The Timken Company (TKR) 5 Nov 242024 Q3 Earnings call transcript

Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Timken's third quarter earnings release conference call. [Operator Instructions] Thank you. Mr. Frohnapple, you may begin your conference.

everyone, third welcome, conference XXXX and call. Emily, to quarter our earnings Thanks, Frohnapple, Investor President Timken is Vice This Neil of Company. Relations the for We us joining appreciate today. you

I that Before to website review that as materials this of our reference we company's morning, will of begin on the point have we part out we posted the presentation remarks results. want today's quarterly

and call through CEO, webcast Fracassa, Financial access also feature download can Timken Phil the Company's Mehta; this the Tarak material President me and our link. With Officer. the You today are earnings on Chief

We plans will forward-looking up hear both before business and today's have the opening and open may results, from you statements comments operations. related Instructions] During this we questions. [Operator call, Tarak morning to call our your for financial Phil future

projected our may due available which with describe in are Our differ implied variety factors, press those today's reports timken.com on in in the from materially release which or of results and filed greater we website. a to SEC, actual the detail

thank call. With Timken use, that, interest your over of Tarak. will We and any call of the its consent, copyrighted without prohibit non-GAAP to written the and any materials. like presentation now to recording I Timken GAAP or financial The portion you Company, I transmission call the by Today's for expressed information would have release and in in Company press turn we equivalent and between included reconciliations is the

my discussing days good and XX of Timken. us. thank we'll and joining our morning, is you first member I by observations at some The will personal then Neil, Thanks, and a Today results, begin from share I call Company, first my earnings everyone. Timken as for

the across demand look year. and we during X% sectors saw soft Industrial last at for down from a revenue of different a remained performance wind. and And And due we and the was in down with Europe, portfolio. geographically, China, soft outlook. saw Organically, geographies. was most quarter mainly mixed start revenue Let's third quarter, to markets the in

up strength the were we side, continued slightly positive India. and the saw Americas in On in

in was little came detail positive At saw quarter. EBITDA Our $X.XX year. Both the were stable logistics $X.XX other On margins through on. Pricing reason share in accretive XXX margin more that continued we the our per in backlog with and recently, order earnings the the per made performance combined second to Lower the basis higher and higher at expectations. quarter in short slightly the XX.X%, and and the go points, note, have Des-Case, was a earnings last main bit we fell shortfall. CGI. strong a compared our will of for headwinds items share adjusted with and Phil costs down volumes, quarter. Lagersmit later these remained our acquisitions from margin

quarter, add in the medical and on space. Motion position Industrial to During high-growth forward. in good third us be gives accretive business also will we robotics drive the systems presence closed precision CGI, a going CGI which automation will also and

aero, performance. defense sectors both and and growth and good a also quarter, This good marine market India as as showed

half proving is across expected challenging Second of sectors and several this to be year more geographies. than

also the want outlook XXXX customers. both updated third performance well respond softer-than-normal to the and quarter. We our reflects demand, capacity a as improve market to quarter Our align as fourth with to and cost margins

strong at lead and brands, quality, for -- details admired in on on early more reputation specific early an order Timken its impact history. this personal its have on and for to February in Timken We their On excellence. I innovation time exciting note, it's will long a provide XXXX. actions its

than colleagues in in. all key China, we our investors good XX the in of XX on gives channel which I some team's Europe with greater business, visited Timken, me start production perspective a to that and met customers. market States, of understanding operate external segments spent days, with XX facilities United strength analysts in in in and the order first partners an I our also my time During get and

the we visits, in are critical efficiency the challenging some also products to During for the well we the for most I strengthen customers. are developing saw role was applications still innovative the and few organization examples beyond. here customers' of the our reliability impressed but as with products early, of as how company and applications. It's improving XXXX address what of our are high-level play to our a and I doing talent

cost our we're a product will by at improve level, which line market to implementing demand the First, capacity and aligning cost reductions margins.

of take Second, on. and product portfolio allocating already good organic with at lines growth capital some better look returns. build will towards examples eye a for We entire resources and our to see higher an we

maintain and will to disciplined we our allocation. Third, deliberate approach capital

our of markets. We attractive quarter. is CGI to portfolio growth we the us that diversify of example presence expect acquisition made M&A this help An and the in increase further

the years. XXXth really customers, want to -- of been is resulted XXX the early, in In that require to returns the addition, cash I will to our foundation and will implement, will take and and date. Today, only process on team's last a built performance changes the our will also a strong we highlight it we service and that is commitment say some and both but the performance bit initial has industry. Timken several Timken has more brand work in Timken in at Again, reflected have in and later we free achieved to time to the significant excellence, improve capital. of our over the invested we quality a improvements which last to strong that has but net capital, improve over working flow the innovation level in today, reduce of years, over anniversary XXXX reflections, This product will expect the cash time. share it's

cash delivers of build more a for team, me let profitable over call earnings that, returns foundation, numbers better invested we [indiscernible]. flow, this the capital. With and a per detailed share a As will the review to future for the on Phil higher growth turn better that

Tarek, Thanks, morning, and Okay. good everyone.

the in presentation the review, financial $X.XX. materials the Adjusted on came of earnings $X.XX third Revenue adjusted summary for in at came year. from were our Slide quarter start with a margins to going XX billion, I'm results. XX.X%, For last and per share quarter EBITDA X.X% at of down

