Q1 2021 Park Ohio Holdings Corp Earnings Call
[music].
Good morning, and welcome to the Park, Ohio first quarter 2021 results conference call.
At this time all participants are in a listen only mode.
After the presentation the company will conduct a question and answer session.
Today's conference is also being recorded.
If you have any objections you may disconnect at this time.
Before we get started I want to remind everyone that certain statements made on today's call may be forward looking statements as defined and the private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
A list of relevant risks and uncertainties, maybe found in the earnings press release as well as and the company's 2020 10-K, which was filed on March 5th 2021 with the S E C.
Additionally, the company May discuss adjusted EPS and EBITDA as defined adjusted EPS and EBITDA as defined are not measures of performance under generally accepted accounting principles.
A reconciliation of EPS to adjusted EPS and for a reconciliation of net income attributable to park, Ohio common shareholders to EBITDA as defined please refer to the company's recent earnings release.
I would now like to turn the conference over to Mr. Matthew Crawford Chairman President and CEO. Please proceed Mr. Crawford.
Good morning, everyone on joined here this morning by Pat Fogarty, our Chief Financial Officer.
It would have been difficult to imagine during the spring of last year, the speed of the industrial recovery underway. Our first quarter results demonstrated record levels of business and parts of our company improve bottom line performance due to operating leverage accelerated by our ongoing improvements and our cost structure and on almost $50 million.
<unk> net debt year over year.
Our success during the quarter was led by supply technologies, the combination of strengthening end markets and new business momentum propelled the business up 12% and March revenue was an all time record.
In addition, despite significant challenges in logistics and supply chain. Our team was successful and seeing impressive flow through at the margin line.
Bottom line is the supply technologies had a great start to the year.
While revenue and assembly components was flat, we continue to see the benefits of and increasingly flexible cost structure, which was beneficial during the quarter and responding quickly to changes and challenges and the automotive space per.
Perhaps the best sign of success and this segment was the steady stream of new business awards across the product portfolio, which will underpin our next leg up and revenue and margin.
We are well positioned to continue to benefit from the reengineering of vehicles globally and in particular electrification.
Engineered products results were lower than anticipated during the quarter, which is not surprising given the weakness and some of their end markets, but new bookings suggest we have worked through the trough and this traditionally mid to late cycle business. It's on its way back towards historical performance.
These results highlight a few things first our diversity continues to be our strength.
Second our improved and more flexible cost structure has provided not only improved margin flow through but also has enhanced our ability to react to and increasingly difficult operating environment.
Lastly, we expect to see progress towards our margin enhancement goals as the business environment stabilizes and we see improvements and our traditionally highest margin segment engineered products.
Thank you and all of our associates for leading our business through these challenging times, we're being rewarded for everyone's hard work and we are ready to move forward confidently into a period of sustained growth and improved quality of earnings and less leverage with that I'll turn it over to Pat to review the results.
Thank you Matt.
Our first quarter results reflect continued positive sales trends and most of our businesses despite supply chain constraints and weather related disruptions that affected several of our operations. The positive sales momentum throughout the quarter was most notable and supply technologies, where sales were at an all time high during the month of March.
And also assembly components, despite the semiconductor chip shortage, which caused production delays throughout our automotive customer plants performed well during the quarter and continues to launch more than 30, new programs and various facilities on.
Although we are not pleased with the results and our engineered products segment, which was challenged by low end market demand from the oil and gas commercial aerospace and rail markets, we began to see increasing new capital equipment orders and strengthening backlogs and our forged and machine products group.
Also during the quarter, we continue and implement and margin improvement initiatives across each business segment, which we believe will drive higher operating margins as revenues increase.
Our first quarter consolidated net sales were $360 million compared to $366 million and the first quarter last year and equal to our fourth quarter 2020 revenues consolidated gross margins and the quarter were 14, 5% compared to 14, 7% a year ago.
Excluding charges and the quarter related to play and closure and consolidation activities margins were essentially the same year over year as the cost reductions implemented last year and higher margins and supply technologies offset the impact of lower margins and engineered products.
SG&A expenses were $39 $7 million compared to $40 9 million a year ago, a 3% decrease reflecting the benefit of cost reductions implemented during the past year.
