyle The next Menges Citi. question

Kyle Menges

up I on question. wanted last to follow that

you were many press saw Tarak, I release, there in So said the opportunities.

the portfolio. see the product in You strength

as fruit you globe, is portfolio? any there kind So gaps? toured you product to any just low-hanging the And I could you've around going, sort product of maybe guess, the of portfolio then see term, the strengthen longer see where

Tarak Mehta

customer-centric. became comes and clear, it the Thanks, travels, need more Kyle. we also, to and In mentioned more I more -- it it become

are product-focused customer-centric. We We company. more very become need to a

really will can opportunity needs the see and an are making in in and we sure the in upcoming the performance. -- very we of can for China even in relevant important the That's more push and States, customers' short United Specifically part what our the do. local contribute our to travel tailored India, next is a products make that what midterm, as us I which

mid- of and term, deploy I as very the would but I to long market are capital economic we view new core said, on strength as environment. as well to we the the take then go thorough to the our given overall both way portfolio, opportunities a and going And mean, existing where demand the to be also the

portfolio. the on take can we perspective the that's So

Kyle Menges

in how tariffs noticed any Helpful. in and I Maybe higher just in the and tariffs And give Any year-over-year. guide XXXX then responding cost half we impacts. should you're actions increases to sort into half? second on through so to in we're I there that about to those those taking sort and reflects effect. of was help pricing? through us of kind us that how first then prepared, go pass maybe delay the slightly XXXX some recall -- of versus pricing actions then think And difference pricing the pricing I guess, think And

Tarak Mehta

do going So -- the let's guide XXXX. take Yes, first we we current question. into do assumptions, current the and there increase in slight your price the part out expect of a with

And our holding gap the seen the time a yes, specifics increase the the give bit so to comes in up. far, we this, taken, between with didn't there typically the seem tariff, and we to the impact job. teams. cost our can it since a But When what time be Maybe, you In tariff are good magnitude of the profitability. we've we XXXX, necessarily a we've it actions were specifics Phil, a and you is with -- 'XX a see recover. of and taking size we hard well. there given more look the did pretty Overall, as that

Philip Fracassa

-- to pricing question, terms year, even how right. bps when got do the pricing, the say, of year it's than given slightly say And as Sure. it No, in the the it. I for higher across thanks just pricing, hit And the think on we across last year. it XX of happy less of I kind think Kyle. it's would Tarak pretty

price put first of or say. delta no there we half, on I And would can note, surcharges real half so second the So where tariffs, lag. then a through, be

surcharges. can tactics distribution, pretty In it be So pricing will and be typically the quick. main mitigation

quarter of less a it quarter Let's think or as a than or less.

be contract. tend OEMs by contract to

covered got be as recall. time, are X the that. So than of can I mainly would quarters it lion's involved, little where was surcharges situation within so. take which it's contract But a quarters, a of share bit renegotiations, say, a couple tariffs a you'll China quarter the it, X, call Where or we it maybe longer last can

very tough move So will we would but does eye it the picture, confident offset be to feel which bigger And what obviously, we'll on that is to forward. we it. overall predict, an we and it, keep can the we offset demand as concern

Operator

Our next Morgan Stanley. Angel question with comes Castillo from

Angel Castillo Malpica

trends far you're January. maybe that, particular, see you to, you in across think what made, until if want just cautious back on comment key guess, maybe direction? was order wondering wanted I kind the you seeing of comment I change And you verticals? if said demand or go to markets you to step could you on I thus end Any either comment could be in the improving. I in

Tarak Mehta

January I mean, our plan with it's our coming much as line what far and is. pretty as in guide goes,

plan. is but to looks then we let's no on short like, So the to much situation have -- actual a said, change relative what real summary so demand we far. January as what pretty said see And that's going

Philip Fracassa

add, Yes. the rest we would of It more maybe And one Angel, really year. the have visibility I quarter obviously, across out. was decent

saw the weakness had we in tough the given as the just in a given increase, normal end I to we sequentially as on normally less than quarter. could we the fourth are quarter step just just little expect a marine, up comp the quarter, maybe year the there QX, comment first do we revenue does, Europe expecting So strength in had from well as it fourth if although to we to

So if And year-over-year, a we'd range. with margins imply it, mid-single-digit organic hundred currency revenue then story, be And being to when year-over-year nicely you because the real be of savings on year. looking the margins about I quarter. think points standpoint, just It reason about margins down then through comp. think sort the cost margin of you the cost just low- -- similar think basis to a down And down difficult ramp, expect it lower move first probably high year step mid-single digits in as from higher year-on-year was on improve we'll pattern last from for in year-over-year for to to and some as of improvement from in being on Main the probably then revenue, we year the but actions. normal a the point see sort up we're couple to for the margins. our was margins, QX beyond sequential all the

