Q2 2020 Toromont Industries Ltd Earnings Call
Good morning today is Wednesday July 29 to 2020.
Welcome to the two RMR to announce the second quarter 2020 results conference call.
Please be advised that this call is being recorded.
Host for today will be Mr., Michael Mcmillan. Please go ahead.
Great. Thanks.
Good morning, everyone. Thank you for joining us this morning to discuss the results of torment industries for the second quarter in first half of 2020.
Also on the call with me today, Scott met Hearst, President and Chief Executive Officer.
As noted in the press release issued yesterday, we'll be referring to a package posted on our website summer did that provided last quarter, we encourage listeners to download and follow along.
At this time and as often as noted on slide two of our presentation I'd like to advise listeners.
This presentation may contain forward looking statements and information that are subject to certain risks uncertainties and assumptions and it may lead to actual results or offense and deferring materially from those expected.
Our complete discussion of these factors refer to our press release from yesterday, which is available on our website.
As is our practice, we will focus on key highlights Scott will begin with a few general remarks, and some comments on our outlook after which I'll provide some highlights on the financial results then we'll be more than happy to answer your questions over to you Scott.
Thank you, Mike and good morning, everyone.
Before I begin I would ask you move to slide three of the package.
From the start of Cobot 19 pandemic.
We need to focus our efforts on three main areas.
Regarding our employees servicing our customer needs and protecting our business for the future.
Our critical incident Executive response team was activated at an early stage and continues to meet regularly.
We are monitoring developing trends and pronouncements assessing our fast course of action and responding appropriately.
We're very proud and appreciative of our team's efforts and recognition that this has been a challenging time for all.
As a result, a reduced economic activity, we experienced lower earnings and net income in the quarter. However, strong financial position was maintained.
April experienced the lowest activity levels.
Some recovery began to phase in through May and June June However, caution is warranted.
Tivity was still below prior year levels.
Go, but 19 continues to put us in unprecedent environment as outlined on slide four.
We're proud of our team and suppliers ability to navigate through this pandemic and support our customers to the provision of a central services.
In addition to our critical incident response team.
Our management and leadership teams continue to monitor the evolving situation closely and are taking responsible measures to manage and protect the interest for people in customers, while managing the long term health of the business.
The diversity of our geographical landscape in market served extensive products and service offerings and financial strength together with a disciplined operating culture position us well to whether this situation for the long term.
Turning now to our financial results highlighted on slide five consolidated revenues decreased 13% a quarter lower economic activity caused by response to covert 19th.
Product support and rental revenues were lower by 16% and 31% respectively.
Sales were lower by 6%, reflecting lower new equipment sales across most markets.
Year to date revenue was down 7% to 1.6 billion after a somewhat positive start to the or in the first quarter.
Operating income was 31% lower on reduce gross margins is mainly due to lower rental fleet utilization sales mix combined with higher expenses as a percentage of revenues due to fixed costs.
Government subsidies were not significant factors in the quarter.
Although savings realized in the quarter due to actions by the management team along with things like travel restrictions other incremental costs were incurred to protect our employees keeping our customers safe and protecting the company through the long term.
These costs included safety supplies facility Sanitization requirements plexiglass installed installations combined with finance costs associated with the additional liquidity.
Operating income was 22% lower year to date for similar reasons for the quarter.
Operating income margin decreased 160 basis points to 8.5%.
Net earnings decreased 34% quarter versus a year ago.
Earnings per share tracking the reduced earnings was 62 cents per share.
Year to date net earnings were also down year over year by 24%.
The dollar eight cents per share.
Backlogs were 496.5 million at June Thirtyth 2020, compared to 551.5 million at June Thirtyth 2019.
That's resulting from a cautionary business environment, However, simco remains above last year.
We are proud to take part as an essential service to our much businesses are critical central services, including but not limited to.
Good production.
Storage and distribution networks power generation, including backup power critical infrastructure transportation and emergency response.
We continue to monitor the situation closely and evolve business practices and appropriate measures to manage and protect the long term health of the business.
The diversity of our geographic landscape in market served extensive product and service offerings and financial strength together, the disciplined operating culture position us well to weather the situation.
Moving to slide six equipment groups parts and service business provide stability and benefits from a large and diversified installed base.
So to the outbreak the long term outlook for infrastructure projects and other construction activity was progress positive across most territories.
