Q2 2021 Barnes Group Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Barnes Group, Inc. Second quarter 2021 earnings.
Vince Com.
This time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone please.
Please be advised that today's conference is being recorded if you require any.
<unk> consistent please press star zero.
I would now like to turn the conference over to the Speaker today, Mr. William Pitts.
Director of Investor Relations. Please go ahead Sir.
Thank you Angie.
Good morning, and thank you for joining us for our second quarter 2021 earnings call.
With me are Barnes group's president and Chief Executive Officer, Patrick Dempsey.
And newly appointed senior Vice President and Chief Financial Officer Julia strike.
If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website.
B G I N C dot com.
During our call we will be referring to the earnings release supplement slides, which are also posted on our website.
Our discussion today includes certain non-GAAP financial measures, which provide additional information. We believe is helpful to our investors.
These.
These measures have been reconciled to the related GAAP measures in accordance with SEC regulations.
You will find a reconciliation table on our website as part of the press release and in the form 8-K submitted to the Securities and Exchange Commission.
Be advised that certain statements we make on today's call.
<unk> both during the opening remarks and during the question and answer session may be forward looking statements as defined in the private Securities Litigation Reform Act of $19.95.
These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.
The filings are available through the Investor Relations section of our corporate website at <unk> Dot com.
Let me now turn the call over to Pat.
<unk> for his opening remarks, then Julie will provide a review of our financial results and details of our updated outlook for 2021.
After that we'll open up the call for questions Patrick.
Thank you Bill and good morning, everyone.
Continuing with a clear focus on our business recovery.
Barnes group produced another solid quarter of year over year and sequential improvement in orders organic sales operating margins and earnings.
With total backlog at its highest point since the end of 2019.
Expanding revenue outlook strengthening industrial end markets.
And are progressing aerospace environment, we feel confident about the prospects for the second half of the year.
More importantly, our improving financial results continued to be supported by significant investments in growth initiatives.
That position us to sustained performance over the long term.
In the second quarter organic sales were up 31% with sizable gains in both our operating segments.
Industrial was particularly strong while aerospace continues to build momentum after the significant effects of the pandemic on that industry.
Similarly orders.
Very good as we generated a book to Bill of 1.3 times with aerospace driving that result.
Our total backlog stands at 984 million at quarter end.
Reflecting a 12% increase from the end of the first quarter.
Adjusted operating.
Square from and margins were up 41% and 40 bps respectively.
Adjusted earnings per share by <unk> 45.
Up 67% from last year.
Again really great results by the team.
Moving now to a discussion of end market.
Dynamics, beginning with industrial.
Our industrial segment generated another strong quarter with each of our businesses generating excellent year over year organic orders and revenue growth.
For the segment orders were up 37% organically.
With a book to bill of approximately 1.
<unk> income lines.
Industrial sales grew 42% with organic sales growth of 35%.
Of note second quarter total industrial sales were ahead of pre Covid second quarter of 2019.
As the macro as a.
<unk> level backdrop like last quarter manufacturing PMI in the U S and Euro zone remains strong.
With China in expansion territory, though not as robust as the other regions.
Notwithstanding the ongoing semiconductor issued that's dampening automotive sales.
IHS still predicts 2021 global production to be up 10% over last year and up an additional 11% in 2022.
With respect to new platform launches and major refresh programs of light vehicles.
2021.2020.
Macro and 2023 are forecast to be sustained at a healthy level.
Within our molding solutions business, we saw a good orders quarter up 17% organically.
Automotive packaging and personal care each saw double digit orders growth with.
Automotive being particularly strong.
Medical mold orders took a dip in the quarter not an unusual dynamic as these large ticket products can be somewhat lumpy.
Organic sales were up 22% year over year, while sequential sales were up 13%.
On.
On many occasions, you've heard me talk about investments in growth that we're making across the businesses.
To drive our sales and marketing efforts innovation and new product development.
Recently I discussed the launch of our new vacuum gripper technology in our automation business.
At molding solutions.
We are also working hard to expand our leading technology based solutions across multiple end markets.
