Tenneco (TEN) 5 Nov 212021 Q3 Earnings call transcript

Good morning. And welcome to the Tenneco Third Quarter Earningd Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to of conference Investor like Golla, to now President Vice Relations. would turn over the Linae I Please go ahead.

related presentation Thank include today you is website. quarter measures. and Please third financial we available information released information. and good section that morning. on XXXX Earlier on the be earnings non-GAAP of prepared aware to will our corresponding today Investors our financial remarks A our results discussion our

and other of Unless our are attachments earnings All materials refers available earnings are press EBITDA, add say The GAAP reconciled specifically value and EBITDA adjusted margin EBITDA. materials. in measures earnings on it which with otherwise, to adjusted our we the other release margin. When release means described website.

include that Conference Global in Please forward materially we’re with many will forward-looking to our of could any differ near-term, in Additionally, statements. our Barclays’ XXth those results statements. the some there. mind Automotive projected in and forward-looking looking you speaking on participating from November of our keep actual the of In comments virtual

Kesseler, Our Brian start level. details Kevin our will more today an overview quarter; will our with Baird provide CEO, the COO, the at agenda segment performance on and of for third giving

the Brian. balance over session. Our then it for into provide XXXX. before With Matti wrap comments turn sheet Brian that I’ll to up will CFO, question-and-answer discuss an Masanovich, move our we will and introduction, progress updated outlook our prepared

Thanks, Please quarter. from our third for Linae. to themes Good key everyone, the review morning, and welcome. of four turn page

as position of are With the the planning through operating and unprecedented. component to near-term, challenging structural mitigate escalating our a light a as labor our shortages of mix cost operating our scale QX. a actions mix, costs, X%, global our conditions to constant performance. availability, compared more markets on On material of that light specifically, in On same aftermarket to in to basis, light important industrial year-over-year the with was QX value-add As in the landscape planning global with truck, end-to-end XXXX. OE improvement quarter, helped we’re freight XX% the recovery we’re end but and contributed the various chain off-highway rates environment. backdrop, More to for affecting our decline the same customer the semiconductor volume production it’s Material basis, for are unique down the production. and operating outperformed revenues impact cost be base a our vehicle the into vehicle revenue revenues know managing us no XXXX only we’re our margin. all actions support about environment and supply currency and that in and a light From vehicle to and global and are and raw unit production commercial help track end market customer global through bill in very and vehicle aware,

light the than to $XX cost XXXX. and benefit new to quarter. million over from ahead, Accelerate+ initiated actions during Planning neutralize more actions we’ve unanticipated the cost of efficiencies semiconductor the will vehicles Importantly, that manufacturing Accelerate+ in effects related are the to that shortages expected Program add structural the structural carry

eventual We of production positioned recovery light the from benefit vehicle are to well volumes.

truck-off drivers growth and revenue space the to commercial industrial year-over-year. continue momentum, growth highway Lastly, build delivered our core Motorparts

from more or Kevin will AST BEV innovative launching of active add $XXX expected vehicle suspension segment positive color reviews Our Rivian annualized press very call, and suspension yield later suspension BEVs Performance Solutions to passive in in automotive is the supply and advanced were launches and business specialty Geely. on within addition, our and technologies our the million. hybrid Solutions our received advanced, semi but programs markets for revenues light for technologies in equipped XX Performance

an third let’s our diversified look of sales. and year-over-year includes substrate page five, end take to X% at by quarter market overview $X $X.X results. Turning mix driven billion our of billion, pass-through Revenue up was

only As a customer our in our Air cost reminder, the a Clean substrate handling and at to fee. sales pass-through are segment, plus small

