B - Earnings call transcript Q1 2022

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Operator

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes Group Inc.

First Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Thank you. Investor may President, your Vice Pitts, Relations, begin you conference. Bill

William Pitts

are thank Rob. XXXX joining me Chief President, Executive Good Vice and you, Streich; Controller, Financial you and earnings Senior Chief Finance morning With Officer, quarter Thank Interim first Marian and for Acker. Officer Vice our us call. and Julie Barnes President, for

corporate the If you can release, our earnings Investor section you Relations press have barnesgroupinc.com. not received a website of our it copy on at of find

will to referring we release earnings posted which our slides call, supplement our During be on the also are website.

financial Our which have discussion today measures in includes certain helpful GAAP These related additional non-GAAP is we measures to accordance the investors. measures believe with information regulations. to reconciled been provide SEC

reconciliation our and opening on part make statements section Securities These differ XXXX. Form are Private be consider forward-looking a as from on call Exchange of statements statements to to subject and Securities our those the filings the that in described certain in website mentioned call, table press the of are question-and-answer Relations forward-looking and corporate with Litigation may and uncertainties submitted results SEC. actual Be both website of available defined projected. filings are Act remarks uncertainties Please that and the the cause today's at to the X-K the risks in risks we barnsgroupinc.com. are These materially during as in Investor periodic our Reform may today's Commission. the and our You session, will that release advised find during through

the Marian provide for results our for our review turn her a up that, now call the outlook to first me call for questions. quarter opening remarks, After updated Julie? open Julie then will we'll Let financial XXXX. and of over

Julie Streich

Thank Bill everyone. good and morning, you,

I'd humanitarian crisis take to continuing like getting quarter's a Before to moment Ukraine. in the details, into address the

violence out and to the those devastation. prayers affected ongoing by and thoughts go Our

of lives All of first or a face expectation significant Barnes many the begins to for of us exceeding earnings quarter the XXXX February solid peace our the quick at resolution some disrupted. of Barnes hope the in headwinds. hostilities rebuilding performance, return and with

we with results growth sequential started in sales March. saw strong a month ending slowly, each January While

quarter's Xx a with ratio of ratio. One of the greater book-to-bill environment a X.XXx, a than indicative was segments highlights of demand seeing both supportive

First sales adjusted ago quarter X% earnings from a per grew were up organic year and X%. share

on driven and first was Aerospace by performance the Industrial revenue pressure expansion. saw quarter Our which strong margin margin weighed several in generated performance. growth points accelerate which

XXXX, healthy, headwinds While likely pressure expect revenues, persist and and low macro point with -- moderate environmental with we demand throughout EPS. will will year to quarter remaining be margins the first we and for the the anticipate for the some

portfolio, Ukraine, we conflict our across ongoing With examined in trade the potential with have including Russia. impacts

For Industrial, million the $X to revenue $X our exposure Russian is range. in minimal annual million with

we other as delivery However, result costs freight including increased of challenges, seen logistical the conflict. have and a

OEM sales not direct market, indirect sales, impact. with With the or there so For OEM sell is Aerospace, respect minimal no do we aftermarket impact. anticipate into we to Russian

and organic in impacted ago, a sales versus supply government for sanctions. COVID-related orders arise. around great should on the watch costs complying a the supply we alternate X% channels a stopped in shipping declined the issue. sanctioned availability current China manufacture teams We our first the Within the continued a modestly up the to Sales challenges, our weakness our Industrial, macro point chain sanctions accordance proved standpoint, is titanium declined absenteeism and by in downward has across rallied businesses. and million $X components Industrial's environment. time, this be Barnes not lockdowns they will sequential item both to broad-based by rapidly approximately buffer X% That into Barnes, of For absenteeism inflation all we to the was in certain supplier. titanium not Russian regions be of At and global were said, spikes agility titanium associated quarter pressure. by through a working much in estimate U.S. quarter. and with maintain costs material we in year segments, impacted such our with assess procuring inventory have organic though showing the the basis. is tough margin been $X this markets. and with mitigate are Operating need net squeezed in Across to From adapt were globe related end million and

greater-than-normal a has costs quarter. over absenteeism the trended to expect remainder early first in down approximately it absenteeism $X continue, of since of level million XXXX. million we While forecast We to similar $X the net of