On an adjusted basis operating income was $13 6 million and the first quarter compared to $13 5 million a year ago. As a result of improved margins and supply technologies and assembly components, and lower corporate costs, which more than offset the decline and operating income and engineered products into.
Interest expense was $7 $4 million and the first quarter compared to $8 million a year ago, the decrease driven by lower average borrowings and lower interest rates.
Our first quarter effective tax rate was in line with our expectations at 26%.
First quarter GAAP earnings per share were <unk> 45.
And on an adjusted basis earnings per share was <unk> 53.
Compared to 13, a year ago, the impact of the lower effective tax rate benefited the quarter by <unk> 30, a share year over year.
On an adjusted basis, our pretax income increased 18%.
EBITDA as defined was $27 2 million during the first quarter compared to $25 5 million a year ago and increase of 7%.
Our liquidity continued to improve and totaled $264 million as of March 31, or 5% compared to a year ago and up $12 million from year end during the first quarter, we generated $10 million of operating cash flows compared to a use of operating cash of $3 9 million a year ago.
The significant year over year improvement was driven by higher net income and our continuing efforts to manage working capital and response to current market conditions.
Capital expenditures during the quarter were $6 $6 million, primarily and our assembly components segment and.
And related to new equipment purchase to support new business, which will launch during the current year and our aluminum and molded rubber products businesses.
Turning now to our segment results and supply technologies net sales were $158 million up 12% from $141 million a year ago during the quarter year over year and sequential growth occurred and the majority of our key end markets. The significant year over year sales increases were due.
Given primarily by the heavy duty truck power sports medical and defense markets average daily sales and our supply chain business were up 14% compared to a year ago and are expected to remain strong throughout the year.
In addition to the strong demand seen in our supply chain business. Our fastener manufacturing business also had a strong quarter achieving their highest quarterly sales number in recent years.
Key to this business as our proprietary self piercing and and clinch products, which are receiving wide acceptance from both domestic and European automotive Oems. We expect this trend to continue as a result of light weighting and electrification initiatives being implemented and the automotive industry.
Operating income and this segment increased to $12 2 million and operating income margin was seven 7% both significantly above last year's $9 2 million and six 5% respectively.
Higher margins and the first quarter were driven by the higher sales levels and the positive impact of cost reduction actions implemented in 2020.
Moving to our assembly components segment sales were $126 million compared to $128 million last year, while sales have substantially recovered from the pandemic lows of just over $50 million and the second quarter of last year sales and the current year were negatively impacted by the semiconductor chip shortage effect.
<unk> certain automotive platforms and many of our plants.
We estimate that the chip shortage reduced our first quarter sales by $5 million and first quarter operating income by $1 million.
We expect the shortage of supply will most likely remain a headwind for our auto related businesses throughout the year. Although it is difficult to project the full year impact at this time, we estimate that the sales impact and the second quarter will be approximately $10 million based on current customer shutdown schedules.
Segment operating income was $6 $4 million and the current year compared to $6 3 million a year ago and segment operating margins were five 1% and the current quarter compared to four 9% a year ago.
On a sequential basis operating income was lower caused by the chip shortage shortage and its impact on production schedules as well as startup costs on new products being launched and several of our facilities.
We continued our margin improvement initiatives during the quarter, including various plant consolidations and this segment and the first quarter, we expect expense $600000 related to these activities and we expect to incur additional onetime costs of $2 6 million throughout the remainder of the year.
And our engineered products segment sales and the first quarter were $76 million compared to $97 million a year ago.
The decrease in sales was due to the continued slow recovery and certain end markets, including oil and gas aerospace and defense and rail markets.
And our capital equipment business sales of new equipment, and aftermarket parts and services exceeded our expectations during the quarter and helped offset the low demand for our forging related products on.
And on a positive note new equipment order activity, primarily for induction hardening and melting applications continues to strengthen first quarter, new equipment orders increased 38% compared to fourth quarter levels.
In addition, our backlogs and our forged and machine products business increased from year end levels and we are optimistic that the pace of recovery will begin to improve.
The operating loss and this segment, which totaled $1 3 million and the current year.
Current quarter was driven by the lower sales, which impacted profitability.
We continue to take actions to improve future profitability on this segment and the first quarter, we expense $700000 related to plant consolidation activities and we expect to incur additional costs of approximately $1 million throughout the remainder of the year and.
