Q2 2021 Harsco Corp Earnings Call
[music].
Good morning, My name is Misty and that will be your conference facilitator.
At this time I would like to welcome everyone to the Harsco Corporation second quarter release Conference call.
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I would now like to introduce Dave Martin of Harsco Corporation. Mr. Martin You may begin your call.
Thank you Miss day, and welcome to everyone joining us today I'm, Dave Martin VP of Investor Relations for Harsco with me today is Nick Grasberg on our chairman and Chief Executive Officer, and Pete mine in Harsco, as senior Vice President and Chief Financial Officer.
This morning, we will discuss our results for the second quarter of 2021 and our outlook for the remainder of the year. We'll then take your questions.
Before our presentation. However, let me mention a few items first our earnings release as well as a slide presentation for this call are available on our website.
Second we will make statements today that are considered forward looking within the meaning of the federal Securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ from those forward looking statements.
For a discussion of such risks and uncertainties see the risk factors section on our most recent 10-K and 10-Q the.
The company undertakes no obligation to revise or update any forward looking statements.
Lastly on this call we may refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in our earnings release as well as a slide presentation with that said I'll turn the call to Nick.
Good morning, everyone and thanks for joining us.
A few weeks ago, we announced the appointment of our new CFO on Schuman AGA. He will join US later this month and I could not be more pleased with the outcome of our search process.
We look forward to introducing on schuman to you once you're settled into the role.
Again, I appreciate peach willingness to defer his retirement and remain with us through the transition over the next few months.
Most are very pleased with our Q2 results, we delivered our highest quarterly revenues since 2013.
And our adjusted EBITDA growth and margins were strong both year over year and sequentially versus our first quarter.
Our results reflect impressive execution by our team.
I'll highlight the ongoing integration of esol and clean Earth.
Our high level of service to a booming steel industry.
And advances in operational excellence in the rail business.
The rail on contaminated materials segments had lagged the recovery of other sectors and we are pleased with the way in which we've met the increased demand.
In short the business momentum is now more broad based than it was in Q1, and we're maintaining a positive outlook for the balance of the year.
I would like to thank our 12000 plus employees for their continued commitment to harsco and to our customers.
I'll comment on each of the segments, beginning with harsco environmental.
Capacity utilization of the steel mills that we support is approaching that of the first half for 2019 before the market began to turn down.
And the outlook into next year includes further volume growth.
When coupled with the shift towards an improved mix of environmental services.
And lower capital spending <unk> outlook for 2022 is as bright as ever.
From a macro perspective, the steel industry's heightened focus on sustainability.
Fits well with our focus on ESG and the portfolio of environmental solutions and our innovation pipeline.
Our business has never been better positioned as a true strategic partner to the steel industry.
We look forward to continuing to work with our customers to advance and expand their green steel initiatives.
Our cleaner segment continues to perform well.
We're delivering on our commitment to maximize the value from last year's Esol acquisition.
We'll also taking advantage of the benefits of a market recovery.
After realizing more than $10 million for synergies last year, we anticipate at least another 20 million this year.
So while the recovery in the each of clean Earth and markets is firmly rooted.
The business is experiencing some pressure from tightness in the labor market and within disposal assets.
We have factored these items into our outlook for the year and where possible are taking action to mitigate the impact.
At the same time, we continue to recognize new growth opportunities in the hazardous waste industry supporting the initial steps we've taken to transform our portfolio of businesses.
The rail segment recorded its highest quarterly profit in 2 years, and we expect EBITDA growth to exceed 60% for the full year.
The business has benefited from a recovery in domestic spending and also was global aftermarket platform.
Covid challenges remain particularly in Asia, and Latin America, but this has been accounted for in our outlook.
The team is also executing at a high level of managing our large contracts dealing with COVID-19 related supply chain issues and.
And as noted earlier improving key operational metrics.
Finally in May we released our most comprehensive ESG report to date.
Highlighting our ESG accomplishments and providing a detailed look at our ESG strategy as.
As well as focus areas on the governance structure to align with our business strategy.
And commitment to ESG with shareholder value creation.
Highlights of these are on page for the slide deck.
We are particularly proud of our safety record last year and our contributions to the circular economy.
Last year, harsco recycled or repurposed over 75% of the material that we process.
