Lincoln Electric(US:LECO)2022-02-10 21:14Financial Data and Key Metrics Changes - The company achieved record sales of $3.2 billion in 2021, a 22% increase from the previous year, with 19% organic growth and 2% from acquisitions [8][10] - Adjusted earnings per share rose 50% to a record $6.22, with record returns of 23.9% [10][11] - Cash generation increased to $365 million, representing approximately 81% cash conversion, lower than the standard 100% performance [10][11] - The adjusted operating income margin increased by 240 basis points to 14.8% [8] Business Line Data and Key Metrics Changes - The Americas Welding segment's adjusted EBIT increased 21% to approximately $84 million, with organic sales up 24% [22] - The International Welding segment's adjusted EBIT nearly doubled to $28 million, with organic sales increasing approximately 13% [23] - The Harris Products Group saw a 16% increase in adjusted EBIT to $16 million, with organic sales up approximately 12% [25] Market Data and Key Metrics Changes - Organic sales growth was achieved across all end markets, with a strong mid-30% increase in construction infrastructure [13] - North America and European organic growth outpaced Asia Pacific due to slow industrial output in China [15] - Customers expressed needs for added capacity, driven by high demand, record backlogs, and low inventory levels [15] Company Strategy and Development Direction - The company is focused on its 2025 Higher Standard Strategy, targeting high single-digit to low double-digit sales growth from 2020 to 2025 [34][36] - The strategy includes advancing operational excellence, richening the business mix, and leveraging the Lincoln business system for greater efficiencies [36] - The company aims for an average operating income margin of 16% between 2020 and 2025, with a high teens to low 20% EPS growth rate [37] Management's Comments on Operating Environment and Future Outlook - Management anticipates navigating a dynamic operating environment in 2022, expecting a high single-digit to low double-digit organic growth rate [29] - The company plans to invest $70 million to $80 million in capital expenditures in 2022, with an expected cash conversion rate of approximately 90% [31] - Management expressed confidence in the demand profile and backlog levels entering 2022, indicating strong momentum [42][45] Other Important Information - The company increased its dividend by nearly 10%, marking the 26th consecutive increase [11] - The company maintained a solid balance sheet with approximately $729 million in liquidity and no near-term debt maturities [11][28] Q&A Session Summary Question: How is Lincoln's positioning and demand momentum entering 2022? - Management noted strong momentum from Q4 2021 continuing into early 2022, with strong backlogs primarily in equipment and automation [42] Question: What are the volume versus price contributions to the 2022 sales guide? - Management indicated that 2021 performance was about half volume and half price, with expectations for more price contribution in the first half of 2022 due to prior pricing actions [43][44] Question: What is the outlook for infrastructure spending and related catalysts? - Management highlighted that increased infrastructure spending is expected to positively impact various segments, including general industries and automation [46][47] Question: What is the expected contribution of automation to growth in 2022? - Management expects automation to grow at double-digit rates, driven by strong demand and backlog [72] Question: How does the company view the international business volume growth potential for 2022? - Management expects solid volume growth in the international business, excluding China, despite current challenges in that market [68] Question: What are the expectations for LIFO charges in 2022? - Management indicated that LIFO charges are factored into the operating plan, with expectations for a disciplined price/cost neutral approach [60][62] Question: How significant is the automation business in revenue now? - The automation business is currently at a run rate of around $500 million globally [95]