Q3 2024 Kadant Inc Earnings Call - Q&A
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Speaker Change: Good day, thank you for spending by. Welcome to cadence third quarter 2024 earnings conference call.
Speaker Change: At this time, all participants on a listen only mode, after this biggest presentation, they'll be a question and answer session. So as a question during the session, you will need to press star 1-1 on your cell phone. You will then hear an automatic message advising your hand is maize.
Speaker Change: Please note that today's call for this being reported. I will not hand the conference over to you, speaker host. Michael McKenney, executive vice president and chief financial officer. Please go ahead, sir.
Michael Mckenney: Thank you, Olivia. Good morning everyone and welcome to Cadence 3rd Quarter 2024 earnings call.
Michael Mckenney: with me on the call today's Jeff Powell, our president and chief executive officer.
Michael Mckenney: Before we begin, let me read our safe harbor statement.
Michael Mckenney: and the United States. Very few marks that we may make today about cadence, future plans and expectations. Financial and operating results and prospects are forward-looking statements for purposes of the safe harbor provisions under the private securities litigation reform act of 1995.
Michael Mckenney: These forward-looking statements are subject to known and unknown risks and uncertainties.
Michael Mckenney: that may cause our actual results to differ materially from these forward-looking statements.
Michael Mckenney: as a result of various important factors.
Michael Mckenney: including those outlined for the meaning of our slide presentation and those discussed under the heading risk factors.
Michael Mckenney: and our Ann Report on Form 10K for the fiscal year ended December 30, 2023. And subsequent filings with the Securities and Exchange Commission.
Michael Mckenney: In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclame any obligation to do so, even if our views are estimates change.
Michael Mckenney: During this webcast, we refer to some non-gap financial measures. These non-gap measures are not prepared in accordance with generally accepted accounting principles.
Michael Mckenney: A reconciliation of the nine Gap Financial Measures to the most directly comparable Gap Measures is contained in our third order earnings press release in the slides presented on the webcast and discussed in the conference call, which are available in the Investor section of our website at www.kaden.com.
Michael Mckenney: Finally, I wanted to note that when we refer to GAP earnings per share or EPS and adjusted EPS on this call, we're referring to each of these measures as calculated on a diluted basis.
Speaker Change: With that, I'll turn the call over to Jeff Powell. We'll give you an update on Cain's business and future prospects. Following Jeffrey Marks, I'll give an overview of our financial results for the quarter and we will then have a Q&A session. Jeff?
Jeff Powell: Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our third quarter results and discuss our outlook for the remainder of the year.
Jeff Powell: Before beginning our Q3 review, I wanted to share with you that we are hosting an investor day to take place on December 12th in New York City.
Jeff Powell: At this event, we will present our new five-year financial targets.
Jeff Powell: and that line are growth initiatives in each of our three operating segments.
Jeff Powell: might provide more details on this during his remarks.
Jeff Powell: Now let's turn to our third quarter highlights.
Jeff Powell: Third quarter was another record setting performance benefiting from excellent execution across our operating segments and record after market parts revenue.
Jeff Powell: This led to record adjusted EBITDA record adjusted EBITDA margin and record adjusted EPS in the third quarter.
Jeff Powell: As you know, our aftermarket parts business is one of our course strategic-developed areas and it is encouraging to see this part our business continues to thrive.
Jeff Powell: Overall, market demand was stronger in the Americas while demand in Europe and Asia reflected the sluggish economies in those regions.
Jeff Powell: As has been the case throughout 2024, our operations teams around the world delivered exceptional value to our customers.
Jeff Powell: I want to thank them for their outstanding work and the results they generated, not only in the third quarter, but throughout the year.
Jeff Powell: Turning next to slide six, I'd like to review our Q3 Financial Performance.
Jeff Powell: Our Q3 performance was excellent with a number of financial records achieved. Revenue was up 11% compared to the third quarter of 2023 to 272 million and benefited from record.
