Timken(US:TKR)2021-11-01 20:20Financial Data and Key Metrics Changes - Revenue for the third quarter was $1.037 billion, up 16% year-over-year and 13% higher than the previous record set in Q3 2019 [7][28] - Earnings per share reached $1.18, a record for the third quarter, up $0.04 from the prior record [9][28] - EBITDA margins declined 220 basis points year-over-year to 17.2% [9][34] Business Line Data and Key Metrics Changes - Process Industries sales were $550 million, up 18% from last year, with organic growth of approximately 14.5% [39] - Mobile Industries sales were $487 million, up 13.7% year-over-year, with organic growth nearly 12% [41] - Adjusted EBITDA for Process Industries was $131 million (23.8% of sales), while Mobile Industries was $58 million (11.9% of sales) [40][42] Market Data and Key Metrics Changes - Latin America saw a 27% increase in sales, Europe was up 22%, North America increased by 10%, and Asia grew by 7% [32][33] - Strong growth was noted across most sectors, particularly in distribution and off-highway markets [39][41] Company Strategy and Development Direction - The company plans to continue focusing on M&A, particularly in Process Industries, while maintaining a strong balance sheet [21][94] - Timken aims to improve operational efficiency and pricing strategies to offset cost increases and supply chain challenges [20][47] - The company is committed to sustainability and has released its 2020 Corporate Social Responsibility report [23][24] Management's Comments on Operating Environment and Future Outlook - Management noted that demand remains strong despite supply chain challenges, with expectations for continued growth into 2022 [8][18] - The company anticipates a sequential decline in revenue from Q3 to Q4, but still expects solid year-on-year growth [16][17] - Management expressed confidence in achieving record revenue and earnings in 2022, despite ongoing inflationary pressures [27][28] Other Important Information - The company is experiencing significant cost increases in materials, logistics, and labor, impacting margins [10][36] - Timken has a strong cash flow performance, with operating cash flow of $106 million and free cash flow of $63 million in Q3 [44][45] Q&A Session Summary Question: Pricing situation and expectations for 2022 - Management acknowledged that they started implementing price increases late and are looking to catch up in the coming months [54] - They expect to cover cost increases with pricing and aim for positive price-cost dynamics in 2022 [55][80] Question: Impact of supply chain disruptions on pricing - Management indicated that supply chain disruptions, particularly in logistics, were significant in Q3 and are expected to continue affecting costs [62] - They noted that while logistics costs have risen, they are working to implement price increases to mitigate these impacts [62][80] Question: Expectations for SG&A costs moving forward - Management expects some pressure on SG&A costs due to base wage inflation and increased spending to support higher sales levels [70][71] - They anticipate maintaining SG&A as a percentage of sales at a reasonable level despite absolute dollar increases [70] Question: Growth expectations in alternative energy - Management is planning for moderate growth in the renewable energy sector, with expectations for double-digit growth this year but a more cautious outlook for next year [72] Question: Capital allocation and M&A strategy - The company remains committed to M&A, particularly in Process Industries, and is focused on diversifying its portfolio [94]