XX. Slide to Turning

take Organically, Let's at as were remained volume our lower, down third look performance. positive. while quarter a sales was sales X.X% pricing closer

acquisitions, see growth at headwind was Looking the of quarter, foreign recent that net X divestiture, a currency translation slight the rest the walk, top you while X.X% line. can of to a of revenue in the contributed

On net growth slide, you the excludes impact. can This currency right-hand and see side organic both acquisition region. of the by

energy and we Let region. the while saw several solid growth our and revenue rail distribution was up. and growth In demand. sales X% higher the decline weakness saw were by the driven in driven we industrial marine, renewable and the me and while including We India quarter, In across down, we each on rest and lower China, double-digit China were down in comment Europe. off-highway region, were by of energy, sectors up expected. In were lower, And as we general and Asia wind the Americas, year. were in in lower mainly India, sectors. And in last primarily were industrial was largest Most the Western sectors, XX% heavy off-highway. heavy Pacific, including as we broad EMEA, distribution finally, general we region about aerospace, automation, from industrial briefly down sectors continued the X% as saw

was million million the to Turning EBITDA or of or $XXX year. to Slide quarter sales XX. Adjusted compared sales of XX.X% third in last XX.X% $XXX

basis by points. actions expectations, headwinds margin and moving Our headwinds these these to talk vast to of was forward later are I'll in some unanticipated call. EBITDA little items negatively quarter, we customer in logistics, and was impacted the but majority a shortfall the due accrual. Collectively, margins below about the adjusted margins of the including improve XXX the taking discrete XX.X% currency company a cost around

at Looking the more EBITDA adjusted dollars. change in closely

by impact driven the was relatively of that quarter. sales decrease the in cost lower You can price with volume mainly see neutral the

walk. the again positive, slight driven segments, net pricing again in which up mix, both little as well a Let industrial a the price to me in respect further as was largely quarter hold this to once comment distribution, also on continues third positive quarter. With sectors pricing was individual OE we by items outperformed in Mix expected. the generally

in second costs. quarter. international costs material spike This saw from effect lower logistics reflecting including higher modestly by some the was freight line, a the lag partially in and On offset quarter, material the logistics we significant costs,

offset than and inflation associated initiatives manufacturing line, by as in impact performance footprint our year-over-year plants slightly quarter continued new reduction the slightly the and negative investments. was more On in efficiency gains the costs with of was cost

But the quarter, were an Looking accrual. a at line. other we in SG&A customer from year. up expense had unfavorable discrete impact the from SG&A Costs slightly last

quarter last and by wage been of was more expense the the driven from structural than control States. of revenue Excluding revaluation This offset sizable the would this impact, a negative compensation mainly slightly last impact. and compared in was and year, incentive other as measures outside down cash to balances the year inflation. Currency lower United SG&A the cost to impact have continued compared

over negative segments. And in posted a As adjusted overall was related million accretive $X the EBITDA currency, net into large to unallocated revaluation. it is balances contributed million divestitures get which just produces revalued acquisitions to impact $X the This these We the included finally, quarter, in of in not margins. local corporate, P&L in company the of quarter of impact. this a

$X.XX of $X.XX perform acquisitions items, respect strong margin offset sale was The from can and South our slightly. Slide some we GAAP shortfall. With per charges, period items, includes of or while off below by you expense on diluted On year on posted other bearing special Carolina. million start. On shares quarter recent per earned $X Gaffney that to we $XX below XX% expectations is of basis, from third recently last line adjusted were $X.XX the diluted third the down in expense income because of amortization net interest to net the partially special down year-over-year, quarter gain share, higher complex Our a an basis. and our share continue and a well, closed current XX, acquisition, including million see in the the about a to for CGI

rate quarter. in $X adjusted our for line due of year depreciation earnings. at from from in million last interest and up came our was mix geographic up to expectations, around slightly up last mainly noncontrolling the but the Our while was XX% expense in year, with finally, tax quarter And

sales Organically, to quarter, quarter, $XXX driven saw In year. XX. in driven sales the million. China. Among move Slide end business Europe were energy bearings on continued demand X.X% most by weakness X.X%, third market in let's Engineered starting down significant were the market renewable by with lower bearing in our from decline the Now and down segment results, China. engineered last sectors,

In off-highway, and truck addition, the general were heavy industrial down sectors auto last year. from and

up in acquisition net and $XXX divestitures unfavorable. Engineered EBITDA sales last distribution, all side, Currency ago to positive XX.X% of aerospace the or rail to XX.X% versus was revenue the than On quarter or impact million a slightly were while of the sectors headwind revenue year was and year. the sales $XXX less X% in compared million Bearings of the was of and period. adjusted

Our impact partially lower volume, logistics margins the costs, in and along offset manufacturing the with of higher favorable by quarter price/mix. reflect