Jeff Powell: after Market Parts Business and contributions from our acquisitions.
Jeff Powell: Solid Execution contributed to our record adjusted EBDAV 63 million and a record adjusted EBDAV margin of 23.3%.
Jeff Powell: Cashflow from operations in free cashflow, Ralph Standing in the third quarter at 52 million and 48 million respectively. Demonstrating the strengths of our business model.
Jeff Powell: Bookies increased 15% compared to the same trade last year due to our acquisitions and strong activity in North America.
Jeff Powell: I'll review the performance of our operating segments next beginning with our flow control segment.
Jeff Powell: We're both Market Demand for our Afro Market Parts that just wrong revenue performance in our flow control segment at third quarter, up 7% compared to the same period last year.
Jeff Powell: Puckins were 89 million up 7% led by strong demand for aftermarket parts, which made up 78% of new order activity.
Jeff Powell: Excent Execution in both commercial and operational areas of the business that had to record adjusted EBITDA and then adjusted the EBITDA margin of 29.4%.
Jeff Powell: Many in markets in our flow control segment remain strong and we continue to see good levels of project activity, particularly in the Americas.
Jeff Powell: Project Activity in Europe and Asia has moderated and reflects the strong and persistent economic headwinds in those regions.
Jeff Powell: In our industrial processing segment, revenue increased 17% to 111 million led by record after market participants, which made up 67% of our total revenue in Q3.
Jeff Powell: Booking has also been a set in from strong parts to man in this segment in a row up 27% compared to the same period last year.
Jeff Powell: and Richard Evedo was up 41% and our adjusted Evedo margins are record 28.7%.
Jeff Powell: Capital Project activity in strengthening and we believe the long-term growth drivers of a end markets remain strong.
Michael Mckenney: and Michael McKenney.
Michael Mckenney: and our material handling segment are revenue and bookings benefited from our latest acquisitions.
Michael Mckenney: We experience high demand for aftermarket parts and capital project bookings in our high performance pillar product line was strong in the third quarter.
Michael Mckenney: Revenue was up 7% to 63 million led by Solid Demand for a bulk material handling products. Well, bookings were up 10% compared to the same period last year.
Michael Mckenney: Adjusted EBITDA margin declined by 210 basis points compared to Q3 of last year. largely due to product mix and lower revenue volume at some of our businesses in this segment.
Michael Mckenney: While we expect the man to stabilize in the near term, we continue to see a high-level activity in the aggrant material handling sector, particularly in North America.
Michael Mckenney: As we look ahead to the remainder of 2024 and the full year, we expect to deliver record financial results again.
Michael Mckenney: We were seeing a lot of activity around capital projects and this is expected to be a meaningful contributor to our Q4 new order activity. Though the timing of these projects can be uncertain and could shift due to back-reconentance certain to your other factors.
Speaker Change: Now we now pass the call over to Mike for his review of the cute three financial performance.
Mike: Thank you, Jeff.
Mike: I'll start with our third quarter performance.
Mike: Revenue was 271.6 million, up 11% compared to a third quarter, 23, including a 12% increase from acquisitions.
Mike: Gross margin was 44.7% in the third quarter 24, up 140 basis points compared to 43.3% in the third quarter 23. This increase was principally due to higher margins achieved on capital projects.
Mike: Another contributing factor was a higher percentage of parts and consumable revenue, which increased to 65% of revenue in the third quarter of 24 compared to 61% in the prior year.
Mike: 3rd quarter gross margins of 44.7% included a 50 basis point negative impact from the amortization of acquired profit and inventory.
Mike: Excluding the impact, Gross margins were up 190 basis points over the third quarter of 23.
Mike: This continues our strong gross margin performance over the quarterly results achieved in 23.
Mike: SG&A expenses as a percentage of revenue increased to 25.4% in the third quarter of 24 compared to 23.7% in the prior year period. Primarily due to our acquisitions, which included non-repearing acquisition-related costs.
Mike: Aschenea expenses were 69 million in the third quarter of 24.
