hb fuller management discusses q4 2012 results - earnings call transcript - sap super absorbent polymer

by:Demi     2019-08-24
hb fuller management discusses q4 2012 results - earnings call transcript  -  sap super absorbent polymer
HB Fuller (NYSE:FUL)
Q4 2012 earnings call at 10: 30 a. m. on January 17, 2013 ETExecutivesMaximillian MarcyJames J. Owens -
Chief Executive Officer, President and Executive Director james R. Giertz -
Chief financial officer and deputy presidentanalyst Michael J. Sison -
Capanke capital market CO. , Ltd.
Research Department Michael J. Ritzenthaler -
Piper Jaffray, a company that studies the promotion of DivisionDavid. Begleiter -
Deutsche Bank studies DivisionRosemarie J. Morbelli -
Gabelli & Company, Inc. Jeffrey J. Zekauskas -
Research Department, JPMorgan Chase
Research Department First Analysis Securities Company
Longbo Research Co. , Ltd. Butler -
Good morning, welcome to H. Sidoti & CompanyB.
Fuller called 2012 investors in the fourth quarter.
This activity has been scheduled for 1 hour. [
Operation instructions]
The management who attended today's conference call included Sir.
Jim Owens, president and chief executiveMr.
Jim gilts, senior vice president and chief financial officer; and Mr.
Senior Investor Relations Management in Masi macsimi.
I will hand over the meeting to Sir at this time.
Maximilian Marcy
You can start, Sir.
Thank you, James. welcome.
Today's conference call is live webcast and will also be archived on our website for future listening.
Before starting, I would like to inform you that certain issues discussed in this call will include forwarding
This term is defined in accordance with the Private Securities Litigation Reform Act of 1995.
As these statements reflect our current expectations, the actual results may vary.
In addition, in today's conference call, we will discuss certain non-
GAAP financial indicators, especially Diluted earnings per share adjusted from continuing operations and regional operating income;
Income prior to interest expense, tax, depreciation expense and amortization expense or EBITDA.
Regional operating income is defined as gross profit minus SG & A expenses;
EBITDA is defined as gross profit minus SG & A charges plus depreciation and amortization charges. All of the non-
The GAAP measures discussed today should not be interpreted as an alternative to the reported results determined by GAAP.
Management believes that the discussion of these measures is useful for investors as it helps to understand the operational performance of the company and its operations and the comparability of results. The non-
The GAAP information discussed today may not be consistent with the methods used by other companies. All non-
The GAAP information is consistent with the GAAP results reported on the last page of our presentation.
For more information, please refer to our recent press release;
Quarterly Report on Form 10
October 5, July 6 and March 26, 2012;
Annual report for the year ended December 3, 2011, Form 10-
Documents submitted to the Securities and Exchange Commission.
These files can be found on our website. hbfuller.
In the investor relations section.
I now transfer the call to Jim Owens, our President and CEO. James J.
Thank you, Max. thank you. [
Technical difficultyOkay.
Thank you for joining us today. I'm sorry for the technical difficulties.
2012 to H. B.
Fuller, I am pleased to report that, while changing the company, our revenue was recorded, earnings per share was recorded, and EBITDA was recorded.
We convey to shareholders three sets of specific interrelated financial objectives.
These are our annual 2012 revenue guidance, our collaborative goals related to the Forbo business integration project and our 2015 strategic goals.
In 2012, we achieved or exceeded our scores on all 3 items.
After the Forbo acquisition, we beat the upgrade earnings guidance we promised during the middle of the year.
The integration project is still in progress.
Our execution of this integration effort is a key driver of the performance improvements we saw in the fourth quarter.
Obviously, the actions taken this quarter, combined with the strong completion of this year, indicate that we are achieving the growth target of 2015 and the profit target of 15% EBITDA.
Our goal is to be the best adhesive company in the world and in 2012 we took a big step forward as our performance improved.
It is human nature to review and reflect on what has happened in the past 12 months at the end of the year.
As we look back this year, we are excited about what we have achieved, the efficiency of the implementation of the plan, and the positive financial performance that all these efforts have brought.
Here is a brief review of what happened to H. B.
More substantial in the past 12 months.
We have made our business bigger and bigger by acquiring Forbo industrial adhesive business, the most important acquisition in H. HistoryB. Fuller.
So far, through the acquisition, we provide customers with a wider and more powerful product, a more efficient manufacturing network, the best products. in-
Business organizations in the industry and interesting new technologies.
Our integration activities are well planned and all actions have been implemented in a timely manner so far.
The financial benefits of the acquisition have been very evident in the results of our North American adhesive business, and most of our European region's benefits will be realized in 2013.
In 2012, we focused on our portfolio by strategically stripping the central American paint business.
This action has been frequently discussed and appreciated for a long time
Long-time followers of HB. Fuller.
This is a good deal for both buyers and sellers [ph]
We can acquire strategic assets, and our price is very good.
Now, we are really a pure
Play glue company.
While the focus of 2012 is clearly on acquiring Forbo and stripping our paint business, it's not everything we do.
We continue to achieve solid organic growth in key markets: Hygiene, packaging and durable assembly.
We have strengthened our adhesive business in Latin America, and the work of our team there has led to strong growth in profits, which is a key strategic goal of the company.
