Harsco's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Harsco Corporation (HSC)

Q1 2012 Earnings Call

May 2, 2012 10:00 a.m. ET


Eugene Truett – Vice President, Investor Relations and Credit

Henry Knueppel – Interim Chairman, Chief Executive Officer

Stephen Schnoor – Chief Financial Officer, Treasurer


Jim Lucas – Janney Capital Markets

Jeffrey Hammond – KeyBanc Capital

Glenn Wortman – Sidoti & Company

Rob Norfleet – BB&T Capital Markets

Scott Graham – Jefferies



Good morning. My name is Sara and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation First Quarter Earnings Release Conference Call. [Operator Instructions] After the speaker’s remarks, there will be a question-and-answer period. [Operator Instructions]

Also, this telephone conference presentation and accompanying webcast, made on behalf of Harsco, are subject to copyright by Harsco and all rights are reserved. Harsco will be recording this teleconference. No other recordings or distributions of this telephone conference by any other party are permitted without expressed written consent of Harsco. Your participation indicates your agreement.

I would now like to introduce Mr. Eugene Truett, Vice President, Investor Relations and Credit of Harsco Corporations. Mr. Truett you may begin your call.

Eugene Truett

Thank you, Sara, good morning. I would like to welcome everyone to Harsco’s first quarter 2012 earnings release conference call. I’m here this morning with Henry Knueppel, Harsco’s Interim Chairman and CEO and Steve Schnoor, Harsco’s CFO and Treasurer.

As we do at beginning of all of our calls, we want to let you know that there maybe forward-looking statements in our discussions with you today. These statements relate to the future of our business, our operations, our results, economic expectations and other aspects relating to and affecting our business. While what we say today is based on our best information available, it is possible that the results could differ from what we tell you today.

We’ve listed in our SEC statements reasons and risk factors that affect our businesses. We invite you to review the SEC filings at your convenience. I would like to remind you that replays of this call and related information are available on our website. Please take the time to access this information at your convenience.

I would like to now turn the call over to Henry Knueppel. Henry?

Henry Knueppel

Thank you, Gene, and I would also like to add my welcome to all of those participating in the call this morning. Thank you for your continuing interest in Harsco. We will follow our typical agenda. I will make a few opening remarks about the first quarter and Steve Schnoor will provide you with further details on the results. I will then finish up with some comments regarding the second quarter and we will open it up for questions.

As all of you who follow our stock for some – followed our stock for some time, know the first quarter is seasonally Harsco’s slowest quarter, principally because of the effects of weather on new construction starts and steel mill operations and rail track maintenance. We took these factors into account in the first quarter guidance that we provided you in January.

As we stated in that call, we expect a difficult in-market conditions to continue throughout the quarter, particularly in our two largest business segments, Metals & Minerals and Infrastructure. And in fact actual market conditions in both segments turned out to be even worse than we had projected.

Global mill production at the customer served by Harsco continues to be at what we and our customer see as the low end of normalized production levels. While we’re optimistic that production levels will start to pickup and return to more normal levels as the year progresses, we are still not seeing that improvement at this juncture. Obviously, one way to counter that – those market headwinds is to broaden our base and we have been successful over the past several months in expanding our footprint with additional new customers. You’ve seen the announcements regarding new customers in Italy, Bahrain, Sweden and Chile. However, we have not – we will not see the benefits of those new contract signings until later this year and into 2013.

We also continue to see year-over-year weakness in market conditions in our minerals business during the first quarter, principally due to lower stainless steel production at mills in the U.S.

In our Infrastructure segment, end market conditions continue to be challenging in the U.K., Central Europe and in the U.S. Fortunately, we are seeing some strengthening in other regions, principally the Middle East and Latin America, as well as measurable cost savings from our restructuring initiatives.

As such, we expect the first quarter 2012 loss of approximately $18 million before restructuring charges to be substantially reduced in the second quarter. In fact, if the onetime pretax gain of $4.5 million associated with restructuring actions as noted in this morning’s press release is achieved during the second quarter, overall results could be essentially a break-even for this segment for that quarter. Again, this is before restructuring charges.

On a full-year basis, before restructuring charges, we are still driving toward a goal of being at or near break-even. However, clearly the end market headwinds I have just mentioned make this goal a difficult challenge.

Regarding the restructuring, we are making good progress both in Metals & Minerals and Infrastructure businesses and we are slightly a head of the schedule we announced at the end of last year. Also partially offsetting the March softness in our two largest businesses was better than expected performance in the first quarter by our Rail and Industrial businesses.

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