Mike: Increasing 11.1 million compared to 57.9 million in the third court 23.
Mike: This included an increase of 9.7 million from our acquisitions and 1.2 million in acquisition related costs.
Mike: Our GAPPPS increased 2% to 2,68 cents in the third quarter compared to 2,633 cents in the third quarter 23. Prince Leedew to hire revenue and gross margins.
Mike: Our Justice EPS was a record $2.84 in the third quarter of 24. Up 6% compared to $2.69 in the third quarter of 23.
Mike: 3rd quarter of 24 adjusted EPS exceeded the high end of our guidance range by 36 cents due to higher revenue than forecasted, especially at our industrial processing segment.
Mike: We also had higher than expected gross margins.
Mike: We had another quarter with record adjusted EBITDA results.
Mike: Third Quarter Adjusted Ebeda was a record 63.3 million, increasing 20% compared to the third quarter 23 due to record performance in our industrial processing and flow control segments.
Mike: as a percentage of revenue, adjust the EBITDA was a record 23.3% compared to 21.6% in the third quarter 23.
Mike: The disincluded, a record adjusted even a margin of 28.7% in our industrial processing segment.
Mike: I adjusted E-Bedup as increased each quarter in 24, with strong contributions from our Modustra of Processing and Flow Control segments.
Mike: are just an even margin of 23.3% in the third quarter 24, represents the first quarter we have exceeded 23%.
Mike: Korny Dorc Cash flows.
Mike: We had strong cash flows in the third quarter 24, increasing 87% sequentially.
Mike: Comparative third quarter 23, operating cash flow increased 12% to 52.5 million.
Mike: Free Cash Flow is up 27% to 48.3 million in the third quarter 24 compared to 38.1 million in the third quarter 23.
Mike: We paid 10.4 million for acquisitions funded by borrowings and paid down debt by 32 million in the quarter.
Mike: Our other nine operating uses of cash in the third quarter 24, included 4.2 million for capital expenditures and 3.8 million for a dividend at our comments doc.
Mike: Let me turn next to our EPS results for the quarter. In the third quarter, 24, GAP EPS was $2.68, and after adding back 15 cents of acquisition-related costs, adjusted EPS was $2.84.
Mike: and the third quarter 23, GAPEPS was $2.63 and after adding back three cents of relocation costs and three cents of restructuring and impairment costs are adjusted to EPS was $2.69.
Mike: As shown in the chart, the increase of 15 cents in the just CDPS in the third quarter 24, compared to the third quarter 23, included increases of 32 cents due to a higher gross margin percentage.
Mike: and 21 cents from the operating results of our acquisitions, excluding the associated borrowing costs.
Mike: These increases were partially offset by 22 cents due to higher interest expense.
Mike: 8 cents due to lower revenue, 4 cents due to a higher tax rate, 3 cents due to higher operating expenses, and 1 cents due to higher weighted average shares outstanding.
Mike: The Operating Results, excluding acquisition related costs from our acquisitions, contributed 21 cents to our third quarter results.
Mike: Recent acquisitions are included in each operating segment and the integration process is going well.
Mike: Colleague, collectively, included in all the categories I just mentioned, was an unfavorable form currency translation effect, a three-sense and a third quarter, 24, compared to a third quarter of last year due to the strengthening of the US dollar against certain currencies.
Mike: and I'm looking at our liquidity metrics on slide 15.
Mike: A cash conversion days which we calculate by taking days and receivables plus days in inventory and subtracting days in accounts payable, decrease to 129 at the end of the third quarter 24 compared to 138 in the prior year quarter.
Mike: Working capital as a percentage of revenue increased to 17.2% in the third quarter 24 compared to 15.4% in the third quarter 23 due to the lack of a full year of revenue in the calculation for our recent acquisitions.
Mike: I'm not that that is debt less cash decreased 33.4 million or 12% sequentially to 236.7 million.
Mike: A leverage ratio calculating cordons with our credit agreement.
