Dynamic Materials' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Dynamic Materials Corporation (BOOM)

Q2 2012 Earnings Conference Call

July 31, 2012 5:00 PM ET

Executives

Geoff High – Pfeiffer High Investor Relations, Inc. – Investor Relations

Yvon Cariou – CEO, President

Rick Santa – SVP, CFO

Analysts

Taryn Kuida – D.A. Davidson & Co.

Joe Giamichael – Global Hunter Securities

Phil Gibbs – KeyBanc Capital Markets

Gregory Macosko - Lord Abbett & Company

Presentation

Operator

Greetings, and welcome to the Dynamic Material Corporation 2012 Second Quarter Conference call. At this time, all participants are in a listen-only-mode. A brief question-and-answer will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Geoff High, with Pfeiffer High Investor Relations. Thank you. You may now begin.

Geoff High

Thank you, Sherry. Good afternoon, and welcome to Dynamic Materials’ second quarter conference call. Presenting on behalf of the company will be President and Chief Executive Officer, Yvon Cariou; and Senior Vice President and Chief Financial Officer, Rick Santa.

I’d like to remind everyone that matters discussed during this call may include forward-looking statements that are based on management’s supplements, projections and assumptions as of today’s date and are subject to risks and uncertainties that are disclosed in Dynamic Materials filings with the SEC. The company’s business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward-looking statements.

Dynamic Materials assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today’s call will be available at dynamicmaterials.com after the call. In addition, a telephone replay will be made available beginning approximately two hours after the conclusion of the call. Details for listening to today’s replay or webcast are available in today’s news release.

And with that, I’ll now turn the call over to you Yvon.

Yvon Cariou

Thanks, Geoff. Good afternoon everyone. Second quarter sales came in on the high end of our focus range as each of our business segments achieved its position objectives. Consistent with the past several quarters, orders shipped by our Explosion-welding segment were predominantly for capital projects in the upstream oil and gas, chemical and petrochemical industries. Based on our market analysis and recent coding activity, it appears this sector will continue to be our best prospective even market for the foreseeable future. From a geographic perspective, the Middle Eastern and Asia remain our strongest regions, although North America has also been quite active.

Coding activity remains very healthy and our sales team is pursuing a wide range of other opportunities, several of which are quite large. That said, we are seeing a slowdown in the rate at which we are converting those prospects into firm orders. We believe this is largely due to widespread concerns about the direction of the global economy particularly in Europe.

You will recall, we saw a 28% surge in our Explosion-welding backlog during the first quarter, and we were optimistic that figure would continue to hold during Q2. But with the recent slowdown in bookings, our quarter end backlog remains sequentially flat at $57 million.

Despite this year of lengthy bookings performance, our market development efforts for the Explosion-welding business continued in earnest during the second quarter. Our principal areas of focus continue to be geographic expansion in Asia and new industrial applications for our clad plates. Both of these initiatives are lengthy processes but every quarter seems to bring new products and Q2 was no exception.

In Oilfield product segment, there is another quarter of solid growth. We said advancing 20% versus the second quarter last year and operating income improving 47%. During the quarter we saw sustained from demand for our well perforating products. Of course most of the international regions we serve and we continue to capture new market share.

In North America, Exploration and production companies continue to shift their bringing focus away from natural gas and more towards oil. Since these shifts are not necessarily happening in parallel, we think we could see a near term dip in order volume for our perforating gun systems in the United States and Canada. However, given the dramatic increase in oil and gas reserves taking place in both countries, we believe they will all present very large markets for our oil field products business for many years to come.

Of course we are taking steps to ensure we capitalize on anticipated demand growth, not just in North America but globally. The shaped-charged manufacturing facilities we are establishing in Texas and Siberia are proceeding on plan. We have selected the construction contractors for the facility in Russia, and have narrowed the field of prospective builders for our Whitney, Texas facility. We also have begun working with the fabricator that will manufacture the pieces for our ship charges.

At AMK, (inaudible) has continued its active pursuit of new customer relationships, both in traditional market such as ground power on aerospace and in non-core industries such as oil and gas. The dialogue with prospective customers continue to be very encouraging and has revealed a range of new opportunities for our specialized welding services. We also have seen new opportunities emerge with some of our large existing customers. We believe the current market development efforts could return AMK to growth mode by the end of the year.

I’ll now turn the call over to Rick for review of our second quarter financial performance. Rick?

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Second-Quarter Earnings on Track for Massive Growth, So Relax Wall Street

Second-Quarter Earnings on Track for Massive Growth, So Relax Wall Street

Here's Why Snap Shares Are Climbing Monday

Here's Why Snap Shares Are Climbing Monday

Stocks Slide on Renewed Trade War Concerns

Stocks Slide on Renewed Trade War Concerns

One Stunning Stat Shows How Important Tech Stocks Have Become in Investing

One Stunning Stat Shows How Important Tech Stocks Have Become in Investing

Emerging Markets Get Pounded by Global Trade Concerns

Emerging Markets Get Pounded by Global Trade Concerns