And finally, corporate expenses were $5 million and the quarter compared to $6 $3 million last year. The decrease in expenses was due primarily to lower professional fees and employee related costs.
Overall and in spite of the first quarter sales volatility caused by the supply chain constraints and weather related issues, we exceeded our internal expectations based on the strong results from supply technologies and assembly components.
Although sales levels and our engineered products segment continued to lag. The overall recovery is seen and our other two segments. We are starting to see positive trends and demand.
Our previously communicated 2021 financial targets remain unchanged, which include revenue growth of 8% to 12% over 2020 levels, improving adjusted EBITDA margins by 150 to 200 basis points year over year capital expenditures of 28 to 30.
And $2 million and free cash flow conversion greater than 75% of adjusted net income.
And finally effective April one we completed the acquisition of N Y K component solutions, our first acquisition since the pandemic began.
And <unk>, which is headquartered in the UK is a leading distributor of electrical components for use primarily and the commercial aerospace marketplace, but also and other industrial applications.
And <unk> products and services are highly complementary to our existing portfolio of electrical products and provides additional product lines and new customers throughout Europe, and North America we.
We expect annual sales team and Y K to exceed $10 million.
And the results to be immediately accretive to earnings now.
Now I'll turn the call back over to Matt.
Thank you. Thank you very much Pat.
I'll comment briefly on <unk>.
And we were to get back on the acquisition game.
While a small deal extremely on strategic.
Accretive I think very exciting to our supply technology business.
And also I think symbolic of us getting back to our roots in terms of our our DNA and our choice.
Twice to try and growth through acquisition as well as organically.
That I will turn it over to questions.
Thank you at this time, we'll be conducting a question and answer session.
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One moment, please while we poll for questions.
Our first question today is from Steve Barger of Keybanc capital markets. Please proceed with your question.
Hey, good morning, guys.
Steve how are you.
And doing really well.
Great to see supply Tech start so strong do you think this level of revenue is sustainable and <unk> and the back half as customers ramp production.
I'll start yes, again, I think that I commented briefly on a couple of different things certainly, we're seeing a robust environment and <unk>.
Lot of our and most of our end markets not all.
Theres a few most notably commercial aerospace to continue to lag, but I also comment briefly on the new business. We've been focused as you know on new business for the last 18 to 24 months and and a renewed and invigorated way. So yes, I do and I do expect.
The strength to continue.
That's great so with that top line and the cost reduction initiatives you. It seems like we should expect.
<unk> is the kind of a low watermark on margin for that segment as we go through the year.
Yes, yes.
Great question on.
We're very excited about where that business is positioned.
No question as I mentioned and Pat mentioned, it was impacted by a variety of different issues related to expedited freight costs.
Port issues supply chain issues labor issues so on.
The volume increases or not.
And what I would call level throughout the business.
Planning and securing inventory and and the right places at the right time can be a challenge.
So I think theres some opportunity on the margin side, but Theres also no reason to believe that some of those inconsistency and we will continue on.
And and.
We are like many seeing some inflation and the system and we'll continue to as we always do and work to get ahead of that and use our leverage and the supply base to get the best deals possible, but that's going to require some pricing changes so.
It's not that I would say the visibility isn't quite as clear as you've articulated but we certainly feel that we're on a good place.
Understood.
And for the acquisition.
Is that a is that pickup based on a specific product line or just the end market exposure that it has and.
Do you see revenue synergy opportunities as you as you look across your customer base.
Yes, Steve this is Pat.
Yeah, a couple of things in 2019, we acquired a very small electrical distributor.
And we believed at that time would be a launching pad to allow us to provide more electrical products within our customer base, what NY Kay brings us not only additional product lines, but also new customers and suppliers certifications, which is very important to allow us to be.
Again to penetrate further on.
Our commercial aerospace customers, where we don't have much electrical component.
Sales and currently so we believe that all of the above we believe we will be able to continue to penetrate existing customers allow us to talk to new customers about our electrical components that we can provide which.
We will generate significant synergies with our current customer base.
Got it and I'll also add yes, I'd also add that debt and.
Another thing we like about this business, which is where we're focused on acquisitions.