A prime example relative to the public health crisis, we've all experienced over the last year or so is our mold technology, serving the global medical market and our investment in development of.
Our new product offering known as pipette tips.
Pipette tips are a high volume critical item used in the world of laboratory diagnostics for collecting a precise amount of liquid and transferring it to a test apparatus.
This market has expanded recently in order to meet the enormous.
Enormous demand brought on by the pandemic.
Our customers require a technology based solution that consistently delivers high output rates with extremely tight tolerances.
The Pip the pipette tips geometry must be precise to ensure that test results about accurate.
Accurate and reliable.
Our molding solutions business has developed a mall concept specifically for production of pipette tips, which not only meet strict technical requirements, but also focuses on superior reliability and ease of maintenance too.
To maximize uptime and operate.
<unk> loans 24 hours a day 7 days a week the configuration of the mold allows for required maintenance of worn parts to occur right on the machine true replaceable modular units or clusters, allowing for minimum disruption and production to come quickly back on line.
Delivering leading.
Asian, Nephrology based solutions, such as the pipette tip mold system and focusing on customer success allows our molding solutions business to demonstrate extraordinary value.
To close my molding solutions comments, our sales outlook has improved once again as we now forecast organic.
Technical sales growth in the mid teens, a bit better than our prior view.
At force and motion control argon organic orders were up over 50% with organic sales up double digits.
<unk>, 2 major end markets sheet metal, forming and general.
Industrial both saw robust orders and sales growth.
On a sequential basis sales increased 6%.
We continue to see full year 2021 organic sales growth to be up mid teens.
Engineered components once again generated high double.
Book digit organic orders and revenue growth on a year over year basis.
Sequentially, we saw a modest step in orders and sales as automotive semiconductor issues way on automotive end markets.
As a result of this issue we saw our second quarter revenue impact of approximately $5 million.
<unk> much aligned with the exposure we disclosed in April we.
We expect the third quarter semiconductor revenue impact of $3 million and another $1 million in the fourth quarter.
Our general industrial markets remained very healthy and are helping to mitigate some of the impact.
Our outlook.
Very organic sales growth is now forecast to be up in high teens, a step up from our prior view of mid teens growth.
At automation as economies rebound the migration towards industrial robotics, and more complex end of arm tooling solutions continues to be favorable.
On a year over year basis, organic orders and sales growth well into the double digits.
Sequential growth in orders and sales also continues along a healthy trend.
We now expect 2021 to deliver organic growth of approximately 20% better than our April.
The expectation of mid teens growth.
To wrap up on industrial clearly our year over year growth rates across the segment compare favorably to last year's second quarter, which was the trough quarter relative to the impact of the pandemic.
Comparables get more difficult over the next few quarters.
We expect to perform well.
At industrial we see 2021 organic growth in the mid teens with operating margins of 12% to 13% or.
Our margin expectation is down slightly as we continued to make strategic investments in our people products and systems.
However, we view.
<unk> investments as critical to setting us up for long term growth and profitability.
Additionally, in the near term, we are managing supply chain challenges, which Julie will address in a moment.
Moving to aerospace.
It's fair to say that the environment continues to improve.
Airbus and Boeing narrow body production levels are anticipated to increase meaningfully although widebody recovery is still a way off.
Global traffic and capacity trends are improving and that all bodes well for our strengthening aftermarket.
At the segment level.
We've been seeing good sequential sales.
Sales growth and expect that trend to continue.
And beginning this quarter will see favorable year over year comparisons as we move through the year.
Aerospace sales improved 23% over last year, and 6% sequentially from the first quarter.
OEM led the growth.
While aftermarket was down modestly, which we believe is simply timing.
Highlight of the quarter was our strong OEM orders, which generated a book to bill of 2.5 times.
That's 3 quarters in a row with a strong order book.
This reflects our customers' confidence in.
In the narrow body ramp as most of the order volume relates to the leap engine platform.
Our 2021outlook for aerospace is unchanged from our prior view.
Total aerospace sales are expected to be up low single digits.