Mike: D.C. to 1.13 compared to 1.22 at the end of the second quarter 24.
Mike: At the end of third quarter 24, we had 85 million of committed borrowing capacity in a additional 200 million of uncommitted borrowing capacity under our revolving credit facility.
Mike: In addition, our strong balance sheet and low leverage ratio will allow us to access additional sources of capital if needed.
Mike: and Michael McKenney.
Mike: Now turning to our guidance for the fourth quarter and four year 24.
Mike: We've had a strong financial performance to date in 24. In the fourth quarter we expect a sequential increase in industrial demand for our capital equipment. However, the majority of these projects will not ship until 25.
Speaker Change: [inaudible] The law is not a law.
Speaker Change: I should note here that the timing of capital ship is conceived by quarter, creating both upside-opportunity and downside risk with our fourth quarter expectations.
Speaker Change: We are narrowing our four year revenue guidance range to 1 billion, 47 million, to 1 billion, 55 million, from 1 billion, 45 million, to 1 billion, 65 million.
Speaker Change: We are raising our adjusted EPS guidance, and now expect $9.93 to $10.13
Speaker Change: Up from $9.80 to $10.5 for 24, which excludes 68 cents of acquisition later costs.
Speaker Change: We expect gap EPS of $9.25 to $9.45, revised from our previous guidance of $9.20 to $9.45, which included acquisition, related costs of $60.
Speaker Change: Our 2024 guidance includes a 17th-cent negative effect from foreign currency translation compared to the guidance given at the beginning of the year.
Speaker Change: Future Actions by the Central Banks may impact the U.S. dollar and other currencies which could have an impact on our guidance.
Speaker Change: Both GAP and adjusted EPS guidance are calculated using our initial estimates of purchase counting adjustments which are subject to change as we review and finalize the valuation work for our 24 acquisitions.
Speaker Change: Okay.
Speaker Change: Our revenue guidance for the fourth quarter of 24 is 252 to 260 million.
Speaker Change: and our adjusted EPS guidance is a dollar ninety to two dollars and ten cents, which excludes five cents of amirization expense associated with acquired profit and inventory in four cents related to acquired backlog.
Speaker Change: We currently anticipate gross margins for 24 will be 44 to 44.5%.
Speaker Change: This includes a 40 basis point negative impact from 4.8 million of amortization expens the associate with the Court of Profit and Immentory.
Speaker Change: We anticipate fourth quarter gross margin will be in the low to mid 43% range. Primarily, due to the mix of projects.
Speaker Change: We expect SGNA for 24 will be approximately 26.7% of revenue.
Speaker Change: This includes a 50 basis point negative impact from one time acquisition related costs of 5.4 million.
Speaker Change: We now expect net interest expense of approximately 18.5 million for 24 and we expect our tax rate for the fourth quarter will be approximately 27.5 to 28%.
Speaker Change: I hope these guidance come at our help.
Speaker Change: and finally, as Jeff mentioned, we'll be hosting an investor day on December 12th at the La New York Palace Hotel in New York City.
Speaker Change: This event is a great opportunity for attendees to hear from leaders in each of our major product lines.
Speaker Change: and they will discuss market trends and growth opportunities and you'll be able to view product demonstrations.
Speaker Change: We'll provide an update on our strategic growth initiatives, including acquisitions and our 80-20 program.
Speaker Change: We'll also update you on cadence performance against the financial goals we set our last in Vester Day in 2019 and outline our new five year financial goals.
Speaker Change: We look forward to seeing you there.
Speaker Change: I'm now turning the call back over to you, operator for our question. Live? Thank you. Please, I'm Jalman, if you would ask a question at this time, you're one of the best star one one on your telephone and wait for your announcement.
Speaker Change: to withdraw your questions simply press R11 again. Please stand by. We'll be on the next episode.
Speaker Change: and our first question coming from the line-up, Gary first of penal with Berning Tonele on a Sopin.