$XX as third on chain EBITDA for Motion as Industrial in pricing. With impacted while Automatic Systems X.X% XX.X% top in also quarter, Drive year. million, platforms marine and X.X%, benefited respect other X% up by the performance modestly notably was from adjusted on Europe while revenue. Belts year. Organically, turn declined just broad was demand systems off-highway In currency lubrication Now Western $XX positive quarter Industrial ag down to by was Acquisitions lower & flat well. million, largest higher lower compared partially last million relatively slightly over to contributed Motion last year. the $XXX was by posted while up quarter. Drive significantly and Systems was the platform, offset sales line, and automatic sector, sales to the to Slide military were or decline, the the weakness lubrication to Industrial sales XX.X% of while was sales last compared demand, let's of from Motion were or XX. higher

performance impacted offsetting the strong flat capacity by were in was customer operating cost mentioned Our favorable the margins higher including quarter our and Manufacturing in partially organic I in Mexico. ramp for to earlier, with quarter the contribution our volume accrual relatively new recent offset lower belts costs from acquisitions. costs. investment performance by related

to XX. Slide Turning

And generated the operating of that third million. see of free in $XX was $XXX cash million CapEx can quarter. million, $XX cash flow flow we You after

improved And ended X.Xx, the with quarterly CGI payment stronger expect the a of standpoint, deployed debt in cash near until consecutive targeted dividend. performance. From we right quarter, our at nearly fourth balance total net during the the XXXX. we at we flow looking EBITDA in the allocation adjusted quarter for million capital quarter working third debt $XXX middle have We acquisition no driven XXXth by our and the significant sheet, the maturities to range. And capital of

of a cautious rest we year. XXXX our outlook to for outlook year turn reduced the third Slide performance more summary our and full updated let's our reflect on a view XX. Now with the to Overall, on quarter

slightly sales percentage So around X And total around our be more expect for we're the headwind CGI we the let's X% lower half fourth seasonal pronounced to year we quarter to in be respect for expected midpoint, planning currency, for sales decline year. relatively of sales normal to We're recent rates. excludes a planning expecting Organically, reiterate, full M&A the starting This outlook. based December. With the versus go to slowdowns full the sector in at sales on as now more X% in now the that year. to now than energy end prior And down points basis line basis with outlook down around point the exchange outlook points through quarter for revenue for to year our than expect is greater customer updated accounts than the XXXX. our XXX of assumes a contribute finally, alone top full the unchanged. renewable XX for organic we're for This acquisition. it, decline guidance. Note

earnings quarter, $X.XX offset On the by reflects in and share the fourth our per cautious bottom accretion of for line, we performance quarter now from outlook third This expect $X.XX. range more adjusted a the partially CGI. to modest

for heading in into outlook implies on revised and and year. XXXX lower year the of full guidance margin will for consolidated implies production will and Our quarter, margins that midpoint. And higher the range adjusted low at the earnings that EBITDA the XX% adjusted volume year-over-year end expectations our be fourth per be share EBITDA sequentially our down costs the

improve with As Tarek second our stepping beyond. satisfied for highlighted, are efforts we XXXX around margins, we are half our and not up margins cost actions and to

about year, beginning by talked and sale working spending. like of the have and closure controlling the we As plant, our reduce all and XX% reducing calls, head prior we've hiring over Gaffney costs since nonessential to rationalizations of count operative salary facility been XXXX. on including

margins positive a been demand not had it fully at to has this levels. While effect, has protect enough current

aggressive. to So more get we intend

our in bring more to with line to is profitability and line with and margins objective Our targets. costs long-term demand improve in levels

details We will not today. get into specific

we guidance the our and will in provide expected for plan XXXX. on as business We early savings February initial finalize actions outline

We've mostly outlook to to our prior cash from flow. to expected of lower XXXX the free million, approximately impact updated $XXX which is Moving earnings. reflect our down guide,

the are the we beyond. advancing for for we'll concludes line, quarter the and expect costs generate summarize, formal moving reduce and This fourth third open a to cash aggressively million now $XXX to sequentially. To step-up remarks, on our our questions. line is company expectations, initiatives while of bottom We which below over especially strengthen strategic to Operator? the and was flow free performance in quarter. our both XXXX

Jefferies. of [Operator Stephen with Volkmann the Instructions] from line today first question Our comes

you you you a visibility. curious starts business in happening little shifts where better start Great. just if And I'm -- a there's if with Tarak. XXXX? have any any you're business in maybe that that actually bit if renewables. think That welcome, should to like that, chance Maybe there's think share and recover

commentary. feel to free of let take So that. course, add And me

you down bit as renewables perspective. a So quite seen, has have come a from wind

the more a and from the quite renewal line up a see strong but don't impacted. The big that we in have from segment for a come orders renewable 'XX from with remains rather overall volumes see us, saw solar change 'XX. down Solar being we to wind market, we in

Over quite intake our stabilization low a seen the past, last at to a past. of bit level order months, seen a than few we've the we've rate compared lower in the

business stable, and have past, some and of from it's we has the we our with are we level. wind been not wind quite price So are from order of consider to the we've the the we time. And win pockets the discussions see the based returns we not our acceptable where decided in business from But with pricing that great an the expect, wind rate continue have we be and I business on level but the we a has perspective. visits very had don't levels. it not intake we've pickup the see we, expect that as -- the what in there customers been this gotten. different to see low at for business we point, in our where we a as levels But been low and can profit And overall, discussed inputs to very, still happy past, the partners, participate

to add, Steve. nothing Yes,

I key stabilized. the think the is market here has

rate again stabilized. gotten So comps of while in we has down of sizably has were decline sort the we if the as have quarter. gone certainly The down -- easier. Demand

line. intake rates As are Tarak the mentioned, order in of sort

this point, And point, that at the it's XXXX. point it I getting in worse. then expect does not would it's growth. not at question a So what of at just we feel like inflect And this

could since that initial And a we if And maybe a businesses here, be back I'm want to that just type any and bit. assessment divested, been the might one buy there's you your questions you stock I why of M&A. guys bubbled curious then, you've may there's I not your I'm -- relative or a might be of thinking Tarak, up more potentially kind of guess? Or maybe of shift get always And that chance doing on of something noncore you see tour if has I'm as appear that to capital don't some is allocation, any sort curious that to Great. little shift.

