Barnes (US:B)2020-10-23 17:40Financial Data and Key Metrics Changes - Total sales for Q3 2020 decreased by 28% year-over-year, with organic sales down 26% due to lower volumes from the pandemic's impact [9][20] - Sequentially, total sales improved by 14% from Q2 2020, primarily driven by the industrial segment [9][20] - Adjusted operating income decreased by 53% compared to the previous year, with adjusted operating margin declining by 640 basis points to 11.7% [9][21] - Earnings per share were $0.30, down 66% from the previous year, but better than expectations set in July [9][21] Business Segment Data and Key Metrics Changes - Industrial Segment: Sales were $197 million, down 15% year-over-year, but increased by 19% sequentially from Q2 [22][23] - Aerospace Segment: Sales were $72 million, down nearly 50% year-over-year, with OEM sales down 44% and aftermarket down 58% [14][24] - Molding Solutions: Medical molds and hot runners saw solid sales, with year-over-year increases in packaging and personal care orders [11] - Force & Motion Control: Orders and sales showed modest sequential improvement, with general industrial orders trending positively [12][22] Market Data and Key Metrics Changes - Manufacturing PMIs in the U.S. and Europe have risen significantly from their Q2 lows, indicating positive signs of recovery [10] - The global automotive production market is expected to see mid-teens growth in 2021, despite being down in 2020 [12] Company Strategy and Development Direction - The company is focused on managing through the pandemic while pursuing strategic initiatives for future growth [8][19] - A long-term agreement with GE Aviation for the Leap Engine Program is expected to generate over $700 million in sales through 2032, enhancing the company's position in the aerospace market [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery signs in industrial markets and the potential for gradual improvement in aerospace as passenger traffic increases [19][40] - The company is preparing for potential challenges due to COVID-19 spikes in Europe but remains focused on operational continuity [36][38] Other Important Information - The company has made significant progress in its ESG initiatives, including setting environmental targets for 2025 [16][18] - Year-to-date cash provided by operating activities was $163 million, reflecting ongoing working capital improvements [24] Q&A Session Summary Question: Automation orders growth - Management confirmed that automation orders were up in the high-teens, reflecting overall growth across various customers and product lines [28][29] Question: Tax rate implications - Management explained that the tax rate increase is driven by lower income in low tax jurisdictions and the impact of GILTI, with expectations for 2021 tax rates between 27% to 29% [30][31] Question: Aerospace aftermarket performance - Management noted that the aftermarket saw a decline in Q3, with expectations for flat revenues in Q4, driven by narrow-body engine demand [44][45] Question: OEM sequential uptick - Management indicated that the sequential uptick in OEM was due to improved visibility into customer acceptance and reduced uncertainty compared to Q2 [48] Question: GE contract details - Management clarified that the $700 million GE contract consists of approximately half extension of existing work and half new incremental work [54] Question: Electric vehicle impact - Management acknowledged that electric vehicle trends are early in their impact but are expected to drive demand for automotive molding solutions [56]