ITT Inc at Stifel Cross Sector Insight Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : ITT has had some businesses that have been especially impacted by COVID-19, both as a result of this severe demand disruption across as well as the location of some of your businesses, particularly the Northern Italy Friction business in Barge, which saw disruptions in your ability to operate the business. Could you just start off by giving us an update on the status of your facilities if there or anywhere you've experienced continued disruptions? Or if you're back to having something like full capacity available to you?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. So you're back up and running. You have that capacity available to you now, depending on wherever demand bounces back to. You're not concerned that you have any issues with delivering on to whatever demand happens -- ends up being?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I've been in a few of your facilities, and some of them are not, I guess, ideally laid out for social distancing. Can you talk about any of the changes that you've had to make to the manufacturing processes to enable social distancing and cleaning and those kinds of things? And how it has impacted your capacity or added additional cost? And do you see that being a material headwind to margins?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I'm just going to get a bit deeper into each of the businesses, starting with Motion. As the business is probably seeing the most severe disruption with OEMs in Europe and the U.S. closed down for April and parts of May, can you talk about your understanding of where OEMs are now in terms of restarting their facilities and actually producing cars?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : It's been great performance for a lot of years. Are the OEMs open enough to tell you anything about what their expected levels of demand and what their levels of production are over the next few months? And how that flows through to your own levels of production? Or are we still in -- they're opening back up, they don't really have any idea what demand is going to be, and you don't have a lot of visibility into that yet?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. The aftermarket business is primarily in Europe and has historically been less cyclical in the OEM side, obviously, but does still tend to see declines during recessionary times. As economies begin to reopen and people start getting back in their cars, can you talk about your expectation for how the aftermarket business recovers and when it gets back to some semblance of normalcy? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 08, 2020 / 2:00PM, ITT.N - ITT Inc at Stifel Cross Sector Insight Conference (Virtual)

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. Companies have been giving investors an unusual amount of detail on how things went through April on their 1Q calls. Wondering if you can comment on what kind of -- and this is Motion Tech specifically, what kind of aggregate declines you've seen in 2Q through May? And with OEMs now getting back open and back to making cars, whether or not you would expect to see some pretty meaningful improvement, at least sequentially, as we head through June and into the third quarter?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I'm going to jump over to Industrial Process now. That business is also going to deal with the dual hits of COVID-19 and lower oil prices. I know your upstream exposure is relatively small, but typically, lower oil prices impacts the whole energy value chain and lubricates the industrial economy overall. So I think that low oil price impacts more than just the upstream. Can you talk about the impact you're seeing in various parts of the business, short cycle, more project-oriented, energy-related and nonenergy-related businesses. Just in terms of order rates and the funnel of future opportunities and how those have changed and progressed over the last couple of months?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I guess just following up on the comment you're mostly downstream there. We have started to hear about turnarounds getting pushed off out of spring into either fall or into 2021. Can you talk about -- if you're seeing the same thing and how that impacts the business?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I'm just going to jump over to CCT now, commercial aerospace, defense and general industrial exposure there. I think the commercial aero side being pretty heavily OEM is pretty well understood. So maybe if we start on the defense side of the business, which should be pretty healthy. Can you talk about what you're seeing in defense markets? Has COVID disrupted those businesses at all, whether it's delivery, supply chain, anything like that?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. Just on the general industrial markets, as a part of that business. Can you give us some color on the different pieces and different exposures you have in general industrial? Are you starting to see any improvement in short-cycle orders there and revenues as economies reopened? Or is that going to be more of a June third quarter kind of improvement in your view?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. One more on commercial aerospace. It's one market that we think is likely to see a slow recovery, taking a few years to get back to prior revenue levels. Do you need to take specific structural actions to reduce the capacity of that business to match market demand and to rightsize the cost structure? And to the extent you're able, can you talk about the specific plans to do that in the commercial aerospace business?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I'll just finish off with this. The old saying of never waste a good crisis. You guys have talked before about the war chest of opportunities to improve the businesses that are in your pipeline. Can you talk about plans to accelerate those as we go through this recession? And how that should improve the incremental margins as we return to growth in the various businesses? So when the businesses do return to growth and after you've accelerated those improvement plans, what kind of incremental margins do you think the businesses could produce in the recovery?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. And then just 1 quick last one. When you look at the portfolio as it stands currently and the end market exposures, do you still believe that all of your businesses in markets that you play in are structurally good businesses? Or are there businesses that are potentially structurally impaired and maybe become noncore to the portfolio as we go forward? And what kind of things are you evaluating to make those decisions?

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Excellent. Okay. Well, we're at the end of our time for this. So I would like to thank you guys very much for participating in this. Thanks very much for your time, and I look forward to catching up with you later today.

Question: Nathan Hardie Jones - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Thanks, guys. Bye.