Speaker Change: Good morning, Jeffrey Michael.
Speaker Change: couple of questions.
Gary first: First of all, for the various divisions, flow control, industrial, material, and anything. Can you give us the percentage of aftermarket parts that were in the prior years, Q3?
Gary first: I just want to get an idea of how they've grown.
Speaker Change: Yeah, um
Speaker Change: Let's see. So of course, this is all in. So for flow control this year, now you're talking revenue-gerry.
Speaker Change: Yes.
Speaker Change: Yes, revenue, the parts were 70% versus 68% in the comparing quarter last year.
Speaker Change: in Industrial Processing. It was 67% compared to 60% last year and in material handling, it was 55% compared to 53% last year.
Speaker Change: Okay, thank you. And then can you just as you're looking at the fourth quarter, if you use maybe very quickly go over some of the puts and takes that you're seeing out there, as it regards to, you know, the three segments.
Speaker Change: Well, I'll just address that very broadly.
Speaker Change: for the fourth quarter.
Speaker Change: I say we're being conservative in case some capital shipments are delayed in the 25.
Speaker Change: You know, when talking to the people in the field, there was a little bit of a concern that some customers may ask for a project to get shipped in the first quarter 25 versus fourth quarter. So, you know, we wanted to, I wanted to be conservative in that regard.
Speaker Change: and I'd also say on the public who can snobles front.
Speaker Change: Um
Speaker Change: You know, we've had a very good year-to-date performance.
Speaker Change: and the fourth quarter can be a little bit of a wild card.
Speaker Change: It can be a bit challenging to peg. This is nothing unusual. This is kind of standard fourth quarter stuff for us.
Speaker Change: So there's a little bit of uncertainty as to whether customers will continue buying as they have through the year or.
Speaker Change: even sometimes buying extra. So if they've used their maintenance budgets, maybe a little softer in the fourth quarter, and if they have extra maintenance budgets, we may get a little up-left.
Speaker Change: So a little bit of a kind of mixed bag on that one.
Speaker Change: Okay but it's just going through my notes. It seems like just what I jot it down for each segment that the capital project activity is going to be pretty good in the US and North America but still kind of sluggish in Europe and Asia is that kind of a proactive assumption.
Speaker Change: Yes, that's correct.
Speaker Change: and just lastly, how does the pipeline look for any future acquisitions?
Speaker Change: is point.
Speaker Change: Um...
Speaker Change: So I think we've mentioned through most of the year that our corporate development group has been quite busy. I would say there's been...
Speaker Change: Very strong activity certainly relative to the last few years.
Speaker Change: and that hasn't really slowed down.
Speaker Change: and I think what the bank was telling us is that next year is going to be even stronger. So it's a pretty active market out there right now.
Speaker Change: The challenge for us is always the same. First finding something that's a good strategic fit that meets our, you know, the attributes we're looking for.
Speaker Change: and then you know and then be able to get it at what we think is a reasonable price and that ultimately is the big challenge is that you know, getting that what we think is a fair price but it's a very I would say it's a pretty robust market out there right now. A lot of acting to thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line-up.
Speaker Change: Curtain with the A-Divts on the Illness Often.
Speaker Change: Great thanks and good morning everyone.
Speaker Change: McCenney, it sounds like you do expect a pick up and capital equipment bookings in Q4. What are you if you could maybe?
Speaker Change: just directly talk about kind of the magnitude that you're anticipating as well as, whether there's any kind of seasonal factors in there, or if you think that might represent.
Speaker Change: I don't want to be too dramatic, but in inflection and something that could sustain going in the next year.
Speaker Change: I don't think we expect to see a step change. We think things are strengthening, as we talk to our customers.
Speaker Change: They're saying that they think things are going to really start to improve the second half of next year and then into 26 to be.
Speaker Change: to be pretty strong. But, you know, it's going to be a slow climb here, I think, the next few quarters. So we're talking about, we expect an increase, but it's not going to be a significant increase. You know, it's going to be an incremental increase, and it should continue to build.