And we continue to see increases in our ESG ratings.
We are reinforcing our commitment to the environment and to social and governance matters.
By incorporating related goes into harsco as annual incentive plan.
I'll now turn the call over to Pete.
Thanks, Nick and good morning, everybody.
So let me start by turning to our results for the quarter and our unchanged outlook for the year.
As Nick mentioned, we are pleased with our Q2 results and our continued expectations for a strong year.
So please turn to slide 5 in our consolidated financial summary for the second quarter.
Harsco revenues totaled $570 million and adjusted EBITDA reached $78 million in the second quarter outperforming the prior year and sequential quarters.
Also our Q2 EBITDA was at the top end of the guidance range, we provided in May.
Importantly, each of our segments performed performed well in the quarter.
<unk> performance in etch execution, environmental as well as the mix and timing of some shipments in rail drove results to the higher end of our guidance.
Clean Earth results were consistent with our expectations and it was good to see the anticipated improvement in our contaminated materials business that we discussed on our May earnings call.
Both are contaminated materials business and rail business, which had been lagging as economic conditions strengthened over the past year are now experiencing positive momentum.
And as Nick noted these businesses are expected to further improve in the second half of the year.
Harsco consolidated revenues increased 27% compared with the second quarter of 2020, and 8% compared with the first quarter of 2021 each.
Each of our segments contributed to these increases.
Harsco as adjusted earnings per share from continuing operations for the second quarter was 28.
And this figure compares favorably to adjusted EPS of <unk> 13 in the prior year quarter and is above the guidance range of 21% to 27 since we provided in may.
Yeah.
Lastly, our free cash flow for the quarter of $6 million was consistent with our expectations.
The change versus the comparable quarter in 2020 is principally driven by higher capital spending much of which as we've discussed before had been deferred from the prior year.
We did see a sequential improvement in cash flow from Q1 as anticipated and we expect our cash performance to improve meaningfully for the remaining quarters of the year.
Now please turn to slide 6 in our environmental segment.
Revenues totaled $273 million and adjusted EBITDA was $58 million.
These results compare favorably to the prior year quarter, when EBITDA totaled $40 million.
Our quarterly margin improved to just over 21%.
Compared with Q2 of 2020, the EBITDA improvement is primarily attributable to higher services and applied products demand globally.
These impacts also include the benefit of higher nickel prices in the quarter.
These positives were partially offset by higher SG&A, including incentive compensation as well as a modest impact from site exits.
Steel production at our customer sites continued to improve.
Liquid steel tonnage or LST increased roughly 25% versus the prior year.
We expect to benefit from increased production as the global economy continues to improve.
Our customers operated at less than 80% of capacity in Q2, which leaves room for further improvement in service levels in the future.
Okay.
Next please turn to slide 7 to discuss our clean Earth segment.
For the quarter revenues were $196 million and adjusted EBITDA totaled $18 million.
Compared to the second quarter of 2020 revenues increased 21% with both are contaminated and hazardous materials businesses contributing higher revenues.
The EBITDA increase year on year was mainly driven by higher hazardous waste volumes and our integration and value creation activities.
Integration benefits totaled roughly $5 million in the quarter versus the prior year period and overall, our integration efforts are progressing well with us on track to realize $20 million of benefits this year.
These positive impacts from partially offset by incentive comp and SG&A investments, including some rebranding and it costs, which won't repeat next year.
Lastly, on clean Earth, I'd highlight that our year to date free cash flow now totals $24 million.
This total represents more than 70% of its EBITDA and reflects the positive results and financial characteristics of this business.
Now please turn to slide 8 in our rail business.
Rail revenues totaled $101 million up 24% from the prior year quarter.
And the segments adjusted EBITDA totaled $10 million in the second quarter.
The revenue increase versus the prior year quarter is attributable to higher equipment sales, including our work progress under a number of long term contracts.
Meanwhile, EBITDA was essentially unchanged year on year.
Here the benefit of higher equipment contributions was offset by a less favorable aftermarket mix, mainly in Asia timing of certain contracting services and higher selling related costs.
With this said our Q2 results in rail improved sequentially and were slightly better than anticipated.
Again this reflects the positive market developments and improved outlook, we discussed on our May earnings call.