We have commissioned a new manufacturing plant in Pune, India, and have achieved strong growth in this emerging market.
We completed the engine acquisition and made other investments to start positioning ourselves as a trusted participant in the global electronics market.
Of course, we have also achieved strong financial results.
Revenue increased by 30.
6%, organic income growth of 6. 2%.
Operating income increased by 39%.
The EBITDA margin expanded by 90 basis points. This 90-basis-
When you consider a business acquired from Forbo, point expansion is especially noteworthy, and it earned a 6% profit a year before the acquisition.
Everything equal should dilute our profits by about 100 basis points.
Our earnings per share grew by 28%, and the share price rose from $22 at the beginning of the year to $33 on the last day of the year, an increase of about 50%.
The year ended with high results.
In the fourth quarter, we continued to deliver strong operating results with 3% organic growth, 36% operating income improvement and 23% EPS improvementweek basis.
We left the year with 12 points.
4% EBITDA deposit.
This is the most obvious sign that the business integration project is running and a good track for us to achieve our 2015 profit target of 15%.
We have planned to do more in 2013.
Our guidance for 2013 requires revenue to grow by more than 10% and operating income to grow by about 20%.
Our EBITDA profit margin is a key strategic indicator that is expected to increase by nearly 100 basis points to a target level of 12 by 2013. 5%.
The business integration work to be completed in 2013 will be postponed [ph]
Laid the foundation for additional growth and profit expansion in 2014 and beyond.
Therefore, we believe that 2012 is an eventful and successful year.
The past year has been full of change, building a platform for future development, bringing us closer to being the best adhesive company in the world. The profit margin of EBITDA is 15%, and the compound growth of organic year is strong.
Now, I will dig deeper into some of the key results and trends in the fourth quarter of each of our operations.
Let's start at the top.
We achieved organic growth of 3% this quarter, which is our organic growth for 12 consecutive quarters.
This record of sustained organic growth confirms that some different good things are happening inside H. B.
Our focused strategy is achieving results.
Pricing is about 1% higher than last year's fourth-quarter level, mainly driven by more surgical price positioning actions, rather than the widespread pricing actions that have been common in the last few years of sustained raw material inflation.
Compared with the same period last year, sales in the quarter increased by 2%week basis.
As the market for our services continues to be sluggish, this is again a good performance.
In our North American building products business unit, we grew by more than 17% in the fourth quarter as we introduced new products and new technologies, mainly through a share increase with existing customers.
In addition, the potential terminal market seems to be slowly beginning to improve.
In terms of adhesives in North America, organic product revenue was flat, sales fell slightly, and prices rose slightly.
These markets have been very weak over the past few years, but our team here has been constantly trying to gain share and secure new businesses.
As our stronger products and improved business organizations are introduced into the market, we also see a positive momentum for Forbo integration.
Organic income increased by 2 in Latin America.
8%, the price of major customers in the main terminal market has improved slightly and the number has increased strongly.
Revenue for organic products in the Asia-Pacific region was flat, prices fell slightly and the number was growing.
Despite the slowdown, China has maintained a good momentum of growth. -
A little slower.
In recent months, with the economy slowing, the level of one-digit.
Our business in Australia is still weak due to the unfavorable macroeconomic situation, but we see that this has bottomed out and better performance is expected in the coming quarters.
In recent quarters in Southeast Asia, our team has been working to change our business portfolio in terms of technical content and value.
In doing so, we lose volume while generating profits.
This trend of quantitative loss has now stopped, and we have achieved a volume increase of about 10% this quarter.
Overall, the results in Asia were much better than in the previous quarter, and we are back on track to achieve our growth targets.
Finally, the EIMEA continued to develop organically.
Prices contributed 1% this quarter and sales rose 2%.
Good results reflect the relatively strong performance of emerging economies in the region and are offset by lower growth rates in mature markets in Western Europe.
In addition, in EIMEA--
EIMEA has achieved great success in driving the growth of our key markets, particularly hygiene and packaging.
This supports our organic growth performance across the region.
So far, integration has not distracted us from running our core business, and we have maintained a strong revenue momentum.
This speaks highly of the team and structure we have built to ensure we can manage multiple priorities.
Now look at the company's overall performance. our gross profit margin in the fourth quarter was 28%, which was 120. basis-
Compared with the previous quarter, the point has improved.
This improvement is the result of rapid North American action to integrate Forbo's business and increase profit margins, as well as a result of a generally more favorable raw material cost environment worldwide.
The fourth quarter profit performance exceeded our expectations, reflecting
Achieve a certain synergy effect.
Sales, general and administrative expenses for continuing operations as a percentage of net income ended from 19.
The fourth quarter of last year was 1%.
6% this quarter, a 50-basis-Drop the point.
The main driver of sparse SG & A is to include the Forbo business, which historically operates as A percentage of net income at A lower operating expense.
In the long run, we believe that SG & A expenses as A percentage of revenue can be kept close to 18%.
Spending to support additional activities related to a wide range of business integration projects has temporarily increased, especially in Europe, which may result in higher rates for some periods.
Then, solid organic growth, strong gross margin management and refinement of SG & A led to A 36% increase in regional operating income from the fourth quarter of last year.
This translates into an adjusted diluted gain of $0 per share for continuous operation.
In the fourth quarter, compared with the same period last year fell by 23%.