freight and and million utilities pricing able Through In we million, we the gross in inflation in in addition absenteeism $X million to approximately procurement net impact. the inflation material a saw costs, of were to raw mitigate quarter. $X $X actions, resulting

a million the million expect $X $X quarter. also to second We in net impact

That solidly and down Organic decreased and with X% significantly. and industrial improved are through sequentially were were growth to quarter, up continuing in personal personal of this a ago. year Molding though flat, behind anticipated At the to Solutions, was were flat with at compared medical care, see high and while momentum inflation care positive, general the orders the at our pricing, sales orders up. and March level Automotive XXXX, procurement medical of productivity impact. up said, offset year-over-year. packaging we levels a second orders and packaging While down healthy half organic actions much

expect up sales were Solutions to mid-single sales to up digits. Motion Force organic organic Control, continue be we At & XXXX, X%. up Molding growth For and orders X% organic

improved a of $X further from we decline a bit less million to $X million, X%. digits, both QX. sales saw while quarter is slow sales a improvement general in sequential up interestingly, the sales in anticipated $X impact expected anticipated and and automotive created We primary our quarter. an the Engineered from year anticipate orders anticipate view. $X had first XX%, than to our lift. a automation, organic prior sales organic the expectation. basis, million of was X% Our pushouts quarter, growth growth see single-digit organic first than driver, for be decreased from considerably begin year, We In high did and We mid-single-digit markets sales production the more we orders XXXX. were organic industrial markets revenue organic up XX%. million up second a prior down mid-single down X%. unchanged organic on the Components were Within a automotive orders Full though Automotive

growth organic foresee Our has not full year in as mid-teens. changed the view we sales

For forecast XXXX segment, continue in Industrial digits. we organic the growth high the mid- to to single

operating range However, I have to lowered with XX.X%. adjusted XX.X% our margin the a expectation we discussed, to of headwinds macro

and ago. grew X.XXx $XXX the a delivered Moving in up quarter from increased margin reached ago. up with In points original December versus strong XX% XXX OEM continues Both sales XX%. year the XX% very aftermarket orders growth. from OEM equipment our first million, a and sales Adjusted grew to Aerospace; recovery operating year's businesses year backlog and book-to-bill as manufacturing X% over of XX% business, last quarter. improved a basis

next months. XX of revenue over approximately convert to the backlog expect to this XX% We

continue XXXX, both by narrow-body Boeing. aircraft production anticipate Airbus single-digit the growth We supported in and OEM increased to of high at

airlines returning. continue For and The as XX%, and generated positive XX% MRO demand strong business we should respectively. delivering sales the with performance recovery aftermarket, be strong travel and year-over-year are to growth businesses RSP of looks XX% showing

our the to society. of that social we is addresses published processes, like industry our we year, environment ESG To higher from service high eighth Aerospace growth and I'd latter to now and month, of policies deeply operating initiatives. XX.X%, responsibility our Shifting in For furthering person baseline thank commercial products Ian published this prior outlook. We wishes up we to XX% year, Barnes Ian Both for its of gears, my corporate provide dedication brings Barnes progress markets, adjusted of this benefit Barnes. to Beck our between like of years welcome with Mike In spare report This America's which like and phase parts to found margin to ESG X X honored and March for MRO through the slight increase benefiting water retirement. on is to anticipate the to committed of been and and and in be also greenhouse uptick responsible update President sales. documents spare lead recognized stakeholders, would in annual aerospace an making defense to his and many corporate Aerospace be to to emissions in offer of for committed governance Mike are him business principles. our "about and understanding growth. a Aerospace. remain to minute under our on XXXX trusted corporate and sales as XXXX. range, and forecast one I comments, experience by be ideal close an Newsweek the our one profitable most companies parts XX.X% have by website Newsweek metrics XXs, can the accountability well-deserved most ESG." in gas and America's Reason companies take broad his a new I'd as Scope and from environmental, next the We low the usage. best