Excluding impact substrates, value-add currency revenue was down the foreign rates. X% excluding our $X.X year-over-year billion, of exchange

previous charts of and recovery business, highway of vehicle unrelated Solutions which aftermarket As industry quarter, the XX% to generated production on the markets favorably I on our this our and the cost million. XX% just light the and XX% to scale our In value-add right. includes regions agnostic and The was is the from industrial served decline third vehicle evident in the diversification applications. light Adding our Performance Powertrain, is truck-off of business revenue over compares portion highlighted vehicles light the and of of ICE to technologies. commercial OE $XXX page, in vehicle material are

that We expected shutdowns $XXX the quarter largest the impacted million the of semiconductor net since expand our our production would to declines the the we to the semiconductor plus a slide, the quarter of chain most shortages million X.X the was revenue normal during In experienced of geographies third six, important end adjustment. we environment, contribution. times on margin to was estimate supply Adjusted margin included improved via XXXX. Despite show price volume. impact approximately operating page EBITDA enterprise million no recovery performance, ratio quarter mix EBITDA revenues the left to cost due this value-add the our have XX% environment, light production with and was negatively incremental strong material expect to on Also, although the maintain We our by in volatile and our the margin we leverage On dollars contribution. and quarter, XXs side adjusted came X.X%. decade. low $XXX EBITDA end and liquidity that of vehicle $XXX third value-add revenue a produce

with put differences value-add X.X%, customer, this down expected adjusted Material versus also and resulted remain teams Kevin? our basis. cost XX manufacturing basis right operating $XXX that at but the performance the in in in the offset the XXX the due side We We positive recovery last points region which year cost a our actions which not supply costs, a arrangements chain rate quarter. with decline of XXXX. segment shortages, their a and now In savings and compared creates solid each of points, basis recovery to resilience right, headwind our by restructuring associated higher operating prior on place margin on year-over-year the to I’ll environment. than the of other Accelerate+ the page, on a In on see half QX box On of you the of turn commodity more lag. to the can to comparative performance million timing almost difficult margin lag the EBITDA review our over vary segments, there’s recover performance. a margin value fortitude was were it temporary to year. for quarter. plan represented operating Overall, significant Kevin in based business efficiencies of rates repeat

Brian. Thanks,

million, a Aftermarket We our saw three Let’s year-over-year continued normal Americas, all demand spite In supply on performance revenue in is relative up growth seasonality. line strong constant to regions, impacted lead recoveries on $XXX quarter, and the margin for of that it the the turn with on currency temporary as million, a delivering eight. was cost the are to revenue our on goods third margin, and was page the EBITDA of EBITDA basis non-recurring quarter Motorparts Asia-Pacific. price in availability. quarter in second by well including was business X% margins. dilute times $XXX lengthening having EMEA chain Adjusted actions compared to year, an in quarter commodity that higher effect taken finished component and XX% XXXX, as prior

all will you impact segments, including cost margins some the OE cost hear our temporary three, of across the recovery. state discussed material I and on common non-recurring actions the of net themes Before

is mentioned OE recovery earlier, touch used differ shortly. important have Brian agreements region Also, raw Steel customer. three different and all which by is commodity and our segments. Powertrain Air exposures, I’ll by our material most commodity product, Clean As input on and

the OE impact year-over-year million comparisons made Light the to applications approximately our the as production lower recovery of and by third applications Solution quarter temporary Suspension Western up Technology up revenues. segment inflation by third quarter constant taken late customer actions on the and X.X%. cost mentioned the in $XXX volumes, the Advanced Earlier vehicle other the million, of lag. down two-thirds was trapped page XX% EBITDA net Brian $XX market in Commercial end. positive schedule representing of Performance changes were XX% due currency. In and year-over-year of for margin material a quarter were of the outperforming flow-through inventory earnings Adjusted were the impacted XX% in currency, year of nine, our truck, almost Year-over-year points. on from off-highway revenue down production Truck $XXX business approximately XX prior notice reviews slightly Pickup addition, was price industry excluding on to program. percentage Electric Rivian million on

we our to and also products. program system product with protection addition line, supply AST In that NVH

making to a in and we the segment win agnostic inroads third a five continue technology in this to the In reminder, business the As Powertrain vehicle. product are lines are quarter week, this make announced OE Geely. premium with CVSAe brand and will we from Technology ZEEKR China Electronic EV Earlier electric our on platforms. its China’s manufacturers debut Suspension the new domestic their new