Within this segment OEM sales are forecast to be up.
Mid single digits.
<unk> down low single digits and spare parts down in the mid teens.
Segment operating margin is anticipated to be 13% to 14% slightly higher than our April outlook.
In closing the second.
Quarter finished with excellent results positive momentum and a healthy outlook for the remainder of the year.
Several growth initiatives are being driven across the organization to help advance our recovery and position us to execute on our profitable growth strategy.
While supply chain and inflation risks are present.
Our teams are doing a good job mitigating the impacts and implementing pricing actions as appropriate.
We remain confident in the strength of our end markets and our team's ability to convert that into new business opportunities.
Now, let me pass the call over to Julie strike, our new senior Vice President and Chief financial.
Natural officer for details on our quarterly performance.
Julie brings to us a highly qualified business background and proven leadership and corporate finance.
We're very happy to have you as part of our team Julie.
Good morning, everyone and thank you Patrick for the warm welcome to Barnes group I'm happy to.
To be here and look forward to working with you and the leadership team as we accelerate the ongoing transformation of our portfolio. It's an exciting time for Barnes and likewise exciting to be part of crafting the gulfport weight story.
Let me begin with highlights of our second quarter results on slide 6 of our supplement.
Second quarter sales were $321 million up 36% from the prior year period with organic sales, increasing 31% and foreign exchange generating a positive impact of 5%.
As the impacts of the pandemic lessen our well positioned businesses are seeing.
Recovery in almost all our end markets operating income was $38.5 million versus $10.1 million a year ago.
On an adjusted basis, which excludes restructuring charges of 700000, this year and $17.7 million last year operating income of.
$39.2 million was up 41% and adjusted operating margin of 12, 2% was up 40 basis points from a year ago.
Interest expense was $4.5 million an increase of 600000 as a result of a higher average interest rate offset in part.
Art by lower average borrowings.
We'll see a sequentially lower average interest rate beginning in the third quarter as our debt to EBITDA ratio has improved driven by the recovery in our business and active cash management.
For the quarter, our effective tax rate was 25.3.
3% compared with 89% in the second quarter of 2020, and 37, 6% for full year 2020.
As compared to the full year 2020 rate our second quarter tax rate is benefiting from the absence of tax expense related to the sale of the Seeger business in 2.
2020, our net benefit related to certain foreign tax matters in the current year quarter and a favorable mix in earnings based on tax jurisdictions.
Net income was $24.5 million or <unk> 48 per diluted share compared to 600000 or <unk> <unk> per diluted share.
Share a year ago.
On an adjusted basis net income per share of <unk> 45 was up 67% from 27% since a year ago.
Adjusted net income per share in the current quarter excludes <unk> <unk> of restructuring charges and a net foreign tax benefit of <unk>.
While the prior year period excludes 26 cents of restructuring charges.
Now I'll turn to our segment performance beginning with industrial.
Second quarter industrial sales were $235 million up 42% from a year ago.
While organic sales increased 35%.
As Patrick noted the strong growth reflects volume increases across all our SP use.
Favorable foreign exchange increased sales by $12.4 million or 7%.
As has been the case since June of last year.
Here, we have delivered another sequential quarter of sales improvement with second quarter sales up 7% from the first quarter of 2021.
Industrials operating profit was $27.3 million versus an operating loss of 300000 last year.
Excluding restructuring costs of.
200000, this year and $15.8 million last year adjusted operating profit was $27.5 million versus $15.5 million a year ago.
Adjusted operating profit benefited from the contribution of higher organic sales volumes and the continuing impact of cost.
Cost actions taken last year.
Partially offsetting these items were higher personnel costs, primarily incentive compensation and costs incurred in support of segment growth initiatives.
Adjusted operating margin was 11, 7% up 230 basis points from a year ago.
Supply chain concerns, including raw material availability inflation and increased freight costs continued to be a watch item. We do have raw material escalation clauses in certain long term contracts and are able to price newly quoted business to account for increasing costs. We continue to work. These.
These issues and are taking steps to mitigate our risk exposures.