So now turning to slide 9 which is our consolidated 2021 outlook.
As I mentioned earlier, our outlet details are unchanged from those communicated in may.
Adjusted EBITDA is expected to be within a range of $295 million to $310 million.
And earnings per share is expected to be within a range of 82% and 96.
And we expect free cash flow of $35 to $55 million for the year.
Our Q2 results support this guidance.
Underlying market performance was consistent with expectations in recent months and our outlook for the relevant end markets is unchanged.
With that said our implied outlook range for the second half of the year also contemplates some modest potential headwinds largely comprising labor availability and inflation related to our trucking fleet clean Earth.
Also the tightness in availability of end disposal options in the industry, including incineration capacity remains a potential headwind in the coming months.
We are however, anticipating in disposal markets to loosen later in the year.
Let me conclude on slide 10, with our third quarter guidance.
Q3, adjusted EBITDA is expected to range from $75 million to $81 million.
Each segment is expected to see improvement relative to the prior year quarter, given favorable market conditions as well as internal improvements and investments.
Sequentially Q3 results are expected to be comparable with the second quarter at the midpoint of the range, reflecting some improvements in clean Earth and rail.
In environmental we expect that services mix will be slightly less favorable in Q3 versus the second quarter.
So before I conclude my prepared remarks, and turn the call over to the operator for questions. Let me make some final comments.
First I want to personally welcome on shipment to harsco as the new CFO.
I've met and spoke with him he will be a fantastic addition to the leadership team of this company a company that I've had the privilege to be part of it for 7 years.
Yeah.
Since this will be my last earnings call. Let me once again say that while my wife and I are very excited about starting the retirement phase of our lives there as much I will miss about harsco.
Most importantly, the great people I've been proud to work with Nick My colleagues on the executive leadership team and my global financing. It teams I will miss him greatly.
However, rest assured I will enjoy watching and sharing in the continued successes of harsco on the sidelines as an investor for years to come.
Thanks, and I'll now hand, the call back to Mr. <unk> for Q&A.
At this time, if you would like to ask a question press star 1 on your telephone keypad again, Navistar and then number 1.
Your first question comes from the line of Michael Hoffman with Stifel.
Hi, Nick Pete and good luck with the retirement I hope it gets us out by truck finally.
Thanks, Mike.
The free cash flow outlook.
A $70 million swing in the second half it seems like it's very heavily weighted around working capital can you help us understand where that is going to come from.
Yes, it's typical for us Michael that the second half is typically higher weighted in terms of free cash flow. It is coming largely from working capital and EBITDA performance, particularly you see it in rail for sure but across all 3 of the business units will continue to see the trend that we've already experiences with it which is an improvement on a worker.
Capital metrics, so we'll see that be the primary driver for the free cash for the rest of the year Michael.
Okay, and then within the line of business.
That's sort of gone on a and a b to it so the day is.
How I think about the second half with the B is the longer view of these trends you are picking up can you talk about.
What you are seeing that gives you confidence about the comment that Nick made about 'twenty 2.
And steel clean Earth rail.
So the VA is the short term view of the long term view is what else are you seeing that gives you the confidence that this carries into 'twenty 2.
Yeah.
Well I'll start with the B Michael.
And I think.
If you simply look at consensus estimates for volume growth and steel to begin with.
But also with the industries that we serve in the U S.
Net source of the clean Earth volume so medical retail.
Industrial and so forth.
Everything that we've seen and heard.
Commentary around those markets suggest that.
This recovery is going to extend well into 2022.
Yeah.
That's the base of course beyond debt and our own business the growth opportunities that we're seeing.
And clean Earth and also the ramp up of some large new contracts.
<unk>.
It should be additive to that.
And as we've mentioned.
Many times before capital spending in 2022 should be a good bit less 50 plus million less than it will be in 2021. So.
You put all of that together, coupled with what should be an improving mix.
In AG and clean Earth, and we're pretty optimistic.
Domestic about 2022.
On the rail business, we've commented before that about half of our revenues are derived from transits and metros.
And of course that has not yet begun to bounce back we've seen recovery as you know on the on the freight side both within the U S.
And the global markets that we serve.
But we've not seen a recovery in transits and that's that's going to come as people return.
To office.
And so that gives us optimism.
On rail together with.