The company has a large base of mining customers, which in some cases temporarily reduced operating activities as result of the covert 19 implications.
He's customers and jurisdictions, they operate and continue to evaluate appropriate activity levels on a daily weekly basis.
Longer term mine expansion continues to look positive but of course depends on global economic and financial conditions.
The company has taken actions to reduce expenses participating government programs such as works here.
Human capital, including our technician workforce is one of our most valuable assets and we will protect that asset to the extent possible.
In the quarter, we continued to move forward with our investment in information technology aligning our dealership under one operating system as well as facilitating the securing remote access to our networks discrete added expense during the integration.
Actions are being balanced between short term adjustments relative span also being sensitive to long term requirements shrink the business is positioned well for future growth opportunities.
Broader product lines.
Yes men in rental equipment and developing product support technologies supporting remote diagnostics and telematics are expected to contribute to long term growth once economic financial social environments return to a more normalized state.
[noise] symbols installed base and product support levels are well positioned to support current and future operations in growth trends. The diversity of market served expanding product offerings and services strong financial position and disciplined operating culture position the company well for continued growth in the long term.
Solid booking activity in backlog position the business well as economic conditions improve.
I will now turn the call over to Mike to take you through highlights of the financial results Mike.
Thanks Scott.
Let's put a bit more color on the operating results starting with the equipment group on slide seven.
Revenues were down 13% in the quarter versus a year ago, and 6% year to date, reflecting the reduced economic activity.
Resulting from the cold at 19 pandemic.
Construction shutdowns and our slowdowns in many markets resulted in lower equipment sales as well as lower product support and rental activity.
As Scott noted, we did see some improved activity towards the end of the quarter, but a tone of caution was evident and activity was still below last years levels.
Cost containment efforts, including human resource initiatives and reduced travel, partially offset the impact of lower revenue.
Total new and used equipment sales were down 6% in the quarter and 2% year to date sales in construction markets were down 3% in the quarter and up 1% year to date, most significantly impacted where sales to mining markets, which were down 45% in the quarter and 32% year to date power.
System sales were up 10% in the quarter and 2% year to date, reflecting progress on projects already underway.
Material handling equipment sales were down 2% in the quarter and up 3% on a year to date basis, well agriculture markets were lower down in the quarter end on a year to date basis by 10%.
Rental revenues were down 31% in the quarter and 18% year to date.
All markets and segments were lower reflecting the familiar theme of reduced market activity.
Revenue declines in each market for the quarter were as follows light equipment rentals, 23% power, 41% construction, 41% material handling handling 28%.
Rental revenues from equipment on rent with a purchase option or RPL were down 55% in the quarter as lower market activity also resulted in lower demand for our appeal equipment.
Product support revenues declined 16% in the quarter and 7% year to date.
Construction and mining equipment.
In territory with idle or operating at reduced rates for much of the quarter, leading to reduce product support activity, which was down 17, and 11% respectively in the second quarter down, 8% and 5% respectively for the first half of 2020.
Material handling activity was 27% lower in the quarter in 15% lower in the first half of 2020 agricultural markets reported increases.
In the quarter and the first half of 2020 up 15, and 8% respectively reflective of the team's efforts in a challenging market and weak comparative results in 2019.
Power systems product support activity, but down 13% in the second quarter, but was up 2% year to date on good activity at the beginning of the or.
Gross profit margins decreased to 150 basis points in the quarter.
Earned 20 basis points year to date equipment margins were low.
In the quarter and year to date, mainly due to sales mix.
Rental margins were lower in both periods on lower fleet utilization coupled to the straight line depreciation expenses.
Hi Tech support margins were higher in both periods on higher parts margins sales mix was unfavorable in both periods with a lower percentage of products the productivity to total revenues.
Selling and administrative expenses were down 7% in the quarter and 3% for the first half, reflecting lower activity levels as well as cost containment initiatives that phased in during this period of uncertainty.
Compensation cost decreases.
Decreased as an it.
As initiatives such as vacation planning.
Salary reductions governmental work here programs and lay offs we're implement.
Travel was restricted throughout the quarter, where training increased early in the quarter and then declined with the lower staffing levels.
Bad debt expense increased in both the quarter and first half of the year in consideration of the potential increase increased collection risk in the current economic environment.
Information technology related costs also increased in both the quarter in the first half the year that's system integration efforts at the dealership continued.