Tarak Mehta

said, Phil our now that focus is much very we see. as And look, uncertainty short-term costs given on the right

challenging we to versus see want to we -- fully XXXX do profitability same we environment team a is which focused So can more we levels as of XXXX. did the the see if in similar manage in

Angel Castillo Malpica

wanted to That's go very back And maybe footprint. the helpful. I on asset just

your vertical was footprint your in integration investment. or desire kind to just particular, the you from willingness dynamic invest how it kind to overlay of as of growth? Any a have lot around the some whether think U.S. Mexico, it's continuing trade certain of the belts you where growth. you about maybe initiatives or uncertainty been consider has kind just or I in accelerating do advance policy your I in and terms wondering of markets, talked on implications new of of

the help the how but about really was guess, you could I thinking us the in just as have kind It footprint, flagged, ways tariffs wasn't you investments? are with deal you if kind of that understand one Just that. of to of terms

Tarak Mehta

overview. with And for region its proposition a customers in serving customers strategy We start we Mexico provides to tariffs, we sustained the when bigger U.S. look it That's are. value where be United one is serve us And It the and #X initiative, over But the turnover. into local want mid- terms and the today it's in believe for comes of and based is very a to our the example, term still in footprint have that long-term to the on Obviously, of the there. market. market biggest biggest belts locations have markets. long region. a to how XX was for local in -- the they the to compelling productivity our Take priority. States, already we customers take the for perspective, Let's longer-term that

by of So in country." And U.S. that's operations served majority be our helping "in U.S. country, the us the vast the is turnover in for

how -- that's strategic with we given the to have the of But And that's deal and we So how we then perspective what of are on you that will overall the seeing side. uncertainty we're thinking gives the a market. hopefully, that's reality bit do. overall

Operator

question comes from D.A. next Shlisky Our Davidson. Mike with

Michael Shlisky

comments into cross-selling. a of little I some dive wanted on deeper your to

to you opportunity? example. give number take long to good is broad realize one that what a of might as kind a think guess, from of and cross-selling mentioned you could untapped how I maybe as I Lagersmit maybe you potential us think it amount the

Tarak Mehta

We just Thanks, few we examples. do giving on areas Mike. what what examples I'm is are focus sales can as do we what say, we to and going on entire across you you a I the can mean, see exactly institutional more a are a the organization. few basis,

we organization solution visit our close see specific And organization bearings. up is the with them example, bearings. that next just So And with who obviously, potential come customer we a we're looking then who have, X,XXX bearings, lubrication. connect find on to an site passing a our we to technical looking sales to where very the to relevance seals two extremely customers to set have some schemes ensure parts to on and as design high. leads, And is have we incentive we're of when our to the

deeper, be. it's it. comes on they area later at the will in come numbers, and plan to specifics. where Later to going have Now numbers have year, hard look put the what That's probably the a to more an year like, this point, into we could we we'll in the when with more we dive back see details comprehensive when the could which what we're might these just numbers it

Michael Shlisky

minutes we're and XX about asked Maybe call it no secondly, the into yet. about one's Great. here

we of through going might that's of go Asia. Renewable that it might like perhaps? projects have and what's update up. Or light during energy the work but as XXXX, can might in down particular quarters on seeing end been how the will out bring the of that tunnel this Curious as at there. here? just It update any you if in to timing So you be any I couple quarter, it how sounds us happening the next

Tarak Mehta

seems a level, low XXXX said, we overall sales lower expect in We overall. flattish the at and low as function projects -- level. will energy think to is to It's it level market be policy. we have running the wind say a not I Yes, a of found a

performing and the most expectations. when of lower level. order and of So subsequent it the And to wouldn't decline majority but levels market, the the continues to it running I specifically have the want to when comes this we to revenue at call on comes comes renewables, at a wind, gone the be anything to solar through the that, it our vast when of is

see wind don't have we so in solar dynamics the as So same we seen in far.

