Q1 2022 Exco Technologies Ltd Earnings Call
Ladies and.
Gentlemen, thank you for standing by and welcome to Exco Technologies Limited first quarter results 2022.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
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I would now like to turn the conference over to your speaker for today, Darrin, Kurt President and Chief Executive Officer, you may begin.
Thank you <unk> good morning, ladies and gentlemen, welcome to ESCO technologies fiscal 2022 first quarter conference call I am Darren Kirk CEO of Exco I will lead off with an operations overview Matthew pause no. Our CFO will then review the financial results before we open the call for questions.
Before I begin I would like to make some comments about forward looking information in yesterday's news release and on page two of the presentation that we posted to our website, you'll find cautionary notes in that regard, while I won't repeat the contents I want to emphasize that they apply to this discussion today.
It was a challenging quarter with several factors catching up to us lower vehicle production volumes due to ongoing chip shortage was the biggest contributor however, labor disruption due to the greater spread of the omicron Varian widespread inflationary pressures inventory destocking broader supply chain issues.
And logistical constraints also contributed.
But I want to emphasize that while the quarter was challenging and while our results were well below our recent performance nothing has changed fundamentally for exco or our medium term outlook.
We expect much.
Much stronger results in the quarters ahead in fact with that in mind I am very pleased to announce that yesterday, our board of directors approved a 5% increase in our dividend to an annualized rate of 42 per share. This is the 14th time Exco has increased its dividend in the last 13 consecutive years.
I'm not sure how many other companies have done this but I do know, it's a pretty exclusive club.
Despite current headwinds we remain encouraged by the underlying trends across our various businesses that will contribute to our future growth.
I've mentioned several times before the automotive industry's transformation towards electric vehicles and focus on reducing emissions is extremely positive for <unk> tooling businesses.
As Oems make the change to greener vehicles and strive for greater manufacturing efficiency. There is an increased use of light metals and the demand for our associated tooling.
There is also increasing demand for technical expertise at the supplier level as products become larger and more complex.
More broadly we also expect to benefit from the trend towards larger and more complex castings across the industry as all Oems seem likely to pursue this playbook.
In addition, there is a heightened focus on efficiency by all manufacturers for sustainability initiatives that will be very positive for the entirety of our tooling business.
In anticipation of these trends, we continue to make sizable investments in order to better position, our various businesses to capture these opportunities.
We are investing record sums of Capex this year across several initiatives and we made great headway on advancing these projects during the quarter.
But at this point I think the constrained supply of microchips impacting the Oems ability to manufacture vehicles is well understood.
Most industry players and analysts do however, expect an improvement in supply as we go through 2022.
IHS for example is anticipating a 17% increase in vehicle volumes in 2022, and a further 11% in 2023 it is important.
To understand that underlying demand for vehicles remains strong. This is evidenced by a record high prices for used vehicles significantly depleted dealer inventories and an aging of the on road vehicle fleet to historic levels.
Turning to the quarter and first looking at our automotive solutions segment overall vehicle production volumes in North America, and Europe were down about 20% year over year. This drove our segment revenue is lower but we were additionally impacted by unfavorable vehicle and product mix shift inventory destocking of <unk>.
Those products in the supply chain as well as our own operational logistical constraints.
New program launches contributed to our results this quarter, including one key new program, where we are supplying sizable content on a fleet of commercial EV Vance.
This program will begin to ramp up more significantly in our third fiscal quarter and continue for several years.
Moreover, we will continue to ramp up several other new key programs through 2023 that will provide outsized growth relative to our historical performance. Meanwhile, quoting activity and New program Awards remains very decent we're seeing a number of sizable new opportunities, particularly with electric vehicles.
From both new and established Oems.
On the cost side, our margin suffered from greatly reduced overhead absorption due to the lower volumes.
Employee severance costs were also a factor although we also carried extra costs as we have retained surplus labor in anticipation that demand levels will rebound in the coming quarters flush.
Fluctuations in the forecast versus actual order releases, where again problematic. This quarter. This occurred as our customers juggled their own production schedules in response to the chip shortage issue.
These challenges were pushed down to the supply base in place strain on our own production planning process. Moreover.
Moreover, raw material cost increase was picked up and we've faced various supply chain challenges of our own.
These elements required us to be nimble and also absorbed a lot of extra costs related to overtime material substitution and expedited freight.
Pricing remains tough in this business and there is limited ability to use this tool as a lever. We did however take pricing action where possible to recover higher input costs, we will see the impact of these actions in our second quarter.