results. value-add On million effects. revenues XX% in X% page year-over-year launches vehicles. battery fell approximately revenues of value-add electric were propulsion our vehicle year-over-year. XXXX currency Air Air’s foreign excluding show Lastly, Clean $XXX XX, XX% declined Light we alternative and Clean are

million, period. most XX% Adjusted of and volume the CTOHI QX material in XX.X%, the year-over-year. expanded as as realized off-highway and of cost Commercial, of revenues the to XX.X% effective Air’s and value-add industrial truck-off weaker of compared segments the revenues Europe’s the of third to bulk industrial the North commercial value-add in comprised from EBITDA commercial, of revenues, nicely negative America’s However impact Strong segments XXXX. highway performance year manufacturing well and year-over-year, truck driving cost in increased margin compared actions helped $XXX XX% all XXXX. for the and EBITDA value-add from revenues China truck-off was offset adjusted temporary quarter, XX% management highway was growth. benefits prior non-recurrence Clean

metals, XX% EBITDA revenues. from due amounts benefited was margin discuss and North strength material the Steel Air cost $XX temporary In XX% but million and to In more decrease significant vehicle important inflation margin steel a Adjusted large currency, constant other both CTOHI of than America inefficiencies input, is Powertrain. to lag year-over-year, and which the addition to base expanded the than restructuring summary amounts revenues ago commercial the turn related including versus more year-over-year and call and attributable X.X%. Accelerate+ its flat to material year-over-year about year Powertrain recovery and in to were Page was offset period. Service losses. strong light was experienced XX in savings, sheet semiconductor operations. non-recurring now in CTOHI adjusted Europe Clean business revenues period. and Service raw has aluminum most stainless broad truck I’ll OE in offset of The Matti consumes our uses of and in helped year steel, actions its a on-road volume OE market. balance volume guidance. ago Powertrain’s several the copper. EBITDA decline the to the cost

I’ll XX. comments on Kevin. begin Thanks, page my

end, XXth, net September With represented from ratio of cash a times, debt approximately neutral. improvement free X.X was flow which ratio. year performance our our times leverage even year year-to-date our been has As with net end X.X

is the reminder, EBITDA. is the As a adjusted flow The cash of weighted leverage driven higher our by normal quarter. fourth LTM seasonality improvement toward

conversion, while and and customer We including supply managing networking reducing schedule order focus capital challenging our capital cash volatile are chain staying a focused the efficiency on environment, intensity.

guidance. significant near-term leverage to to with we of our needs. times. strong revolver plan billion, ended and the Our X mid-term stay quarter future debt We we refinancing opportunistic liquidity past, maturities target $X.X range As our times our shows X.X in XX XXXX the Page no have undrawn is regarding updated net with

have to The prior billion. of to which update. value-added XXXX vehicle guidance We $XX.X a our to our lower billion, last billion range fiscal billion stems from $XX.XX global largely $XX.XX revenue to revised relative to range production light change compares year $XX.X of our

their customer production Our releases this deviated the assumes over volumes is production guidance recent vehicle units light the fourth third have months from conservative schedules QX than continued update. several quarter. flat Actual of XX.X approximately global QX and quarter, with the HIS’ million most more into has which past

volume market and volume our incorporates a a our consistent markets aftermarket seasonality. key with off-road in guidance sequential business decline in normal sequential Our decline

recovery to We rate continue price be expect margin to comparisons. our will via material to cost our build, diluted but

the with decline our received because XXXX from of billion trapped loss cases, we nature $X.XX $X.XX to primary EBITDA is higher being of light to reduced lower since range The production have change of that billion. adjusted We inefficiencies little revenues the slightly customers creating range was due the midyear. than The normal, a notice some the the billion shutdown driver of costs. $X.XX associated the from EBITDA to from sudden billion shortages. have cancelled, production, is vehicle semiconductor In $X.XX and global

inflation elevated. but material higher cost half rates will inflation of to believe growth the there’s commodity continue We We recoveries to material a remains XXXX, our from gets and lag continue lag timing caught and the assuming up commodity begin recover as inflation first year-over-year to the that costs, stabilize.

full $XXX our the million XXXX, from to expect of savings Cost Program. we Accelerate+ Reduction For year-over-year year continue