Operating income decreased in both the quarter and year to date on lower revenues and gross profit margins also leading to higher expense ratio.
Bookings were down 30% in the quarter to 298 million.
Lower orders resulted reflecting.
Lower underlying economic activity and the cautious tone within the market on a year to date basis bookings were down 12% to 636 million as higher power and material orders were more than offset by decreases in other areas.
Backlogs of 269 million, where 135 million lower than this time last year.
Now, let's turn to Simco on slide eight.
Revenues were down 12% in both the quarter and year to date on reduce construction activity stemming primarily from slower economic activity and temporary shutdowns related to the pandemic.
Timing of receipt of orders and customer specific construction schedules also will affect the timing of revenue recognition.
Got it support activity continued.
Given the essential nature of the business.
Albeit at a slightly lower level.
Package revenues were down 20% in the quarter on lower construction activity due to site restrictions and against a tough comparable last year.
Revenues in Canada were down 32% with declines in both industrial and recreational markets.
In the U.S. packaged sales were up 51% as lower industrial sales were offset by higher recreational revenues.
Products apart revenues decreased 3% for the quarter and 1% for the first half the year revenues in Kennedy decreased on lower economic activity, resulting from site restrictions.
And the U.S. revenues increased on the higher technician base and continued activity in the industrial sector.
Gross profit margins decreased 70 basis points in the quarter on lower package margins, partially offset by favorable sales mix of product support revenues to total revenues.
Year to date gross profit margins increased 120 basis points with higher package margin combined with the severable sales mix of product support revenue total revenues.
Selling and administrative expenses were down 7% in the quarter.
Bad debt expense improved on strong collection activity.
Travel and training costs were lower reflective of restrictions in place for most of the quarter.
On a year to date basis, selling and administrative expenses.
Increased 3% largely on compensation related to increased headcount offset by cost reductions in other areas related to reduced activity.
Operating income decreased 29% in the quarter and 37% year to date largely on lower revenue related mainly to the timing of project activities.
Bookings were up 15% to 52 million in the quarter industrial orders were 53% higher with increases in both Canada and the U.S., while recreational orders were down 22% with lower orders in the U.S. only partially offset by an increase in Canada.
On a year to date basis bookings were up 43%, reflecting strong industrial order activity in Canada offset by decrease in the U.S.
Recreational orders decreased in both Canada and the U.S.
Backlogs of 228 million were up 54% versus June last year on strong industrial backlogs in Canada ultimately.
Approximately 70% of the backlog is expected to be realized as revenue. This year. However, this is subject to construction schedules and potential changes stemming from the cold at 19 pandemic.
On slide nine I'd like to touch on a few corporate highlights.
Noncash working capital was 17 million lower at 468 million versus a year ago.
Strong focus has been placed on managing accounts receivable aging and inventory levels lower accounts payable reflects the timing of receipt in terms on inventory purchases.
As of June Thirtyth, we maintained our strong financial position with cash of 537 million available liquidity of 616 million and a strong balance sheet.
As announced the board of directors yesterday approved the regular quarterly dividend at a rate of 31 cents per share consistent with the last quarterly dividend when it was increased by 15%.
The company is also very pleased to announce that subject to annual shareholder approval Mr., Robert Ogilvy Chair and Mr. Wayne Hill have agreed to serve on the board until 2023.
Extension of their services will downs word renewal process with their depth of knowledge and experience ensuring a smooth transition of rules with new directors.
That concludes our prepared remarks.
I will be pleased to take questions operator.
Please.
Set up the first call. Thank you.
Thank you.
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Your first question is from Gabelli. Please go ahead.
Good morning.
Hi, Jacob Martin Jacob.
Yes, I wanted to start off on.
You equipment backlog.
Down quarter on quarter and year on year, and I know it can be a bit lumpy, but maybe just some comments on.
What you're seeing in backlog for construction versus mining.
Yeah. It was the backlog is on a comparative basis obviously.
Downturns and softer it's reflective of the the environment.
The in Q2, you get a bit of a build but.
It's also reflective of our our inventory and availability.
That we experienced in Q2, so and then as you mentioned Jake if we there is some lumpiness in there really due to the power compared as a quarter over quarter and.
And of course Lee the the the mining environment than we experienced in Q2, I mean, the equipment sales were down almost 50% Q2, so and usually that helps build your.