And our casting and extrusion segment, our topline held up fairly well in fact, we recorded modest growth over the prior year the.
The extrusion market remains strong this quarter with high demand across a number of end markets. Our extrusion tooling ultimately supports a diverse range of applications, including residential and industrial building and construction solar panels consumer durable products in various modes of transportation.
This quarter, we again demonstrated we could keep up with the sizable demand growth by utilizing equipment and labor more efficiently, while leveraging the harmonized manufacturing process of our numerous group facilities.
With regards to the latter this initiative has allowed us to centralize certain processes, such as programming and design and utilize our capacity on a network basis. All of this keeps our cost low capacity high and provides us with the ability to manufacture a quality product in a standardized manner.
We are making significant strategic investments to further shrink lead times drive down our operating costs and in source more of our own heat treat requirements, all while reducing our environmental footprint.
The die cast market, which is driven by automotive production, however, softened materially in the quarter as lower view vehicle production was magnified by inventory Destocking.
This negatively impacted demand for cast tools consumable dicast tooling, while the large mol group suffered from reduced rebuild work nonetheless.
Nonetheless, we achieved a number of program wins that will benefit future quarters. In fact, we achieved record levels of order intake in our large multi group ending the quarter with the highest backlog in our history.
We are very bullish on the long term outlook of this business given the growing demand for large and complex die cast components, coupled with our leading market position full service capabilities and view that supply change will become more localized overtime.
As well our adequate tooling business continues to perform very strongly contributing record levels of sales and order intake during the quarter.
Additive tooling is a critical differentiator, providing us with an unmatched competitive edge, we are extremely optimistic on where this business will go.
Looking at the casting and extrusion segment margins, we experienced weakness this quarter from levels that we have otherwise come to expect.
Margins were impacted by unfavorable product mix rising input cost higher freight charges and labor disruption due to COVID-19 , all of which outpaced ongoing efficiency gains.
As well front end losses at cast tools, new plant in Morocco added to the margin pressure. This quarter as revenue was only started to be generated towards the end of the quarter.
We did take pricing action, where possible through the quarter to protect our margins and expect the impact will be evident in our next quarter.
Lastly, as we announced during the quarter, we reached an agreement to acquire helix Europes second largest manufacturer of extrusion dies.
There's not really much more of an update at this time, we continue to work towards closing the acquisition this spring and welcoming <unk> employees to exco at that time.
That concludes my operations overview I will now pass the call to Matthew to discuss the financial highlights of the quarter Matthew Thank you Darren and good morning.
Consolidated sales for the first quarter ended December 31 were $101 million, a decrease of $24 million over the quarter. The consolidated impact of exchange rate movements reduced sales by $3 5 million.
Adjusting for the impact of foreign exchange first quarter sales at our automotive solutions segment decreased $18 6 million or 24% and the cashing extrusion group sales were up $1 6 million or 4%.
Consolidated net income for the first quarter was $2 7 million or earnings of <unk> <unk> per share compared to $10 9 million or 28 per share in the same quarter last year to 75% decrease in net income.
Income tax rate for the current quarter was 26% compared to 22% in the prior year period. The income tax rate in the current year quarter was impacted by geographic distribution and foreign rate differentials.
The automotive solutions segment experienced a 27% decrease in sales in the first quarter, a decrease of $20 9 million to $55 2 million the.
The decrease in sales was attributed.
To lower OEM production volumes due to COVID-19 constraints related to supply chain disruptions storage, including a shortage of semiconductor chips unfavorable vehicle production mix logistics challenges and the negative impact of foreign exchange.
First quarter pre tax earnings in the automotive solutions segment totaled $3 4 million, which is a decrease of $8 2 million or 71% over the same quarter last year. The segment's lower pretax profit is due to the 24% reduction in sales.
Causing lower overhead absorption and higher material logistics and labor costs.
The casting and extrusion segment recorded sales of $45 8 million in the first quarter compared to $45 $3 million last year.
An increase of half a million dollars.
The extrusion group experienced strong sales at locations, reflecting steady demand for extrusion tools and market share gains.
To a large low groups sales were down during the quarter due to the same supply chain disruptions caused by the semiconductor shortage negatively impacting automotive vehicle production lowering demand for consumable tooling for die casting and rebuild work from all the large mol group quoted and was awarded a number of programs from current and new customers in the quarter.
As a result inventory and backlog are increasing.
Pre tax earnings of the casting extrusion segment declined by $2 6 million or 7% over the same quarter last year to $4 $6 million.