We've talked about before some new products that we're introducing in the rail sector that have been trialed.
With.
With test vehicles, and with really very good.
Feedback from from potential customers. So.
So across all 3 segments Hec in rail there is a good bit of optimism not only.
Beyond this year, but.
Implicit in our guidance for for this year.
The AG business.
As you know is a bit more stable the volumes we.
We have decent visibility to the volumes of material that will process for the balance of the year.
And.
And in clean Earth and rail course rail.
It has a substantial backlog.
And clean Earth, we continue to see.
Growth in each of its end markets.
And if I teased a little bit out on clean Earth.
The infrastructure related part of that volume any visibility there.
Well there is great visibility to a number of large projects that are coming online many of them have not yet come out for bid.
And so there will be a question as to timing on.
Although we're somewhat confidence.
Debt, we would be involved if not.
As a sole provider at least in part so there is visibility to the pipeline of projects.
It's really more a question of of.
Timing of that of course, you add on to that.
The projects that will be created by the infrastructure Bill that was passed a couple of days ago.
Again, it's difficult to quantify the impact of that on the business, but clearly.
And clean Earth with respect to clean up of.
Superfund sites.
Large number of new infrastructure projects that should create material that we would process.
Not to mention.
<unk> with respect to wastewater and.
<unk> so.
Well a lot of optimism on clean Earth also.
Youre alluding to the $30 billion of increased circle of funding on the $10 billion for P. Fast work, that's what's on that infrastructure.
Yes in part of course, there are other components of the infrastructure Bill.
We're oriented towards infrastructure that should support both.
Harsco environmental.
And also a clean earth.
Last 1 for me.
Never made any secret your businesses on a transformation that rail eventually isn't part of the portfolio is business. Good enough that you can start a process of that transition now.
Well, that's a very good question.
Michael and I'll, let me start by saying.
<unk>.
We noted both Pete and myself noted in our commentary, we're very happy with the performance of the business and the outlook not just for the balance of this year.
But but in 2022 and beyond and of course, we're trying to balance.
The creation of shareholder value.
As a result of the disposition with the benefits of sooner being better than later.
And so thats the balance and of course with respect to shareholder value.
We are expecting given the outlook for the business.
For that outlook to be manifest in and the sale price.
So that's that's the question really.
At the moment.
And of course, the second half, we expect to be stronger than the first and.
In 2022 to be a good bit stronger than 2021.
And so we will just have to wait and see if we can capture some of that value now or we need to be to wait and execute a process.
Bit later on.
Okay and lastly, the incineration issue is there just for just that busy support share every other statement and cleaner for these great fundamentals on the incinerator capacity in North America is just full and that's the problem.
Yes. It is.
It's not what I would term a major problem for us we certainly send.
We process and repurpose and recycle a lot more material than we center.
Incineration.
And so we're managing through that as best we can and it's sure.
It is holding back revenue and profit a bit in the second half, it's likely only a timing issue.
But it's not material to us and it's embedded in our in our guidance. Okay. Thank you very much. Thank.
Thank you Michael net.
Your next question is from Larry Solow with CJS Securities.
Great. Good morning, good morning, guys. Thanks for taking the questions today.
Just a couple of follow ups maybe.
Nick you mentioned sort of the improving mix of services as you head out into 'twenty, 2 and beyond particularly in environmental.
Could you just speak to that more is that sort of a culmination I know you guys have walked away from several contracts over the few years and it sounds like some contracts from now on new contracts are ramping up is that driving the improved mix of it.
Contract base is.
Is it more actual services base.
It is driving that.
Well its partially a contract churn, but I would say the larger impact is from the.
The mix shifting more towards applied products than to the.
Mill service contracts.
Now with all that said I think we really need to focus more on.
On kind of the EBITDA minus capex.
Kind of trends of course applied products being less capital intensive.
And also the environmental services that we.
Provide also are less capital intensive than the more traditional logistics services that we provide so.
We need to look beyond simply EBITDA margin or gross profit margin and also focus on EBITDA minus capex margins and you'll see a pretty notable jump in those in 2022.
You mentioned the applied products, which obviously had a very strong quarter. This quarter I think and you mentioned a little bit of a benefit from nickel prices.
But do you see this sort of uptick is sustainable.