It is important to remember that compared with our normal 13 weeks in the fourth quarter of this year, there were 14 weeks of operation weeks in the fourth quarter of last year.
Without the extra week of last year, EPS growth would be about 23% higher.
I will talk about our raw material cost environment very briefly now.
As you can see from the slides or slide 5 currently shown, if you download the deck, the cost of raw materials is down by more than 1% in turn.
Although some of this decline is due to the improvement of the raw material environment, most of the decline is driven by us because as part of the business integration project, we strive to promote coordination and improve our bulk sourcing opportunities.
The raw materials we purchased are still in a state of balanced supply.
As we said before, due to the particularity of our raw materials, the cost of the materials we purchase is more dependent on the supply and demand dynamics than the cost of the upstream feed inventory.
Looking forward to 2013, we expect the raw material cost environment in the first half of next year to be quite moderate, and there will be some moderate upward pressure in the second half of the year.
Let's continue to talk about business integration.
A short version of our status report is that all of our business integration activities in all regions are on track or ahead of schedule.
As I said earlier, our results are better than our internal expectations, and this progress is obvious.
Let's take a quick look at the plans for each region and what we have achieved so far.
In North America, we announced the closure of six production facilities.
So far, 4 of these plants have been closed and we expect the final 2 to be closed earlier in fiscal 2013.
Nevertheless, we have transferred 80% of the total production volume of the Forbo plant to their new [factory]ph]
As well as family and existing H. B.
More complete facilities.
New business organizations are producing results and helping to maintain market share in the North American adhesive business.
R & D and customer service functions are fully integrated, and the advantage of expanding the function growth is to create value.
The consolidation helped boost EBITDA's quarterly profit margin to 17%.
The plan is nearing completion and we are confident to maintain profitability at the current level.
In the EIMEA business unit, integration is also going on as planned.
As we discussed in our last conference call, many actions have been taken to fully plan integration.
In addition to the actions we discussed last quarter, we completed the implementation of the pan-European sales organization and made a breakthrough at a new reactor facility in nimberg, Germany.
The sales restructuring was completed, including the exit of 60 employees as planned.
The cost savings associated with these departures will be fully reflected in our first quarter results.
The foundation of our new facility in Niemberg is also a positive sign that the integration plan for the region is going on as planned.
Finally, all plans have been implemented in China.
We announced the restructuring of our sales team in July, and shortly after the start of the fourth quarter, we decided on our final footprint plan for the country.
After the acquisition of Forbo, we currently have four factories in China, two of which are very modern and newly built;
And two companies that are older and need incremental capital.
We decided to close the old 2 Facilities and 1 from the traditional H. B.
1 of Fuller and legacy Forbo, we will add existing capacity in two newer facilities.
These closures and investments should be completed in the financial year 2014.
So, in short, business integration is right in terms of achieving and maintaining the synergies that we promised at the time of acquisition.
In addition, over time, we are more optimistic about how to integrate the business as a stronger partner for our customers and a solid platform for future growth, and we use the technology obtained from Forbo to develop.
At this point, I would like to transfer the call to Jim gilts to discuss in more detail our financial results and guidance for next year. Jim? James R.
Thank you, Jim.
I will start with more comments on the fourth quarter and full textyear results.
At the top turn, organic growth in the fourth quarter was 13-
Sales rose 2% in the fourth quarter of last year and prices rose 1%.
Organic growth of 6% throughout the year, in comparable 52-week basis.
Our organic growth rate is within or above the strategic target of 5% to 8% for the third consecutive year, and I think that is a solid result given the general downturn in the end market we are facing.
I would also like to note that at the beginning of 2012 we provided guidance on net income growth of 6% to 9%, and although the acquisition and divestiture activities in 2012 distracted us, we reached this forecast.
Now moving to gross margin, we have made considerable progress in this year.
We finished the fourth quarter at 28%, 120. basis-
Compared with the previous quarter, the point has improved.
Most of this increase in profit margin is in marginal contribution.
The benefits of extensive rework and integration of our manufacturing network to reduce manufacturing conversion costs will be achieved primarily in the future.
Gross profit margin fell by 40 basis points throughout the year.
But given the huge dilution we experienced as we increased our Forbo business in the second quarter, it was an impressive result and certainly evidence was provided that as part of our business integration project, the price positioning and procurement work we are working on is proceeding as expected.
Regarding SG & A, the performance in the fourth quarter was basically the same as in the previous quarter.
Expenditure increased over the previous year, but the percentage of income decreased by 50 basis points, mainly due to the inclusion of Forbo businesses with lower operating costs.
SG & A grew 24% throughout the year, but the percentage of net income fell by 110 basis points to 18 basis points. 8%.
Part of the business integration plan is to save about $30 million in this area, and we expect these savings to bring this indicator down by nearly 18% over the next two years.
All of these factors together contributed to an increase in profit margins for the EBITDA quarter and for the 90 basis point year, a good step-by-step towards our 2015 target, with an EBITDA margin of 15%.
Now make some comments on our guidance for the upcoming fiscal 2013.
We expect little growth in the middle.
One digit, based on the assumption that the current terminal market conditions in the key markets we serve will not change dramatically.
Net income growth will be about 7 percentage points higher than organic growth, due to a full year increase in Forbo's business, which is part of H. B.