Your backlog in there on the equipment side of the business.
Okay, and it's Adam can you get all here in much longer on the one so.
I think right now what we saw in the quarter was was soft cautious environment on the on the customer side.
Through all in all the industry's we're operating in <unk>.
Okay.
And maybe my second question here I'm just interested in hearing how things progressed through the quarter in into July as far as you know the ramp of revenue growth obviously.
The world was quite a bit different in April versus June versus today.
What was that that ramp like see for new equipment product support.
Okay, I'll start with rental.
Rental was.
We started experience as we noted in March and then rental.
Continue to be a real drag on our earnings through through the quarter we have.
Rental fleets relative to our strategic approach.
Show utilization was much lower on a month by month basis, when you compare to the previous quarter, you did improve as the quarter progressed, but still below.
Last year and I'm talking Hill.
Ranging from anywhere from three to two high.
9%. So these are news were shifts that took place in there.
On the rental fleet activity. The other thing we saw reflecting the cautious environment, our rental conversions were down significantly.
On the new our appeal. So we were single digits, that's usually you get.
Last year in the quarter, we had we had very active environment there.
Again reflective of the cautious environment products Port was was down it started to improve.
As you start with levels at the end of the quarter, we're we're still below previous year.
No what we saw was in the quarter. It was it was quite interesting.
As.
You know activity if you look at it holistically the industry numbers improve but it was was all driven by the by the compact construction equipment. So if you look at the large equipment being sold in the quarter that those segments that was down 26%. These are industry numbers and even in June it was down 20.
1%, where the act tivity really started to to improve was on the cc compact construction side. So I think thats reflect.
Segments like landscaping I think there was a lot of people started working on their backyards and [laughter] things of that nature, but.
So there was some in various areas as outlined some improvements but still below.
Last year, when you look at it on a month by month basis.
That's helpful. Thank you.
Great. Thanks, Jessica Thank you.
Thank you.
The following question is from Sherlyn Redburn. Please go ahead.
Thanks, very much and good morning.
Good morning, Shirley learning.
Just wanted to ask relative to the equipment group, we were a little surprised I guess, but rental in product support seem to be hit a little harder than equipment sales in the quarter. So maybe you can help us understand that dynamic and I guess I'm curious whether that just reflects deliveries of.
That would have been ordered previously and maybe if I look at bookings activity and equipment that sort of circles circles, the Swiss square so to speak.
Yeah, well the the you know I think it's important.
Look at these these segments we had.
Clean cut back in material I mean, there was there was major shutdowns that took place.
In the quarter starting in April and.
I think thats, that's reflective of some of these these outcomes.
We had.
You know, we had over 20 mines and care and maintenance at one point.
As well as a pull back and other mines in their production so that that really impacts your products or.
Your overall equipment sales and then combine those construction sites shutdown right, especially in Quebec, particularly in Quebec, and even though we were quite as essential services. So.
There were some.
Fairly aggressive measures taken understandably and that created some of these outcomes and then of course win win when customer fleets get parked there the demand for rental [laughter] Oh is it does does not to increase so.
You know, there's there's sort of how we.
Oh point in the quarter given the all said there Mike Yeah, I think it just natural that when you think of the idle equipment for periods of time, and then of course, you know things like parts and service dropped fairly significantly right, which is what we talked to in terms of mix and so forth and so.
We need to have the utilization up before we start getting this you know that type of activity supporting the business as well.
Okay, so that kind of ties into my other question, which is.
I think there's any pent up demand for product support in the market or with the pressure on product support simply a function of lower hours on machines during the quarter.
Well that was a big part.
Just.
Hours logged almost machines.
We are down.
So we'll see how things progress I mean, we wouldn't want to speculate now.
We we did see improvements as the quarter progressed on the equipment utilization and the mine starting to come back on so we'll see how things evolve and help production.
Develops here, but that.
And in June we saw a very cautious right I mean customers.
Normally in Q2, you've got customers that are highly productive.
They were focused on getting those jobs up and running or mine sites.
And you know they've got to get their fleets active get organized and that's really what took place in Q2. So we'll see seal things develop here, it's a pretty cautious environment obviously.
And if I could sneak one last one in can you just give us a better color on how rental rate held up relative to utilization there.
Yeah the rates.
Our comparisons they weren't too bad sherlund actually.