Without at least on the volume side.
Probably harder to forecast pricing on commodity yes, it's a good point good point, Larry we certainly have benefited.
From higher commodity prices this year as you as you note.
So I'll put that to the side given that of course, they are very difficult to predict but on the volume side, absolutely our reed minerals business as we.
Transform it's.
Its source material from coal to steel slag is a very bright outlook I'll say.
The steel false business, which is the road base material.
We provide largely in the U K, although we are.
Planning to commissions from new plants here over the next year or so that business is.
<unk> is a very good business for us and should see.
Nice growth.
All tech as well right.
We talked about all tech we've been challenged with <unk>.
During COVID-19 from.
Inking contracts on on.
On processing waste from the aluminum industry I certainly expect that.
To pick up quite nicely in 2022 and also on the second half year this year.
So yes. There is good reason for optimism in terms of volume growth in applied products and again the margins.
Our good but even more important for the capital intensity is relatively low.
Okay and could you just give us I realized low churn between your clients, but I imagine the base is pretty similar the same over the last few years. So I know you mentioned.
Utilization at your steel Mills is just about <unk>, but maybe a little bit over 80% in the quarter and that sort of back to where we were.
Early 19 before things start to go slide downward.
For the last 5 years is that sort of low 80 number.
Close to the high watermark or have we been higher.
For a customer well first of all yes, we're I think as Pete mentioned, I said approaching and Pete indicated that there is still room and there is.
Kind of at that 80% level on our mills, and our high watermark, which would be closer to the mid eighties or so historically.
The average is 80% to low eighty's.
Of course with that.
All of the stimulus spending not not just here, but in the <unk>.
Other markets, where we provide services to the steel mills.
We think there's opportunity beyond that because of the stimulus spending beyond the historical.
Historical highs, even so and of course, a lot of capacity has been taken out.
And mills that.
We don't that we don't serve so that should lead to higher utilization of the mills that we do.
Right. Okay fair enough just last question on the on the clean Earth.
Outlook sounds like things are certainly improving across segments.
Within clean Earth, I would've thought maybe sequentially you would've had a better revenue improvement usually Q1 is a little bit slower seasonally and it sounds like dredging, maybe coming back a little bit or maybe thats more on the back half of the year on the containment on materials side.
Are some of these limiting factors is it just the.
More of the employment labor.
The labor issue.
The incinerator issue mentioned or is it.
Maybe I'm splitting hairs, a little bit on just any thoughts on that.
It's a combination of this data is a combination of a bunch of things in the soils business. Yes, we did see the momentum this quarter, which is great, but it's still on.
On a rapid uptake, it's going to be building up each quarter a little bit.
Better than the preceding quarter. So we're going to see that trend continue but it's not a hockey stick by any stretch. So at the top line, that's probably the big driver at the EBIT line. It's a combination of things it's the cost headwinds the labor shortage headwinds, we pointed out during our earlier comments, but also the investments we're making on the G&A side. So we've talked about this before we are making some investments in the.
And the G&A front, we've got some and rebranding costs, which will be incurring this second half continuing for the second half of this year that won't repeat in 'twenty..2 so it's a combination of all of those factors that kind of mute the otherwise.
Hi, I growth top line, they're great great. Thanks, I appreciate the color and good luck for you Pete as well thanks, Scott Thanks, Nick.
Your next question is from Rob Brown with Lake Street capital.
Good morning.
Hey, good morning.
Just wanted to follow up on the on those labor issues and cost issues and clean Earth can you.
Can you offset those with pricing or do you see those working at us.
The labor market stabilizes.
Yeah, well first of all the Labor challenge is primarily for us with with truck drivers, we have a rather large fleet.
Of trucks.
It's been the U S. So that's that's where the labor shortage is crimping us. The most of course, there is also inflation and labor costs with respect the truck drivers and others as well so.
But to answer your direct question, yes, we do expect to be in a position to raise price to offset the impact of that inflation.
Okay. Okay. Good.
And then on the.
The rail business.
You talked about kind of trends that are metro improvement.
What sort of drives that improvement is that really an economic reopening or are there are government actions that need to happen to get that business growth.
Well, it's both I think you probably noted that.
And the infrastructure Bill, there's a rather large allocation of stimulus funding to Amtrak.
