Barnes (US:B)2022-10-28 17:25Financial Data and Key Metrics Changes - Third quarter sales were $315 million, down 3% year-over-year, with organic sales increasing by 2% [15] - Operating profit was $30 million, down 31% from $43.7 million last year, with adjusted operating income at $39 million, down 11% [15][16] - Net income for the quarter was $17 million or $0.33 per share, compared to $27.9 million or $0.55 per share a year ago [16] - Adjusted operating margin was 12.4%, down 110 basis points from 13.5% a year ago [15] Segment Performance Changes - Industrial Segment: Sales were $204 million, down 12% year-over-year, with organic sales decreasing by 4% [18] - Aerospace Segment: Sales were $111 million, up 18% from a year ago, primarily driven by a 55% increase in aftermarket sales [22] - Molding Solutions: Organic orders increased by 15% year-over-year, while organic sales decreased by 9% [20] - Automation: Organic orders were up 22%, while organic sales declined by 6% [21] Market Data and Key Metrics Changes - Foreign exchange negatively impacted sales by 6% [15] - Book-to-bill ratio for the Industrial segment was 1.03x for the third quarter [19] - Aerospace OEM backlog remained solid at $729 million, with expectations to convert approximately 45% to revenue over the next 12 months [23] Company Strategy and Industry Competition - The company is focusing on driving revenue, improving profitability, and securing backlog for future growth [8] - A restructuring plan is in place to achieve approximately $26 million in annual savings with a total restructuring cost of $29 million [11] - The company is pausing M&A activity in the Industrial segment to focus on integration and rationalization [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Aerospace segment's recovery and potential for growth in military and MRO markets [42] - The company anticipates continued inflationary pressures in 2023 and is focused on mitigating these through pricing strategies [56] - Management emphasized the need for improved commercial leadership and operational efficiency in the Industrial segment [49] Other Important Information - Patrick Dempsey, Executive Vice Chairman, retired for personal reasons [13] - Year-to-date cash provided by operating activities was $43 million, down from $128 million in the prior year [24] - The company expects adjusted EPS to be in the range of $1.90 to $2 per share for 2022 [26] Q&A Session Summary Question: Comments on Aerospace margins and productivity - Management indicated that supply chain challenges and mix issues contributed to margin performance [30] Question: Thoughts on backlog and orders - Management clarified that the slowdown in orders is a timing issue and not a cause for concern [31] Question: Revenue impact from facility closures - Management is evaluating product lines and considering rationalization to improve efficiency [38] Question: Supply chain dynamics and inventory management - Management is focused on mitigating inflationary effects through pricing and value engineering [56] Question: Exposure to energy-related disruptions in Europe - Management is particularly sensitive to operations in Germany and Italy but does not foresee significant issues currently [59]