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
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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