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Lincoln Electric's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: LECO

The launch of our new energy efficient FlexTec inverter platform has been one of the best in our long company history. Automation sales continue to accelerate in North America as customers invest in tools that help them reduce their costs and improve quality. Our recent North American acquisitions Torchmate, Techalloy and Arc Products, all performed quite well in the quarter.

Continuing to expand our specialty consumable products offerings, during early March we acquired Weartech, a manufacturer of cobalt-based consumable products with operations in California and Port Talbot, Wales. We’re also quickly integrating Weartech into our broad consumable product portfolio.

The general industrial economic environment in North America remains positive but appears to be moderating. Key industrial metrics that we follow such as industrial production and capacity utilization across factories in the United States are running ahead of last year’s comparables but showing some month to month volatility.

Total manufacturing industrial production in the U.S., excluding high-tech segment, was trending 5 points ahead of 2011 in March of 2012 while capacity utilization was running at approximately 78%. The U.S. purchasing manager index also continues to indicate a growing economy although the measure is softer than the Q1 2011 measurement.

Turning to our Lincoln Europe welding segment, the economic environment continues to present both challenges and opportunities basically along geographical lines and market segments. While Southern Europe remained challenged, we did see improvements in the region coming mainly from the UK, France, Eastern Europe, Russia, the Middle East and Africa.

With consumable demand and volumes in the traditional European core businesses generally down, we have focused heavily on margin improvements through price discipline and driving product mix towards higher value equipment and chemistry-based consumable products, which contributed to a margin improvement of over 3% of sales compared to last year.

The energy-driven business and particularly the oil and gas segment in the Middle East has continued to drive strong demand for our products. Robust fourth quarter sales into this segment continued into the first quarter of 2012, with year-over-year sales increases of over 60% into the region. The Middle East and North Africa market remained a positive for equipment and consumable exports from the United States and China.

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