The impact of inflationary pressure on raw materials, and transportation combined with lower overhead absorption at cast tool and large mold reduced pre tax profit.
Exco generated cash from operating activities of $8 million during the quarter and $5 2 million of free cash flow after $2 8 million and maintenance fixed asset expenditures. This cash flow together with cash on hand was more than sufficient to fund fixed assets for growth initiatives of $8 2 million and a 3.3 dollars 9 million.
A dividend.
<unk> ended the quarter with $11 6 million in net cash and $35 $3 million in available liquidity, including $26 3 million of balance sheet cash.
<unk> financial position remains very strong as such the company's balance sheet and availability under the existing credit facility allows considerable flexibility to support strategic initiatives like our helix extrusion purchase announced in December 2021.
Our strong financial position combined with our free cash flow creates a foundation for management to pursue high value growth capital expenditures dividends and other opportunities that may arise.
That concludes my comments, we can now transition to the Q&A portion of the call.
Thank you.
Ladies and gentlemen, as a reminder to ask a question you would need to press Star then one on your telephone.
To withdraw your question press the pound key.
Dan Thats Star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of David Ocampo with Comex Securities.
Line is open.
Good morning, everyone.
When David.
Karen I'm, just curious what percentage of the contracts that you guys have in place where were you able to reprice and then just thinking about it more higher level. When you combine that with sort of got operational efficiencies that you guys are looking for.
Are you guys able to offset that inflationary pressure in hitting your 15% target or are we thinking more longer term, where we need to see some of these contracts roll off okay. So.
I presume you're talking about the automotive solutions segment, yes.
Yes, that's right yes.
Lot of that business is kind of fixed price work that continues for a number of years.
Hugh.
Kind of are exposed to rising raw material costs.
<unk>.
Our path back to kind of a 15%.
Segment EBITDA margin.
Certainly remains.
Very achievable in our minds.
That path includes kind of first getting back to.
Normalized sales levels, and then having the benefit of the new program launches for over absorption of.
Of overhead that.
We plan through the next at.
At least couple of years.
And there are pockets of.
Of products within the segment, where we do have some pricing power and we're certainly and we have.
Pursued that.
So.
It's probably the minority of products and the rest you have to offset with efficiency gains, which we continue to do there are other aspects such as.
LTE as our long term pricing adjustments were.
Hugh.
Have an obligation to reduce prices through the program but.
We've pushed back we expect that.
We'll be successful in not taking those reductions.
No.
That's kind of at a high level, how we think about the.
The impact of rising.
<unk> costs in that segment.
Okay understood and then.
A lot of the discussion over the last few quarters has been on your large multi division and the impact on sales from the shift to EV.
But one area that we haven't really touched on is the margin profile. So are the molds for EV.
View similar to transmissions, and then Jim Walter or.
It may even be higher than.
For your legacy business is today.
Yes, I wouldn't I wouldn't say that there is.
Or a reason.
A reason to expect it.
This similar margin for EV malls as opposed to powertrain I mean, just but just generally as.
Molds get larger and more complex.
It reduces the number of.
Players that can effectively compete in this space and requires much more sophisticated engineering and technical depth.
You would expect that that would be accompanied with a higher value add over time, but we're certainly not modeling that in but I think the logic holds together.
Okay, and then while some for me what kind of ramp can we expect that the new castle facility.
Similar to what we've seen in the other greenfield facilities, where it takes a couple of quarters to get up the profitability yes.
Yes, yes, that's right I mean, there is certainly.
A few quarters of drag.
And the profitability, but.
By the end of the fiscal year, we would certainly expect that facility to be at least EBITDA breakeven if not better.
Our five year target that we have disclosed.
Realizing at least $30 million of revenue between cask tools.
Plant in Morocco, and then their plant new plant in Mexico by the end of that time frame certainly holds.
Certainly holds true.
Okay. That's it for me I'll jump back in the queue. Thanks, guys.
Thank you.
Our next question comes from the line of Peter Skylar with BMO capital markets. Your line is open.
Yes, good morning, Darin and Max you.
My first question is.
Like you've done a really good job explaining.
How the earnings deteriorated year over year.
I.
Would just like to have.
Little bit of discussion versus quarter over quarter versus the fourth quarter. So.
Like if you look at.
Vehicle production volumes like they were.
Sure.
Stronger global vehicle production volumes in North American North American vehicle production volumes were stronger in Q1 than they were in Q4, but like the earnings of the company in both segments really deteriorated rapidly.
Inefficiently versus the <unk>.
Fourth quarter, so I'm, just trying to figure out what has changed since.