Speaker Change: as people start to get comfortable. I think a little bit of what the Fed does, the next couple meetings they have. And frankly, I think everybody is right now sitting on their hands a little bit, waiting to see the outcome of the election in the U.S.
Speaker Change: China is putting together another stimulus package to try to get things growing there. Then Europe depends on course which country you're looking at. Hopefully, bottoming out, they're going to start.
Speaker Change: and start to make some investments. We've seen this before when investments get quiet and it can't last forever because the equipment just continues to work out and that's why our department's symbol of business has been so strong.
Speaker Change: and record rates is because they're running equipment longer than they traditionally would.
Speaker Change: So at some point, they're going to have to start making investments in what we're hearing from the market, places are going to start strengthening and they're really expecting the back half of next year to really start to see a market improvement.
Speaker Change: Got it. Okay. I appreciate that and and
Speaker Change: I think it's pretty clear.
Speaker Change: Geographically kind of where the pockets of strength and weakness are. I guess from an end-market perspective.
Speaker Change: Um...
Speaker Change: What areas of the portfolio stand out in terms of where you see particularly compelling kind of capital opportunities going in next year.
Speaker Change: The market that has continued to surprise us with its strength has been the OSB market, the way it's strandboard market.
Speaker Change: In fact, we just booked another new mail order today this morning about an hour before the call started. So it's one of these situations where it just continues to push through around the world and we're pretty strong globally.
You know, of course we have our installed base in China continues to increase as does in North America and Europe. So that's probably the strongest. You know, I would say packaging certainly in the parts with the symbol cited held up quite well. You know, so we've been quite pleased with that. Capital has been slower for sure.
and then we have other smaller markets that are doing well. The metals market defents. Frankly, we've got increasing exposure to the defense market and that's growing. There's a lot of kind of what we'll call industrial markets that are starting to show.
Speaker Change: some new strengths.
Speaker Change: Okay, got it.
Speaker Change: and Mike, I know we talked about a little bit last quarter but...
Speaker Change: you know, capital equipment sales kind of continue out-paced bookings by a pretty word wide margin. Is that just the work down of kind of the backlog and is that something that you would still expect will normalize as we move into next year or how long?
Speaker Change: Could that dynamic kind of persists for in your mind?
Speaker Change: Yeah, you know, it's just as we discussed Kurt. Yeah, we that certainly happened here in the third. We may get a little bit of that again in the fourth.
Speaker Change: and then I'd say as we go into 25, it should be relatively normalized, well it's kind of work through the access we had.
Speaker Change: Okay.
Speaker Change: and then just lastly on the gross margin front. Obviously a very strong performance again this quarter.
Speaker Change: You know, mix is one element, but the margins on the capital side seems like it's been kind of the biggest upside surprise. How sustainable is that and what would you kind of attribute that to in terms of what's driven the upside there?
Speaker Change: Well, it's a...
It's a great question. I would say there's a component of that, Kurt, to be quite.
Speaker Change: you know, Frank Anna is can be met.
Speaker Change: the Mixer the Capital Project. Some when you take...
Speaker Change: and we take very large capital projects that will oftentimes create a little pressure.
Speaker Change: and the gross margin performance, but you get better operating a leverage so you get to pay off at the end.
Speaker Change: So I think the projects that are shipping now, it's they are, you know, not the large capital projects.
Speaker Change: and I would say we picked up a little bit from, you know, commodity prices coming down and I think frankly the 80-20 exercise has been helpful in terms of what we're achieving on the margin front.
So I think there's been, you know, as is almost always the case, it's never one particular factor. It's a several things, but I'm...
Very happy with the Gross Margin performance this year. We've out performed 23 every quarter this year and frankly we've out performed our own forecasting expectations every quarter.
Speaker Change: Right, right, okay, appreciate all the color I'll turn it over. Thank you
Speaker Change: Thank you. And as our minor to ask a question please press star, one, one and wait for your name to be announced. Our next question coming from the line-up, Ross Dernd like with William Blair, he'll let us open.