Gradually more utilization story right yeah, it was utilization.
Thank you that's all for me.
Thank you.
Thank you.
The following question is from Michael Jumei. Please go ahead.
Hey, good morning, guys.
Good morning on its good morning, I wanted to follow up on.
I guess question just in terms of getting the cadence of three down to the through the quarter.
I mean would be possible for you guys, maybe just help us out disclose what your June products.
Towards sales work compared with last year, just what we're going into Q3 was.
Well, if you look at it on a consolidated.
Still down right, we even where we've been talking.
A few quarters about our rebuilt initiatives and they were they were down even 13%.
Through the quarter, so and again, it's just just reflective of the cautious environment, that's taking place so and it was it was fairly equal would we look at the declines on parts and labor on a percentage basis. So.
But.
You know again, we did see improvement as things progressed, but I mean customers are focused on getting those job sites up and running and mine sites and even in the power segment.
And maybe.
Not not is focused on there the repair schedules and the plants right.
Okay.
But in our in our in our.
Labor hours a bit as well.
Right.
Okay, and just I mean, just for so I understand correctly. So there wasn't improve at month to month, but the improvement from April to June wasn't significant.
It was significant.
They were they were improving steadily but still below last years levels.
On a month to month basis.
Okay. Thank you.
And then maybe just on SGN in how should we think about SG any ramping back up with with revenues either recovery and I was just wondering if there any cost reduction initiatives that you think could be considered to be structural.
Yes, it's a great question, you know I think where.
We are keeping really tight rein on our costing and so forth and making sure that.
<unk> productivity levels are there.
Supporting the appropriate level of activity in so I would say.
A cautious phase and that supports the business.
You know structurally I would say you know you hear a lot today about working from home and other things like that and I would say there's.
We've learned a lot through the process in terms of you know what rules we can work.
We can perform more remotely then.
Directly in branches and offices, but I would say you know I'm still a lot to be done a lot to be learned there before we would say there's a real structural shift in how you operate.
But I think overall from a from a compensation perspective, we're still very focused management you know travel. This is restricted we did invest early in the quarter on training as I mentioned in some of that comments and so initially as we assess kill of it we didn't move our folks into some training and.
Initially, which I think will help us with some potentially some productivity later in the year, because we've got that training a significant amount behind us, but it's going to be very.
Very surgical I would say from that perspective.
And you know and again, we have to be very mindful of the cautious environment.
In bring a staffing back in at the appropriate time.
Just a little like the team I think did a very good job on the discretionary expense, but we're also trying to be very sensitive and how we come out.
I guess, we we could look like and I talked a little critical.
But.
We're being very conscious protecting.
We think are critical components for our business, whether it be skilled labor and again looking to that long term, even our our integration continue donor systems, which you know there's there's some onetime only expenses in there that to.
We just believe we wanted to move continue to move forward on and as well with the coal that protocols and things there were some some expense associated with that protect our people and we.
We just we just.
Really look at that is that's what we had to do to manage the business both protecting our people customers in the and the long term health of the business.
Got it that's great color guys. Thank you.
Thank you.
The following question is from Yuri Lynk. Please go ahead.
Hi, good morning.
Fournier learning.
Wondering some little more color on the discussions you're having with your mining clients, particularly in the in the gold kirker given.
Oh, the parts of that commodity has moved up quite substantially so are you getting any any different signals from.
Summers in your mind on six to nine months ago.
Well actually know were heavily engaged in this sector and.
Vault with with discussions.
We'll see how things evolve as I always say, we've got to we've got to earn earn the business with our value propositions, but obviously the some of the commodity prices.
Are attractive and we'll see how you know again a quarter was was really above.
For 20 mines, going and care and maintenance and some pull backs and restrictions on the operations side of it but we're we're obviously heavily engaged here and we'll see how things progress.
Mining companies.
Look at their plans going forward as they come out of the second quarter.
Okay. Nothing you can give us on on quoting activity or anything like that.
We are engaged.
We are engaged but we'll see we'll see how things evolve great. Yeah, it's still early.
Understood.
Maybe just on on the staffing levels.
How do you feel your shops our stuff.
And I'm, just asking on the context of.
You know some some employees and.
Some industries or might be hesitant to return to physical work workplace. So just how do you feel your stopped and dealing with those.
Central issues.