The fourth quarter, because arguably the backdrop was pretty bad and was even worse in the fourth quarter at least in terms of vehicle production volumes.
It's a good question Peter and I.
Explain that we were more so impacted by inventory destocking in our first quarter than the fourth quarter.
<unk>.
That concept has really come come to a head.
During our latest quarter and just to kind of explain that.
You are running.
Call It six dicast machines.
Might have.
12 malls.
And production six.
<unk> backup.
And as.
As volumes go down then.
Your first.
Yes.
<unk> youre backup dyes, rather than adding new new dies for rebuild and we really saw the impact of that this quarter.
In fact, we we only shipped one.
One rebuilt die.
In the quarter, which is highly highly unusual for us.
So I.
I guess.
The converse of that is on the way up not only do you get the benefit of higher vehicle production, but then you've got the.
The inventory replenishment that needs to occur.
<unk>.
With our strong order flow that we saw in the quarter rising to record backlog.
And the large mol group.
We certainly think and expect that we are at the front end of of that rebound.
Okay, similar dynamics would apply to cast tools, dicast consumable tooling components, which which did see.
A more sizable dip this quarter than what we saw in prior sequential quarters.
Right Okay.
And can you talk a little bit about plant labor.
No.
Have you had trouble getting labor in the plant.
That disrupted your operations.
Yeah for sure.
Sure I think that.
Phenomenon is pretty widespread.
Across all entities.
And it has been exacerbated by the <unk> in the last quarter, where.
There were some weeks, where 20% of the labor or more was.
Was that.
Q2.
Due to that factor and.
So it's it's a continuing challenge too.
Just find people.
And then that.
Is compounded by just the disruption thats.
That's occurred due to due to COVID-19 .
We continue to to work against that.
It forces you to.
Think about how you produce things and.
Ultimately you need to become more efficient and I think that one of the benefits that we've had over the years as we've added a lot more equipment and.
We really haven't increased our head count.
And so we have become more efficient and we will continue to do so.
And Darren just back on this quarter over quarter seem like I understand you gave a good explanation why is it.
The tooling businesses did worse, but also auto solutions did worse versus the first quarter.
And <unk>.
Vehicle production volumes were higher in the first quarter, but the fourth quarter, so what what happened there.
So that.
As similar inventory Destocking I think was was.
A big factor in that.
And then labor disruption.
As well and there has been some elevated.
Raw material.
Put cost inflation.
<unk>.
<unk>.
Have taken some measures to to reverse and as we've indicated in our comments and.
In the news release that we expect to see the benefit.
That in our second quarter.
And Peter is another component that we look at it is mix between different locations and we don't get into that level of detail on these calls, but we have different mix of production might have been up in certain areas, but depending on how it fit our mix in our production and our locations that also caused some challenges there too.
Okay and then just my last question is in the write up you talked about the additive manufacturing business.
I've heard that wording before what is what is that.
That's our <unk>.
<unk> printed tooling components and.
<unk>.
We'd love to have.
You up to our new market plant.
That's been a.
Very strong growth business and differentiator for us but.
What we're talking about there is may.
Making parts of the mold components.
By printing them.
With steel so we basically.
A steel component and that enables us to.
Have water lines and cooling lines.
Follow the contour of the mold.
And so we can target hotspots in the mold.
Much better using three D printed components then.
And making those components.
Traditionally.
And that has an overall.
Very positive impact on the cycle time, and other measures such as scrap.
Right.
Of the casting process.
We are we are leaders in this business a couple of years ago.
We won the.
Automotive news pace Award.
In recognition of our leadership of this business and we're seeing greater and greater traction.
From from many customers.
And so we use these.
Adequately produce components in our own model molds, and we also sell some of them.
Kind of.
Replacement components for from old rebuilt so.
It's a.
It's a very exciting part of the large mol group and.
We expect it will have.
Very strong growth over the coming years.
Is it.
Is it like.
Prototype tooling or is it a prototype.
<unk> tooling.
Yes.
Used in the molds and more and more of our malls. In fact, most of them now have three D printed mold components in them.
Serves to improve.
Improve the efficiency of the overall mall.
Interesting okay. Thanks, that's all I have thanks.
Thanks Pierre.
Thank you as a reminder, ladies and gentlemen, Thats star one to ask a question.
I'm showing no further questions in the queue.
I would now like to turn the call back over to Dan for closing remarks.
Thanks, everyone for your time. This morning, we look forward to speaking to you again next quarter take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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Ladies and gentlemen, thank you for standing by and welcome to Exco Technologies Limited first quarter results 2022.
