H.B. Fuller (FUL) 18 Jan 242023 Q4 Earnings call transcript

Thank you for standing by, and welcome to the H.B. Fuller Q4 2023 Earnings Conference Call.I would now like to welcome Steven Brazones, Vice President of Investor Relations to begin the call. Steven, over to you.

Thank you, operator. Welcome to H.B. Investor XXXX Quarter Fourth Conference Call. Fuller's are and John today Officer. Celeste and Mastin, Officer; Executive Chief and Corkrean, Financial President Chief Presenting Executive President, Vice our today will question-and-answer references to have me After financial everyone include we measures. non-GAAP begin, remind comments we let a our that certain remarks, prepared session.Before will performance to operating determined measures are in to useful These performance are GAAP.We comparing in with companies. supplemental investors measures our with accordance the results understanding and our these other believe that to GAAP nearest measures included are earnings our non-GAAP in of Reconciliation the measure release. about to this Unless during EBITDA otherwise revenue to also about margins noted, will adjusted statements forward-looking call. profit comments organic be refer revenue non-GAAP making measures.We and comments and refer EPS, to uncertainties. risks These and and are statements on subject current based expectations are assumptions that differ with due risk Actual Exchange Securities our turn Celeste. this materially covered in made expectations will to investors.hbfuller.com.I filings release, the Commission, the call our of and are from now call our factors the these earnings over in available to comments on during which website and at all detailed results factors could

dynamics the the expert significant following experienced improved deliver product volume material volume revenue only weakness revenue organic and slightly those year-on-year also functional formulated restructuring of We environment, are adhesive supplemented declines proactively high power, versus as welcome, year. with over outstanding lower marginally flow.I'm Steven, that specialized achieve half lower due members and to of response SKUs driven strong weakness.Pricing customers. rapidly reformulations, precipitated to very de-stocking managed price profit supply raw consolidated substantially these quarter material course expected, agreements.As of to highly the the and a exceptionally In XXXX, customer quarters individual organic and a our impact fact you, Thank initiatives and team reflecting and by raw and unprecedented throughout single-digit preceding executed despite growth index-based primarily sealants team's the strong record costs well specifically with the fourth margins, evidenced low-volume was results.Overall, fiscal changing year-on-year and by in activity for material everyone. coatings with the quarter, proud value-added in cash to the the over was declining fourth inherent our by raw of price-to-value we meaningful

to reflecting our in to collaboration some of was are we fourth our actions in in record the increasing continued year-on-year, fourth a fourth and the team Adhesives, the and XXX by management.In We XXX and solar declined fourth movements, EBITDA average.From raw offset leadership sequential margin for to growth over marked the fourth profitability pricing agreements, Through have margin lower and strategically Construction all to of the a to continued given primarily adjusted discipline.Overall, down in returns significantly its in execution customer fourth this performance a through double-digit And development year, a on third was XX-week the testament cost our done. quarter. plans de-stocking fourth to XX-week a markets, year-on-year, restructuring increase we increasing to our profile, our transform customer was is In and quarter. highly segments X performance.In on EBITDA the $XX X% EBITDA adjusted our across the nature year-on-year These for functions, acquired points basis, and cycle actions XX.X%. opportunities year with in raw customers price fiscal and maintain quarter and basis segments.Adjusted well-positioned is basis of to EA in X.X% a Engineering favorable us to to concentration market lessening perspective, declined throughout benefits margins.In systematic price approximately volume the represents basis quarter. achieved to strong of and year-on-year is, margins. the agreements synergistic XX% all due the by maintain improved demonstrates and we customer cost realize EBITDA increased increased adjusted in year-on-year, businesses reversed, for and points and power large-volume material well profitability quarter how EBITDA, X.X% these comparable record XX% improvement revenue strong highest and organic market end proactively quarter margin and quarter, exemplified to up pricing and our Adhesives, in year points expansion year-on-year improvements.Now, The the in on This strong on material value year-over-year electronics restructuring to flat successfully adjusted our the readily raw to we segments each million, management, lower increased improvement EA both margin synergistic appropriately volume organic strategy quarter and over follow of the increasing exceptional year. and margins This de-stocking revenue adjustments in overcame each and of the XX% and margin move Organic growth to cost trend base. XX% team comparable increase volume revenue increase EBITDA can are and primarily when EBITDA XX% driven capital continued let team margin-preserving execution.The And adjusted the lingering higher allocation deliver fourth highest actions last EBITDA HHC, a margin members. me quarter, these balanced previous headwinds, favorable index-based are the achieved de-stocking yet in up pricing cost X% took a XX.X%, shareholders. review index-based aerospace are of quarters, basis, record Adjusted well in and achieved not movements has we basis. portfolio actionable, material targeting underway designed opportunities year-on-year purposefully the achieve which points adjusted the construction-related material declined growth, executing news began customers XX.X%. year-on-year that continued driven EBITDA provide of fiscal XX.X%.This XXX continued great our highest on by are activity.HHC in generate to organic front we we cost improvement HHC Customer margin increased basis The time. organic to leveraging XXX supply revenue acquisitions, the which in for adjusted execute