come said, the I with come last, I we'll we described. have that look, quite a towards comes back what day. When are. might entire think that but as let's indications. Thanks, time, days months. At back the a our disciplined Steve. done even mean, to remains too looking business we've early the It's XX you of And we portfolio like, first Timken share where a to say, the in at with the bias with a XX any kind of are looking it be allocation, few very M&A. perspective look buybacks, or Look, with deals we much about as appropriate bias and related just evolution portfolio in, said, the would conclusions we learning is any at the

We integrating looks that executing are and very something deals. along, If interesting. actively comes those

mind it said, But side, to buyback. as frame but On will with M&A, the continue, side, the always if That's that's we'll also comes the take when how medium yes, a of along, biased. hard we the on comes nothing share smaller look. both we've right we're now our

for do we we Stephen. of a just M&A. bought of a portfolio, can add, become lot the quite growth, believers et -- to package, we've but could in XX being And overall the terms Obviously, better, margins, in shares to years, the also And last what M&A making done over bit if the improving Timken we have being diversifying cetera. accretive back pretty firm Yes. I do of accretive us

managing carefully being continue well. EBITDA a So balance a But see see mix year as down with this sheet think the for actually but you'll to the I I think flat an continued you'll M&A. both. Obviously, with year continue to of standpoint. with EBITDA from or both, bias We're this

with Bryan from comes Next question Oppenheimer. Blair

you rates We wins. terms in touch a of that or just your spoke the orders late color back of quarter, on be bit would organic to pulled front And the end know through other being you production rates guide. being you in trends mentioned quarter, into detail how QX. into that Any revenue for on markets order QX anticipation helpful. factored can the and large the additional Maybe stayed further offer

more Thanks, than softness Bryan. said, industrial mean, we've I we earlier. as we've general the a bit seen in indicated had area

the the products that side more portfolio that's solutions lighter market. offer and we of So to from the

focus. So I is we've inventory softness. And a of seen going where precisely where and area mean the working that's on are to we net a bit comment the capital

now So down what we the we demand, quarter. our cautious intake a are as to on running capacity, bit plus see comes when mentioned, order based more as the compared a bit production we tracking fourth ahead you incoming with rates, the to are and being it

see As quarter down say, that's every I have not supporting I side, inorganic we and in quarter. we're that's and our piece were assume your been I'm quite always what the answering the you third asking. performed acquisitions sequentially, us I'm but would question well you have precisely, that fourth sure year. From the this compared same know, to quarter,

expect both growth the recent contributions, Lagersmit the with including profit acquisitions, and the So CGI already and happy our in specifically of and September. the performance accretion quite we're month Des-Case, that the we continue to to Since we the month. them closed performance. what on had quite almost we we our whole markets. their see positively end And contributed CGI, based in Those have

I if Maybe could add, Brian. just Yes.

talked the kind just top the given one-off little of guide it when are quarter, revenue basis slowdown a relative the the to through as the rest for the the from year. And pronounced Tarak line really certainly some customers that then for of bit for of in kind you hearing of I more we're December, which get I did costs of would certainly, about what July seeing, was lower our the when quarter, primarily tell the August. the we September better certainly popped was in planning So at look But off I'd mentioned, and think that quarter popped up the then order book the that accrual, -- still little the we sort second of the order in bit late standpoint, a it, overall, things broadly, quarter, last kind say, kind of about backlog which the our sales currency and from down is of trend. And year-over-year, of But in from of customer were quarter line, is quarter. you well. in were book sequentially, kind mid-single sort digits, late was an what flattish as call trends in

order I certainly So and would stable the say year of rest the supportive of book, the guidance.

then being segment? the XXXX the be fully we Appreciate been headwinds that ramped outlook? the the And we for to to And year-on-year you in good might impact EBITDA as specific reset that Mexico to point, to willing how guy speak on capacity year. a will much detail. in built the basis, at much motion, how look platform Understood. that Are compression chain, a industrial with a is or know and facing

Certainly. pricing mean, the when organic for and can I manufacturing have will we part certainly of primarily well, year, that, higher that for Yes. be part expectation cost, margins certainly, would that. The and positive by costs some you a the lower volume plant of ramp about impacted year-over-year. Industrial be full then new as belts as higher Motion and is offsetting the think well as

headwind million a as ramp, quarters. it of plant new that be year, next to dollars of a could couple talked forward before, we've fast about of you as So

as productivity And the X standpoint plants year. end cost nice as that And should continue ramp. the operating to next call come significantly standpoint you plant Mexico, capacity. move the to other. But shift we through, X similar and operating next will part to the Mexico year, than that will into down. to have production You improvement will trying shift for early facility year from of of margin U.S. Production the should be fully to the from half of it get lower the us of a be first from operating a it, a then

the market. the volumes Right the we in we at now, of overheads in X future. expect lower the And trifecta. have versus have kind the Unfortunately, full running plants we that we their have X

combine we've like. facility you up ramp as the part result when a of what ocean has comes been is that business is bit specifically. fast belts before, The not a it chain lower for And to industrial So the I can those add. ramping said all in when up that Mexico, as as doing the slightly on headwinds and combined we'd better