QX improve our debt and due inventory reductions end. to approximately in the billion year light quarter. flow Relative largest sudden Seasonally, free expect customers. to our quarter cash third $X.X our to our elevated production sharp of is our We expectations, net remained vehicle at several to levels at

estimate we third quarter. million inventory mentioned, in Kevin trapped As the $XXX approximated the

generation our fourth partially We’re in quarter. cash expect working to to reduce contribute to the and and flow the free diligently inventory it unwind

reduced with our of softer million, $XXX cache CapEx cash our team be expectation. balance are beginning cushion The a lowering flow covenants. by in the estimate intensity due sheet. year on strong and fire full million I’ll have significant than management turn improving work now remarks. focused has us on $XX for XXXX operating to call our position, team done focus to lower taxes remains environment spend since and We free our for The our capital million, back Brian to in our the estimated the has conversion approximately liquidity $XX on concluding

Matti. Thanks

close page major increase shareholder to XX, priorities value. a our to of Turning with I’ll summary

we’re significant cost not the structural with of taken have we First, and stopping Accelerate+ out the business Program.

savings the its XXXX that this positions and have margin We once expect volumes top projects I begin meaningfully to of million that from to will Accelerate+. initiated company constraints identified on $XX new want supply rate closer we focus of the contribute levels. improve in performance to emphasize are carryover XXXX production materially continued chain relieved and returning

to the cash the Second, cash with target remain enhance free our EBITDA we terms. of to have intensity the levels continue the capital business and lowered disciplined XX%. In spending to capital we to of to flow XX% mid- ratio a conversion. capital our enhance long-term, flow working intend to in We our free neighborhood

investments the value-add Solutions end key growth light being vehicle revenue businesses with significant company long-term. our and revenue the base with enhance believe regulations have market on a the behalf enterprise, outgrow associated the above investing CTOHI Further, base vehicle revenue decade. go-forward our Motorparts On we growth a we’re of non-light Performance geographies can characteristics Third, average On entire have predominantly revenue content transitions segments ICE mix opportunities. not ICE the as opportunities and the drive today quote in organic applications as the by next made company’s over and taking to of market world and than several our will returns facilities grow we keep the new around a of increase for other safely. years to basis, team and in we’d the more of in focus extraordinary like believe XX% our commitment leadership for these operating for their each our that over We the and growth businesses capital. above care in our to team, working and times, members technical the XX,XXX thank to

Operator, high We’re to of performance. customers now you they will answer our to continue we as improve for the operating us delivered time services taking today. any level to proud join our the of questions. Thank

Instructions] first ahead. Please Colin [Operator question comes Wells Langan with The go from Fargo.

Oh! my for Great. taking Thanks questions.

through and least left at takes Does mean, reverse, additional there and restructuring you I are some see that on how recovery? we to sales. from this can levels, -- kind you kind these on have some at puts the -- into -- should go as one, plan still the or of XXXX? we incrementals complete do high the go at to Just from very year, Is guidance much the stay what just they you of rough quickly value-added on Commodities, this go headwinds some broadly is if actually get recovery, of are had that pretty point? related then we decrementals you tailwind

Colin this Yeah. Brian.

the further me comments, alluded reaffirm We’ve into we XXXX. restructuring, improvement meaningful take carryover we of the the structural started cost into some on XXXX. to Let and initiated about execution $XX drive of impact as that so million Program kind benefits will Accelerate+ we in believe our

We going recovery price. details that in on of impact look the cost QX will see with the on our more forward the From the a revenue earnings highlight XXXX. as into our call we’re to perspective, material we

obviously $XXX new some quarter to They don’t those where We’re get where no margin we this costs. There’s kind recover increase the from empty only long we’re we we And in our little expect be. into those there. recoveries a they at are our up track are million revenue bit with year. -- as dollars would That on of lag in -- to expect calories. going

benefit on see down. way, negotiated, are with of go other they the stabilize we the and and customers as the a price the works lag and the we contract would stabilize, depending commodity where tailwind As stays