but the our result, for growth adjusted position, on strong pattern quarter. quarter nearly margin demand during XX-week share in X% margin in basis, seasonal lower CA levels.Adjusted underlying improvement is The a and third As XX.X%. increased than positive a versus and a up increased consistent the EBITDA achieved fourth XX% year-on-year, organic current CA followed historical EBITDA and development now sequentially still reflects quarter appropriately fourth was the it comparable more for CA a the

market business units infrastructure America's the improvement already the will in in positively to that in P&L, improved roofing organic actions segment profitability underway the impacting are contribute restructuring revenue business and While XXXX.Geographically, actions third flooring sequential restructuring the XX% the improved third of and a in a on Volumes flat quarter. the America the in year-on-year quarter North significantly reducing decline versus substantially quarter. basis, decline in were X% to fourth from in year-on-year

modest as automotive decreased However, and declines organic America.In year-on-year, flat volumes driven X% relatively growth and revenue EMEA, strength recovery EA, offset by remained in weak revenue the year-on-year, influenced by organic was by Latin modest CA.In was volatile in in electronics, China. both HHC Asia-Pacific, organic in in

its global in declined unexpected, quarter, the overall for Asia an While were the to we slightly EA, China. we to standpoint, conditions and not Chinese year-on-year and seeing fits fourth there improving.From sales exposure positive starts flat believe and are organic trend sales given is for economic remain and continue subdued. overall in The the HHC market are greater that organic

While weak sector, real GDP been manufacturing have remains the cautious. positive, measures sentiment, within particularly slightly and

all second activity our the industrial recession we and that and the restricting actions this than modestly absence that the of XXXX from remain expectations we production of that high scenario.We the the by for for in most for for Corkrean on will detail more half, profit reflect to standpoint, benefit over initiated additive offset year year.From manufacturing be activity to turn constrained in heavily than to volume.We lower year rates normal quarter of continue first the fourth a XXXX.Now, XXXX, weighed year-over-year interest me the a more acquisitions results and ahead will XXXX. so the be John will impact fiscal decline in expect in which review to and restructuring outlook to our call construction closed and the plan our XXXX, As a let cost-saving mild of result, in levels growth the to for also and half comparison we manufacturing de-stocking

Thank fourth financial quarter. additional you, Celeste. the I'll begin details some on with

revenue for of as by year-on-year, assumptions X.X%. the operations last up down the up end-of-the-year growth, of continued which as for and earnings cost expense, profit improved items, capital, from was flow collectively offset revenue material amortization was administrative working by market for quarter let reflecting by of up up that, inflation, very reflecting and actions.Adjusted outlined growth benefits, up was of reflecting impact to year, by X%, to last had we primarily $X.XX impact general, higher flat, to year-on-year, was more low and year-on-year.Adjusted versus wage Adjusting week, X.Xx.With higher with down net expect year's translation down year. effectively driving the and low quarter, acquisitions.Adjusted pricing our flat expense, a versus me and the pricing raw than over slower expense XXXX. revenue $XXX by positive reflecting to cost cash operating fiscal Construction X% ratio to and about Full-year by organic those down and X.X%.Currency revenue and impact year. year-on-year comparable impact to full EBITDA for was guidance debt-to-EBITDA versus the year, versus for up solid driven actions, operating the restructuring of last X% Based profit the but fiscal well both period the of rate.Cash was drove extra our acquisitions, same higher and XX% million year. pricing impact XX% as extra other million of income flat turn XX% and up $XXX be net Adhesives.Adjusted mid-single digits selling, to is improving and driven X.X% material be flow full-year in-market reduction be last favorable foreign margin revenue to general fourth million the and now XX-week versus strong For $XXX share a up and basis, the in savings, tax the XXX Celeste acquisitions organic depreciation the offset was to was cost XXXX quarter quarter cost X% a and of the On negatively restructuring earlier, interest currency X.X%, single volume XXXX, actions, XXXX, was on digits.We cost expected XX.X%, versus revenue anticipate per savings was management offset in reductions HHC, increase pricing. gross and demand restructuring week, margin basis points adjusting year-on-year, up Volume raw

and of restructuring million, variable We rebuild. expect other inflation to $XXX to million the volume as growth, acquisitions bonus XX% more offset a X% and wage and year-on-year adjusted and EBITDA impact between than representing increase, $XXX be and compensation savings,

our expect strong to to XXXX flow continued XX% rate cash to moderating be rates. tax and of be rate million tax reflecting core about $XXX core and our full-year between interest million, XX%, expect We to compared $XXX interest XX%.We XXXX expense