At this time all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press Star then one on your telephone.
Please be advised that today's conference is being recorded if.
If you require any further assistance. Please press star then zero.
I'd now like to turn the conference over to your Speaker for today, Dan Kurt President and Chief Executive Officer, you may begin.
Thank you Eduardo good morning, ladies and gentlemen, welcome to ESCO technologies fiscal 2022 first quarter conference call I am Darren Kirk CEO of Exco I will lead off with an operations overview Matthew pause no. Our CFO will then review the financial results before we open the call for questions.
Before I begin I would like to make some comments about forward looking information in yesterday's news release and on page two of the presentation that we have posted to our website, you'll find cautionary notes in that regard.
While I won't repeat the contents I want to emphasize that they apply to this discussion today.
So it was a challenging quarter with several factors catching up to us.
Lower vehicle production volumes due to ongoing chip shortage was the biggest contributor however, labor disruption due to the greater spread of the omicron Varian widespread inflationary pressures inventory destocking broader supply chain issues and logistical constraints also contributed.
But I want to emphasize that while the quarter was challenging and while our results were well below our recent performance nothing has changed fundamentally for exco or our medium term outlook we.
We expect.
Much stronger results in the quarters ahead in fact with that in mind I am very pleased to announce that yesterday, our board of directors approved a 5% increase in our dividend to an annualized rate of 42 per share. This is the 14th time Exco has increased its dividend in the last 13 consecutive years.
I'm not sure how many other companies have done this but I do know, it's a pretty exclusive club.
Despite current headwinds we remain encouraged by the underlying trends across our various businesses that will contribute to our future growth.
Mentioned several times before the automotive industry's transformation towards electric vehicles, and both focused on reducing emissions is extremely positive for exco tooling businesses.
As Oems make the change to greener vehicles and strive for greater manufacturing efficiency. There is an increased use of light metals and the demand for our associated tooling.
There is also increasing demand for technical expertise at the supplier level as products become larger and more complex.
More broadly we also expect to benefit from the trend towards larger and more complex castings across the industry as all Oems seem likely to pursue this playbook.
In addition, there is a heightened focus on efficiency by all manufacturers for sustainability initiatives that will be very positive for the entirety of our tooling business.
In anticipation of these trends, we continue to make sizable investments in order to better position, our various businesses to capture these opportunities.
We are investing record sums of Capex this year across several initiatives and we made great headway on advancing these projects during the quarter.
But at this point I think the constrained supply of microchips impacting the Oems ability to manufacture vehicles is well understood most industry players and analysts do however expect an improvement in supply as we go through 2022.
IHS for example is anticipating a 17% increase in vehicle volumes in 2022, and a further 11% in 2023.
It is important to understand that underlying demand for vehicles remains strong. This is evidenced by a record high prices for used vehicles significantly depleted dealer inventories and an aging of the on road vehicle fleet to historic levels.
Turning to the quarter and first looking at our automotive solutions segment overall vehicle production volumes in North America, and Europe were down about 20% year over year. This drove our segment revenue is lower but we were additionally impacted by unfavorable vehicle and product mix shifts inventory destocking of X.
<unk> products in the supply chain as well as our own operational and logistical constraints.
New program launches contributed to our results this quarter, including one key new program, where we are supplying sizable content on a fleet of commercial EV Vance.
This program will begin to ramp up more significantly in our third fiscal quarter and continued for several years.
Moreover, we will continue to ramp up several other new key programs through 2023 that will provide outsized growth relative to our historical performance. Meanwhile, quoting activity and New program Awards remains very decent we are seeing a number of sizable new opportunities, particularly with electric vehicles.
From both new and established Oems.
On the cost side, our margin suffered from greatly reduced overhead absorption due to the lower volumes employee severance costs were also a factor. Although we also carried extra costs as we have retained surplus labor in anticipation that demand levels will rebound in the coming quarters.
Fluctuations in the forecast versus actual order releases, where again problematic. This quarter. This occurred as our customers juggled their own production schedules in response to the chip shortage issue. These.
These challenges were pushed down to the supply base in place strain on our own production planning process. Moreover.
Moreover, raw material cost increase was picked up and we've faced various supply chain challenges of our own.
These elements required us to be nimble and also absorbed a lot of extra costs related to overtime material substitution and expedited freight.
Pricing remains tough in this business and there is limited ability to use this tool as a lever. We did however take pricing action where possible to recover higher input costs, we will see the impact of these actions and our second quarter.