And this this business is adjacent provides a lot of value for us in terms of marketing synergies, but the reality is they have their own growth story.
This is a business that operates well has good margins and has their own growth story with or without us. So we can augment it we see tremendous strategic value, but this is a business that's going to that's going on that's going to growth.
Got it on us.
One more and and hop back in line, Matt its really good day here, you're so focused on cost reduction and driving higher returns over time and I'm not asking you to name names here, but are there any business units the consistently under earning relative to expectations and maybe on working cap heavy that don't make sense for the portfolio is there any opportunity for growth.
Subtraction.
We as you know we spent the last couple of years sort of looking on.
Looking at carefully and critically at our product portfolio.
And I do think and as mentioned in the past that we have emphasized our allocation of capital to businesses that we think can outperform.
So again in that sense I think we do.
We'll continue to focus capital on acquisition and organic growth, where we see above average margins and up and above average growth. We have some businesses that maybe don't fit that profile, but in general those businesses are tremendous contributors to our ability to generate cash and pay down debt and gives us flexibility.
And through the business cycle, so I would not articulate that theres tremendous opportunity and that and that and that space.
And we like the businesses that were that were and that doesn't mean that we won't see some as we emerge and.
C revenues build.
But that's the way we're thinking about it today.
Got it thank you.
The next question is from Marco Rodriguez of Stonegate capital markets. Please proceed with your question.
Good morning, guys. Thank you for taking my questions.
And Mark I was wondering Marc.
Hey, guys I was wondering if maybe you could kind of give us a bit more of an update with a finer tooth comb if you will on.
Some of the launch schedules for the assembly components debt, although spicy and kind of got delayed last year kind of.
How should we be thinking about those product launches coming into this fiscal year.
Yes.
Ill describe it at a high level.
And what's happening.
First of all it is very difficult to plan for this business.
As you know a number of the.
Product launches were pushed back on.
And now and not only have they been pushed back but to the extent they've launched.
We're seeing lower volume.
So.
I do believe.
And that we are in a.
And we'll continue to see revenues grow.
Even against the headwind of lower volumes.
But to articulate a number at this point would be challenging.
But I would also say to you separately as you think about the business going forward.
Commented on the opening comments about the redesigning of the vehicle and electrification.
Our business funnel is strong and it's ever been across our product portfolio.
We are seeing tremendous opportunity so.
Well, it's hard to answer your question on the context of the next couple of quarters.
Again, given some of the strength and the supply chain that Pat mentioned.
We will outperform the market for years to come.
Got it.
And then revolving around the assembly components and your commentary on.
Impacts that you've seen from the chip shortages and what you're expecting here in Q2 another.
And the $10 million kind of headwind.
I would have to assume youre expecting year over year growth, but is there and expectation that you will see sequential growth and that business as well.
I Pat may be.
Quicker to answer this question I would tell you that.
This.
The current environment and the supply chain and automotive.
It's going to make a flow out of a lot of people on in terms of trying to guess the next three to six months in terms of production.
And <unk> sort of seen I think Ford come clean was out last week on their production schedules I think still antigens that now kind of come and clean.
On our information candidly is not a ton and better than yours.
So again I think if we look holistically at the business over the next 18 months given the backlog of the business that never hit us quite the way, we expected what's comment and the new business I think we're going and we will outperform the market, but I'm not sure I'm prepared to take any risk relative to we may simply see.
New business offset production losses, and the near term that is a real possibility.
And that would be okay.
Craig would be more thoughtful on that and no.
And then.
Marco I think as you know this it's a fluid situation right. Now every day you are hearing about different changes that are occurring with customer schedules. So it's hard to really comment on that so.
So I will standby, what Matt is saying in terms of we're going to outperform the market. We've got plenty of new launches and they cover so many different product lines and so many different plants that we feel real good about that and our team is more than qualified to be able to launch that many products.
They are accustomed to doing that so we're confident and what theyre going to be able to achieve.
I want to comment too and I know this isn't your question Marco but.
Whatever your political leanings.
The vigor and electrification right now is a positive for our company.
It allows us the opportunity to work on the design phase.
Some of the new products.
Obviously, our light weighting products are all over sort of the battery infrastructure on.
The significance of light weighting is more than ever.
And as it relates to other products that we service and.