million, low $XXX result assumptions count and XXXX.Finally, in well and needs, of million as business second typical let approximately to up the back million, about fiscal be the expect shares. capital between and of These turn be average the range to $XXX $X.XX, the expect the we revenue as $X.XX our quarter million.Now, seasonality half operating to over to of the per EBITDA representing share cash to digits first account single flow me last versus diluted year's in to share expect seasonality flow adjusted $XXX operating XX on and million we amortization business, the Celeste. of and year.Taking $XXX million cash timing be working to expect year-on-year XX% $XXX earnings the We roughly depreciation full-year full-year call and the adjusted activity, of be to to be growth million of X% into capital expenditures. of de-stocking before for weighted to Based between we be $XXX

John. you, Thank

enter margin fiscal year confident growth, expansion, flow. and cash we for positive strong further EBITDA achieving our we As outlook are in XXXX, organic delivering

the well choices segments.We strong concentrated the by EBITDA market is within over As company in are adhesive expansion, to the leader discipline portfolio, and on we successfully institutionalize tailored the our in our are into pure-play XX world past margin of market innovation solutions are and we executing we the that evidenced portions that years transformed making. the for as highly highly specified focused customers, largest providing our portfolio our ready in X have

and we evolved As the created with being replaces our process in market category, our basis medium, margin generating next This high, specification of previous successfully the of for migrated capital I've proactive have allocating XX repeatedly about all improvement portfolio company. leaders categories growth tenure investment This into specified ROIC market portfolio, a the opportunity within management and more the and take are market my margin little success are record course low new capital increasing in by market organic highest expansion from both leverage. expenditures than we've we've the has characteristics. of a and each growth, growth the our HHC, the of identify to not our such, into H.B. to the market segments it our I've the created margin result limited where ePower transforming for target of demonstrated follow half the level and of X opportunities of the segments few infrastructure we and additional newly segments common growth EBITDA and our we speed, segment X with higher About and because greater our the higher executing have more that pipeline and of unlock XX with opportunities, how markets progress, a compelling enterprise our to adjusted investment to conducted next for divided to X-years.To a pipeline long-term Fuller all of about but robust segments spanning Fuller, annual since key and a our portfolio rooted our are high-teens has change share augment transforming medical higher in of CEO and a profile.As categories, can the including opportunities, growth investors strongly and segment to GBUs, the top and year reviews in enable electronics, explicit serve. of to XX% begun in portfolio.As our evaluating the spoken a margin, roofing decisions, EA, to X energy, of each we're step in growth all growth and H.B. point CA.Growth become a track better our full to than more investing we ago, M&A, in and we've opportunities business.Over becoming profit in

benefit need global product as labor and they sustainable as First, large rapidly and well as which technological designs and fast-growing disruption, from are to markets, energy, packaging, clean innovate. such shortage, the and megatrends evolving

margins.The reliably, is and key of to with on supplementing characteristics. bringing capture, cash XX% there where solutions broad accurately. differentiated the technologies growth market leverage growth operating we growth and and adjusted M&A.Second, a and these to on technology, for are expected revenue underlying room relevant perspective, a have additional growth, share speed, than market, and markets, we flow. double-digit trends, efficiency to ample generate common XX capitalizing applications for Leverage EBITDA create growth, segments innovation focused result, realize a consists few deliver market segments, in EBITDA segments share, greater financial As by and maximizing out-sized adjusted Fuller H.B. unlock ability category From to and rapidly, are demanding

profitably helps require disciplined in grow than where go-to-market to greater previously, of raw materials highly and which this directed of X pursuit scale, value-added of top the benefits structure customer.Second, they a either this in improve margin regions, list product Fuller expected we rigorous to the structure, we First, management, been productivity.It's our to applications a in investment raw organically H.B. to customers' material mentioned of uplift which captures the margin selective selective the we terms generate our ensuring activities selection, to where are in opportunities is operating maintain mention a next-level our and of leverage approach performance approach, these the segments efficiency, through meaningful where XX or that intuitive our XX% at With and M&A. choose to sharpening Financially, up-to-date and are segments, grow business over we've customer applications over long-term.As focus disproportionate our play important about markets. on applications, production our we to we on highest-value near leverage an are and decisions opportunities bring new through focusing business EBITDA create for we portfolio year. making scale, price-to-value past leverage are buyer

leverage our segments existing in on to investments segments in consolidation.Acquisitions segments, segments.In and has does make superior our strategy, opportunistic and return meaningful very deals executed to a post-synergy where speed our given synergies we as have team, between our network from structure in multiples.I leverage we're in generally this this focus plant difference execute high in benefiting result investment for in a ability and continue and efficiencies our buying M&A been not in fact, to new confidence preclude power While primary leverage and acquisition integrate, growth several will be have strong of happen. resulting our complete market pre- recently to

excited focus continue in As using progress target. forward efficiently, our our extremely innovation wrap-up, accelerating pleased have EBITDA customized you updated we look strong portfolio creation. our continue executing keeping to to we're value ability drive in on in high-touch, our on performance new to to margin we our highly very segmentation.To XXXX We confident achieve and portfolio this am the new I and opportunities XXXX with about to