In the last three quarters of 2012 alone.
Revenue growth will be driven by quantity and structure rather than price.
Foreign exchange is expected to grow slightly in 2013 compared to 2012, and our plan is based on the exchange rate of US $1 to 1 euro. 30.
Our goal is to earn EBITDA profits in 2013.
5%, about 100 basis points higher than the results of 2012.
Our EBITDA target is between $0. 26 billion and $0. 265 billion.
All in all, we expect the diluted earnings per share to be between $2. 55 and $2.
65, representing an increase of 16% to 20%.
We expect the ongoing core tax rate for excluding prudent projects to be 30% in fiscal 2013.
As part of our business integration plan and overall strategic plan, we intend to spend approximately $0. 25 billion in capital during the financial year 2012 to 2015.
We spent $39 million in 2012, slightly below our original expectations.
In 2013, we plan to spend about $0. 11 billion in capital after completing most of our investment in business integration projects.
The remaining $100 million capital will be allocated in 2014 and 2015 to complete the final part of the business integration and to fund the growing demand.
At the time of the acquisition, we said that in the three years of the integration project, our capital expenditure prospects were $65 million per year, totaling $0. 195 billion.
The more specific forecast I just pointed out is consistent with the previous one, just to reflect a better spending time estimate and to extend to our current 5-
Strategic Planning.
We believe that our 2013 guidance provides prospects for robust organic growth and profit expansion using operating profit growth.
The results we achieved in 2013 should be another important step in achieving our 2015 strategic goals.
With this I will turn the phone back to Jim Owens and finish it. James J.
Thank you, Jim.
We finished a strong year, stronger than our original budget, and even stronger than the recasting budget, post Forbo, and Paint we announced during the middle of the year.
This is a year of record sales and a year of record profits.
We did this in terms of performance while working to integrate the biggest acquisitions in the company's history, while divesting profitable assets intertwined with our Latin American business.
The changes we have made within the company over the past few years have enabled us to drive this performance while completing M & A activities.
We have been using the word "lift" inside Fuller.
This has nothing to do with our relative size or financial performance, but applies to everything we do.
We are building the best business team and an efficient operational organization,
Strategic adjustments, functional team upgrades and a strong culture of accountability.
Function and business team leading by the World
They are experts in specific fields.
The company is led by hundreds of years of combined depth of talent in the adhesive industry.
Many customers from suppliers, customers, competitors and other leading companies have become more fulfilling.
We have really built a great team and improved our strategy.
This boost creates momentum that will drive us to achieve continuous business integration and 2015 goals.
Despite many changes and challenges in the internal and external environment, we have consistently performed strongly over the past three years.
We are a team that is winning, and as we continue to succeed in 2013 and beyond, we are ready to create record profits and revenues for more years.
Please attend our investor day at Grand Hyatt New York on February 7 to meet with some of our leadership teams for details of our various workflows of strategy and business integration.
Thank you for joining us today.
Now, I want to open the phone for your question. Question-and-
Operation instructions]
Today, we will be answering our first question from Mike Sison and KeyBanc together. Michael J. Sison -
Capanke capital market CO. , Ltd.
Based on your organic sales growth, the research department continues to be impressed, and in all regions, positive growth is basically part of the bag, if you want, where the environment allows, now that you 've shared or generated a new product, the visibility into 13 years is pretty good? James J.
What I want to say is that this organic growth is a driving force, Mike.
So, as you are doing every quarter, of course, you also have rolling growth through this.
So, yes, I mean, there must be 2013 wins in the second half of this year.
However, I think the most important thing for us is that we are building, we have organizations that understand how to win in the market, and we focus on them.
So we can sell adhesives in this vast world.
There are target segments we win and target customers we continue to win, and these are the drivers.
So I don't know that I used the word "in my bag," but I think we have a very good momentum and that should be built on our own as we move forward. Michael J. Sison -
Capanke capital market CO. , Ltd.
Okay, research.
It sounds like the integration of Forbo is going well.
In terms of what has been done so far, do you have this good detail? Is the $90-
The million number is still the correct number to track a little better, is it possible? [indiscernible]
What kind of synergy number? James J.
Owenode, I think Jim Giertz has been expressing this in the way we measure integration.
So we have specific trackers to analyze every detail of the integration.
On each line in each area, we are above the target level.
So yes, when we look at the projected numbers, we're over $90 million.
But the key indicator for us is the EBITDA target.
When you do the integration, a lot of things happen in your business.
So in every region and every business, ensuring that we achieve the bottom line of EBITDA's performance is a key indicator of our focus and ensuring that it is truly back in the hands of shareholders.
So the short answer is yes. We're --
As I said, every line of our integration detail plan is on it.
But I think the important indicator is EBITDA.
Jim, what do you want to add there? Michael J. Sison -
Capanke capital market CO. , Ltd.
OK, last question, your capital expenditure has grown a lot this year. Any --
Could you please give us a little bit of detail on where you will spend the money and what projects will be resolved this year? James J. OwensOkay.
We're going to talk a lot about this on investor day, so I'll try to discuss it briefly.
In North America, the integration project will get the quantity from 6 factories.
They happen to have 6 at the Forbo plant and transfer it to the North American plant.
As part of this, each of these plants requires capacity upgrades.