And our casting and extrusion segment, our top line held up fairly well in fact, we recorded modest growth over the prior year. The extrusion market remained strong this quarter with high demand across a number of end markets. Our extrusion tooling ultimately supports a diverse range of applications, including residential and industrial.
Building and construction solar panels consumer durable products in various modes of transportation. This.
This quarter, we again demonstrated we could keep up with the sizable demand growth by utilizing equipment and labor more efficiently, while leveraging the harmonized manufacturing process of our numerous group facilities.
With regards to the latter this initiative has allowed us to centralize certain processes, such as programming and design and utilize our capacity on a network basis. All of this keeps our cost low capacity high and provides us with the ability to manufacture a quality product in a standardized manner.
We are making significant strategic investments to further shrink lead times drive down our operating costs and in source more of our own heat treat requirements, all while reducing our environmental footprint.
The die cast market, which is driven by automotive production, however, softened materially in the quarter as lower view vehicle production was magnified by inventory Destocking.
This negatively impacted demand for cast tools consumable dicast tooling, while the large mol group suffered from reduced rebuild work nonetheless.
Nonetheless, we achieved a number of program wins that will benefit future quarters. In fact, we achieved record levels of order intake in our large multi group ending the quarter with the highest backlog in our history.
We are very bullish on the long term outlook of this business given the growing demand for large and complex dicast components, coupled with our leading market position full service capabilities and view that supply change will become more localized overtime.
As well our adequate tooling business continues to perform very strongly contributing record levels of sales and order intake during the quarter.
Additive tooling is a critical differentiator, providing us with an unmatched competitive edge. We are extremely optimistic on more of this business will go.
Looking at the casting and extrusion segment margins, we experienced weakness this quarter from levels that we have otherwise come to expect.
Margins were impacted by unfavorable product mix rising input cost higher freight charges and labor disruption due to COVID-19 , all of which outpaced ongoing efficiency gains.
As well front end losses at cast tools, new plant in Morocco added to the margin pressure. This quarter as revenue was only started to be generated towards the end of the quarter.
We did take pricing action, where possible through the quarter to protect our margins and expect the impact will be evident in our next quarter.
Lastly, as we announced during the quarter, we reached an agreement to acquire helix Europes second largest manufacturer of extrusion dies.
There's not really much more of an update at this time, we continue to work towards closing the acquisition this spring and welcoming <unk> employees to execute exco at that time.
That concludes my operations overview I will now pass the call to Matthew to discuss the financial highlights of the quarter Matthew Thank you Darren and good morning <unk>.
Consolidated sales for the first quarter ended December 31 were $101 million a decrease of $24 million.
Over the quarter, the consolidated impact of exchange rate movements reduced sales by $3 5 million.
Adjusting for the impact of foreign exchange first quarter sales at our automotive solutions segment decreased $18 6 million or 24% and our caching extrusion group sales were up $1 6 million or 4%.
Consolidated net income for the first quarter was $2 7 million or earnings of <unk> <unk> per share compared to $10 9 million or <unk> 28 per share in the same quarter last year, the 75% decrease in net income.
Effective income tax rate for the current quarter was 26% compared to 22% in the prior year period. The income tax rate in the current year quarter was impacted by geographic distribution and foreign rate differentials.
The automotive solutions segment experienced a 27% decrease in sales in the first quarter, a decrease of $20 9 million to $55 2 million. The decrease in sales is attributed.
To lower OEM production volumes due to COVID-19 constraints related supply chain disruptions storage, including a shortage of semiconductor chips unfavorable vehicle production mix logistics challenges and the negative impact of foreign exchange.
First quarter pre tax earnings in the automotive solutions segment totaled $3 4 million.
Which is a decrease of $8 2 million or 71% over the same quarter last year. The segment's lower pretax profit is due to the 24% reduction in sales, causing lower overhead absorption and higher material logistics and labor costs.
The catching in extrusion segment recorded sales of $45 $8 million in the first quarter compared to $45 $3 million last year and.
An increase of $5 million.
The extrusion group experienced strong sales at locations, reflecting steady demand for extrusion tools and market share gains the cast to a marginal low groups sales were down during the quarter due to the same supply chain disruptions caused by the semiconductor shortage negatively impacting automotive vehicle production lowering demand for consumable tooling for die casting and <unk>.
Build work from all the large Mol group quoted and was awarded a number of programs from current and new customers in the quarter as a result inventory and backlog are increasing.
Pre tax earnings in the casting extrusion segment declined by $2 6 million or 7% over the same quarter last year to $4 $6 million the.