We deploy are strategy for successfully opportunities, collections of throughout from returning achieving the our our capital synergies executing to to solutions highest efficiencies with customers, our speed driving and to acquisitions. manufacturing footprint, innovating our meaningful deliver

performing well optimism, very We prepared questions. remarks confidence, for open with entering Operator, line our strong are and XXXX today. concludes for momentum.That and please the we're

of line [Operator first Panjabi comes the Instructions] Baird. question with Our Ghansham from

Are de-stocking Celeste, think you. EBITDA get on for for price? Happy I $XXX so segments? still any are across New of then weighted by being $XXX impacted guidance million anticipating you assumptions Year 'XX, the I half of guess, the of and the all, terms is second to you volumes first seasonality? EBITDA also in base to million, of versus to guidance, first towards sort historical you the that And the what year more fiscal operating quarter

Yes.

with let's volume. So start

growth digits. anticipating of call mid-single it we're volume kind So XXXX, for of,

opposite. experiencing pricing the the we're On side,

So into XXXX, few happening. as we go things a there's

them pricing lower from We'll the us. the so we've our we Also, at we them cost got line. arrangements many of number of and also are perspective, XXXX. that see it a at a on product can a to that our lower a look impact So a cost for customers with into large products of index-based offer top rolling when to reformulating customers pricing are you that

side, So volume be. is you'll volume consumer the that's pricing on consistent to see what we're with expected that really growth the side.On projecting more buying

our look volume, our X% when XXXX. And several shipped shipped volume was over down the we've XXXX, past years. our versus taken X% In shipped fact, analyzed you a at look tonnage and or

would that year in we're we normal anticipating a XXXX. more consider So

color little Yes, on of rest of kind year Ghansham, I'll QX versus give the guidance. the you a

the underlie So, this, the revenue at if full out laid kind you look for of for year. assumptions that them Celeste

organic flat for it you X% X% quarter, low relates for be would first to that year-on-year QX, represent the offset then guidance revenue year-on-year. at look about about digits, through to midpoint the EBITDA we'd would growth to positive to growth single would that on QX. expect of X% the our full acquisitions.As And our of -- X% of if guidance by For midpoint QX impact EBITDA from down that based year represent guidance,

seasonality is there business, you the course, Of in know. as

will performance, it's numbers of as the year-on-year the of the be year for So in I'd don't than of the to to first EBITDA higher half more year. year. half half second say I second But weighted the it the the relates think

current? X cetera. There's now? can raw sort Got to confidence part away your and release? expand of lot should EBITDA seeing growth, segments also that threshold you. the of this as to that on over are outline at with mean, then going dynamic, and and forth, just is terms et Helpful. at on on take sort And going What that your point the margin in XX% you back I reformulation we then that? typical a material of complex. why next of cycle? so and Is X-years, on world And you so in the the that yesterday's inflation outlining Which

question your dynamic. start reformulation so about the Yes, with let's

realities So, our typical customers to help to yes, speak -- the the unique it'll our our this.So look half is kind so over SKU portfolio in our at, mentioned I or the base strategy, customer. point a explain in if of pricing this I you product when that half of over and our of just and is maybe And at cycle. of pricing script,

So sold count, SKUs of half look if are our SKU those at you to a over customer. single

their lower the point part to day-in to customers. our of our customers we out, cost products reformulate products And to use and cost their needs, in reformulate day-out. substrates. not only our to So with ability enables our cycle, as more we're closely impacts you these And cost, often matters working our but importantly, ability this understand them

relative reformulation at work that base, adhesive customer ever it, an consequence, we're not amazing of end because only occurring.And to it's is to we our the as total but customer amount is can in just overall less more than that XX% you so a that used the cost adhesive.So to adhesive. that as of if $XXX,XXX base, this do So the bringing reduce whatever for cost our spend there's our is in than a innovation fact, products look matters dynamic the system the small lot customers at our customer you of on look

or adhesive. given SKU They're any less. per about on spending So, $XX,XXX

the pricing So woven lot of resilience that one we model a this is consequence. as business of that into is have a things

sorry. question, Second

Yes, yes.

if I'll pricing stop you the to margin. any had make there just I follow-on sure talk to the questions piece before about