That will certainly will certainly help.
But yes ridership levels have to go up and.
Thank you.
As I kind of span.
Many of our peer companies and talk to others.
It seems as though many are pointing towards after the labor day holiday for a return to office, which which certainly should should stimulate ridership improvements.
So it's.
Theres really nothing baked into our second half forecast around a recovery in transit debt would be more of a 2022.
On.
But at a macro level some of the shifts are taking place that would suggest that.
That will happen.
Okay, great. Thank you I'll turn it over that for.
TB.
Thank you very much.
Again, if you would like to ask a question press star 1 on your telephone keypad again that is star and the number 1 for questions.
Your next question is from Chris Howe with Barrington Research.
Good morning, everyone and best wishes Pete on your retirement.
Thanks, Chris.
Yeah just.
Some of the topics are concerns in the quarter.
I guess, starting with the supply chain issues and then you also we have been talking about the labor market as it relates to clean Earth.
And some other challenges in the quarter.
Can you kind of put these in context.
Whether thats.
For the company as a whole or on a segment level basis.
As to what kind of impact they had on quarterly results and our results came in good versus expectations.
But just wanted to see kind of what your thoughts were on how these constraints impacted the financials.
Yeah Yeah.
Well first of all I will say that individually and collectively.
Would say that.
<unk>.
These challenges are not material to our results.
In order of impact.
Probably impacting harsco rail the most and then I would say clean earth and to a lesser extent on harsco environmental.
So I'd hesitate to quantify it I would just again say that it's not material and its.
It is labor as we've mentioned it's also.
Inflation, but in rail we have a very global supply chain in many countries as we all know continue to.
To be in the depths of the Covid pandemic impacting their economies. So.
Both on the supply chain side as well as on the revenue side.
In terms of.
Bookings that we expected in parts of Asia, and Latin America.
Or just not happening and we certainly do you view all of that to be temporary were.
Hearing the right things from our potential customers and suppliers.
This will pass.
But it hasn't yet.
<unk>.
So, yes, it's holding us back again on hesitate to quantify it but again its not material.
Okay.
Just going off those last comments surrounding the rail segment.
Certainly the positive part of my thesis on Harsco is the transit metros have yet to come back you mentioned that is a 50% approximate mix of the rail segment.
As we think about.
That portion of your business versus rates.
Can you talk about or compare contrast, the mix of business within those 2 buckets and one's transient metros starts to show.
Some level of recovery, how that would change your mix of business as we look further out into fiscal year 'twenty 2.
Mhm.
Well in transit we have a generally speaking.
A richer mix because.
A good chunk of the.
The revenue is derived from our technology products.
Which have a very healthy margin in fact, I would imagine debt within the allocation on the infrastructure build to Amtrak.
That we see opportunities for our <unk>.
Safety and measurement of diagnostic technology products, which are which have very healthy margins.
So I would think that and of course, the the balance piece of debt is the aftermarket and in Asia, which is which is freight in China right.
But I'd say in general as as the transits.
Begin to.
To pick up debt that the mixed for I should improve.
Perfect.
And then.
Yeah.
Okay.
And then 1 last question just to wrap things up.
You talked about the improvement it wasn't a rapid improvement in contaminated soils.
Whether it's contaminated or other parts of the business that are recovering.
As we look at now versus 3 or 4 months ago.
You did well versus expectations, but could you perhaps talk about something that may be.
Is it a little bit better than you expected 3 to 4 months ago.
As we kind of.
Dig into what comprised the results.
Yes, well.
Certainly in Harsco environmental.
Volume is probably surprised a bit on the upside.
I would say.
Yes.
I think the.
I'll speak more on the EBITDA line here for a moment I think the ongoing benefits from the integration of clean Earth and esol.
It's probably been a little stronger than we anticipated and that of course is helping the EBITDA margins.
As well in clean Earth.
But I would say in terms of volume.
On hazardous waste, probably pretty close to our expectations I would say.
We've continued to await the bounce back and contaminated soil volume.
And so thats held us back a.
A bit.
And was although it's again higher than it was in the first quarter is still probably a little bit weaker than we would have would have hoped.
Okay, great. Thanks for taking my questions and great quarter.
Thank you.
Next question is from Jeff Hammond with Keybanc.