Before global in They our a to we thoughts and concluding, end our daily showed Dempsey our markets continue strong I'd and their relative results In team performed environment. to be and them tremendous expect are Aerospace closing, we well we remain like expectation his resilience dynamic and to in to acknowledge supportive. family. highly earnings well. Patrick wish

the pricing, productivity environment management with traction the as the anticipate that we through solid margin significant Clearly, driving Industrial expect macro move business focused holds forward, improving taken also and actions orders We and improvement quarter the will in on we performance. uncertainty. squarely year. procurement gain But

Now, the let me the to over pass detail. for Marian discussion of a financial call

Marian Acker

and thank morning you, Good Julie.

our Slide with first quarter begin of supplement. highlights results me on X Let of our

with per XX%, $XXX first approximately million of $X.XX $XXX,XXX down are effective $X.XX Adjusted the interest was previously margin down per year. and a from low negatively quarter million low ago. $X.XX to absence the or lower was tax from expense charges excludes XX.X% million up adjusted compared were Net in from of income $X.X year ago. a million, tax an in XXXX was earnings essentially sales recorded The X%. diluted ago. Adjusted or sales XX.X% result GILTI down a intangible share was additional first quarter rate restructuring impacted of last X% drivers to expense from per per was as prior period year projected ago. million share quarter, borrowings year to X%. basis, in was increase of year operating last the jurisdictions of or in primary year. operating last net prior a income of X% million, an income global line $XX.X the rate year's a The In the quarter increasing in a quarter. from of $XX.X bps of First Other was $XX.X by an year income related X% tax in decrease sales adjusted $X.XX company's share year average tax FX expense actions. period. XX $X.X to up first million, diluted with On announced a year, compared share $X.XX $XX.X organic income net the Adjusted the this

to performance, segment Industrial. beginning Now with our I'll turn

was quarter lowered were down down exchange foreign by XX% operating million, while First period, from $XX.X X%, prior $XXX X%. sales X% from down sales a ago. was year X%, Organic decreased million, profit unfavorable sales while XXX margin bps. Operating the year

ago in from this Excluding X.X%. XXX million, operating charges declined margin $XX adjusted XX% year profit and adjusted down $XXX,XXX was bps operating to restructuring year, a

manufacturing due headwinds quarter. utilities including Julie freight, As and difficult chain $XXX material, prior period. sales XX% XX% of equipment were profit compared was increased XX%. Original an primarily and productivity challenges inflation, COVID-related decrease are in million, up macroeconomic increased labor, to Aerospace, $XX.X in sales mentioned, lower supply benefiting to sales end from Industrial The the there XX% At a the ongoing was aftermarket million, with and from operating Operating coupled certainly a our due year to increase year and facing recovery ago, aerospace broad-based several absenteeism raw was markets. segment. profit

part Free $XXX,XXX adjusted of Adjusted by $X costs challenges. operating and year due from COVID-related $XX was profit year XXXX productivity approximately operating million supply flow compensation the increased paid the current margin provided drivers performance, was compared in restructuring million ago, cash cash slightly are from $XX of activities unfavorable used expenditures XX.X%, higher flow to operating period. to sales in million was year bps. of use the $XX.X a Excluding cash up this activities from change a million, primary prior in offset million last the Capital million versus down benefiting absenteeism XXX year respect ago. of operating of $X was contribution a were year, by and period. volumes, related $XX source of working to a With incentive chain The to up of cash year. capital XX% from

agreement In basis, rate net as that quarter the of flat rates amendment our credit interest grid. replacing expiring defined XX X.Xx Barnes end of amended I debt-to-EBITDA depending where This be light changes which favorably adopts to our ended is base and at SOFR which upon On also sheet, debt-to-EBITDA the leverage benefit spread X.Xx. LIBOR pricing bps, XX.X as recently we a wanted balance our quarterly XXXX. environment, at by be to will June the rising interest in ratio, to forecasted to Regarding revolving ratio. was The by rate agreement, the we'd change the computed credit XXXX. mention interest

interest reduction a discuss in expense our for when note the year outlook. You'll forecast we

shares were XX Our shares first approximately quarter both outstanding shares. period-end diluted average and million outstanding

XXXX remain we quarter, repurchase X.X authorization. not shares Board's the the repurchase approximately under During stock shares did and million available

our of X supplement. Slide to Moving

updated our discuss XXXX me Let outlook.