The from comes question next Evercore with David ISI. Raso

the and Look, of more I waiting some a know for around softness a the so forth, year-end customers' hopefully of is and hopefully, more they're pause election seeing for little clarity. But of the in surprising. is third organic some wind more even bit in quarter, a the quarter little implied the down business saw though growth fourth than we the stabilizing a little

company. When can of trying you we think back start December Some can more mean heard I the year. growth, organic to hearing to for think next positive, correctly us their any around customers sense You made of orders, it 'XX? give what of broadly, a your comment you're from about I if the but commentary slowdown, about what swing

your we there's to like top do of it's may on rethinking exact follow-up a it's you're guidance anything first down easier should half you your in lot Or I and year? here, [indiscernible]. quick some be. degree get on company seems then in it for and really assume customers we organic at work the story on it's favor. Not that going cost back to of of getting see portfolio, there from but could now, for the the And have a hearing a line But some cost right positive working more think I looking lot point next you're whatever is obviously, now? when it right the a

an you business David, I always X of Timken's quarter customers' revenue X, in because our see and to nature increase portfolio PC. the mean, know, patterns ordering think, I quarter of from at as and we patterns

but that we So the get we always, to how a quarter. it meaning healthy low That's very year, year, be one the fourth the last be expect starting many QX we expect years. case also points, every in of this increase as to depends quarter to fourth the

to is expected we bit XXXX, reasons we in is we that quite of at signals on And XXXX forecasting have outlook because we So have of get the are, continue. When comes XXXX. one to this it point. a mixed point, the this focused primarily at

signs As that confidence we haven't any to XXXX businesses on business be weak, degree strong, expect point. places our of at that been of the where well. have take we we strong. doing quite it said, with looks I that seen But some provide all this are us

would So view, at say QX XXXX when if until the to do not difficult this numbers from to something that XXXX. going going bit call we our point are then but even love on call the are and to And a bit later. point, back of we're I a it, to team's did wait you looks we with even it's

David, be from that it standpoint, I tell going just would our today. an one mean, they on said assumptions quarter well, customer I you Yes, will complete the time. to we're OEM our could -- largely thing I by fourth if Tarek certainly, that with should mean, inventory OEMs XX destock I I think add. for not comment be

imply of it really X worsening other standpoint. And of would we're third fourth you're stable. We X factor, strong, of several business we said, positive than XXXX after performance year-over-year. would rail growth exactly planning quarters was early quarter. running couple the It And from a our certainly renewable, be strong tougher implied does about the question So slightly comps. after too a to be year-over-year that -- right, as right. markets quarters would in your organic, but talk again to about have you're worse be for that then services some quarter. that the hitting would year-over-year third and aerospace running then be are really do One several lower quarter

fourth So implied you -- for would be those be third the if between the delta, quarter the in drivers quarter. will, organic that year-over-year main would the

their Phil I down adjusted we the our thing many One just see said can level what of have customers to probably is they feel add inventories do to comfortable.

course even are, that part further on most where a customers. we lead bit also shortfalls year and segments a see our this reduced course, quite improvement. a given to times the don't reduced. Plus of part, we bit see have like process of see be that But some customer for challenge of that the exception, we the ag, rare a with we in of it the for destocking continues the So our

sitting would for or we the say, are, that most are conclusion if So demand. with there you're their believe customers if short lead the and part, of inventory let's the helps. we levels be That at with observation, an comfortable a times,

basis trying on understand in I is And quarter, almost XXX so but the to range. like price basis but But just just And quarter maybe is about costs. that was a the there, like trying that the I'm lot to and margins, is figure helpful. mentioned. negative noted in out of trying was the you to fourth in step I sure that hear the in sequentially. I costs make you There's the the XX.X%, XXX just is there that know then very figure XX.X% somewhere the of follow-up total, the I'm in onetime. Because quarter. correctly points discrete did there fourth of cost again onetime down That's sort feel case, points did quarter, I out just delta if implying to XX.X%

a it's question, David. great No, Yes.

wouldn't the tell it of of a -- costs. other bps about say would negative the -- we would I the had our was little sort you bit in XXX in them was quarter, big So to one-offs call relative we logistics spike expectations. And in margin on of it particular, I

tell not we're to quarter. in I that Now the expecting you, receive fourth will

accounts, to But into assuming cash and play would conservatively reval balances then come going our currency to a fourth the thing, quarter. that's other that not of be -- expect was expected really a bit recur. And unusual accrual outside the would customer kind against that customer of the So the not took allowance not an we little X X other typically down. [ U.S. that did of recur. to the was we it an was ] X,

a of would through slow both relative into with inventory customers behind coming just down there. costs out, be and to cost higher often of expectations heading ourselves lower down was we relative revenue our result. to the trying because ourselves find combination really end quarter, to for year in and other find you step continued the take organic we're the the as just higher guide It half past, what's when and fourth is a do yes, year-on-year, the we the to So bps. And expectations, the it a sequentially the the prior fast forward XXX and margins then

decided the end into the little So on cost the to a outlook of be fourth we quarter year. cautious heading

have addition And India. you we just Phil some and know, in as what Mexico maybe and cost investments in structural adjustments to in said,

into XXXX of would to XXXX. kind in those kick later So into more and start

So will of into facilities but part getting fourth and in investments significant come carrying significant. And online only quite not cost ramp-ups contributions amount be are expected some in factory of profitability there, quarter. the in contributions the volume terms of to volumes we duplication in are the those 'XX. those a are terms and where in

the we investments early cost for adjustments sizable half of probably -- investment second belts in year. India next the investments like So structural made more 'XX

addition, fourth also, why quarter. a are that's So in on cautious the we bit reason