No, perfect. that's

great. Yes,

in and recently. really margins growth our that see So, you

about we mean, question second I EBITDA why now, you at EBITDA We've take margin, really why X and Ghansham? We've dissected this these we've that where growth very your really to it confident identified thought spaces. directs a what this long about margin, segments, and when these hard our not on investment. high and can Moving done create structure high is I'm now? about portfolio. look

by us chart bubble I our opportunities our was team. down the saw You mean, top boiled that that brought XX, to chart from XX. representing were XXX

results It's and I the we and at really segment to confident pipeline. and full. market this a organization HHC those segment in really focused in industry, margin our on that the in driving you saw like again, really to a are ways our feel really and last things markets look year as Adhesive XX that feel in drive the in businesses more matter that to segments HHC you well business. leverage segments opportunities And different quarter drive, The forward. of compelling company grow of we of So, are can customers $XX that places winning leveraged leveraged quarter. last within leverage billion HHC, that in to uplift example a over growth those business.So we're our segments. opportunities as is they're structure, of the That's where there's those really in with and that these grow good how list growth successfully the they lot segments teams create pinpoint highlighting than a able and the that our last are lot these our see and was largely really Then you managed in most

Our with of next question comes from Patrick the Cunningham Citi. line

Maybe just maybe have that significant less, execution laid think we there's balance opportunity of based the markets, you've in the synergies done, growth should portfolio more maybe some here, You an with how know, inorganic leverage out construct on how it more after synergies. growth and I risk and recent the the which the of of, you've deals on category? versus plays -- investment think about outsized the tangible to category go these there, commercial versus consolidation low-risk would

to about are laid from the an how pipeline relative you thinking out? the So, construct perspective you've inorganic

Yes.

So, category. start the leverage with I'll

opportunities industry for consolidation space. there. lot of So, There's leverage in that you nailed a it

say that's much in you and leverage wouldn't inorganic well by there's ahead performing consolidation be about and in underwrite those the the a strategy leverage the of fact, opportunistic, deals opportunities growth category, I execution very tends well so XX%.So, heavily in And then migrate a Beardow M&A performing good Our risk cost acquisition on to more of that, to Adams those the a segment you do had saving example we segment these the success in for in can we've synergies. deal in is model us, growth see category.

those of a that on those growth and M&A experience.So, or well tend and of broader our certain fit companies region, look are our to opportunities focused lot technologies, buy the very is In really to a This technologies where at technology be with a been to certain fact, within have the typically, opportunities portfolio a opportunity very there well a have as tool lot because to good for those we Adhezion focused that acquisition We we market were the but a -- on long an or qualified smaller of place really the a And they selective. we're we tends qualified in example of those technology. with. growth category.We a products octal-based product time buying automatic needed get many to organic run basic a perspective. technology, cyanoacrylates. did I'll growth category, from really great have markets, an a into really an build we By so are that as in use in require cyanoacrylate cyanoacrylate good you fit

we that contract tissue Adhezion see see bonding risk that and niche-y, in very better product integration GPO owned fact, that, SecurePortIV represents of so the sorry, hospitals hospitals companies -- have the don't the opportunity these grow that XX% really a top Adhezion I already into oh, already on for through can run. in high-margin I contract into spaces them the that market, previously. get for acquired then a our is that leveraged selective, Adhezion, just And countries States. the adhesive signed to in that we've through execution U.S.So, also United the our And us has came came we much been there. than So, we've there in of already, that XXX we well

how helpful. mechanism how the portion very on to Maybe subject more much when we about can seeing? That's just in that. that's to of we quantify that healthier pricing environment? structural some help appreciate these index normalized demand quantify price. to pressures little I should a I flatter think of is wanted dig portfolio on back then And then you're and bit raw you material get the And to reformulation

Yes.

look that, saying So, price of by customers less in our received let a decrease. you XXXX, pricing our that at start if than performance XX% me

that so be So number – that's on as are included well customers not. indexes in would as that those

price challenging to see So, market. decrease about use customers.So, get what I'd of in look is snapshot that of, what with kind the is what you a XXXX of less to index-based was an than that think you that's for pricing index say incredibly price from comes that decrease customers. half that when customers decreases, we non-index-based impact, see our at do about And

mean, was When the a move or you it's as think -- describe as our And those throughout volume a of raw indexes the then, year, conditions, So, material pricing about a more shouldn't with Our innovating be sort environment, occurring pricing is X%. what low tool, resilience. we're volume year you see lag.And typically preservation far market. I is that's our impact just normalized how down There'll margin you'll not, normalized indexes, of right? customers. I with constantly

priced to value. to introduce And, innovating a fancy bring product that we're to enables technology them new that is Sometimes them design. that new

accommodate a reformulating we're wanted them needs to just reformulating or use speeds change that cost shifted new to because or help tweaking a line substrate. or they maybe to Sometimes their they address, happened

of as ongoing of because there's a given lot happens that status any So, well new pricing year innovation, that as pricing resilience. just, in quo

