Quaker Chemical Corp Q3 2024 Earnings Call Transcript

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

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : Looking at the operating margin performance in Q3, you guys were 120 basis points lower sequentially even though the revenue level was pretty similar to last quarter. Can you help us understand the different pieces of that sequential margin decline? Did we see some change in price cost? Was there a change in mix? Was it some growth investments kicking in? Just really trying to better understand those margin dynamics there.

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : All right. And then you talked about Asia and the strength you've seen there. It's kind of been a bright spot for you with this high single-digit volume growth rate this year. Can you talk about what's driving that strength? And I guess with some stimulus in China, is it possible that we see that momentum continue or even accelerate as we look over the next few quarters?

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : All right. And then in terms of the outlook for Q4, you mentioned there's some seasonality. And typically, we would expect to see some seasonal decline from Q3 levels into Q4. Can you maybe just talk about some of the puts and takes as we're thinking about Q4 versus this current quarter Q3 from revenue as well as a margin standpoint?

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : Okay. And just to clarify, if we do see a seasonal decline on the top line, would you expect to see some margin decline from Q3 into Q4 as well?

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : All right. I'm going to sneak one more in here and then I'll be done. Any chance I can get you to comment on some modeling assumptions as we're starting to turn our attention to 2025? I would assume that markets remain pretty soft, at least to start the year. Maybe we see some volume inflection in the second half and then you guys would anticipate some share gains on top of whatever the market is giving you. But as we're thinking about EBITDA margin next year, do we need to think about incentive comp reset? You've talked a little bit about restructuring and more productivity, particularly in EMEA. Just trying to think about how to model EBITDA margin as we're looking out to next year. Any help would be appreciated.

Question: Dan Rizzo - Jefferies LLC - Analyst : Hey, good morning. It's Dan Rizzo on for Jefferies. If we were to lap current pricing, what would the net price tail would be next year?

Question: Mike Harrison - Seaport Global Holdings LLC - Analyst : Okay. And then how much share do you think you've captured over the past two to three years? Is the pace of share gains accelerating would you say?

Question: Dan Rizzo - Jefferies LLC - Analyst : Could you characterize any of that as like a cross-selling or revenue synergies from Houghton? I thought you guys kind of have a long sales kind of cycle. But I was wondering if that's starting to flow through a has well past that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, KWR.N - Q3 2024 Quaker Chemical Corp Earnings Call

Question: Jon Tanwanteng - CJS Securities, Inc. - Analyst : I was wondering if you could talk a little bit more specific about the impact of customer factory and facility shutdowns or extended downtimes and even strikes on Q4 and how much that will be incremental over your normal seasonality.

Question: Jon Tanwanteng - CJS Securities, Inc. - Analyst : Okay. Great. And then you guys spend a bit of time talking about pricing and index that impacted Q3. I was wondering how much of the impact was mix related either by end market or geography or product type?

Question: Jon Tanwanteng - CJS Securities, Inc. - Analyst : Got it. And last one for me. Any thoughts or update on capital allocation, just given you still do have healthy cash flow, your leverage is in a nice place. I know you bought back shares in the quarter. Just what are your preferences going forward or your priorities as we enter this maybe weaker period on the operations, but still have a lot of firepower in the bank.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : So I guess -- yeah, I mean, I guess I wanted to just dig in a little bit on the performance that you've seen here. So it looks like according to the volume slide, that you are down a little bit year on year in volumes, maybe low single digits and maybe at the lower part of that. So I guess, would you attribute most of the decline in revenue this year to price? And if so, has that kind of cycle run its course? Or do you expect further price deterioration especially if you are now considering some volume headwinds to accelerate?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great. Thanks for that. And just as a follow-up, then. So we were kind of modeling a resumption of growth in '25. Do you feel like that's still kind of in the cards? I know that you often target above-market growth, a couple of hundred basis points above the market. But with the market kind of seeing some of these headwinds around strike and aero and maybe lower automotive production, maybe that could ultimately result in lower steel and aluminum utilization rates as well. So in the face of flat to down volumes, would you still be able to turn in margin expansion and earnings growth next year? Or should we kind of moderate that view?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Thanks, Andy. And then just a quick follow-up here. So on the balance sheet and capital allocation, it's been a few years now since you guys have done a more material size deal. Your leverage is very manageable at that [1.6%]. So just curious if you've considered if there are some larger consolidation opportunities. Especially now with interest rates potentially coming down, are you seeing any businesses that you've had your eye on, be a little bit more open to a sale process? Is that -- and is there a material consolidation opportunities that you'd like for us to keep in mind? Is that those -- are those any opportunities that really could drive some good synergies and growth as you look out? Thanks.