In the second quarter, we experienced approximately $1.5 million of combined freight and material inflation in the industrial segment for.
For the second half of 2021, our industrial outlook includes $2 million of inflation impacts.
Moving now to aerospace.
Sales were $86 million up 23% from a year ago, driven by a 37% increase in our OEM business.
Our aftermarket business, which continues to be impacted by lingering effects of the global pandemic experienced at 2%.
Decrease with MRO down, 8% and spare parts up 14%.
We expect the aftermarket to sequentially improve as we move through the second half of the year.
On a sequential basis total aerospace sales increased 6% from the first quarter of 2021.
Operating profit was $11.3 million an increase of 8%.
Excluding 400000 of restructuring costs this year and $1.9 million last year adjusted operating profit was $11.7 million down, 5% driven by higher incentive compensation and unfavorable.
Sales mix.
Adjusted operating margin was 13, 5% down 400 basis points from a year ago.
Aerospace OEM backlog ended June at $694 million up 16% from March 2021, and we expected.
Spec to ship approximately 40% of this backlog over the next year.
Moving to cash flow performance year to date cash provided by operating activities was 86 million versus $123 million last year with free cash flow of 68 million.
Down from $103 million last year.
Capital expenditures were $18 million down $2 million from a year ago.
Year to date operating cash flow in 2020 saw a $48 million benefit from working capital as cash management was a significant focus.
During the pandemic.
While we have seen a modest working capital improvement in the first half we won't see the same benefit in 2021, as we did last year as business rebounds.
Regarding the balance sheet, our debt to EBITDA ratio as defined by our credit agreement was 2.9 times.
Quarter end down from 3.1 times at the end of last quarter.
Our second quarter average diluted shares outstanding were $51.1 million.
During the second quarter under a pre existing <unk> 1 plan, we repurchased 100000 shares at an average price.
At a 50.229, leaving approximately 3.6 million shares remaining available for repurchase under the board's 2019 stock repurchase authorization.
Turning to slide 7 of our supplement let's discuss our updated financial outlook.
Book for 2021.
We now expect organic sales to be up 11% to 12% for the year, an increase from our prior view of up 10% to 12% driven by stronger industrial growth.
FX is expected to have about a 2% favorable impact on sales while divested seger.
<unk> revenues will have a small negative impact.
Adjusting up adjusted operating margin is forecast to be approximately 13% consistent with our prior view.
We currently expect a small amount of residual restructuring charges to come through which we will take as an adjustment to 2020.
21 net income.
Adjusted EPS is expected to be in the range of $1.83 to $1.90, 398 per share up 12% to 21% from 2000 Twenty's adjusted earnings of $1.64 per share.
Our current expectation.
Reflects an increase at the lower end of our previous range of $1.78.
<unk> to $1.98.
And we expect second half EPS to be weighted to the fourth quarter.
Rounding out a few other items.
Our interest expense forecast remains 16.
<unk> million dollars, while our other expense is forecast at $6.5 million slightly less than our April outlook.
Estimated capex of 50 million average diluted shares of $51 million.
And a full year tax rate of 30% are all consistent with our prior.
Yes.
Cash conversion is now anticipated to be greater than 110% an increase over our prior expectation of 100%.
In closing, we continue to drive solid revenue gains across the organization and expect further improvement.
Our outlet with many of our end markets demonstrating sustained recovery our businesses are positioned to seize upon the opportunities presented by a stronger economy.
Improving financial performance, good cash generation and a supportive balance sheet sets us up for good second half of the year.
With a clear focus.
Executing our profitable growth plans will continue to fund our strategic initiatives and pursue accretive acquisitions that will help us deliver superior performance over the long term.
Operator, we will now open the call for questions.
If you would like to ask a question. Please press star 1.
On your telephone keypad again, Thats star 1 to ask an audio question.
Your first question comes from the line of Myles Walton with UBS.
Thanks Tamara.
Good morning, good morning.
And welcome.
I was hoping you could touch on the.