And the coolant area and the fluid delivery area.
And we're learning more as more energy goes into that transition we're learning more about the applications that we can succeed in.
And it's getting more and more exciting.
And I understand very helpful. Thank you.
And then kind of taken and look at one of your end markets.
Marshall Aerospace area, obviously has been.
Challenged over the recent past and as you mentioned in your prepared remarks also continues to kind of lags and your other and market industries, and just kind of wondering and I know that obviously you guys are excited about that space and its growth potential can.
Can you, maybe just kind of update us on your thoughts on the industry and <unk>.
What sort of expectations you might have for that to kind of returned to growth mode and start to positively drive some some revenue growth for you guys.
And Mark we have no reason to believe that the 'twenty three 'twenty four type estimates for returning to historical volumes are wrong.
But again that doesn't mean that we're not a net investor in this space.
This is.
And we're long term investors. So we are confident it's not if it's when but we do not expect this to be a significant tailwind for this year or probably not next.
Got it.
And then.
And just wondering here in terms of the supply chain disruptions, you got and seen some of the inflation on you mentioned on on your prepared remarks I appreciate the quantification of the impacts of assembling the components, but there are there any other areas of the businesses, where you saw obviously, some some issues where.
And they were meaningful.
On.
Declines or meaningful impact to your financial results and Q1.
Yes, I wouldn't say meaningful but.
And would comment.
The price increases that were seeing and certain commodities.
We always react very aggressively to try to get ahead of it as Matt mentioned.
Our aluminum business saw tremendous increases in pricing not only year over year, but also since year end and.
And our arrangements and agreements with our customers is that we catch up to that but there is a lag and so and the first quarter. We were we were affected by that lag.
And so as prices begin to stabilize we fully catch up and of course, we always benefit then with that same lag when prices.
The decline so I would say that and as one business that we did incur additional costs.
The cost of goods sold line.
Because of that lag.
Michael I would add.
Debt.
Recall that the majority of our business.
Are either have indexing against raw material metrics as Pat mentioned or for example on the net engineered products business.
And does not have long term agreements. This is a project based business or and aftermarket driven business. So the vast majority of our business can reprice as prices go up.
Clearly and in the auto space, we've got some otas that arent index that we're going to have to work on clearly and supply Tech. We've got some spots that are but a lot of that business is buy sell and again, we can we can change pricing pretty readily so the parts of the business where we're exposed.
Not just on timing.
As mentioned, which is an issue, but also just terms of fundamentally.
And is very much a minority of the business. So most of the impact will be reasonably short term.
So I will tell you a reasonable amount of inflation.
It's a very good thing for park, Ohio Industries.
Very good thing, meaning it makes our position and the value chain more valuable and makes our inventory and more and more valuable. It makes our knowledge of our suppliers more valuable and makes our process more of it and makes our people more valuable so on.
Believe me we are rooting for.
On a meaningful.
But.
A reasonable amount of inflammation for a sustained inflation for a sustained period of time call. It 2% is a good day.
Understand it really patient and care and guys. Thank you.
Thanks, Michael.
The next question comes from Sarkis <unk> of B Riley Securities. Please proceed with your question.
Hey, good morning, Matt and Pat and I Hope everything is going well for you guys.
Good morning, Hey, So just wanted to touch on the NYSE acquisition I'm not sure. If you had a chance to speak to the growth and margin profile of the business and the prepared remarks I think you mentioned it has a good growth story and operates well and has good margin.
You can maybe provide some context around that statement. Please.
Sure.
We mentioned that we expect the business to to exceed $10 million and revenue their margin profile is greater than the margin profile of the supply Tech segment.
So.
As that business grows we expect to expand on those margins and I think the other the other opportunity that I didn't mentioned earlier, sorry pieces the the ability of.
Their expertise relative to suppliers.
Our volume that we're going to bring to the table allows us better pricing.
On the pricing grid.
So it will have.
Impacts to other parts of our of our supply Tech business.
Understood and when you mentioned better than our supply Tech segment margin is that on operating income margins or is that.
Operating operating income margins.
Good. Thank you and what was paid to acquire the business I know, it's $10 million and sales, but just trying to get a handle on.
Whether it's also accretive from kind of a financial metrics perspective, sure sure $5 $5 million net of the cash that they had on hand.