In the first quarter of this year, the two largest factories are about to be put into operation, which is where some capital is going.
Great changes in Europe.
Not many plants can absorb this volume.
Therefore, a large part of the project is to merge 2 to 3 factories into one that requires a greater amount of capital investment.
In fact, our business in Europe has changed in terms of capital structure.
I mentioned nimberg in the script.
This is a website and we have an important project that requires a long-term website.
Fuller website.
We are installing a new reactor facility.
We used to make Reaction Devices in 5 facilities in Europe, and we will make reaction devices in one stateof-the-
As we did in North America and Asia.
So this investment is happening, but this investment is happening at many sites in Europe, so we have these centers of excellence in Europe, not an incomplete network.
Then, of course, we have the merger that I mentioned in China, which is both a merger of numbers, and in addition, as part of the project, we are building the expansion capacity in China.
Jim, is there anything else?
But yes, Mike, that's what we're doing.
OperatorNext, we received it from Mike Ritzenthaler Piper Jaffray. Michael J. Ritzenthaler -
My first question is about--
I think an interesting aspect of this quarter is the growth of the quantity segment, with organic prices of 2% versus 1%.
Obviously, the building end market is a market that you highlighted in your prepared comments, but I think, can you talk about which technologies are particularly powerful beyond that?
Or really, is that the main driving force behind volume? James J.
OwensYes, I don't think this is a huge driver of sales when you see the size of our building products.
This is our core area, so we do a good job in the health business. -
This is a strong growing market and we will continue to expand our market share.
We do a good job in the packaging market all over the world.
The durable components are slightly stronger.
But packaging and hygiene, especially as I mentioned in Europe, they did a particularly good job.
So these markets, we put our resources and strategies-
Is the company that gets a bigger number of growth. Michael J. Ritzenthaler -
Piper Jaffray, a company that studies DivisionSure.
Then there is a question about a broad question in Asia --Pacific.
One thing we have talked about in the past is how Asia's growth will better fill the cost structure of the region.
You talked about this in the prepared comments, but the 4Q results show that the profit margin is better than we expected.
My question is, I think, for 100-basis-
Is the main point of EBITDA's profit margin expansion in 13 years Asia?
I think I will include Australia as well, right?
But when Asia reaches a $0. 25 billion, $0. 3 billion revenue milestone, how important is it to grow into a cost structure? James J. OwensYes.
So when you look at the size of our Asian business, right, because of the relative size, mobile in Asia is not a big driver of our overall business.
So I would say, for us in 2013, what we would like to see is a change in quantity and organic growth.
So it's going to drive some improvement, but I don't think we'll see ---
This factory is not built on the basis of great changes in Europe.
We do want to see it change, especially on the strategy of our business growth trajectory there, and as I said in the script, Australia has really held us back, and some things that happened strategically in Southeast Asia in the first half of this year.
We see that Australia is stabilizing and there are good signs of the business we are doing.
Our investment has really started this year.
Then, I see that our growth in China is accelerating next year.
So I'm optimistic that we're going to be on the right path, but what I'm saying is that for the company as a whole it's not a huge driver of our numbers next year. Michael J. Ritzenthaler -
Piper Jaffray, the research department, makes sense and makes sense.
And finally, for me, super blast
I don't remember. is Japan's absorbent polymer factory in October? I guess it was.
Is there any particular driver in the EU outcome that is the result of the diaper supply issue, or is it a fear of the supply issue, I suppose?
Or, is this more helpful to drive interest in the materials you bring to minimize the technology? James J.
Owens, what I'm trying to say is that there's no impact on our European business, actually, on--
In Asia outside Japan, as well as in the strong position of certain customers.
This is a positive factor for our joint venture in Japan, but the SAP shortage does not have much impact on us unless you point out, make people realize the importance of having a supplier they can rely on.
I think our key strategic partners recognize the importance of key raw materials.
The next question comes from David Begleiter of Deutsche Bank. David L. Begleiter -
Deutsche Bank, research, you did a great job of sharing.
Do you see a competitive reaction from a competitor to your stock gain? James J. OwensYes.
I mean, competitors always react to the competitive market.
I think the key to us is to make sure that the share we get is based on providing real value. So --
When you see our share in these markets, it is the incremental movement of the stock.
Therefore, we are not significantly changing our share, but gradually expanding our share in various fields.
So now, I won't say yes--
I mean, there are a lot of competitive responses in different areas, but I can't point out anything dramatic. David L. Begleiter -
Deutsche Bank, research in North America, Jim, how much faster are you than the market--
Do you think you can grow up in the next 2 or 3 years?
What is the growth of the market in your estimate? James J. OwensYes.
Therefore, in terms of market growth in the next few years, this is a big problem.
I don't know what good answer I have for this. The --
I think there is a quantity drag on many of our consumer goods markets.
So while some of our customers are still growing in revenue, if you get a deep understanding of the number of our many customers, the number of various consumer goods and packaged goods will be dragged down-
It's not strong, it should be improved, right?
I mean, this should happen as the economy recovers.
What we like to do is beat it in two points.
So in the long run, we are aiming for organic products from 5% to 8%, which means we will meet--
We are growing more than a few percentage points in each core market.
Next, we will hear from Rosemary mopele of Gabelli & Company. Rosemarie J. Morbelli -
Gabelli & Company, Inc.