On the aftermarket MRO it sounds like the spares were were nicely up sequentially and year on year and that would be sort of consistent with GE spares, but the MRO business itself, it's always a little bit.
More challenging is nowhere near those are going to come out is that a lack of expansion sequentially more an indication of.
Competition for MRO activity constraints or just overall market as you see it.
No I think it's Myles I think its basically timing and that we saw.
Our sales slightly down a couple of.
Percent sequentially, however, our orders.
Those were up.
4% in the quarter. So while we're while we saw was over the course was a strong may a little bit of a dip.
Strong April a little bit of a dip in May and then a strong June.
And that's continued into July so.
Dan.
It's.
Nothing I think more than just the.
Nuances of how products are coming in to the shops.
Nothing that we.
We see us.
Other than.
The natural.
Volatility of what's going to happen I think overdue.
It had come in weeks and months, but nonetheless, with an upward trend and we see aftermarket just going to continue to grow sequentially quarter over quarter as we move through the year.
Okay and your for your look for that.
The MRO outlook for the year, that's baked in didn't really change that.
Yes, no inside of aerospace.
We have a full year MRO was down low single digits, which is consistent with where we started the year and the primary reason for that of course as you recall was a strong first quarter in <unk>.
'twenty 'twenty and then.
So I'd bring note to the fact that we had a strong April.
As the as the pandemic hit last year, we saw the strength continuing into April before it tailed off in May. So you had a comp that was pretty tough on a year over year basis as well.
Okay, and then on the supply chain concerns and in particular, the inflation numbers you provided.
1.5 million in the quarter, and then 2 million for the rest of the year. Maybe can you just contextualize that how much inflation is that how much or maybe how much more than you expected is that maybe just some frame of reference.
Go around it.
Sure Thanks miles and if you might recall from our.
Our first quarter call, we had anticipated full year inflation to be closer to $6 million for the year.
And now where we're backing off of that slightly as a result of what.
For instance.
<unk>, So I would say what we've experienced year to date is largely in line with expectations, but we're a bit more optimistic going into the second half of the year.
Okay. Okay, and then the only other 1 clean up wise is on on cash flow and I know you've raised the greater than 100 to a greater than 110, but.
What we've done and I heard her due on their working capital in the second half, but unless there's a big working capital build.
I guess I'm, a little unclear why 1 Penn is the right number as opposed to something materially higher than 110% conversion.
Well I'm certainly aligned with your line of thinking that we'd love to see.
Material materially higher than 110 per cent and clearly we're going to strive to maximize our cash conversion, but as the business rebounds, we do need to be cognizant of some build in working capital and therefore our comp.
Comfortable at 110% or greater.
Okay. So you do.
Something that has paid some.
Some relatively material level of working capital build.
Or at least are.
Allowing for that to happen in the second half of that line yes.
Okay alright, thank you.
Thanks, Mike.
Your next question comes from the line of Michael Carroll Molly.
Do insurance Securities.
Hey, good morning, guys. Thanks for taking the questions.
How are you guys, maybe just go look at the margin.
Both segments I mean aerospace.
Took a step down sequential incrementals.
I guess less than 4% you had you had the spares improve which presumably carries higher margin MRO can you can you just give us color on.
What's happening with the aerospace margins and kind of how we should be thinking about that sure. So if you recall in the first quarter our operating.
Operating margin was 13.6% and then as you noted were down 10 bps to $13.5 in the second quarter.
The 13.5 I would suggest was a a better performance than what than what we had indicated in the first quarter, because we've given full year guidance.
<unk> of 13% for the full year.
And the reason that.
We gave that guidance was just some concerns over mix between the.
Right of which OEM load growth versus aftermarket, obviously with aftermarket being higher margin. So.
With that improvement.
And in the mix, we actually finished the quarter at 13, 5 and now have upped our guidance for the year between 13 and 14 for aerospace.
And clearly depending on the rate of which aftermarket comes back that that number could.
Could be significantly improved upon it totally depends.
Depends on the rate of.
We see aftermarket recovery over the back half of the year.
Got it and I mean looking at the commentary from from GE from SaaS or I mean.