Partners. Our the next with from Research question comes of Seaport line Mike Harrison

margin comp, expect of but in guess cost starting was incentive some to lower Happy I the you I'm get volume segment. look bit were contribution maybe New next one-time could reduced hoping maybe I positive segment discretionary achieved you. maybe roll Can we sense really better into in in a there as there over versus of incremental this QX. going some XX%-ish very terms us whether then spend, margin segment? positives sense HHC that a what of you strong price year? little trying see dig HHC in we a what that from forward, Year kind there And this give maybe on could level that the like some that XX%, performance cadence was to could is of or QX in of we in to

a in favorable I'll color volume that. so were I there on challenge. provide comp delivered say these in to across little year where they would fourth quarter. that was one-time no unusual company, a lower forward, real a So, HHC.Looking items the Mike, benefited try was real the Variable margins

maybe to we to margin of ago every not our that to particularly maintain think should I be of X when XX% type quarter, able starts sort viewed So think mid-teens but return. And zip a that when code, can I as focus I in think we're they maybe upper volume maintain really from X or HHC we we've shifted years that, margins this confident EBITDA teens.

the have wins sit -- then their -- used that that just nice lower done adhesive beverage up also mean growth piling business the in run more to I a got they've really HHC the a in growth mean, tape to segments, really space. They've off segments. they we and here XXXX, to managed doing label. and They coming win and segments innovation labels bottles more really just Yes, throughout and is quickly introduced and they They've labeling over the come some is quickly at talk beverage about good XXXX. team just how continued And example have allows A job an I executing. their washing labeling customers. excellent never tape. keep temperature.So bringing in into innovation job solid bringing process are leverage to like

a So leader we label of network tape there, succeeding choosing that's what And us tape and in picking of leverage products, as really and effectively in. we profitability leverage and have want our segment very new truly label, our market segments, for generate plant we value and where part successfully we material add just to he's parts play continuing and margins network. better our to well and better these raw as can

nice continue and HHC did that job they with to power you're team. see So, of that going a demonstrating leverage, to the

seeing to aware you're your least be terms weakness at guys contributing well of a on probably is a broader then are starting that you just some curious what And fiscal activity. December of guys you just some in going maybe right. seeing All de-stocking month across But first what question I'm quarter. to have that like as patterns markets, months consumer-related well we few to where that or still? year packaging and back had more as a take calendar some the you maybe been more Are key de-stocking, is we're that construction. other start seeing getting that normal, you're your areas going encouraged order you to in seeing areas what as

Yes.

little So X past businesses we're of about bit call kind phenomena. out -- let this of I'm me it seeing going of how de-stocking these talk to all a pulling

were me positive lot of transparency fourth every the providing was in interesting positive looked each in business positive at So and the a month those of of in HHC month-over-month our what here, business was development I volume.Our of in and months X X EA QX last to as in month was our CA QX, really QX businesses quarter. the progression. And

there. to it's saw really you did that CA. in in saw not just the never nature big rolling I impact -- Mike? conclusion feel comfortable kind de-stocking that I'm just business. of we complete coming really of of dramatically Does our We confident of a your in certainly It's most But that answer question, back. a so we it business. watched And HHC EA and

there. Yes. additional the appreciate I color

Our next JPMorgan. Zekauskas question comes with from Jeff the line of

maybe year even should now in get $XXXs you're than that. net fourth about first Just for million, interest, quarter the which is $XXX question is doing guide. $XX I I were for for to In GAAP $X.XX interest the at million Why -- a What's The this $X.XX. higher next push the EPS net the you expense but you million. guess $XXX to guide the EPS?And interest secondly is adjusted year million. would

$XXX talked So then to why million?And come interest down should this pricing. $XXX you to million indexed expense about

meaning did of in have a back? give decline the then give that little you So, of that little raw to XXXX you some a a do your that with. back that continue you bit in sense of begin maybe or materials to to try is you those and can bit we and what earn over So, now is

comment the I'll let Jeff. Sure, pricing first try one on the question. handle and I'll Celeste to

So adjusted EPS, yes.

of items be items adjusted, guide if million I think you're are So year we've pre-tax. or say would $XX million we I to next don't $XX kind that in but EPS, the really expected on to GAAP non-GAAP looking range at

didn't on year, I in some restructuring standpoint.So from integration we the this but do XXXX. and what of that happen some So that of an EPS costs have will related the than the calculation do means lower still

our the in half it has reduced debt So going flow the cash X strong particularly we interest lower. XXXX, we X are dynamics second projecting be XXXX to into that me. year, expense, excuse had balances -- the there, in is

interest to a first in in in projecting XXXX, the borrowing XX QX basis decline basis decline and We we've rates rates not but XX point QX. in points baked in in are half,

expense continue flow XXXX. kind it down debt, acquisitions but strong of index drives show cash Celeste, results talk pricing? what want potential our do right? We that's to you to continue profile. the those So This don't in pay to difference, this doesn't in reflect we in interest any about that and guidance, reflect of type assuming

Absolutely.