<unk> of inflationary pressure on raw materials, and transportation combined with lower overhead absorption at cast tool and large more reduced pretax profit.
Exco generated cash from operating activities of $8 million during the quarter and $5 2 million of free cash flow after $2 8 million and maintenance fixed asset expenditures. This cash flow together with cash on hand was more than sufficient to fund fixed assets for growth initiatives of $8 2 million and a $3 $3 $9 million of divvy.
<unk>.
<unk> ended the quarter with $11 6 million in net cash and $35 3 million in available liquidity, including $26 $3 million of balance sheet cash.
<unk> financial position remains very strong as such the company's balance sheet availability under the existing credit facility allows considerable flexibility to support strategic initiatives like our helix extrusion purchase announced in December 2021.
Our strong financial position combined with our free cash flow creates a foundation for management to pursue high value growth capital expenditures dividends and other opportunities that may arise.
That concludes my comments, we can now transition to the Q&A portion of the call.
Thank you.
Ladies and gentlemen, as a reminder to ask a question you will need to press Star then one on your telephone.
To withdraw your question press the pound key.
Dan Thats Star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of David Ocampo with Comex Securities.
Line is open.
Good morning, everyone.
When David.
Karen I'm, just curious what percentage of the contracts that you guys have in place where were you able to reprice and then just thinking about it more higher level. When you combine that with sort of got operational efficiencies that you guys are looking for or are you guys able to offset that inflationary pressure and hit your 15% target or are we thinking more longer.
<unk>, where we need to see some of these contracts roll off.
Okay.
So.
I presume you are talking about the automotive solutions segment.
Yes, that's right and yes, a lot of that business is kind of fixed price work that continues for a number of years and.
You.
Kind of are exposed to rising raw material costs and.
Our path back to kind of a 15%.
Segment EBITDA margin.
Certainly remains very achievable.
Our minds.
That path includes kind of first getting back to <unk>.
Normalized sales levels, and then having the benefit of the new program launches for over absorption of.
Of overhead that.
That we plan through the next at.
At least couple of years.
And there are pockets of.
Of products within this segment, where we do have some pricing power and we're certainly and we have.
Pursued that.
So.
It's probably the minority of products and the rest you have to offset with efficiency gains, which we continue to do there are other aspects such as.
LTE as our long term pricing adjustments were.
Hugh.
We have an obligation to reduce prices through the program but.
With pushed back we expect that.
We'll be successful in not taking those reductions.
So.
That's kind of at a high level, how we think about the.
The impact of rising raw.
Resin costs in that segment.
Okay understood and then.
A lot of discussion over the last few quarters has been on your large multi division and the impact on sales from the shift to EV.
But one area that we haven't really touched on is the margin profile or the molds for EV.
View similar to transmission as I mentioned long term or could even be higher than.
For your legacy business is today.
Yes, I wouldn't I wouldn't say that there is.
Okay.
A reason to expect it.
Dissimilar margin for EV malls as opposed to powertrain I mean, just but just generally as.
As molds get larger and more complex.
It reduces the number of.
Players that can effectively compete in this space and requires much more sophisticated engineering and technical depth and.
You would expect that that would be accompanied with a higher value add over time, but we're certainly not modeling that in but I think thats. The logic holds together.
Alright, and then last one for me what kind of ramp can we expect that the new castle facility, it's something similar to what we've seen the other greenfield facilities.
It takes a couple of quarters to get up the profitability yes.
Yes, yes, that's right I mean, there is.
Certainly.
<unk> quarters of drag.
And the profitability, but.
By the end of the fiscal year, we would certainly expect that facility to be at least EBITDA breakeven if not better.
Our five year target that we have disclosed.
Realizing at least $30 million of revenue between cask tools.
Plant in Morocco, and then their plant new plant in Mexico by the end of that timeframe certainly holds.
Certainly holds true.
Okay. That's it for me I'll jump back in the queue. Thanks, guys.
Thank you.
Our next question comes from the line of Peter Skylar with BMO capital market. The line is open.
Yes, good morning, Darin and Max you.
My first question is.
Like you've done a really good job explaining.
How the earnings deteriorated year over year.
I.
We'd just like to have.
A little bit of discussion versus quarter over quarter versus the fourth quarter. So.
Like if you look at.
Vehicle production volumes like they were.
Stronger global vehicle production volumes, North American North American vehicle production volumes were stronger in Q1 than they were in Q4, but like the earnings of the company in both segments really deteriorated rapidly.
<unk> versus <unk>.
Fourth quarter, so I'm, just trying to figure out what has changed since.