Mike from D.A. Your next question Shlisky with Davidson. comes

until can you those any you up Maybe specific of different feel know those to your months. this do reductions these to but reductions a I margin actual aren't past? what targeting cost costs perhaps Just cost know a you about I range than the out update to follow reductions. or with until -- as of just been the got question. shows decremental maybe month are maybe or making to incremental going kind specifically plan within get in cost discrete And the looking to we you're next that's start get few won't we strip maybe broad February, last some lot February. But you've onetime details to trying there. still answer I'm quarter on give a the X-part If

chime Maybe Mike. as Thanks, Yes. I'll to start in and well. then ask Tarak

costs as mentioned. to mean, cost, working continue. that been taking year, relative on out So I I the will we've all

then seen be We most supporting will, the have to the demand a cost and areas kind our from then, those. of declines, and our towards incremental target still current within Investor down standpoint areas. Though ago pronounced also obviously, at with with Day, levels. that of we a the at demand more we're if targets, the inflect, And And bring line get those hitting in business long-range in working couple then which margins you obviously, out will our we functions the we'll years would if benefit obviously, put objective the actions from that. line

bit XXXX. probably maybe incremental from expect So a the towards more quarter. benefit get wouldn't cost little in of It's the fourth stuff, standpoint, a I the targeted

in operations. there, I add you would terms big And bit we size that a mean too lines, a or size, shoe are I it's call But would our more inventory. have product trimming. product jacket between are in of certain we it. are lines where much our gap quarter, remember, very I specific down we mentioned the see own our we the we fourth also to please demand and too in capacity. And slowing

bit those operations we are drive a flow the impact cash to negative of facilities under obviously, in that absorption of So have we idling. will a when the in because down order slow

bit the to we we the on in but stepping that that call are environment X demand, this X forecast quarters upside and the us terms said, fourth that in our into difficult quarters being XXXX. going outlook. And do We a contributing bit this you back, see So the market we see and in in decline that some from given market we ahead we'll terms point at see a of also see for the almost are after we factor or that production and hope more, a got cautious of it's of is it. year, Phil us performance as now now XXXX, a quarter. for

one for I typically on guide decremental. know keep guide decrementals run, price comment, be implied you And than year. But would in then organic we is what mind, referenced the the cost Mike, Certainly, higher maybe somewhere have implied think at the more -- And like ran would decrementals period can year. incrementals we as move I mid-XXs because periods strong would through in that -- decremental and of lumpy decrementals you sub-XX. X-year move the this. XXXX, in kind together, stack over X years we the is net be the in if you decrementals as very And organic through XXXX, the

combined got time It's we pulling and of we frame. just So we I for talked of of which these think some a a that kind earlier, neutral volume stuck some price quarter -- across lower the really in that and standpoint of quarter. been have levers I from these with this the cost us one-offs executing spot put as said, margin about sort well difficult

Okay.

up follow story And forward. Great. Okay. the just going margin to on

your cost was in trying staying targeted sure is permanently taking pursue year that the XXXX So of in you there guys have the maybe not than mostly to also 'XX elsewhere. but make in expecting a you've to mentioned a broader, in maybe more cost lot I'm comments got makes lower if of to make it in structure wondering R&D kind you've was and to investments 'XX. increased of you're cost sure or to just of kind reductions you're certainly would investments structure offset looking some or aggressively, place reductions be just it got just growth want that I'm sense. than Any by be net 'XX make engineering. I appreciated.

this costs this the in I'll take demand. demand there of question, is what is think assumption will the yes, a your then that you made lot we And year, the investments that see look batteries I well demand add. than within are year, terms can in then, this equal at we're and we please we quite to new Phil, maybe doing is of as adjust to that's and A to what given the capacity both lower probably, pattern. as have

is a 'XX and to dip the same XXXX. be big and level in big there's However, a continues the around gift demand

we growth have in see we're and make look take to would do be going where we see yes, we're are what invest in ensure and line going And So order is going with in main to a investments portfolio lines and adjust trying to product some which to and opportunities, that we our we that in that's do to profitable now the driver. them. But that, to to costs portfolio. demand,

on and difficult net-net, it's like. But what don't top a as a to need in think view the where have line talk costs So line like to terms the about not about specifically, something for working of performance, growth terms we the and in performance. we challenges XXXX see see we we are to of that's thinking we the right where it product we need challenges going this but bottom on opportunities. now, is in we'd on And where us address lines to collectively see is because our looks the team where be we

could if targets there I invest, add, margins, as got out we've And Mike, et cetera. obviously, for Right. just we growth,

flow, cash margins, As look commitments we those the always the we invest, we the confines to of funded for cetera. we within around commitments investments make make be around et

the the done margins, confines improve the we've job business cetera, all cetera, continue. set of over et we I around M&A, I targets very good and would investments margins So the commitments a we've the made and improve think that et of in and think competitiveness, years, and to grow making of within