Speaker Change: Hey, I do want to go.
Speaker Change: MoriBuff.
Ross Dernd: Thank you. Can you help us out with the back wall in the quarter? Another spring, some of the emanating packed here and the first half there.
Speaker Change: and make sure we're almost in the same page. Yeah, as we stand right now, Ross, it's at 285.
Speaker Change: Okay. I mean, get the center through that kind of 250 threshold for the fourth quarter on the orders and might come in a little lower than that, just depending on timing. And then maybe second half of the next year we kind of stabilize and booked the bill stabilizes.
Yeah, I mean it's you know, I'm always careful not to go too far I'm like forecasting on the booking Sprunt
but those aren't bad markers, you know, certainly were...
Speaker Change: and Dispading Sequential Increase.
but to your point, let's say using the 250 number, you know, we would depending on, you know, with the guidance range at 252 to 260 that would imply, you know, as I mentioned to Kurt a little, you know, a little more consumption of the backlog.
and you're getting yourself more crowded. You're a better forecaster than you went on. Looking at the couple of quarter and six, seven million in a third quarter, give us a sense of price and volume and if there's any impact from steel passers.
I don't think there was anything special in terms of what transpired in the third quarter frankly.
Speaker Change: and I kind of sounded like maybe the man was picking up because the children come in, some of those little bit of price, but volume was, you know, so...
Speaker Change: Freedom and the system.
Nothing to read into there.
Yeah, I think so. I think you know, as you know with what's a capital quimit, you kind of collect your current input cost and you bid these projects and so they tend not to get too far out of whack with the actual commodity prices, you know, that we're that we're experiencing. So
Speaker Change: and then maybe just the mix of kind of grief, so that activity that you're seeing in the order book, there's kind of the maintenance cycle and more around the day.
Speaker Change: Yeah, I think, you know, as you would expect an awful lot of the capital is as replacements and repairs, you know, with...
and the majority of the Greenfields were happening in developing world with Asia being the largest market there. It has been quieter and we are certainly still booking Greenfield projects there, but it certainly not as strong as it had been.
The one exception is we are seeing some kind of greenfields opportunities on the wood side. So that's, I mentioned earlier, that was B-market tends to be probably the market that is...
Speaker Change: and Durd the best during this.
Speaker Change: This time you know what, I would say the industrial markets globally.
Speaker Change: I've been pretty slow, I mean this has been a North American economy's continued to grow but it's been an awful lot on the service side and when you look at capital equipment durable goods it's been take strip cars out it's been sluggish
Speaker Change: and so we are actually quite pleased that we've held up as well as we have. And as I said, the Woodside probably OSB in particular is probably endured the best of all those markets.
I mean it's kind of curious to you say that the PNC had been strong around packaging, but I've personally gotten the sense that the OCC capital puttons also doing fairly well in the science and reflection.
and I don't know if we're not ready to clear victory at that we've got back to kind of robust man. It's held up okay and the parts we've two will have been very good. I think I mentioned last call, one thing we've benefited from is that the percent of paper and packaging being made.
from recycled fiber, you know, is at 44% this year. And you gave you a sense of that in 20,000, it was 25%.
Speaker Change: So, you know, it is grown, the percentage of paper and packaging being made from recycled fiber continues to grow and is that a record record level. And of course, as you know, that's our focus is on the recycled side. So we clearly have benefited and that's why you see the parts and symbols being high.
Continuing the growth is because more and more of the paper packaging we produce has come from recycled fiber. And so you know in that I suspect that will probably continue. There's a pretty decent price.
Price difference between recycling fiber and virgin pulp.
and most of the new capacity, you know, that's come online. I've asked almost all of it, it's been recycled fiber. So they're taking some old pulp production off, blind, and bringing on recycled fiber capacity. So we'll continue to benefit from that.
and the United States. So there you go. Maybe just one more thing about P&C and he updates on the kind of utilization rates by region. She seems like maybe Europe was characterized as decelerating and looked like a pack with certain sort of bottom previously and again, you know. Yeah, I mean it's a little bit.