Look at you, Jim. -
According to your definition of organic, the organic growth you just mentioned from 5% to 8% is volume plus price.
With the stability of raw material costs, you won't get much in terms of pricing.
Do you think so?
What do you need to get sales growth of 5% to 8%?
What do you need to do? James J.
Owenode, I would like to have a few comments on 5%.
I mean, 5% to 8% is our compound annual growth target for the plant cycle.
As you know, Rosemary, we have exceeded 8% in the last few years.
We are in the middle this year.
Depending on the internal and external conditions, the situation will be different, I think there is no flow of price raw materials in times of economic difficulties, in particular, when we do something we are doing to reposition the Forbo product.
Our growth will be less than it is now.
So I don't think-
I think the price composition will change depending on the market situation.
The current market situation is that any price change we are going to make will be a strategic repositioning.
Some of the strategic re-positioning we will take on Forbo will result in some loss of business as we strategically realign their business. Rosemarie J. Morbelli -
Gabelli & Company, Inc. Okay.
So this will continue to improve this combination? James J. OwensCorrect. Rosemarie J. Morbelli -
Gabelli & Company, Inc. All right.
I want to know, when you say you saved $90 million worth of money in restructuring and integration, I guess the combination of the two, right?
If you get more in terms of savings, should this translate into a profit of 2015 above 15%? James J. OwensOkay, yes.
So I want to say, when I say it, I'm not saying we're on it, Rosemary, right.
Every number is on it, I would say. So --
Of course, I want more than 15%.
But I think this is a good strong goal for us in 2015 and we are working towards it. So --
But, yes, when I said in my previous answer, our goal is.
We are a little higher on each of them.
But I think $90 million is the right number to consider. Rosemarie J. Morbelli -
Gabelli & Company, Inc. Okay.
There's one last question, if you can.
You are going to build a new factory in Germany.
Good location?
This is not a highcost location? James J.
We have a factory in Germany.
In fact, we have many factories in Germany.
Through this plan, Rosemary, we will close a factory in Germany.
So there are three people between us and Forbo.
Through integration, we will close 1 factory in Germany and 1 factory in Austria.
So I think our strategic footprint is moving in the right direction.
The plants we have added in the last few years, when you look at the countries we have added, are Malaysia, Egypt, India, and we have opened these countries this year.
So yes, I think the transformation of our factory portfolio is a good one.
It is a good move to move from 3 factories to 2 factories and to more efficient factories in Germany.
The next question comes from Jeff Zekauskas of JPMorgan Chase. Jeffrey J. Zekauskas -
JP Morgan, Research Department, you have a very useful raw material sheet.
By the time I saw it, your raw material seems to have dropped by 10%over-
Or at least 10%.
Does this table represent the money you actually spent?
Or an industrial basket?
Are you doing better than a table?
Or what did this table do for you? James J.
Owens, I'm--
I know you're going to ask me a question and I can hand this over to Jim Giltz for Jeff.
So I will ask him to try and give you a little explanation on the table. James R.
GiertzWell, let me answer your specific question, and then you can ask Jim more questions.
But the chart we show is the internal basket. So we --
This is the theoretical measure of how much we have recently purchased a basket of raw materials that will cost us in the market.
Then, our actual raw material costs are usually better than that, because we do a variety of things to reformulate or otherwise reduce the future costs we see in the index.
In fact, you will see a lot when we submit our K file next week-
You will see the actual figure of the cost of our raw materials.
When we post the SEC document for you, you can get a better idea of the details. James J.
Jeff, as far as our raw material cost is concerned, we did a good job in price coordination, so both our price and Forbo's price are the best.
From the perspective of raw materials, this is helpful for us.
We also use the fact that we have multiple suppliers to integrate in certain product categories.
We are also preparing some bulk materials.
So we have done something very positive in terms of raw materials.
I would say that it is certainly flat in terms of the environment itself and may drop a little bit. Jeffrey J. Zekauskas -
This is very helpful, JPMorgan Chase, research.
And in--
So you have indicated that you have spent or that you have booked a cash cost of $57 million.
So far, how much have you actually spent of $57 million? James R.
We call it cash cost because, to clarify, I think you know that, but we call them cash cost because they end up being cash.
We then have another non-cash column, more like accelerated depreciation.
But for your question, for the whole of 2012, the cash portion of the cost of restructuring or special expenses is about $24 million. Jeffrey J. Zekauskas -
JPMorgan Chase, research arm, $24 million.
So, you 've been talking about the $90 million synergy you'll achieve.
When you leave fiscal 12, what is the speed at which synergies are running?
How much did you achieve in the fourth quarter? James R. GiertzSo, yes --we --
You know, Jeff, I'm sure you 'd appreciate the combination of these things with your numbers.
So it's actually hard to get you a specific number.
But in general, I would say that if I try to give you a feeling from the point of view of running speed, of course, more than half of the synergy is left to us when you consider us--
Most of our manufacturing interests in Europe will come.
Part of the benefits of manufacturing benefits in North America, followed by some profit-boosting figures. So it's a --
In the early stages, we have integrated some SG & A and have done A lot of integration on the marginal contribution of raw material growth, followed by some price positioning this year.
The return on the manufacturing product will then appear later in the project.