of tailwind world kind that that’s so and restructuring world. And the

As actually you the volume decrementals, a look look if at you just it’s perspective. on

a on of But seasonal, volume Phase that’s our is our of a to aftermarket in out usual the X so that’s taking CTOH aftermarket, the particularly to of are seasonally bit again, get little and kind their and decline looking then bit -- is higher down little in little sequentially X kind a and CTOH they’re getting soft, it’s margin bit those We’re their and little lines so China impact. China, had and phase as QX their a China’s getting more. product X

some contributors. So those of are the

Can the what on us in I your certainly it commodities? it. of net year-to-date income you quarter remind Got from the impact just mean, was and…

If saw you quarter, impact are on over about to and will that’s year into $XX recovered of then that we looking about we million net million us enterprise commodities every slide, on full that’s $XX on a XXXX. the be carry basis the

has to the XX it year margin. points basis impact So, full about

All taking Okay. my right. Thanks questions. for

Thanks, Colin.

go Instructions] from ahead. Jordan [Operator comes next with question Our Please Jefferies. Bret

morning, guys. Good Hey.

Good morning, Bret.

the shift you On talk guess, aftermarket volume the you the category, side you this saw year ex apples-to-apples business, of share in sort comparison? of talk could in and there I about demand? some that an about what chasse was aftermarket market could but I ease mean, growth

was Yeah. maybe year-over-year. Volume up bit about a even

as customers. supply some everybody our Southeast talking -- availability us. on as out of up to to team pretty customers, But put length of the we’re our like aftermarket we’re chain else Just the China holding well talking is and Asia constraint as coming especially

a performing fill. probably from We’re better

loosen and order some have time XX ago, also up that put fill orders days supply from still XX starts in that chain to we days necessary to is there’s now delivery. ago, availability So to cycle you’ll longer gas the that

can’t team miles aftermarket on and up sales prices. vehicle to so attention car into are has more get The the pretty repairs level. the people remain is paying strong. U.S. record are well. new returned our traveled the cars, pre-pandemic holding fundamentals the I So still

positioned. So we’re we’d like where

a year-to-date space Motorparts On the is considerably up basis, so…

Yeah.

So we are excited.

for fill of sort chain maybe look your you basis versus a rate And how like look? quarter mean, fill rates is what could of the us on XXXX give the ex-pandemic I the of guess supply on sort third feeling I a topic,

year, -- want from have we because it troubles is QX, the had from up chain we still back actually where then supply not availability… an last It’s

XXXX… said You

…stand point.

we if XXXX, fill at …not rates… looked

Oh! XXXX.

I Yeah. rates. want fill a

Oh! Yeah. XXXX is probably down points. XX

gotten, increases. supply or you’d question -- the And and aftermarket chain on seeing pass-through are guess comment price largely timing of aftermarket you Okay. think, as But you materials pricing, that in in about have does I you costs what the on prior lag? I you’re

bit lag a have of We with a QX.

on in with We’re caught right of nice here paying we’re getting real job close the those a team’s pass-through. the QX, now attention commodities as quarter. up going for But this to sitting done what’s

bit a a stabilizes work and year. benefit this lag of So the out will little bit, a for way thing as its that

Thank you. Great. Okay.

I With any no back over closing our concludes the would remarks. Brian turn session. this question-and-answer more to for questions, like to conference

you. interest Thank just again, a We up wrap Thank few call your Great. you, want with comments. our to questions. and your for

look the beginning yield of and improvements look decade. bottomline benefits, time environments The delivering yield our both in to a Our materially shareholder disciplined return the execution in us long-term. vehicle and pre-pandemic committed speak to target allows pandemic. the we’ll really foundation progress. solid and investments operating to our through in our value top engines the to solid are since the structural eventual the attention, accelerate We the has with stabilizing mid-term. light for creating portfolio environment growth from you have and We to of and to remain production turbulent in costs our evolution levels team and performance both of that consistent in to volumes beginning benefit have near- your firmly the and the for by positioned us soon. The operating near- results a end set forward again Thanks

Thank for presentation. today’s attending The concluded. now conference has you

disconnect. now may You