Quaker(US:KWR)2025-05-02 13:32Financial Data and Key Metrics Changes - First quarter net sales were $443 million, a decline of 6% year-over-year or 3% on a constant currency basis [8][24] - Volumes declined approximately 1.5%, with new business wins and acquisitions contributing approximately 1% [25] - Gross margins improved 120 basis points to 36.4% compared to the lows in the fourth quarter of 2024, but declined year-over-year due to higher raw material costs [10][26] - Adjusted EBITDA for the first quarter was $69 million, reflecting a sequential increase of $4 million, with adjusted EBITDA margins at 15.6% [11][26] Business Line Data and Key Metrics Changes - Asia Pacific segment net sales declined 2% year-over-year, but organic volumes increased approximately 1% [27] - EMEA segment net sales were down 7% year-over-year, with total sales volumes declining 3% [29] - The Americas segment net sales declined 7% year-over-year, with volumes down 3% due to soft industrial activity [30] Market Data and Key Metrics Changes - Overall market demand was softer than anticipated, with aggregate market declines estimated at a low to mid single-digit percentage [6][21] - The company outperformed the aggregate of the end markets, particularly in the Asia Pacific segment, which showed growth despite challenging conditions [9][10] Company Strategy and Development Direction - The company is focused on returning to growth, reducing complexity, and effectively deploying capital [11][12] - Strategic investments include acquiring three companies to enhance the portfolio and expand the addressable market [7][19] - The company is advancing a $20 million cost program expected to deliver approximately $15 million in benefits primarily in SG&A [14][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating tariff impacts through a local for local strategy and maintaining strong customer relationships [8][22] - The outlook for 2025 anticipates a low single-digit percentage decline in underlying market growth rates, with expectations for revenue and earnings to align with 2024 levels [21][22] - Management noted a strong pipeline of trials and business development opportunities, aiming for above-market growth in 2025 [20][21] Other Important Information - The company is investing in a new facility in China to enhance local supply capabilities [15][34] - Capital expenditures for 2025 are expected to remain at 2.5% to 3.5% of sales [34] Q&A Session Summary Question: Impact of tariffs on input costs and overall demand - Management indicated that while there are some raw material purchase impacts, the main concern is the uncertainty affecting overall demand [41][46] Question: Details on strategic initiatives to simplify operations - Management discussed efforts to reduce complexity, improve brand awareness, and enhance customer experience through technology and inside sales channels [47][52] Question: Expectations for second quarter EBITDA growth - Management expects modest sequential improvement in EBITDA for Q2, driven by seasonal demand and contributions from recent acquisitions [55][56] Question: Volatility in order patterns and customer feedback - Management noted increased order volatility, particularly in Europe and The Americas, with customers managing inventories prudently [59][60] Question: Contribution from acquisitions and outlook - Dipsol is expected to contribute approximately $80 million in sales for 2025, with strategic fit and synergy potential highlighted [67][68] Question: Capital allocation strategy - Management emphasized a balanced approach to capital allocation, focusing on growth investments, debt reduction, and shareholder returns [75][76]