Jeff, it's not a number for you, but conceptually it lets you know where we are. Jeffrey J. Zekauskas -
JPMorgan Chase, research, and finally, your profit in Europe has increased from $6 million to $12 million in turn.
How did you do it?
The $12 million figure, everything is equal, is it a run rate number? Now --
I mean, it's clear that your first quarter income in 13 years will be lower than your income in the fourth quarter of 12 years, so there will be some adjustments due to revenue growth or a decline in total revenue.
But is the order of magnitude our future direction for this total quarterly revenue? James J.
Let me fix this in a broad way and then maybe Jim can give you more colors.
Jeff, I think the first thing is how we set up our calendar year.
Q4 is much better than Q3 because our Europe has August in Europe and throughout the summer.
I mean, our third quarter is August and our fourth quarter is not December.
So for many companies, their third and fourth quarter are relatively similar because they have 2-week months. We don't.
We had a fairly weak summer and then there was no Christmas holiday in Europe in the fourth quarter.
So I think this is a natural trend in our business and you should always see a stronger fourth quarter.
Having said that, I would say that if you look at the overall numbers we have had in Europe over the last few years, there will be good progress, and also, we have seen some of the first stages of the Forbo integration effort.
We're doing--
We begin to make the progress we expect.
So there's nothing special or unusual in the fourth quarter.
We will have a normal seasonal pattern, but we have said for a while that driving Europe's performance is a key factor in achieving our 15% goal.
The work we are doing is going well.
While we carry out all the restructuring work, we maintain organic income.
This is really impressive.
When you get into the details of all the actions we do to drive business development in Europe, this is an impressive performance.
I look forward to investor day as Steve Kenny will be present directly.
You can talk to him and he will introduce some details.
You have a chance to taste it.
But yes, good progress has been made in Europe this year and we will make better progress next year.
I mean, 13 and 14 years, Europe is a key performance driver for our business.
We are in good shape.
Is there any specific addition, Jim?
Steve Schwartz, the operator of the first analysis, raised our next question.
Steven Schwartz
First analysis of securities companies, research departments
As mentioned earlier, SG & a aims to save $30 million.
Jim, you mentioned the layoffs that should start in 1q'13 years in Europe.
So, just accumulate a little bit on Jeff's previous question, how much savings are there?
How will this affect the profitability of Europe in the coming quarters? James J. OwensSo --
I mean, I'm not going to delve into the details of each number on our collaborative goal, but in the case of 60 people, you can imagine $6 billion a year.
Some of them are in this quarter, and most of them will start in the next quarter, right? So --
Then, one of the things we talked about earlier about this transformation project is that there are a lot and a lot of this project.
So each of these clips is executing as fast as possible. So --
When every one comes, they offer more and more benefits to the business.
So yes, so I think it's a way of looking at it.
Steven Schwartz
First analysis of securities companies, research departments.
This is very helpful, though.
The figure of $6 million is helpful.
And then, like my followers
I think we all know that the utilization rate of adhesives and paint plants is usually very low.
But given that you're going to take out so many plants and expand the other plants, how do we see your abilities once it's all done?
Will there be net additions?
Or are you decreasing? James J.
What I want to say is a net decrease.
I mean, as you said, it's not a project that we talk about a lot, because it's not the main driver of costs and it's not excessive capital --
Intensive type of chemical business.
But yes, in general, a lot of capacity has come out in North America.
If you combine us with Forbo, close 6 factories.
But we did do some expansion in some areas, but overall it was a net integration of capacity.
The same thing will happen in Europe.
In Asia, due to some of the things we are doing, this can be a net advantage when you close the project.
But in both cases, our overall capacity is declining.
Next, we will hear the Dmitry Silversteyn of Longbow Research.
Dmitry Silversteyn-
I 'd like to ask a few questions if I can.
First of all, when you look at the numbers for the fourth quarter and this year, Jim's view of you is that the area where you perform best seems to be Europe, from an economic point of view, everyone thinks this is the worst area of 2012.
So, can you talk about where your strengths come from in Europe, especially given the integration of Forbo and the fact that it is primarily European business, not what you think it is?
Or, when the company is merged and the customer is merged, it is usually thought that you will have some customer losses.
So you think Europe is actually weaker than you think it is.
However, it is not only more powerful, but also the most powerful in all of your regions.
Can you talk about your success in Europe? James J. OwensYes.
I don't want to-until you go--
I have to say the North American show is also good, right?
So they did a great job of integrating and driving, we were a high
Do business.
But I think you are right. your point is correct.
What happened in Europe was impressive. And I think --
A few things, right?
Fundamentally, some useful work was done in 2010 and 2011 to improve the organization.
Our goal is to focus on the core market so that we can win and focus on our customers.
But we made some good investments in Egypt and we now have an investment in India which is part of the region to make sure we are able to serve our customers there very well.
We have built a culture of winning organic growth that we have seen in acquisitions.
Then, as we move into acquisitions, we know it's a huge task, so the team builds their own structure so that they can focus a lot of their resources on the right acquisition and integration, while we continue to drive our business.
It minimizes the distractions that really help them, right?
As you have pointed out, they are able to manage these two very big, difficult initiatives in a difficult economic environment.
So I think what really makes it possible is leadership and organizational structure.