Philip Fracassa

nice we as see did hoped. in there. fourth Mike, renewable Yes. expected we it the say, And a Tarak had we had And moderate said, is as as of would rate in quarter to stability I decline and see

quarter, growth last and it's reaffirm of And didn't of more 'XX, So only we stability between about that. flattish then we revenue. we kind I -- see think I if think sort now, in saw talked and

about, is that think market the we do in encouraging. stability that but Tarak expect that I flattish that talked So growth do

Operator

Raymond The next James. Thein question comes with from Tim

Timothy Thein

a you've just you of the but what I'm noted stocking was what or of the curious you're growth for don't or in wallet distribution, had And there. just look not I many seen not question sales you've gaining there declines. your 'XX function with some share on or if close North still where reporting you're or distributors that probably daily results public a America. and they're first of immaterial perhaps year-over-year about maybe best -- talk to maybe one, obviously in on more this have distribution and in X think levels the it's quarters neither, can it's sales if or line specifically row up of And industrial just levels you The broadly, there I'm obviously, wondering metrics, that. changes the if stocking perfectly And not at maybe that's one to, I fairly maybe of America? just just assumptions include North X But

Tarak Mehta

well with Thanks, distributors us, it our increasing. share as Tim. I'll just performing been might said. believe Yes, give you a we has for quick We update of wallet commentary. be

And You happy of performance, their seem expect cannot look versus what performance our I would remember, to we quite When we're we the you comes be very as distribution when we and be in moderate distribution, when have the to the it broadly, wallet is it precise, increasing say. be still comes more share broadly year-on-year. years. our diversified we a to our to bit I said, last with performance at the while portfolio performance, quite about

said. in quarter we flattish in that saw bit XXXX So relative as the growth we in the a means we saw especially to the of XXXX, fourth acceleration

So we're being a cautious. again bit

their Given optimistic performance, over distribution. terms to in be we don't want of

Philip Fracassa

still pretty have last year have just this the little consistent particularly the of good we where we sort inventories outlook like bit of strength as feel North and in levels, destocking assuming we Tim, Tarak with Europe the on. add, maybe would flattish -- was going may saw overall But I year, Yes. visibility America said, a cautious... that given at

Timothy Thein

topic entailing you not be All terms have to mentioned -- have something the And Timken, about opportunity model? can just know maybe earlier ago what what can years a the vertical right. -- it's many XX in then business, thought in you in things had more one competitive would on something steel terms Tarak, integration, your where may of but you I maybe of don't maybe that would it. but a for I an remarks capital-light divulge that reasons, reducing however maybe have for that? expand when Got everything. you was been and want that speak I of something of to But of in you terms years

Tarak Mehta

across at looking to work integration performance we of are our team and different around think by Traveling parts that the and these looking I opportunities pockets at the least a more done more our versus but intensity, are -- an vertical when delivery. of the we world, go today, say, or it I across -- to thanks. less the seen operations And I good accelerate good vertical would can Yes, comes have seen we've to demand area -- we asset-light aggressive of flexibility CapEx the are portfolio. reduce bit yes, model, we we go and broader wouldn't have part where can to increase And integration using model a that's from what we the focused. in fluctuations our

us going based opportunities overnight, seen where It to it's we've what some happen the will team results. what has we on not at an least take time. -- see area and are It's of done terms in but we

Philip Fracassa

in in it's It's a than by the XXXX. so. CapEx also It is before, bit way, already -- reflected lighter our also

Operator

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

Steve Barger

And the Tarak, maybe question somewhat. is related this to last

does practice? Just some that to performance. with look customers contributing being You doing design embedding work? engineers what or about relevant mean more talked being more that like in customer-centric customer or Does outsourced

Tarak Mehta

and very very No and more involving is our than customers design, the the in even it Look, became product the technical we capabilities. that competence Steve. team What today. is I valued -- clear customers-centric thanks, our mean we travels, terms of very, in are are in

about tailored market And you today specific China, to both as design specific be well portfolio the needs looking and than more product means customers ensure markets price are as that segments. products from on if about think that the India, these these at performance in they about I different for think more quite point value our the they to -- tend our based customers are markets. in So of think the -- U.S. being specific with look

to as then lubrication an And is before, do a almost we for customer-centric. the more every bearing. have comes need have broader bearings, it when focus portfolio, opportunity, primary the certainly with other the I've for That's part who's somebody discussed being doing they

customers talk business, we our brand, to Now take opportunities they for can and look a a need. have relationships have competence can lubrication we and creating through obviously, And the technical the lubrication selectively examples of for our see many and lubrication portfolio our business. putting years. who and And our we given at seals

terms can these So local. are bit and inputs areas being customer our a offer of portfolio and local of where our customer we for in in more become terms own focused

Steve Barger

then, So better of do kind your right if engineers so the customer hearing of for it's that customer really can application your in-region that I'm requirements more strategy, understand you having cross-selling? you

Tarak Mehta

Yes.

region, in sure to our customer On but that region. the portfolio make part requirement the side, product customers' are we the also absolutely, of needs that produce the for