I'm you know, we're really pleased how our leaders have handled this very challenging and delicate situation. We have people moving to lay offs and work share programs.
We we are monitoring our skilled labor and Supervisions very closely on a on I'll call. It a daily page [laughter] with some.
Because it is a.
Unique environment, and we're trying to stay close to our to our people who are both active or only if we did you know I'd say, we peaked in the may with those layoffs or the work share programs and.
So were we continue to be very focused on that at the end of the quarter with some improvements.
But we're pleased how are people are reacting in understanding the situation because we we want to retain rate and I would say.
So far into the quarter, we're really proud of the team and how are people have reactive to which required as a.
Call. It a team first approach and the best interests of all and.
Greenlee proud of our people and leaders on that front.
Okay, let's get some investments when a color.
Thank you thanks.
Thank you.
Following question is from Ben Cherniavsky. Please go ahead. Your line is now open.
Yes.
Good morning, guys.
Pointing that right.
I'm just wondering if you can shed a little bit of light on the comment around product support margins increasing in the quarter.
Just a mix issue and that type of.
Parts that you're you're selling or.
What what's behind that trend.
Well, maybe I'll just start on the men.
Just a couple of comments that we did make in there and I think one thing to keep in mind is.
Like when it comes to mix and a lower level of product support as proportion or revenue given the drop in activity that we've talked about quite extensively.
Yeah.
We are seeing you know.
The strong parts margins, but at a lower level right. I think you see that also in our Simco business, where we spoke a bit about product support was tracking reasonably well.
But again you know, it's really comes down to the balance of activity in the other part of the business right and how that blends out over time. So it's a combination of activity in areas of our business, where we have a essential services and support I think to things like power and and certainly on the Simco side. For example, you know you do.
See more resilience there right.
Thanks.
Two exposure there.
I mean.
Lots to do with the mix in there right at the sales going and yet because I think the disclosure say singled out part as margins and equipment group than those just.
It's not just mix of the types of death and yeah just.
Just mix I wouldn't.
Read too much in the Yep.
Okay.
And then on Simco side, just a very strong.
Order intake in the backlog.
Sadly we ended the quarter.
Maybe just a bit of surprised given the environment. How did you guys manage to get that kind of activity books.
You know confronting.
The we locked down and.
Where is that exactly coming from where exactly but generally where's that coming from what explains the increase.
Yeah, the booking activity in the quarter really came from Canadian industrial side of our business. We've been fortunate some some good wins in their continued in the in the quarter team's doing a nice job in there.
In that space there is some investments going on.
<unk>.
You know food and beverage type environment. So.
Which I guess heads up.
[laughter] situation we're in.
And show good work on on behalf the team I mean that backlog is very strong but on theres been some softness on some of our service I mean, you look at the the recreational side that was down that was impactful in the quarter and normally than what we see when it starts you know early April in through the summer months should.
Get some some really good service work on the recreational side.
Obviously has not been at the same levels were accustomed to.
As reflected in there, but you.
You know.
We're pleased with our team's progress and positioning.
Going forward.
You know even on the Simco side some of our construction projects had to be shutdown.
Back.
Which impacted our progress here on some of the projects so.
What sort of it it is what it is right and but the good thing is.
That industrial side and quoting activity remained solid.
Right no is the disease.
If I could just ask one more on on the equipment group.
The mining sales being down as heavily as they were.
Yes, everyone was expecting overall your your Ah deliveries will be down, but looks like mining took the brunt to that.
Was there any can you just remind me from a year ago I know you often will reference.
A difficult.
Comparable period, when you're lapping a.
Period previously that had big order liquids.
Factor at all.
You had mentioned other.
Yeah.
Quarter last year look like.
Yes, there was a little bit of comp in terms of the what we described as the Lumpiness.
But actually that the real comp.
We had is looking at their own power side in the backlog last year. So that was a maybe a larger impact although power activity on the sales side for prime product in electric power was was very impressive in the quarters. When we were pleased with a with the activity on the revenue streams for prime product and.
And electric power.
Yeah that would probably makes sense.
Learn as well but.
Just just back on mining the.
I mean, it had been sort of fits and starts in the mining sectors I recall prior to coated.
Did you find that we the co bridges.
Put a complete not a complete but is that primarily what explained that kind of a drop you think or was the sectors sort of already heading in this direction or for the mining sales specifically.
I think.
You know I mean, I don't want to speculate but.