Hey morning, guys.
Hey, Jeff Hi, Jeff.
Just trying to get a sense of whats precluding you from from getting more positive like within the guide on <unk>.
Environmental it just seems like great.
Great momentum in the <unk> and it seems like production is moving higher into the second half.
Yes part of it Jeff is that as you know we have been for a handful of years now really focusing on exiting.
Contracts that are don't provide the returns and net investing in new contracts that debt due some of those new contracts had been slower to ramp up.
Based on permitting issues and customer issues.
Issues in thinking in China for example.
And in some other geographies. So so that that has held us back a bit.
Again, that's a timing.
Related related matter.
So that's what I'd probably point to us.
As the largest.
Yeah.
Kind of challenge and not not having a stronger outlook for the second half it's still of course quite strong sequentially.
Sequentially and year over year.
And even by historical standards our EBITDA.
In AG will.
Be approaching that of 2018, which was a multi year high we probably won't get quite there will likely meet or beat the 2019 EBITDA and volume.
But now Im overall happy happy with what we're seeing in the market and how we're executing.
Do I wish that some of these new contracts for ramping up more quickly absolutely, but again its a timing issue and we will see the benefit of that in 2022.
Okay, Great and then just on clean Earth.
Clearly a lot of inflation you talked about some of the issues just maybe talk about what youre doing on price. It seems like this is a price taking market and then just dovetailing that into you saw I think 1 of the issues. They had was not.
Pushing price and I think youre going to go after kind of strategic pricing initiatives. So just update us on on those 2 things.
Uh huh.
Well certainly.
A portion of the $30 million or so of benefits that we've received upon integration has been price I mean, it's not the largest component, but we have <unk>.
Certainly taken advantage of some of what you mentioned with respect to previous ESO practices on pricing and so there is some benefit that we've derived to date.
Over the last 18 months or so from that.
Going forward we.
We really haven't yet built in.
Probably to the extent that I might like to see some pricing benefits.
But you are right. This is a market debt.
Should enable us to.
To see more benefit from pricing in those.
Those discussions are on the table as we speak.
But not not necessarily built into into our outlook for the second half.
Whats.
Within clean Earth, what's typically like the.
The transition timing to get a price increase through.
If youre doing a follow on or something like that.
Yes, I don't have a good sense of that Jeff I don't know Pete if you know.
It's obviously it's.
It's not on across the board.
Exercise that affects everyone the same.
Amount, but I can say historically.
Looking back over the last 5 years in clean Earth price has exceeded inflation and so that's <unk>.
Dynamic has been accretive to margins.
Okay. Thanks, a lot.
Okay I'll have a follow up question from Michael Hoffman with Stifel.
Yes, just to check on the last bit I mean, just so everybody's clear clean earth pricing issues, because it gets down to waste codes, it's not quite like.
You can just say I'm going to raise price broadly on all chemical companies. So it's really a waistcoat issue. That's why you're I think prior being reserved on your comment there.
My question is this is a market that keeps looking for momentum commentary or actions by companies and I think you have any momentum aspect of your story on the sequential improvement you raised guidance on <unk>. So you did it but wondering what's the bias in your guidance is it solidly at the midpoint or is that an upper half.
<unk>.
Perspective, given that its been raised.
Okay, well I'll say, what you expect me to say solidly at the midpoint.
I was hoping you guys say upper half right that's true.
Yes.
Okay, and what would cause it to be upper half then what has to happen.
Yeah, I would say some of these these COVID-19 related.
Challenges in rail and clean Earth in particular would need to abate.
I think that debt would be 1 we've talked about pricing a bit.
Clearly commodity prices staying robust in wood.
Wood.
It would help us.
The faster than anticipated ramp up of new contracts in <unk>.
Of course would be a good thing for us and then some of these large contaminated materials projects.
<unk> are on our pipeline, but the visibility on timing is poor and were not expecting.
A significant lift from those in the second half for the year of course that could happen.
Okay, great. Thank you.
Okay.
I will now turn the call back over to Dave Martin closing remarks.
Thanks, Misty and thanks, everyone for joining us this morning feel free to contact me with any follow up questions and as always we appreciate your interest in harsco and look forward to speaking with you soon take care bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participating you may now disconnect.
Okay.
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Okay.
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