Newpark Resources(US:NR)2021-08-07 20:28Financial Data and Key Metrics Changes - Consolidated revenues improved 1% sequentially to $142 million, with a 28% increase in international Fluid Systems and a 15% improvement in Industrial Solutions rental and service revenues [6][9][15] - Second quarter EBITDA generation was $7 million [6] - Net loss in the second quarter was $0.07 per share, compared to a net loss of $0.06 per share in the first quarter and a net loss of $0.29 per share in the second quarter of the previous year [20] Business Line Data and Key Metrics Changes - Industrial Solutions segment revenues declined 15% sequentially to $45 million, with rental and service revenues improving 15% sequentially to $33 million [7][13] - Fluids Systems segment revenues improved 11% sequentially to $97 million, with U.S. land revenues increasing 24% sequentially [9][15] - International revenues in the Fluids segment improved 28% sequentially to $35 million, benefiting from project start-ups [9][15] Market Data and Key Metrics Changes - U.S. land revenues increased by $21 million or 74% year-over-year, significantly outpacing the 16% increase in market rig count [17] - International revenues improved $6 million or 22% year-over-year, benefiting from new project startups and recovery in several European markets [17] Company Strategy and Development Direction - The company is focused on expanding and diversifying the Industrial Solutions business, particularly in the power transmission market, which contributed 35% of first half revenues [30][32] - The company aims to reshape its cost structure to generate profitable growth and provide an acceptable return on capital [11][29] - The company is optimistic about the long-term market fundamentals in key industries, despite ongoing challenges such as cost inflation and COVID variants [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed encouragement regarding the improving longer-term fundamentals in both business segments, while acknowledging significant inflationary pressures on raw materials and transportation [23][29] - The company expects Q3 revenues for the Industrial Solutions segment to pull back modestly to roughly $40 million, with operating margins declining into the low to mid-teens [25] - In Fluids Systems, international markets are expected to recover through the second half of 2021, with revenues anticipated to grow by a low-teens percentage in Q3 [26] Other Important Information - SG&A costs were $23 million in the second quarter, reflecting a $2 million increase from both the prior quarter and the second quarter of last year [18] - The company ended the second quarter with a total debt balance of $78 million and a cash balance of $35 million, resulting in a modest 14% debt-to-capital ratio [22] Q&A Session Summary Question: Can you help me better understand the unfavorable sales mix in the U.S. market? - Management noted an unusually high amount of liquid oil-based mud in the product mix, which is expected to normalize in Q3, negatively impacting margins [36] Question: Is breakeven EBITDA possible in Fluids in Q3? - Management indicated that top line growth should be enough to achieve EBITDA positive in Q3, with a return to positive income expected in Q4 [40] Question: Where is cost inflation most acute? - Management highlighted that raw material price increases and transportation costs are significant challenges, with proactive discussions ongoing to pass costs onto customers [41][43] Question: Looking to 2022, is there reason to expect continued growth in the utility sector? - Management expressed confidence in structural growth in the utility sector, driven by energy transition trends [46] Question: What was the CapEx designated for in Q1, and what is the outlook for future CapEx? - Management clarified that Q1 CapEx was heavily concentrated in the mat business to meet demand, but expects limited CapEx in the near term [49] Question: Can you provide an update on completion and stimulation fluid penetration efforts? - Management reported solid progress in stimulation fluids, with successful trials and expanding customer footprints in various regions [50][52]