Clearly if we see the parts pull through I mean that that's going to be the bigger.
For you guys than than the MRO.
Yes. Its spare parts are clearly is another area that we saw nice sequential improvement and year over year in the mid teens.
On the spare side, so that bodes well for.
Sure.
A trend that we continue to see improving and of course the.
Sure.
The repair side of the business continues to be a nice margin business as well as the engines come into the shops.
Clearly we will see this the.
Lever side also improve.
Got it got it and then just quickly on the industrial margins.
Obviously you know.
Some of the items you mentioned from from supply chain inflation related cost the investment.
How should we think about you know sort of the trajectory of.
The recovery of these industrial margins I guess when do you think you guys can kind of really start showing showing the benefits here I mean, obviously once the supply chain raw materials ease a bit that should help but the investments and I guess I'm thinking.
Trending back up to those levels.
You had been kind of mid teens just just.
How should we think about the overall cadence and maybe even when does the investment subside a little bit.
Yeah, It's a great. It's a great question.
And what I would highlight is that if you think about where what his way.
Way and right now on our industrial margins, which are still pretty healthy even as I compare them back to pre COVID-19.
Performance and so I referenced in my prepared remarks that we had seen total sales higher in the quarter in industrial than we did in Q2 of 2000.
<unk> maintained before Covid.
Our margins are just slightly below that performance in Q2 of 2019 as well with significant investments being made into the industrial side of our business. So the areas that we're making those investments are primarily we announced last year the launch.
<unk> innovation hub and that has continued to build momentum into 2021, and we're excited about the opportunities of the key technologies.
Team there are developing.
Secondly.
Obviously.
Personnel costs on a year over year basis.
And particularly as it pertains to incentive comp where last year was basically zero. This year, obviously, we're seeing the improvement in the business day inflation is a factor in.
Very pleased with how the team is managing that and whilst we've tried to.
Put some parameters.
There's around it.
We've built those parameters into our guidance for the full year.
And the last thing I, just mentioned and I mentioned it in the first quarter.
We allocate out to the 2 segments is based on sales and so.
Industrial has taken a little bit more of the ways this year with ore and down and that will self rectify as well as arrow comes back.
We move forward through the year so.
I would just highlight that our goal and our target of mid teens with industrial.
Australia is still very much where the team is focused.
And we're looking for industrial margins to.
<unk> continued to improve sequentially.
Just with the off so the underlying margins to improve the offsetting some of the investments we're making.
Got it thanks.
Julie just a housekeeping I think you said what was interest expense for the year going to shake out to $16 million.
$16 million.
Great. Thanks, a lot guys I'll jump off from here.
Thank you.
Your next question comes from the line of Matt Summerville with D. A Davidson.
Thanks, maybe just first put a little finer point on what Mike was talking about with industrial Incrementals at 17% total company at 13, given the volume increase you're seeing running through that business. Maybe can you parse out you mentioned the input cost pressure 1.
That would give you a little bit higher on an incremental basis. If we were to exclude that but I guess I'm a little surprised that incrementals are materially better than than what they are right. Now I know you mentioned from growth investments, but can you maybe get a little more granular on what's driving that and how we should think about incrementals.
In the back half.
Yeah, so the incrementals.
As I pointed out I look at it from internally, we look at it from a perspective of the underlying businesses and once the businesses are doing operationally and there we remain very confident that we're continuing to see improvement.
<unk> and that incremental flow through occurring the areas that I just highlighted investments in terms of long the mid to long term those investments are the hub that I highlighted our innovation hub and we see that as a key strategic initiative.
Long term and that is primarily focused today on the industrial business in particular as it pertains to technology around molding solutions.
Digitalization.
And the whole area of how we.
Use our technology to.
For our become major solutions provider in the quest for reducing plastic waste and so there as a highlight that and with the.
Clear opportunity.
Within that industry and in that space, We think we can be a leading provider of.
What is a.
A breakthrough.
Solution in the future.
The digitalization side of things is where we're looking to move our products and services more towards being smart and connected and there we have a number of key projects that are working around.