The Markets. Steve Barger next Capital question comes from with KeyBanc

wind or some bad, were in pricing you other end X don't there take willing you multiple that participate. pressures there seeing business do you competitive there margins said to your unacceptable? out of And want business main so you to competitors at Is Tarek, where markets? consider is any like are competitor

competitors, with more more we capacity-based but we as it's concepts levels where been Thanks, China biggest many, It's is Steve. don't in long-term a -- a spend thinking. price pressure a time not few price where sustainable. see profitability-based competitors China. the to and than sustained those this They're few Having exactly see rather is

see ensuring and view performance in point But business. and of point also are line from customer expectations our away we a have is view. both do we walked working with from on meantime, from a there, of Andreas structure So the in that team the and cost

years participate is couple the products difficult order So But to we're of processes everybody new developing in where to and sure is a a new requirements reduce. specific scenario in compared volume was a we very ago. to make market looking still of And market. in low the can wind it to it meet

own are I So in, pressures. But not see more levels will local participate do product a to do costs and acceptable who line bit gross particularly competitive in the margin many, our segment at this willing requirement. take don't with more business at see find, own or the we aggressive a interesting that we we point. we but see our we competitors say that few Until a are in bit

a make sure is team of continuous Andreas process So kind that market. the both working we and a to the where and are in stay competitive participate

to in we're mean, And we I summarized really -- share, China well. But would it, I would business like see feel Tarak mean, anything, from don't unlike targeting opposite. versus at near say, is China, customers we're particular, wind isolated any to tell term. least to And market it's and Steve, it in looking down in you, down I if move significantly price see gaining in China, the would that's extremely you what are get willing wind the as Yes. as that's -- concessions in for not where we where I

not So little it's a dynamic to bit totally adds unique.Obviously, the China it.

be I anything the well. much was it mean, only by spot. it as summarized choice overall, else. Tarak again, And But as would that

mean, behavior other but we us on to "walk away" see say, don't continue I the the kind we see let's a also some see business. of, bit we many other we're segments, same in down same from do your segments, question, plus in don't both quite it need for to X And

don't we've last and of we've the I see behavior it So talked segments. seen course mean, about in other from We that over same Phil year. the

to... good That's And want to Yes. hear. don't I

prices... why That's

Go Sorry. ahead.

please. Sorry, ahead, go

ahead, Go Steve.

you environment? year, expect around per at year? thinking enough down when have drive view that Sure. sure. is actions are the question based capital say it X negative take cost don't you the you of EPS the will trends, even your ultimately, growth. want control you a EPS quarters we do about to guidance. My inventory about growth But Yes, think your understand be end this too we'll be your and Or XXXX. take to into I Oh, how deployment is that that XX% broader next in options, on to you're and to double-digit destocking to early year-over-year

we purchase -- to sheet funds for would it, as Certainly, that from a want have bit our how say we sure we business. available see could perspective, adequate the want we said, to we do we sure make but I make want investing broader share based says to we environment. it's in a early on the balance too

about this at at say. being more would cautious and I least that's are XXXX, we So point, what

for XXXX Just being a one. more about this bit cautious

question. But of in remain to -- on answer I should today. good think at need the that should customer taking situation including heading inventories into agree. Customers really market We'll move cost to to have a as will develops a 'XX. the that the really the I Yes, level we your year. better of talked the end drive, how level we actions through point, February see your we're about we I are because mean side, good view really a that actions incremental the at

say. be But to really a position. we'll markets So the as we until the see we too to how think soon I year, the get end develop of good in

comes Ritchie question Joe Sachs. next from Goldman The with

Yes, customer welcome. welcome, that first on question my you're is that Tarak. and you you, accrual Thank Maybe just mentioned. discrete

sensibly, clarification debt So to like that some that bad expense? get Just around item. was wanted

we for Yes, in in a that accruals It renewable the energy up set customer was collectibility X exactly. the quarter reserve that's specific sector.

far quite obviously, we set history at typically anybody. against of occasionally, years, this we It's collectibility, to been would with got to it a where you have we're sort and stack for. I reserve. stable up very up consistent closely, and up it If But set watching look like it's have few our an was generally and had reserve between will around a situation but we mean prior that collections outlier a strong. I

can a that Tarek, to way on -- the fourth get about you're a I the a impact I to margins. -- impact logistics guys logistics it. Is of up guys pretty that structural spike things, you you there seems you're kind set with to are times it seemed thinking side of side offset like It as was going that you this it's quarter like guess referencing the happens. costs. on It Yes. cost? like as Okay. quarter. I do big guess, the when like improving see in the logistics maybe anything big

Yes. X years. mean economic been in necessarily -- I followed is It know mean, one not the the last of the quite that normal I logistics pattern. something volatile has has you

our the from locations. and area as demand we Sea perhaps we changes see are So at to geographies. that making terms locations you our It's that say, reason And of in I in are supply challenges logistics the the markets structural Red we different the our Timken evolution with of bigger how main we combine costs. why take would terms of a at will look an we look the serve the

long-term whether or the we How Asia. at a supply-demand supply area Middle the far based we So I on operate at point, will geographies, how an it's to examine as logistics, consider way wouldn't East, answered at as it's this And point, different we have this on we're this answer, not change something Africa ready going look an But we are to level. But least logistics. haven't I we alignment. not point, say into we're dependent at say we design the discussion decision. but and so Europe, and it's it's our Americas to an the as at interregional do chains, future, meet we where as

