Metallus(US:MTUS)2019-05-03 16:46Financial Data and Key Metrics Changes - The company reported net income of $4.2 million or $0.09 per diluted share, an improvement of $6 million over the first quarter last year [16] - EBITDA was $26.3 million, representing a $5 million increase over the same period last year, with an EBITDA margin expansion of 150 basis points [17] - Operating cash flow was a use of $34 million in the first quarter 2019, primarily due to the timing of supplier payments [21] Business Line Data and Key Metrics Changes - Shipments in the mobile segment were 10% above the fourth quarter and 2% above the first quarter last year, with expectations for second quarter shipments to be in line with the first quarter [18] - Energy shipments increased 8% year-over-year but declined sequentially from the fourth quarter 2018, with expectations for second quarter energy shipments to be similar to the first quarter [19] - Industrial shipments decreased 3% compared to the fourth quarter and 10% compared to the first quarter 2018, with expectations for second quarter industrial shipments to be similar to the first quarter [20] Market Data and Key Metrics Changes - The North American light vehicle production forecast for 2019 is 16.8 million units, slightly lower than last year but stable with an improving mix of heavier SUVs and trucks [18] - The market saw a slight decline in drilling activity, with a high number of drilled but uncompleted wells impacting energy demand [13] Company Strategy and Development Direction - The company is focused on creating customized and innovative solutions, delivering quality products, and operating with integrity, leveraging technological leadership and operational flexibility [8] - A lean initiative was launched to review all facets of the business, aiming for approximately $50 million in annualized sustainable savings [25] - The company plans to accelerate maintenance activities to better position itself for anticipated stronger demand in the second half of the year [14] Management's Comments on Operating Environment and Future Outlook - The second quarter is not performing as initially expected, with lower customer demand impacting operations [13] - Management anticipates stable automotive and general industrial markets in the second half, with growth in mining, rail, military, and oil and gas [14] - Microeconomic indicators suggest a stronger second half, despite current challenges [13] Other Important Information - Capital expenditures for the first quarter were $4 million, with full-year 2019 capital spending expected to be approximately $50 million, a 25% increase from 2018 [22] - The company has sufficient liquidity of $165 million as of March 31, 2019 [22] Q&A Session Summary Question: Understanding the cost savings program - The $30 million in 2019 savings and $50 million in annualized savings will have a cash component, with some items providing true cash savings while others improve margins through efficiency [32][33] Question: Maintenance work in the second half of the year - There is still substantial maintenance work planned for the second half, but management is confident in managing both maintenance and production schedules [35] Question: Capital expenditures and spending trends - Capital expenditures are expected to increase in the second half of the year, with a higher level of spending typically seen as the year progresses [39][40] Question: Pricing weakness in the automotive sector - The pricing weakness was driven by a product mix shift, selling fewer higher-priced tubes and more lower-priced bars [41] Question: Exposure to oil and gas business - The company has broad exposure across oil and gas activities, with expectations for improved balance in drilling and completion activities in the second half of the year [43] Question: Raw material spread as a headwind - The raw material spread is expected to be a sizeable headwind in the second quarter, but it is anticipated to lessen as markets recover in the second half [45][46] Question: Update on trade issues - Ongoing trade negotiations are being monitored closely, with expectations that negotiations may shift from tariffs to quotas, which could be more effective in managing imports [47][48]