to adjusted expect FX Adjusted $X.XX between to the be impact. up due forecast per from operating our at to Industrial with organic updated now the share. be range our EPS slightly to and continue down previous XX% XX% $X.XX having our the year, XX% to end of high the by is $X.XX is XXXX's XX.X%, Adjusted a X% anticipated EPS range ongoing range. X% We expectation sales negative for previous margin pressures to $X.XX, to be in up segment. to reduced The of in from was XX.X%

year, restructuring we third second residual the forecasted on impact $X.XX charges a the For $X.XX and for for expect quarters. with EPS

than actions end We an on closing, of of lower exceeded half, XX% pressure Rounding realized our a items. steam of gathering forecast high million, to a we despite indicates continue and February few earnings split outlook. previous ramp, XX%, XX% book-to-bill, to quarter's anticipated Other shares to XX Interest first expense approximately forecast million other million XXX%. first of million diluted reflects In cash rate We approximately we greater average million, call. tax of expectation a half the XX% $X this and a is and significant outlook second absenteeism conversion $XX challenges, of believe effective CapEx our though subsiding, shared expense half the $XX be than with our out EPS. second good performance. $XX.X in other $X.X pricing our achievable to million, about

headwinds continue We XXXX. expect macro through to

first peak as Operator, those actions of and the the quarters from now the the for questions. open impacts. other Future should pricing pressure call see momentum quarter points. the we'll benefit of to taken we However, mitigate

Operator

Instructions] Your [Operator from of the comes question line Christopher Oppenheimer. from first Glynn

Christopher Glynn

ring-fence Yes. the major I supply. just Maybe timing could the on from a extreme set issue, to potential if curious you impact if Russia, was up alternative titanium there's there.

Julie Streich

the for question, Chris. Thanks Sure.

what would in so sources buffer we something we they quality we already to as with and our working should about to partnering have something do months' So customers our inventory them many suppliers stock backstop checks alternative mentioned, ready have that expect, we're of happen. and begun And apologize, I alternative worth talk I and happen. should also a with have

Christopher Glynn

Okay.

if the to Russian some with would failure the it your proportion ready So minimal What titanium of issue? whether overall follow-up there's source? from a sudden is

Julie Streich

It is our source. primary

Christopher Glynn

you And you good there? prospects pretty Okay. think backfills, have

Julie Streich

market It's open The Yes. a -- there's it. availability. with associated has cost just

trade-off. So that's the

Christopher Glynn

to how think revenue sequentially just margin. the Industrial, for I then And through great. Obviously, year. both increased about Okay, the progression curious and think of

of than We over about have cadence improvement triangulation, leave curious in but our you're seeing you there, XQ. talk kind XX-XX EPS if rather just sequential could XQ to it margin

Julie Streich

expect So of the impact with to the gradual a ramp continuing absenteeism we throughout see year at this would quarter point. second

modeling year. see So in look a really you the pick from half the -- to perspective, up should of a second

Christopher Glynn

And direct I Okay, great. China any on if or lockdowns? that mention indirect you you the did. didn't hear

Julie Streich

of with impacts started there's shift the to in port the down China thus productivity the has contributing been the has disrupt from ability et been the while are there So We to accept disrupt been -- some That of congestion, year customers' part lockdowns Tianjin our locked products. Suzhou not facility. And lockdown of issues. our Shanghai the that cetera. are far, because lockdown really

quarter would there that of And second and our this anticipate some lessen point, we, QX. at QX into factored that So impact is impact forecast. sold in

Operator

bear Your line next the Sam Securities. me, question from Struhsaker comes Truist from with of,

Samuel Struhsaker

you I'm just this kind pressure? of some your structured might morning. curious of about what implications be through of -- terms able pass on guys kind did any in materials, I and was to pricing Aerospace contracts that to for like of see for be Mike

Julie Streich

all Sam. of Yes. have for Aerospace material the pass-through. question, our long-term an Thanks From raw perspective, agreements

inflation headwinds seeing facing the the not on from side same on Aerospace really Industrial that we're So we're side. the

Samuel Struhsaker

all said side guys materials on of you're I at kind concerned or you of on to, you Aerospace Industrial about planning. Are with least other any then are kind your And great. Okay, okay the that titanium, there current guys guess?