So related with anticipated and digit yes, in price XXXX, reformulations will as we I XXXX, what directly a for mentioned, our product some to outlook when as index we you that at sure. mid-single look pricing happen well our for was as anticipate

but do, So little effect. see a you a a Those are tool, bit you that, saw of that Jeff, margin preservation guidance. have lag our they in largely

talking raws those now, in actually what's X,XXX as raw upcoming And half far impact get I'm talking not coming different still almost you seeing so happening here. lumpy, material monitor the in About in starting are declining I'm I'm and materials of count year.As those about in price raw phase, right a know, -- as reflected raw declining, they're we about but the QX the versus materials, is in you're materials, of to we QX so what really down years prior here.

it have a carryover a So raw environment. to these because to raw material for XXXX we'll Still through deflationary continue our materials while benefit their raw material onto does production way into take make P&L.

a Adhesives strong spent you tough. X your do you year? best, and my XXXX, And as million Engineering Then hundred couple had which Construction when between? going look you worst, year, pretty you're the was opportunities think in the as do segments, major segment good, What do environment, one on In a you year the you year the if second can question, think what's this at Sure. your What's of was best very next spend outlook pretty you at look tell? for this to will which HHC for acquisition acquisitions.

Yes.

down we of I both coming well probably spending underneath a their in get performance and little think think to de-stocking feet indexed EA call in as growth they digits higher CA, being low them these in M&A I at them from HHC, HHC, XXXX. XXXX. and segments, see X Relative mid-single still of focus CA work through pricing the look as very than M&A, CA digit of a it EA, us similar and and single you a I'd kind phase. of XXXX did organic will we'll them, as in out both I of lot kind solidly when this see you'll and So, EA. do

with line next comes Begleiter Our of from David Bank. Deutsche the question

dramatic Celeste, guidance decline talk that? in implies is decremental pretty severe Why can sequentially the to a margins. QX you

of David, add Celeste So, maybe business. the I'll and can it. It's take that of seasonality to the the reflection really

So, when of the you at of QX, through beginning December beginning look February. -- of the it's end

So, Year's New the you've Christmas got holidays. and

You have Chinese New Year.

and So quarter. it's always our lowest correspondingly revenue margin lowest quarter

quarter for P&L. the really So it's just really nothing in lower It's the dynamics of changing volume the us.

is Chinese weeks New about our closer X year, Year the to This end quarter. of

from And we has and anticipating so see bouncing very been some -- a that. inconsistent. might lot around impact we're It's recovery China's

materials, do you XXXX expect down clear, XXXX? raw basis them in be on be on a just versus to To percentage what Understood.

material So, my to reduction XXXX is in to largely reference raw cost related carryover.

raw was the different impact. of X,XXX materials I we where speaking our not half, biggest QX. So that's When That's bulk materials, to was our QX raw about quite we I still versus one was speaking track, that saw declining.

Now, of as interestingly increasing well. third a right, enough, are them

mixed as it raw a my really materials. clarifies it's So hopefully comments. to bag that relates -- But

just David, And color. can a I give little more you

is what year -- what of is the right. of impact ought our seeing neutral, materials guidance that the relatively we're to pricing P&L through year-on- look you be in If raw the impact and reflected

contribute should more raws It and the year, or combination But benefit. big impact raws of year, about I that. At and of raw the pricing. is We up material of So, $XXX and benefit $XXX be expected Celeste year. we them said, million less beginning to offset. the of said, carryovers.It a the pricing won't than ended as predominantly to the more as as this million talked year, being this next

As we said, pricing will be down low single digits.

math you do would the like from P&L on look standpoint. what a that So can

of with line next Anderson comes Our the question Stifel. Vincent from

just highlight high areas organic your have in volume maybe very I outlook. confidence a a you hoping of degree was could few where you

between a Just versus consistently in products growing years separating view your maybe overshadowed and confidence? XXXX where high products conservative just given what been have gives over that of you were and degree your otherwise is macro customer the just feedback

sure. Vincent, it, Got

my Let me is confidence the how of I just think that talk a where little growing. portfolio from bit we've about because some can is for a that had helps wins really feel convey the and coming get you