No because it's the shift placing there on the production side with.
With many of the mines.
We're involved with.
Certainly there was a cautious and burn start, but I think you know I.
I mean, the commodity prices are.
[laughter] areas, maybe there's some sensitivities as.
Being focused on their balance sheets I don't know.
That might have a little bit to do with it as well, but we'll see we'll see all things evolve here I mean gold certainly setup a favorable price we like that sector were.
I have a lot of activity in there and we'll see how things evolve.
Okay. That's helpful guys. Thanks very much.
Thanks, Ben Thanks.
Thank you.
Once again, please press star one at this time if you have a question. The following question is from Maxim Sytchev. Please go ahead.
Okay.
Hi, good morning, gentlemen.
Good morning Max.
Just a very quick question on mining if it's possible.
I'm not sure from the past you provided kind of the breakdown between gold versus non gold exposure, but is it fair to say it's around.
So 60% on the mining seidl for a few mining business or is that is up too much.
Yes, you know I think you'd have to keep in mind. It does vary a bit then but.
Generally speaking.
We look at it is about 50% about 50% isn't the golden than the other base metals mic at the restaurant.
Okay.
That's helpful. It a bit but the integration right to remix.
Yeah, Yeah, sure makes sense and.
Correct me, if I'm wrong, but obviously it was.
Last year very competitive environment or.
Having technicians and this is such a critical part of your business just.
Yes to see how youre sort of one boarding practices have changed and there's it's easier to find people obviously as the economy opening up just just maybe any comments.
Well certainly I mean, we were.
Our aggressive strategy, obviously came to a halt in the Q2.
Because we were more concerned about protecting the existing team.
I think it's it's really we were.
Again as I said on a pre the previous call. We were very focused on making sure. Our retention was good as we work through these layoffs.
Sure programs.
In terms of the temperature externally for availability I mean, we really.
I'd say, we will get a better pulse on that and becoming a second half because we were very focused just internally right.
Protecting our people as best we could.
Makes sense and last but have a clean up question in relation to how should we think about the noncash working capital obviously.
Very strong and positive swing in kiichi ballpark any comments you can provide were put the back half of can you don't.
Yeah, if any.
Yeah, it great great observation there.
Thank you don't really.
Really proud of the way the team has responded in the way that our model functions.
You know with with the distributed nature.
The team has done a tremendous job on collection activity.
Yeah, and inventory management from that perspective, right and so you know as we look we're pretty conservative in terms of how we think forward I think again I would I would call I would emphasize the cautionary environment as we look into the second half Theres still lot of variables. There that were I think we're all.
Looking to understand as time progresses, and so I think we feel comfortable with where we're at however, you know they're going to be a number of things that happened in the second half here and the team is prepared to really keep tight controls on it. So again, we're trying to balance having the availability of what we need working very.
Closely with our customer needs, but also their their credit picture and you know I don't I don't see it changing dramatically Max I think it's just a matter of focus.
On the environment and trying to trying to manage through what we see as a cautionary sort of landscape going forward right.
The government I guess.
What's that.
Please go ahead.
Just going to say you know the one thing yet we all have to keep in mind is also with the incentives that the government stimulus. The government has put in place those things will come to an end and so we'll have to be mindful of how that also ripples through the economic environment and what that means from a a working capital management perspective right. So.
You know, we're well from the emerging from the pandemic at this point plus to be seen yet.
Sure I guess I mean, it's fair to say that we shouldn't expect these types of run rates.
Kind of over.
Over the back half of the has done a normalized and I mean, hopefully as things opening up and the mining opportunity you hope that presents itself.
We should see some normalization on the other side is that affairs assessments.
Yeah, I mean, that's difficult to say right, it's very difficult to say at this point in time, I mean I think.
We're going to just monitor it as as we can invest very prudently and very carefully.
In terms of inventory and.
And and so forth very difficult to comment on that as we look at the second half at this point.
Fair enough, okay, well that's it for me thanks very much.
Thanks, Matt Thanks Meds.
Thank you.
There are no further questions registered at this time I'll turn the meeting back over to Mr. Mcmillan.
Great. Thanks, Melanie. Thank you everyone for participating on the call today that concludes our call we wish everybody a great day and please stay safe.
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Okay.
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Okay fair enough on 50, though.
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50 for though.
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Yes.
Okay.
Okay.