The fourth quarter, because arguably the backdrop was pretty bad and was even worse in the fourth quarter at least in terms of vehicle production volumes, yes. It's a good question Peter and I would explain that we were more so impacted by inventory destocking in our first quarter than the <unk>.
Fourth quarter.
<unk>.
That concept has really come come to ahead.
During our latest quarter and just to kind of explain that.
You are running.
All it Dicast machines you.
You might have.
<unk> malls.
Six in production.
<unk> backup.
And as is.
As volumes go down then.
Your first.
It does.
<unk> youre backup dyes, rather than adding new new days for rebuild and we really saw the impact of that this quarter.
In fact, we we only shipped one.
One rebuilt die.
In the quarter, which is highly highly unusual for us.
So I.
I guess.
The converse of that is on the way up not only do you get the benefit of higher vehicle production, but then you've got the.
Inventory replenishment that needs to occur.
<unk>.
With our strong order flow that we saw in the quarter rising to record backlog.
And the large mol group.
We certainly think and expect that we're at the front end of of that rebound.
Similar to on an amex would apply to cast tools, dicast consumable tooling components, which which did see.
A more sizable dip this quarter than what we saw in prior sequential quarters.
Right Okay.
And can you talk a little bit about plant labor.
<unk>.
Have you had trouble getting labor in the plant.
Got disrupted your operations.
Yeah.
For sure I think that.
Phenomenon is pretty widespread.
Across all entities.
And it has been exacerbated by the <unk> in the last quarter.
Sure.
There were some weeks, where 20% of the labor or more was.
Was.
Q2.
Due to that factor and.
So it's it's a continuing challenge too.
Just find people.
And then that.
Is compounded by just the disruption thats.
That's occurred due to due to COVID-19 .
We continue to to work against that.
It forces you to.
Think about how you produce things and.
Ultimately you need to become more efficient and I think that one of the benefit that we've had over the years as we've added a lot more equipment and.
We really haven't increased our head count.
And so we have to become more efficient and will continue to do so.
And Darren just back on this quarter over quarter. It seemed like I understand you gave a good explanation why is it.
The tooling businesses did worse, but also auto solutions did worse versus the first quarter.
And <unk>.
Vehicle production volumes were higher in the first quarter, but the fourth quarter, so what what happened there.
So thats.
As similar inventory Destocking I think was.
It was a big factor in that and that and then labor disruption.
Well and there has been some elevated.
Raw material and <unk>.
Input cost inflation.
We are.
And have taken some measures to to reverse and as we've indicated in our comments and.
In the news release that we expect to see the benefit of that in our second quarter.
And Peter is another component that we look at it is mix between different locations and we don't get into that level of detail on these calls, but we have different mix of production might've been up.
In certain areas, but depending on how it fit our mix in our production and our locations that also caused some challenges there too.
Okay and then just my last question is in the write up you talked about the additive manufacturing business.
I've heard that wording before what is what is that.
That's our <unk>.
<unk> printed tooling components and.
<unk>.
We'd love to have.
Are you up to our new market plant, but that's been a.
Very strong growth business and differentiator for us but.
What we're talking about there is may.
Making parts of the mold components.
By printing them.
With steel so we basically pre.
Rent, a steel component and that enables us to.
Have water lines and cooling lines.
That followed the contour of the mall.
And so we can target hotspots in the mall.
Much better using three D printed components then.
And making those components.
Traditionally.
And that has an overall.
Very positive impact on the cycle time, and other measures such as scrap.
Right.
Of the casting process.
We are we are leaders in this business a couple of years ago.
We won the.
Automotive news pace Award.
In recognition of our leadership of this business and we're seeing greater and greater traction.
From from many customers.
And so we use these.
Addictively produce components in our own <unk> molds, and we also sell some of them.
Kind of.
Replacement components for from old rebuilt so.
It's a.
It's a very exciting part of the large mol group and.
We expect it will have.
Very strong growth over the coming years.
Is it.
Is it like.
Prototype tooling or is it a prototype production tooling.
They are used in the molten and more and more of our malls. In fact, most of them now have three D printed mold components in them.
That serves to improve the.
The efficiency of the overall mall.
Interesting okay. Thanks, that's all I have thanks, Peter Thanks Pierre.
Thank you as a reminder, ladies and gentlemen, Thats star one to ask the question.
I'm showing no further questions in the queue.
I would now like to turn the call back over to Dan for closing remarks.
Thanks, everyone for your time. This morning, we look forward to speaking to you again next quarter take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.