Great. Thanks for that and you mentioned.
Kind of retaining the annual guide you provided from the prior call. So I suppose as we work this incremental $10 million and sales and accretion to the model it would be over and above the base level fiscal 'twenty one guidance is that correct.
Right, Yes sarkis.
The $10 million doesn't really impact the range of of targets that we've given.
And so we wouldn't expect that to have a material impact on the on the guidance that we've given.
Okay, That's fair and just wanted to kind of get a better sense for some of the working capital shifts quarter on quarter I noticed inventories.
Built up here is that.
And kind of seasonal is that strategic just help me understand the magnitude of that buildup.
Sure.
It's all of the above.
But I think where we saw inventory increases and supply tech.
Part of it was the <unk>.
And obviously for customer demand that we expect to see and the second and third quarter also there.
Just on.
Logistics.
The issues that we saw at the ports.
Our job is to basically protect the customers and their and their requirements and so with that we carried a little bit more inventory than we traditionally may have carried.
Also the increases that we saw and inventories and assembly components was to cover new new volume demands that were occurring and the second quarter. In addition to the price increases that I mentioned earlier with aluminum that increases the inventory levels, but in general when you look at our overall net working capital as it were.
<unk> two are on annualized level of sales from the current quarter. We are right in line with our historic levels at about 25%.
And so theres a lot of.
Inputs into that ups and downs and various working capital categories.
But we are still.
Our goal is to continue to bring that number and that percentage of working capital sales down throughout the course of the year.
Circus and that gives me an opportunity to mentioned the work done inside the business and the last four or five months has been heroic in terms of the products that we supply in many cases, our just in time as you know some of them are by the shifts some of them a couple of days are and the supply chain.
There are so many people around the business that have done some of the best work of their career and keeping our customers satisfied so.
To support them with inventory dollars necessary.
To make sure that their jobs, just a little a little easier.
No that's fantastic and one last one for me and I'll hop back in the queue.
We've been hearing a lot of manufacturing companies and and operations, having difficulties with with labor just wanted to get a sense for how your facilities are operating on the factory floor and regards to labor and if there's anything you've started to think about our implement to kind of alleviate any potential pain points. Thank you.
Uh huh.
It is the issue of the day.
On.
It is the issue of the day.
And we.
And Theres nothing were.
Not doing.
In terms of thinking about how to attract and retain talent and.
In terms of making the on boarding process better in terms of.
Changing waste wage scales where appropriate.
We've changed some of our benefit plans.
At the same time, we're trying to make people's jobs easier and to be honest with you.
The volatility and the marketplace in terms of demand from our customers is tough.
The one thing I want and wants to do is work seven days a week.
So we need to invest and the right places to make people's jobs easier and.
And get people and a position where they can work five days and go home and be with their families. So.
This is a complex issue.
But it's not just about about cost of labor.
It's about putting people on a position that they can succeed and feel good about their jobs. So a lot of our investment is.
And is going towards and I mentioned flexible cost structure.
We've been reducing our footprint, but we've also been investing heavily and our current footprint and our current footprint.
A lot of that money is targeted towards operations, where we need to either increase capacity or create a better work environment.
That's the key.
Two I think.
Creating a more permanent basis of employment.
But it will continue to be an issue and will continue to be something that.
Every plant that I go to and is it just one a couple of weeks ago and.
We were meeting with the senior team and the HR person was new and I said, you got the hardest job and development.
No doubt she's got the hardest job and the building. So that's where we are but again I think where we're focused is making the quality of life for our people better and making their jobs, a little easier and yes, maybe having to compete a little bit on on compensation and so forth, but that's not the answer.
Long term.
Thank you.
The next question is from Steve Barger of Keybanc capital markets. Please proceed with your question.
Hey, guys. Thanks for the follow up.
Pat for Assembly, you said, there was a $1 million reduction and net income on a $5 million delay on the revenue should we expect that same percentage negative contribution margin on the $10 million and sales that you called out.
Yes.
So does that mean margin is probably flat or down and assembly and <unk> versus five 6% and <unk>.
Yes, I think the.
The expectations are we will be able to offset.
Much of that.
But.
Right now based on the information that we know on the shutdowns occurring $10 million has an impact of roughly 15% to 20% on our gross profit and.