Yes. of lower years, with some and to the been get suppliers supply chains our suppliers, across globe, always to that's costs. the last Joe, lower-cost comes we've competitive trying that lengthened XX frankly, and over Certainly, very

spiking You extra it's had been the it. spiked last where much has come. choppy it's got years came including a But the And it very logistics. it didn't we on net-net, it company. And to been sort We've didn't bit few a be We been and little to benefit this it bit not always through. us. did little higher, the we logistics a quarter, as but see as expect of And expect manageable.

we side the go the it will But on lower kind We're kind normalize. of planning for and So as net-net, fourth in on normalize forward. come quarter. not move cost has logistics those material hand the it X will It hand. with of

Michael next from of The America. comes question Bank Feniger with

Great.

on the you you your on sales, the Just working the there? I in a into inventory you the think surprised feel demand? going like be the year it QX demand do to do be work XXXX, like to guys quarter. Do down. It it like relative if -- where to -- with is bit the with stays feel your that Or of line where Phil, just at there is you in was demand free be to finishes cash just still that fourth flow in inventories some end are going should are -- little quarter that's seems good build for like

compared working side the volumes, to the is historical would working past. our you I general, look capital net -- mean, are net say, we high capital at our in on I if

we we revenue to the to the chains we together terms the net and that than to have is as percentage rates the level changes a our the and past. level of our of a going net in and customers we capital our and it over high been in Mike, working quarters will fill make a has of run future to terms process how and redesign So that certain general. It's serve our distribution in do performance on of lower and drop will of working inventory homework work next supply have and in our ensure it to customers course for into for capital a of down, today, reducing

on. So we're that's something working

and just And look currency. million. for sheet. in close the when you we at inventory I clarification, had right down we think say Mike, balance $XX would Organically, came Yes. to quarter, the acquisitions

mentioned, the in at come still we'd statement, ahead you Timken if more to think and cash that for quarter. moving both Tarak in inventory see flow capital I You out opportunity to more working look even managing after fourth And that, get broadly. efficient there's expect the more as

starting about we the are channel, the look of really just that pieces, versus acquisition. great has Timken going Is Could some cost think I drive a positive guys, price helpful. to It's to job guys any thinking year. just curious, would on bucket neutral? That's When didn't pricing starting to flatten done the industrial about been pricing out. of talking in positive. We're the at see Okay. for about some even moving thinking price the curious, this just be that? big it versus And cost. leaning helpful. QX getting picture that positive measures and I'm that cost that kind picture, XXXX. price, price thinking you're cost on it forward. cost? And big of you Just is if more how is thoughts be OEMs on

Yes.

other on be in flattish we pricing don't XXXX. picture expect than to think I big anything a level,

we cost see inflation. by fourth because the primarily down. input on also you from and on in we was -- pricing see third not expect be can in in to it obviously, as be perspective. And to the not then have flat usually and gone expect see won't plus but big But and based So flattish bit overall, costs gone some based to going downturn imagine, as And see and like we on areas can quarter be. have what might prices down, quarter XXXX, have been driven it a you from with distribution a XXXX better a will theme up, pricing continue what down, when expectations labor

will that's go down than driver overall and for we price isn't the there to fill factories the to So trying natural market not a other do. what in

there, isn't if is some discipline that the year. like and market there seen in this So we've

lower I really think what pricing see -- -- input in happens of that's think the intrinsic will see drive We to price it. how see down actually at don't up, low least let's costs and But significant we driver we hold XXXX. overall. any

time for Tim from Thein next question further our Raymond James. We And with question. comes have X

All right.

you that up, of one your seeing lot softens a you the kind of saw kind it pretty quick that down, you in move of of Europe here probably overall sizable row. How just announced can just industry a balance? you and some restructuring generally? demand. discussion terms Europe supply Just given fluctuation more to been some Maybe historically, of challenges combined around. kind see more just auto broaden industry, when Europe can in think there's think do just is the terms And specific, that's one capacity matching in like of it maybe Germany of X And I speak of in what of industrial morning. about years you're peers this I production -- to plan in terms the supply-demand with but it the just the in a auto in

Thanks, we're mid automation it at year the And year have And as in what on Chris terms capacity Tim. on we demand. Overall, of in almost -- of did see about those soft talking as then the same X like long I are business. when [indiscernible]. being it's quite based we the looks think see Phil term said managed the Europe thing we based motion. being by Yes, making we adjustments the discuss industrial portfolio almost mentioned, and been you to needs are and soft, for a some time,

not are long mid- term. short-term are They more those to decisions. So necessarily discussion

taken. are actions -- plant is And to everything furloughs being short-term it's that the are are not actions those So capacity, at level. And those individual or whether also adjust actions in managed factories, adjustments individual being small down.

more line it we discussions As for there's to. and to on will need regularly a have doing targeted, sizable, more the than expected make this some engaged quite as is continue are time, we and given we that's even pretty a a lines that homework we and our product product announce we we do is team it. why now see. of and a and If been bit softness decisions. But the few quite it more that's we'll something that But location-specific well rather something to more doing said, specific, we've

There are remarks? any remaining comments Sir, do questions have time. or this at final you no

for us Thanks, Yes. you, today. thank Emily, joining and everyone,

any have this contact our you please me. after today's questions concludes call. call, you, If further Thank and

everyone, This lines. us today. now you, call, joining may Thank our you and concludes your for disconnect