Julie Streich

our late, castings slowing supplies, our alarming. castings then that's as with new. that's There's challenges respectively. with some And there's have basic chain supply but ongoing of in challenges nothing been intermittent And of nothing been

-- major point. at that disrupt concerns any would there's have really this offer don't no, I would that our So production we

Samuel Struhsaker

like here. seems just increase possibility a last Okay, bit a one there's worse. one demand could chain then great. getting be that supply It would little And

in curious Industrial of the of year. confidence you moving for kind just how forward to So are viewing that some address the guys relation to

Julie Streich

repeat the part the first you question please? Can of again,

Samuel Struhsaker

Yes.

Sorry.

Just moving be throughout moving forward supply of the the confidence guys kind gauge in throughout year. given Industrial your potentially that the with you it do year? with rest demand could possibility, of chain looks of worsening like in increase the the rest forward How

Julie Streich

we're leveraging dynamics a definitely lot stock we're No, procurement mitigate they and just said, happening think coming for eye Yes. I that. on buffer We may play. looking We're top impacted of areas. by risk. what's a help were from supply some at China. from and it's What the some there perspective enterprise significantly environment our closely alternate on is staying areas a can for everything as more of sources the system increasing they as dynamic be there's is team logistics to chain teams keeping an our top I in staying example, on if in challenging could parts our impacts. environment. close And are as a is supply of be think doing that as But have That could shutdowns that

William Pitts

Sam, some flow indirect working the cash increase of capital month. in that Yes. the to And impacts Marian in impacts is the or referred direct of impacting

and see a in part have our of You the creeped balance inventories bring. that can of bit what may anticipation is chain on supply sheet, up

Operator

from from UBS. Myles line Your of question Walton next the comes

Louis Raffetto

make Anything is X back out? Or sure, want I on Bill. anything that needs number? Myles. I prior the just to want Julie, in there with all years? to going guess, Raffetto about to to just that this it quarter? different on, year Marian, It's Louis comp. incentive spread It's come I than for

Marian Acker

Lou, this is Marian.

year you incentive flow, of the on the cash payout is what So see comp. prior the

we first out So the quarter. in pay

than better year first ago COVID. a we year. So higher payout The course, XXXX, of XXXX, in we XXXX saw year off coming a saw much was what was the of

Louis Raffetto

good. Okay,

with of you to kind I offset Just you Julie, sort $X my were the -- having of as Industrial. mid-teen there able And still sort guess that there. that million, -- mentioned into extra $X margins we over to commentary of added sort I million incrementally think business? question and guess, about sort that you had 'XX you to that [indiscernible] more then switch million make going of if of costs appreciate about $X of and the up difficult? I forward, of level we anything of Is the that think impact. can do I else does more getting rest in 'XX, even their

Julie Streich

them we're there's impact. focusing have we're So Clearly, the and will headwinds things offset of a as as inflationary on. number continue, long working it to an

enterprise this we we facilities, take how the how looking focusing at mentioned, we I How productivity flow out control. again, mid-teen not neutral At a do how forward, level, seek net will what as our total the potential that I HX, back of take system, we we on cost that without we're can do we leveraging, sources. in And costs. However, we're have our system, there, do the different that do confidence given at position. we'll the we optimize, through in anticipate, to We're have get going driving be portfolio question, be but there. to XXXX point,

Louis Raffetto

And again, then seeing great. that it's any chain side. out understand into in there going -- Is Is their pull OE of expected? are on you Are their anything supply the you out I sort your there pulling there the the -- customers? as the normal of just they side? ordinary? chain. Okay, but from supply Is guess, I Aerospace

William Pitts

it's any out nothing on Yes. whether of to timing, seen Aerospace ordinary. the Lou, have I haven't the variance been side, expectations kind of what our

Julie Streich

No. No.

Louis Raffetto

And make great. then Okay, you Marian. just correct, want -- heard so to just I one sure

million this the going $X be $X previously? and year said million other You was income to

Marian Acker

Correct.

Operator

from Your next Sam line from Davidson. question comes the of Summerville D.A.