And.
We're working hard to be able to move our own costs down to offset that.
Okay.
Steve I want to I want to use that comment to also say.
Our team we've talked a lot about this restructuring and flexible manufacturing and the changes. We've made there is a part of this.
Challenge on the revenue side, and the shutdowns and the automotive space that is good for our business.
And what I mean by that is we continue to reposition.
Our manufacturing footprint and.
And where we do things to be optimal for for not only our cost structure, but also for what <unk> and I just discussed about creating and I'll.
Our work environment people can sustain so.
And.
And a perverse way.
And we're seeing some opportunity and these shutdowns to do things that will benefit us for years to come on.
I'm, not saying I want it but we're going to we're going to get paid back for some of this because we could accelerate some restructuring moves and we will get paid back later this year and two years to come. So we're not we're not just sitting back and saying Hey, this kind of strength, we're looking at it and saying what can we do this year.
That maybe we weren't going to do until next year and there is a number of those things going on right now.
That's a good perspective.
And for the engineered product.
Product segment, specifically you have the easiest comp of negative 33% from last year.
Do you think that same on returns to growth. This quarter is that probably not likely just given the trends that youre seeing and some of those end markets.
I think we started to see some of those growth trends and the month of March Steve.
I think we're going to continue to see the business sequentially improve based on the order levels that we're seeing and our new equipment business and our induction business.
So I think Thats fair.
Yes.
We're this is our our.
Business, its most directly exposed to oil and gas.
So the question Sheila.
Although we're seeing some activity there.
And despite what everybody says.
And any.
Oil and gas so for a while to come so I think we are but this business is driven by the by the equipment group and as people have confidence on this economy is going to growth.
We expect to see first and are seeing a little strengthen our aftermarket business and now we're starting to see I think.
The kind of sustained <unk> and the new order bookings that Pat talked about and his comments. So we've got a long way to go and that business to get to where we're we're used to but as I mentioned, we're on our way.
And we're on our way and again I want to articulate again, we're not done there, but we have made fundamental changes to how we think about the business.
And we have.
<unk> taken some opportunities again to reduce costs and create more flexible manufacturing environments, which is important and.
And we've also invested.
Talk a lot about investing through the cycle.
We have taken the opportunity there with new leadership at the business to invest and and parts of the business and people that I think are going to kind.
Going to be very exciting and change and change the business and the future.
That's great.
And since we're on the topic of challenged end markets and I'll ask about one more the rail business I know that's been under pressure for awhile and we are seeing sequential increases and rail traffic, we're seeing and equipment come out of storage, whether its railcars or locomotives any sense. There that orders are picking up similar to what youre seeing and and maybe the aftermarket of oil and gas.
Yes, Hey, and Fac.
More pronounced on oil and gas.
And that should be that should be.
And if not when thing as well and I think that the awareness startup.
Yes ill give you. One example of that Steve and our and our forging business and Arkansas, which is primarily providing forged products to the rail industry. The month of March was a very good month from a sales perspective, and probably at the highest level of monthly sales that we've seen.
And a year and a half on it.
Almost two years, so I thought that was a good sign for that market. It's a relatively small part of the business, but it was a sign that we could be seeing more upside there.
Obviously, we're optimistic.
Net debt the infrastructure well hit that part to whatever they do and infrastructure. It seems like they are in violent agreement about about rail and some of the park basic stuff. So so we're excited and I don't know what we're seeing as much activity on the locomotive side, but candidly and Thats a smaller part of the business.
Yeah, No that Arkansas business is more on the track maintenance side as I recall is that correct or am I remembering wrong.
On the car and the railcar on the railcar rail track Okay. Okay.
Thanks.
Okay. Thank you.
There are no additional questions at this time I would like to turn the call back to Matthew Crawford for closing remarks.
Great. Thank you for the good questions today, and thank you for giving US some time to talk about the business. Most importantly, thank you to all.
All of the park, Ohio people that make this happen.
Truly believe we're entering into a very unique time in our history.
And I'm proud of the way, we've allocated capital and I've never been more excited about the future. So thank you very much.
This concludes.
Today's conference you may disconnect your lines at this time, thank you for your participation.
Yeah.
Okay.
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Okay.
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