And opportunities to create recurring revenue streams in the future again, another investment that we see.
As key to our future success and then.
The last investment that we're making which I expect to be.
Our return on in more of the show.
Again term is strategic sales and marketing.
And there we've added significant resources in terms of talent.
On the marketing side as well as our feet on the street.
Salespeople to continue to position ourselves for future growth. So.
They are they are what's weighing Matt on the incremental margins externally and as I mentioned also if you'd just parse it out to industrial.
Clearly a little bit of a shift in the allocations as well.
So as I.
<unk>, maybe it might be helpful. Patrick within the industrial business, how much would you say growth related investments are up on a year on year basis 21 relative to 'twenty.
So.
They're up.
Sure.
I would say in the 5 to.
$10 million range.
Okay got it.
And then as a follow up with industrial book to Bill at 1 point.
Given kind of where we're at with the trajectory of the trajectory of the recovery I'm, a little surprised it's not higher maybe that some lumpiness and molding.
Well can you talk about that a little bit what SP use are trending maybe above that what's trending below that maybe just a little more granularity there.
Well as you highlight I think the primary.
<unk> is the mold side of the business and as I highlighted in my prepared remarks there.
So we did see a little bit of Lumpiness in medical orders in the quarter, which is not on.
Surprising are not something that is.
Not something we've seen in the past because from quarter to quarter day tend to be a little lumpy, but within.
The trail overall I would suggest that.
Each of the businesses, we're in that consistent range of about 1 times.
Okay, great. Thank you.
Thank you.
Your next question comes from the line of Pete.
Pete Scott Kucinski with Alabama cobalt.
Good morning, guys nice quarter.
Pete Good morning, Pete.
So.
Guys just sticking with industrial.
Revenue Wise you grew 42% so it's kind of hard to ask this question, but we've heard a lot about.
The chip shortages in the automotive industry and people having plant shutdowns, we've heard about it impacting revenue at other firms. So I'm just wondering how have those kind of phenomenon impacted your sales at all so far kind of year to date from from a revenue perspective in your automotive end markets.
Yes, they have.
<unk> pay it impacted us.
Predominantly in the production side, which is within engineered components and what we've seen is in the second quarter, we saw about a $5 million impact to revenues.
With an outlook that we've built into our forecast.
Cost of another $3 million in the third quarter and $1 million in the fourth quarter. So a dampened a little bit the engineered components performance. However, I would highlight that the industrial side of engineered components has grown from strength to strength and that has been a offset.
To some of the dampening effect of the top line on automotive.
And so it didn't really impact molding solutions at all really it sounds like no molding solutions, primarily driven by the new model launches and.
The new model changes and to that end they.
They saw some nice.
Nice increased activity in the quarter, particularly I think as it pertains to new electric vehicles and the announcements that have been made around that.
Okay.
Let me.
The next question, let me beat a dead horse a little bit on the industrial margins.
You took down the full year modestly but even.
Even with that.
Looks like Youre expecting you know call it 14% to 15% type of a margin in industrial in the second half of the year.
And obviously it seems like volume will be your friend for a while it seems like an industrial so I'm, just wondering that 14% to 15%.
And not to back you into the corner on.
'twenty 'twenty 2 but is that type of range something that is reasonable to think about for 2022.
Well I think we're definitely looking at margins improving over the course of the back half of the year and I would suggest that it's going to be a combination of volume and in turn those.
On an.
Activities that the teams are driving so we're looking to see an improvement in margins both from a operational standpoint, and the initiatives. It's been driven by the Barnes enterprise system, but and then also obviously as you mentioned a little bit of an uplift as a result of <unk>.
The <unk>.
As we move into 2022, I expect again that the industrials will continue to improve and build on that momentum back as you said and as we've continued to communicate with a goal of getting back to mid teens.
And since.
To build on what Patrick saying since industrial margins are very much in focus I would also add that remember $12.4 million of the sales increase was driven by FX in quarter, which has.
Virtually no margin drop through associated with it so that is.