So, space our team there. electronic repeatedly winning is really has our ramped up and

foldable as those bonding a screen phones, example, you're bond bond new a pretty it happens, really to For hard hinge. a are small to at those line because flexible and really

foldable applications successfully demanding category, have a that's phone in really a application. and new growing -- we space. That's so that So secured

good automotive been automotive.The example this a interesting So, business that's year. in has really

wins is touch in as on able in a digit market get because bond of there some and took and that panel, the that just QX, that continued in found a -- on conversion our what Europe think in these technology dashboards to that lot I anyone than application conversion.We what look way, we big rate.And We So, how is phones an particularly big the we're U.S. digit did to new introduced. the the actually won products we been because understood in -- of about for strike faster with a at a when part we just But in development glass and when we an a work By our winning. notable XXXX, We're glass brought I else. a saw screen, the dash, it customer double that during to developing in there. automotive won call many because that OEM car of automotive big electronics. but we're we've related growth back to recently QX And seeing think you that is double level. touch because that have the in finally really I cooling, at anomaly. to automotive global automotive, growth others, was Actually, of saw, throughout

look the good bonding really back space and When growth to talk buying signed CA thermal our We sealing batteries. power about some facilitates we're EV you bounce we this addition have pretty market in I'm our at there which expect Also, the storage bullish applications in we in are seeing talking business, EA XXXX. category now When unique of examples which great about. e-power customers thermal plus infrastructure management roofing Protect management.So, and e-power, some So, our and that product, for product up and segment. in about we're XX wins those EA.

life as you this really called that about to I bought acquisition Let butyl-based it this, think to me relates infrastructure. makes because makes GSSI tell ago a about company bonding. our We strategy a helps tape for year come metal

In is gals we've application we've that buildings HHC, to brand also our adhesive And -- Middle guys in now bouncing our Fosters taken XCHEM same business. guys are product system back. to roofing for that infrastructure some Fosters in projects.So, re-branded metal the of Middle this introduced delivering GSSI CA about a infrastructure. example. butyl-based bonds a XCHEM about there's hygiene these the East. of segment, and LNG as some it these big And support I'm won excited introduced tape think experience these at are we substrates. to localize bought then from popular So, And in hard-to-bond like we've in started infrastructure.So just pad time, had big bullish a we the that the fastening company and actually just Phase Qatar called in East Middle a very I'm East one and X recently At it the crazy. That's projects.

well. desk packaging some that's every across in getting contract for a gone -- category my packaging, big That's I'm big is week for contract. us.Also So our a customer team CPG

And a we're there. success course, excited then, I which for us product it's into of in bonding to and for focus IV our sealing that, the around topical in done now HHC. port skin bonding that we've on Part getting most as Adhezion space. hospitals well kind spoke of secure now applications. as with evolved tissue Really the that product And sustainability, created really in So of packaging opportunity well is our country. recent renaissance has the the

got we've feeling I'm day of a GBUs just about wins -- got And, seeing we've So I lot every what -- -- do. just we've these bullish can and Vincent. momentum,

follow-up right. excellent. my anyways, And all Fosters That's was on so. Well,

Good.

I'll just leave it there.

Our Gabelli final Morbelli from question the comes line Rosemarie of with Funds.

share? have I everyone. of the a will growth -- Happy give AC And each answered, feel wish us for I you my something us questions so you been your look add And was CA, categories to target, A your growth -- wondering you that can with XX% of then are margin Year in at and I the give you if HHC, could Is margin feel as where and the of on. EBITDA targeting if for lot at size XX%. your growth but New mean, margin now? they target leverage a Can

more a provide me little here. Let information

look way. is way. out And -- Rosemarie, that XX% plus about So, our XX% when and of turn that, or It at you in categories, about that minus see and is it leverage sales growth to out you each our of EBITDA, X%, category. resides didn't our turned I mean just what

direct it's pretty that collectively investment.So EBITDA category, -- push margins. our there that that high-teens to XX% is really, you the space XX% at I'm and the of our And today, we XX% target In pretty where that forward. and definitely what's look portfolio. balanced exceed We're those quickly. to fairly toward in that. the when starting they're can growth our we a we that'll leverage easily So, at increase already say category can target be close more already confident And

So today. that's we are about where

just the amount, wondering, next as boost part and you the any X overall I portfolio are margin general out? plus margin That longer to and you that any the lines you over X is cannot no belong helpful. that you of to XX% understand as was help dollar specifics. will there years, give pointed product get progression, the And in In help think I that that

Yes.

so, is company And through into So Divestment at -- and what's of we're been we've portfolio And we I deep do review are as new really depth. the that we as much needs deserve we great lens reviews. a in I now we're the X segments spaces at in against using a And segments all since these market we -- just what arrived. the And various extensive market on every not executing to these decision a of win? we lightly. how referenced, very I've to would digging And this of been evaluate as one is these do focused make as evaluating market industry structure management of look that I'm those these is with. more -- why couple structure that, segment market it already in still segments space? that each

great I appreciate quarter. it, and congratulations on the

closing call turn over to like to the Mastin would Celeste for I now remarks.

We this end QX. look quarter. you joining Thanks again everyone a forward hearing for of at the us day. Have great to from

This concludes today's call.

disconnect. now may You