In terms of the end market and our winning or losing, it is clear that, as I mentioned, packaging and hygiene are two businesses that our team has done particularly well in introducing technology, adding value to our customers.
Geographically speaking, the Middle East and India are more powerful than our business in Western Europe.
Dmitry Silversteyn-
This is very helpful.
I don't realize that India is also part of your European business.
Secondly, can you talk about the small electronic adhesive company you bought? -
The definition of the market is quite broad?
So where are they playing with electronic devices?
What is your strategic plan for this asset?
In addition to sanitary packaging and electronic durable assembly, will we hear in 3 to 5 years that your target market is still there?
Or just an opportunistic business, put your toes into the electronics market and see what's going on? James J. OwensYes.
So what I want to say is that we are working hard for our future.
So this is not what you will see--
From now on to 2015.
But in 15 years, we will have to make a plan for the next five years, and part of it is to build a foundation.
Strategically, we see that electronic products will continue to grow and grow as a market with new and different needs.
What Engent brings us is some very talented people, and some unique ability to analyze and evaluate the technologies that come up in the market.
So, in conjunction with this, we made other investments in terms of people and reached some business with our customers.
All of this is relatively small at this point, but I think you'll see more focused attention over time.
But what I want to say is that it will take longer.
This is not to say to be a big driver in the next few years.
Of course, when we look forward to the future, we should-our long-
The term intent is to be a considerable participant in the field.
So hopefully this will let you know the timing of what we have to do.
But this is capacity-building that allows us to make the right decisions about where and how to develop in the changing process of this market.
Dmitry Silversteyn-
This is helpful, Jim, Longbow Research llc, and then thank you for explaining this further.
But the only follow-up
If you can address where the industry is currently in the electronics market?
In finished assembly? Is it --
I mean, what are you doing--
Electronic products are a very broad market. James J.
Yes, yes.
I think our biggest or earlier opportunity is to assemble the finished product.
So it's the Assembly product, and some of the technologies associated with it that we're good at and some of the areas where chemical reactions are developing.
For example, reactive heat melting is a strong area for us.
More of them are used in the electronic field than in the past. So --
But that doesn't mean we'll do it, but I think it's a good early entry point for us.
From where we assembled, it was a great extension, taking advantage of the technology, but winning in the electronics field in a different way.
The next question is from Christopher Butler of Sidoti & Company. Christopher W. Butler -
Sidoti & Company, LLCA a couple of questions, kind of like the ones that were asked before, are you energising the synergies that you think were pushed a bit further in the fourth quarter?
Does it sound like European? James J.
I want to say again, Owens, it's hard to quantify.
But what I'm talking about is synergy.
The forward is more North America than Europe.
Then, more is what we can do with good sourcing than in some other areas. Christopher W. Butler -
Sidoti & Company, LLCAnd continues to discuss this topic, so if we are looking at the favorable raw material costs that you have talked about in this quarter, are those costs applicable to North America as well? James J. OwensNo.
Overall, I think we see a better raw material environment around the world. So. . . Christopher W. Butler -
Sidoti & Company, llc and slightly turned to growth, the growth in Europe was relatively good in 2012, and when you look forward to your forecast, do you have the opportunity to see sales growth again, in Europe this year, all the restructuring you are working on? James J.
OwensYes, that's the purpose of the team, right? I think we're --
They have a good momentum on the organic side and will continue to do so.
As we have said in the past, we have considered the fact that all these interruptions can cause some loss.
So this is part of our plan to consider that some of it may also happen.
But for us, this is also a growth in sales in Europe. Christopher W. Butler -
Sidoti & Company of LLCAnd looks forward to 2013, what is expected of your pension cost and how ---
They may change the contribution we can expect, and then they will put all of this together, the restructuring cash cost you want in 2013? James J. OwensOkay.
Let me give Jim some details. James R.
Chris, Jim G.
I don't have this number in front of me.
Pension costs will be higher in 2013.
I think it's about $5 million or more.
You may recall that our recent pension spending is actually very favorable for various reasons.
I think we are returning to normal with a more normal pension spending load. So we'll --
This, of course, is included in our guidance.
We're restoring it all, though--
But it's on this order of magnitude.
Oh, I don't have that number for the cash charge specifically. It's --the cash --
You can see from the chart where we are going to spend the money, but most of the cost of restructuring in front of us is severance pay.
So when we close the facility, these will time out.
These are mainly in Europe.
So it's based on the time of closing.
So my guess is it's almost back
At the end of 2013, at the end of 14, cash will actually flow out of the gate in large quantities.
But I don't have a specific number, but this can give you some ideas. Christopher W. Butler -
Sidoti & Company's contributions to the pension plan this year? James R.
GiertzI thought they would be modest.
This year, we received less than $10 million in modest contributions to the global pension plan.
I think the numbers will be lower next year, or similar. We make [indiscernible]
Go home from time to time, so, yes.
At this time, we will hand over the meeting to Mr.
Any additional concluding remarks by Owens. James J.
OwensOkay, thank you all for your time.
We really look forward to your joining us on investor day on February 7. Bye now.
Thank you.
Ladies and gentlemen, today's H. B.
Fuller called 2012 investors in the fourth quarter.
You can disconnect now.
Custom message
Chat Online 编辑模式下无法使用
Chat Online inputting...