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Xerium Technologies's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: XRM

But even with the European crisis continuing, we substantially improved our consolidated gross margins by nearly three full percentage points from the first quarter as a result of our cost reduction activities and favorable product mix which partially offset Europe’s below expectation volume.

We also significantly improved our adjusted EBITDA from Q1. In the quarter, we increased consolidated adjusted EBITDA by 35% over Q1’s results and 21% without unusual adjustments on just a 1.5% consolidated revenue increase.

When we look at these results without Europe, Xerium posted a 5% volume increase and a very strong 78.4% adjusted EBITDA improvement over the prior quarter without consideration of currency changes.

I want to reiterate that this substantial improvement is a result of our relentless focus on continuously reducing operating expenses, improving our product mix, particularly in the roll segment, and to maximizing returns from the new products we’re developing and selling.

Digging in a little deeper, Q2 2012 bookings, as shown on Chart 3 posted on our website, declined 4.9% from Q1 2012. Bookings declined 10.6% from Q2 2011 but just 3% at constant currency rates.

The rolls segments bookings shown on Chart 5 performed better than the PMC segment shown on Chart 4 with only a one-half of 1% quarter over prior quarter reduction while clothing declined 7.5% from the prior quarter without adjusting for currency and just 2.2% at constant currency exchange rates. These bookings decline occurred primarily in Europe.

Regionally, we saw very strong Asian order intake of 17.4% with rolls up 34.5% and clothing up 11.6% when compared the prior sequential quarter. Our customers in Europe remain justifiably concerned about their end markets and they’re doing all they can to hold down their PMC ordering and inventories and they’re stretching the life of their roll covers, so they’re ordering is significantly constrained in both segments.

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