That's in local and they product customers on engineers example in the X, in price good on the have is portfolio. X regions the more business a the that and in the wind imagine input with component we the of bit the about. directional An last engineers the want. the some what progress. application months, bit the a the can bit you being change done and what a cost performance So both less that That we talking means design getting and -- global, our are are from

Steve Barger

Got it. one And follow-up. then quick just

of favorable mean having some to how you more reviewing go focusing are the which expansion? parts portfolio You product to market. potentially also profitable as less exiting that and talked headwinds structural you or on about that Does lines margin see

Tarak Mehta

early. I mean, bit too it's a

back with exactly giving later answer the question. As we said, to the your more fall we come an specifics in on in year

with back in more the year. specifics come later will We

Operator

from comes with The next question Feniger Michael Bank America. of

Michael Feniger

I know little a running we're long.

or just -- quarter that pull regular a you a pull in about sorts seemed there's little or can or any anything the from there election, post a sense customers, flag? even tariffs, hearing your before end if but you see would prebuy of January, maybe to of is want the on any forward Just forward distributors with commentary of a

Philip Fracassa

I lot quarter we say unusual a in mean, Mike, I fourth No, it anything a around no. say it. I that I'm impacted internally good you glad would that. prebuy of question. no, of be have an didn't kind And that -- in way. would the actually significance material in would we see of asked would inquired terms

Michael Feniger

know a lot and good about on just there. hear And Perfect. stabilization I commentary of the the lastly, you guys renewables gave to

maybe some there some are pickup around Just signs pricing of pressure there.

little guys guys you seeing cycle think there. are That's even local content. bit sea I weaker. a for a being you don't earlier push more change actually I if just flagged about a know the little

pricing any the highlight? Just seeing on side want you're you of the comments to that renewables

Tarak Mehta

that I increase as 'XX, in been can see have pressure. requirements the and we market in portfolio indications early are intensity don't while to share both we XXXX, 'XX profitability our drop said, of in. our mean, side a volume well the you to side. see such the are when changing as what any the happens, in imagine half we And the sure on that's prices meet and for customer competitiveness We and relative under latter going assumption that dynamics stabilizing might towards our mean case the

Operator

Goldman next question with Joe Ritchie from Sachs. Our comes

Joseph Ritchie

And comments. this? I like million know, Phil, of the a I have pretty $XX this what the think guess, the quick quarter? manufacturing -- XX a things prepared on you of for guys on can you mentioned cost we a ones. happened couple for item in But big was I where item. the your double-click Like bridge bridge, couple Slide

Philip Fracassa

variances There's difficult call, settlement. standpoint benefits really had, -- that that favorable warranty inventory it's we we an Last a Joe. last large year. say, year's from really We and this last we talked was a of favorable. also see settlement a year great didn't comp. couple a pretty year this -- question, through. had had supplier, things came I year-over-year, And we supplier year, on we Last would We of customer amount accounting favorable had No, on. had that repeat about some going capitalized

would that normal say, and the I rest sort last of that that's see actions. repeat. not $XX we the million benefits be big was and offset on that a year by a from of that did reduction chunk slide a you cost would inflation the So of big But number -- had actually the chunk

as see we we So won't that degree. forward the continue move to same

Joseph Ritchie

year. going basically what your end you potentially market And broader an at and to you When Okay. if for XXXX confidence is about close your -- down there your yes, in, you number, key actually, you is customers? last then set from your that's baked short initial -- in with I guess, don't that organic in know, guide, fairly were as just on that based is short conversations like back that is just risk maybe most organic makes I business question level number. growth I the the organic came X.X% construct there cycle. to of any calling do thinking and the kind pretty standpoint? downside think guide maybe the sense. the about risk recognize that And to guidance a think XXXX you're of And of think and you having any the fully But

Tarak Mehta

I I right now our performance would delivering think is say, the cycle. aim keep to higher to

everything the of much see it that programs much its weeks, So cost ball and very the on profitability make is those impact we've on in couple demand. are 'XX in the last heard very doesn't it with a potential difficult focus It's the crystal to through easier, along and lines.

market. tuned we in being because see are uncertainty sure we to very line. are the in then much making costs the team So that And cautious is the the

later let's short growth that. And the and the then perspective. year we happens on term right deliver now making cost our from in So a focus sure see is in what margin,

Operator

Thank you. no remarks? are at There remaining time. or do final this any questions Sir, have comments you

Neil Frohnapple

for Thanks, joining And today. everyone, you, us thank Emily.

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

Operator

fourth Thank call. you release earnings conference Timken's participating quarter in for

disconnect. now may You

The Timken Company (TKR) 5 Feb 252024 Q4 Earnings call transcript