Matt Summerville

actually is This Yes. Matt.

auto single finer this continuing least we're put to year-end. still at least mid-single supply that business business, see in Help, being to guide year would the down high okay be through ramp the that digits. want confidence but with with, to chain at about challenging this me heavily point I I I kind through remainder a of talk to orders year-end, Industrial through looked So global assume book-to-bill give of think, on going to the disrupted. up the

get just help organic or me that view. So with comfortable

Julie Streich

a It's where quarter first first Yes. starting the the is supports going with second a demand the and ramp we good book the the question. are the into And trajectory today. saw we step in order quarter. And

step. So first that's the

leverage without right? first risk environment next our looked strategic we the will your ramp marketing to you have into risk, spaces. there addition, in go piece our of very our penetration they new outside year traditional us would expectations That forward initiatives forecast. and offer to allows I sales from step continuing as is after hasn't said, much. team there's of the anybody markets upon But of to who not grow the was confident there's orders deliver our and there. one, moving And say which yes, And And are In quarter to do that, confidence support no would this of we're that the that second sales? around half we our

William Pitts

a Matt, Yes. went facilities through lot strong. pretty The and got we January add and better news as our mentioned, and Julie good is, quarter, was of better that with COVID. March was the I'd difficult as very a month with sequentially things associated absenteeism

Julie Streich

Yes.

William Pitts

environment the confidence underlying our what demand kind we year. for remaining So in supportive gives see of that's and the maintaining us forecast

Julie Streich

pricing We at given looked is might just able I that second thing add the half other the mitigate one the the that impact. the most of inflation. thing actions add that other on if I one to could talked We think -- hold. taking are being about I

Matt Summerville

at X%, this I in and automation, you've years. operating over evolved we the the Solutions universe, the but into of look migrated I really how to sitting this that are Industrial understand guess given given it companies Molding margin like my a just I'm might structurally, majority be performance platform has it broader not overwhelming record trying I how think worst in kind X%? today my coverage about are I'm And When margins. printing here at compare, is of comparison years, do going fair anyway. like business XX to at When necessarily

William Pitts

ahead, Go Julie.

Julie Streich

No, no, okay. that's

heavily see how are, not question in impacts. the productivity be fair when volume you the inflation There with can were we sure lot we has is But have We a certainly through by would time. level, do of where a hit hoped to you appreciate have that at absenteeism. a it's facilities, the where I'm So coming and it's Matt, this are, point lost we we entire we an had that quarter, to earlier XXX about out during We margin the than it my XX% which the is ballpark, basis the locations as of million the which had perhaps out. January while parts And of sell little in impacted $X bit quantified for performance. is of a up points quarter population our higher quarter, be could estimate COVID significantly in it that. to

have a see see That normally line don't absenteeism how team that inflation. of we're volume want which in landed and on turning absenteeism of having some people jobs people did offset there's a out. we with which We up in their corner having productivity do, productivity. the will immediate We are. had also I we the should terms what bottom did productivity. with down where to our other recovery So terms have doing the underplay great the And to inflation going comes an that that and we we efforts. team don't drop that that's job coming said, us through that hit impact to they

we leveraging our system on own operating inflation. of down continue our we Our our surcharge double X and in have will what inflation within gain the control walls. to efforts efforts teams our more focusing traction, offsetting to own And the increasing and internal productivity

we're where answers question that's but So your I'm if not sure that at.

Matt Summerville

if you susceptible And titanium much in have sure How now? make open from I that the resource that Understood. valid you scenario? And more you another then you that from to and I the time. be are spot source hand case inventory same a supplier, be I'm titanium would realize pricing forced the for on to market? Or do would it long mechanism under that's just to Russia. issue. one been the sure understand follow-up still pass-through

Julie Streich

Thanks, Matt.

mentioned So of for we titanium. have I material pricing. substantial amount through stock a And buffer have of our as many contracts raw passed earlier,

we to should more be would need VR of -- would able contracts. vast through costly sources shift passed to So majority be titanium, of the that

William Pitts

are have, agreements Matt. long-term that There in Yes. the we protections

Operator

And over at you there remarks. closing Bill Mr. the I turn further are no this Pitts, back some time. call for questions to

William Pitts

would second you this Thank forward conference we We like XXXX with look now thank joining will earnings call. quarter next us all we and you, call. for speaking Rob. today's conclude to with on to our XX you morning Rob, July

Operator

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

now may You disconnect.

Barnes (B) 29 Apr 222022 Q1 Earnings call transcript