Donaldson(US:DCI)2022-08-31 18:31Financial Data and Key Metrics Changes - Fiscal 2022 ended with revenue exceeding $3 billion, including a $1 billion contribution from the industrial business [6] - Adjusted earnings per share (EPS) were $2.68, with a fourth-quarter EPS of $0.84, reflecting a 27% year-over-year increase [7][9] - Operating income increased approximately 19% in the fourth quarter, with an operating margin of 14.9%, up 40 basis points year-over-year [26][31] Business Line Data and Key Metrics Changes - Total company sales in the fourth quarter were $890 million, up 15% from the previous year [14] - Engine segment sales were $620 million, an 18% increase, with aftermarket sales up 18% to $442 million [14][16] - Industrial segment sales increased 10% to $270 million, with industrial filtration solutions growing 14% [19] Market Data and Key Metrics Changes - Sales in the Off-Road segment were $108 million, up 21%, driven by high equipment production levels [14] - On-Road sales were $35 million, up 5%, with growth in all major regions except Asia Pacific [15] - China Engine sales decreased by 6% due to market weakness and COVID-19 lockdowns [18] Company Strategy and Development Direction - The company is focused on advancing filtration technology and pursuing organic and inorganic growth opportunities, including acquisitions in the life sciences sector [12][44] - The strategy includes a commitment to higher-margin opportunities and a selective approach to customer projects [36] - The company aims to maintain its leadership in technology-led filtration while managing costs effectively [46] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding stabilization in supply chain challenges and inflationary pressures [11][40] - The outlook for fiscal 2023 includes expectations for record revenue and earnings, with a forecasted operating margin range of 14.5% to 15.1% [22][40] - Concerns about potential recessionary impacts were acknowledged, but management remains confident in the company's resilience [45] Other Important Information - The company returned $281 million to shareholders through dividends and share buybacks [7] - Capital expenditures for fiscal 2023 are projected to be between $115 million and $135 million, focusing on growth initiatives [42] Q&A Session Summary Question: What are the expectations for first versus second half volume in 2023 sales guidance? - Management indicated that sales growth will be stronger in the first half due to easier comparisons, but growth is expected in both halves [51] Question: What was the growth of the Advance and Accelerate portfolio in fiscal 4Q? - The Advance and Accelerate portfolio grew 18% year-over-year and represented about 60% of total business [52] Question: How is the backlog currently compared to historical averages? - The backlog remains strong, although slightly improved, and is still at uncomfortable levels [56] Question: What impact does the lockdown in China have on expectations? - Management is more conservative regarding the outlook in China, factoring in recent experiences [57] Question: How do aftermarket sales typically perform during a recession? - Overall vehicle utilization remains positive, suggesting growth opportunities in the aftermarket [58] Question: What is the expected impact of Russia on revenue? - The impact from Russia is estimated to be about 1% on a consolidated basis, primarily affecting the Engine Aftermarket [71] Question: What is the expected contribution from acquisitions to revenue growth? - The revenue contribution from recent acquisitions is considered relatively immaterial, estimated to be less than $20 million [73] Question: What are the expectations for the Advance and Accelerate portfolio in 2023? - The portfolio is expected to drive revenue growth, with significant contributions anticipated from Off-Road and On-Road segments [80]