Volume factor contributing to in quarter performance in industrial.
Okay. That's helpful. Thank you guys. So just 1 last question switching to aerospace.
On the OEM side.
A lot of good things, there and Patrick I would think that the.
The strong OEM results in aerospace.
Another I would think youre, having some headwind on the 787 program I would think that not much is going on for you on that program at the current time.
That's correct that's correct I would say we're at we're seeing clearly lower volumes as it pertains to most of the wide body platforms.
And.
What's driving our activity at the moment is all narrow body and particularly the leap program.
Okay, Okay that sounds great. Thanks for the color guys.
Thank you.
Okay.
Your next question comes from the line of question for Glen with Oppenheimer.
Thanks, Good morning good.
Good morning, Julie Patrick and Bill.
Good morning, Chris.
I was curious the school's outlook remains down mid teens, but you did.
Mid teens in the second quarter and look at the sequential increases it seems like that trend line would kind of eat up the big down in the first.
First quarter more than the outlook so just.
Curious about the arithmetic there.
Well the you know as you highlight.
There may be some conservatism inside of the outlook for aftermarket, but it is something that is.
Going to continued to be driven by.
By Air traffic and Moreover, I think the dynamics of the airlines and how they're managing cash.
So there are a number of factors in play but clearly.
Domestic travel here in the U S has seen a marked improvement in everybody's.
Pleased about that.
Also within.
I'd say Asia, particularly China, a marked improvement in passenger traffic there are a little bit of a laggard has been Europe and I think that also stands to.
It'd be an upside in the event that.
The Europeans.
And the vaccinations rollout a little quicker there.
So all in Chris.
We see sequential improvement in MRO and spares.
Spares through the back half of the year. The question is.
How much we.
The bodies.
The rate of that increase and I think we've reflected it in the guidance accordingly.
Okay, Yeah, I think the comps actually get a little easier but.
Revisit my notes.
And then on book.
MRO spares there I'm wondering if you run into any periodic pockets of inventory.
Gay is causing some of the volatility.
Any idea how that spares channel and free.
Running here.
Weighted.
Well clearly what happened over the course of the pandemic was.
With a view to conserving cash the airlines did everything within their power to bleed down inventories.
And.
To that end that all bodes well I think in that.
There.
Theyre going to reach if they havent reached that already in the first quarter or the second quarter, the point of where the restocking and so that I think.
Is something that is another positive outlook on the aftermarket.
That are out of the house as well as.
They've run probably a lot of.
What's known as Green time engines, which they've allowed them to defer maintenance.
They are going to run to the end of that and required to be required to pull the engines back into the shops as well.
Switching to industrial.
You said automation orders were up well into the double digits curious can we get a little more specific on what the orders did there sort of a state of play on that dramatic acquisition the operations.
The pipeline around that.
Both inorganic and organic.
Sure.
So I said it was well up into the double digits just to put a number on that it was up north of 70% in terms of organic orders.
And up north of.
Approximately 60% organically.
In terms of sales.
So just a super strong quarter, and actually I would highlight a record quarter within dramatic in the history of the company.
So just the very strong all round performance by the team there and of course, that's been driven I think in part.
At by virtue of the.
Industrial sector are waking up to some of the vulnerabilities.
In a pandemic and a shift towards more automation and robotics.
To complement existing Workforces and so that's driven demand.
<unk> costs each of their end markets into Q2, and we expect that to continue on a healthy trend going forward.
Sounds great I missed the updated industrial margin guide if you could repeat that.
For the full year, we guided 12% to 13%.
Okay great.
Great. Thanks, guys.
Thanks, Chris Thanks, Chris.
At this time there are no further questions I would like to turn the conference back to Mr. Pants for any additional or closing remarks.
Thank you Angie.
We would like to thank all of you for joining US this morning, and we look.
To speaking with you next on October 2009, with our third quarter 2021 earnings call.
Angie we will now conclude today's call.
Thank you for participating in today's conference call. You May now disconnect your lines at this time.
Fourth.
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Okay.
Okay.
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Yeah.
Yeah.
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