America's health and health America is held up reasonably well. I would say I just still slow China still and they're kind of mid-60s
You know, maybe higher 60s now depending on which region you're looking at. Very little bit in Europe, but Europe's kind of in the 70s and 80s. Again, depending on which area you're looking at. The North America is clearly held up the best.
and it's not a big surprise if you just look at GDP growth, paper is pretty closely correlated in packaging closely correlated GDP growth.
Speaker Change: So America's done well and it's out of the best. They've done a better job. I think in rationalizing production, you know, with mergers and acquisitions. And so they've been able to keep their operating rates up higher than Europe and certainly higher than Asia.
Alright, so it was really a sound like no news for next year on TNC.
Speaker Change: Yeah, I am.
Speaker Change: I think our customers are packaging customers and paper customers are telling us they expect to see things straightened next year and they're really hoping the back half the second half the year is going to be much stronger and then they're all getting ready for 26 which they seem to think is going to be a pretty real bus year.
So those start to make it, that's not starting to make it that's the next year to get ready for that
Speaker Change: Alright, well thanks a lot, guys.
Speaker Change: and Steve.
Speaker Change: and we have a follow-up question from Kurt Jingo with the AWS on UNISOFIN.
Great, thanks. Just two quick ones. First it look like FX was maybe a million dollar headwinter so in Q3 is that right, Mike, and how are you thinking about or I guess assuming an impact in terms of Q4?
Yeah, you're right Kurt, rounded, it's a million. So it was on favorable a million.
Speaker Change: Right now with the rates we're using, we're actually anticipating Q4 to be favorable.
Speaker Change: and Michael McKenney.
Okay, perfect. And then, you know, you've grown that call it industrial bucket in terms of the sales mix the last several years. He may be just update us on kind of the biggest components within there at this stage and how that piece is maybe trending relative to...
and the traditional forest products and markets.
Speaker Change: I mean, I think the flow controls where we have the most opportunity, the reserve, the products range of markets there. And after packaging, I think food, metals and defense are the next three big ones.
There's a lot of them, there's others, there's alternative energy, you know, things like that that have that have grown, but you know, I think those are the big markets there. On the material handling side.
I would say that our Bellar business has continued to do.
to do quite well. You know, as more and more of the roads is separating and trying to recapture recycled materials so that it continues to grow globally. And then on the block material handling side, of course, you've got the in America in particular, which is where we're strong. You've got the infrastructure bill, you've got the chip sacked.
So those are big drivers for those markets.
Speaker Change: and just a sneak one more and maybe I should know the answer to this. But do you guys have any specific exposure within box plants? Obviously a lot at the middle level, but just curious what kind of you're selling in there.
Bellers, I mean, at any box plant, they've got a lot of packaging that they got them handle and waste packaged, that's a big market for us, is selling Bellers into them.
God, it makes sense. Okay, appreciate the color. Thank you.
Speaker Change: and the United States.
Thank you and as I'm sure to ask a question please for a star one one.
Speaker Change: 11.5.
and I'm showing no further questions on the Q&AQ at this time. I will now turn the call back a person with a Jeff Alt for any closing remarks.
Jeff Alt: Thanks, Olivia. So before wrapping up today, I just want to leave you with a few takeaways. 2024, as we just said, shaping up to be an excellent year across the wide range of metrics.
and we made good progress this year and our efforts to accelerate revenue growth and boost our profitability despite the challenging macroeconomic environment in various regions of the world. And as always we expect to deliver excellent cash flow and optimize the allocation of capital to maximize the value for our shareholders.
with that. I want to thank you for joining the call today and I hope we see you all in New York in that's today. Thank you.
Please, I'm John Linda, Dustin.com for today. Thank you for your participation and you may now disconnect.