Harsco Corporation

Good morning. My name is Chad, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Harsco Corporation second quarter release conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. If you would like to withdraw your question, please press star then two on your telephone keypad. Also, this telephone conference presentation and accompanying webcast made on behalf of Harsco Corporation are subject to copyright by Harsco Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the express written consent of Harsco Corporation. Your participation indicates your agreement. I would now like to introduce Dave Martin of Harsco Corporation. Mr. Martin, you may begin your call.

Thank you, Chad, and welcome to everyone joining us this morning. I'm Dave Martin from Harsco. With me today is Nick Grasberger, our chairman and chief executive officer, and in Chumanaga, Harsco's senior vice president and chief financial officer. This morning, we will discuss our results for the second quarter and our outlook for the year. We'll then take your questions. Before our presentation, let me mention a few items. First, our quarterly earnings release and slide presentation for this call are available on our website. Second, we will make statements today that are considered forward-looking within the meanings of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For discussion of such risks and uncertainties, see the risk factors section in our most recent 10-K. The company undertakes no obligation to revise or update any forward-looking statement. Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in the earnings release as well as the slide presentation. With that said, I'll turn the call to Nick.

Thank you, Dave, and good morning, everyone, and thanks for joining us today. As you have seen, our adjusted Q2 results were consistent with the preliminary results we released a few weeks ago. The second quarter was a challenging quarter for us, especially in our Clean Earth segment. Inflation and energy transportation and disposal costs in Clean Earth continue to accelerate beyond what we anticipated in our January and April price increases. Our July price increase was by far the largest and broadest increase ever implemented at Clean Earth. This was implemented successfully through coordination with our customers, despite significant contractual limitations. Coupled with certain cost reduction actions, the impact on second half EBITDA should be 30 to 35 million, roughly doubling the EBITDA margin compared to the first half of the year. Over the past four quarters, the cumulative gap between inflation and price was at negative 25 million or so with Clean Earth, or about three points of EBITDA margin. We are committed to eliminating this gap moving forward through pricing and cost reduction actions. I've been running Clean Earth with the support of the corporate team over the past three months. The opportunity to leverage our asset base and our value proposition to customers is clear. Our targeted EBITDA margin of 15% remains achievable, and I'm excited to lead this business as it realizes its potential. Before I discuss Harsco Environmental, I'll provide an update on the sale of our rail segment. The sales process for rail is ongoing, and we remain in discussions with certain strategic parties. However, a change in economic conditions, including in the M&A market, and business complexities with Rails European contracts have slowed the divestiture process. Overall, as we've said before, Harsco Rail is a unique business with a very positive long-term fundamental outlook. The company remains committed to selling the business on a disciplined basis, thereby creating value for shareholders. Further updates will be provided as appropriate. Turning to Harsco Environmental, the segment performed well during the quarter, and revenues increased over the prior quarter due to increased demand. And Schuman will discuss the impact of foreign currency and inflation. Overall, the fundamental business is strong. We did see some pockets of weakness in steel volumes in Europe, which were offset by higher volumes in India and China. We've implemented price increases in most regions, and we expect HEE to fully offset the impact of inflation through its annual price escalation mechanism early in 2023. In summary, each-demand in each of our businesses remains healthy. Our businesses operate, more or less, under long-term contracts that were negotiated at a time when inflation was nonexistent and our supply chains were strong. The labor market was also supportive of our needs. Times have certainly changed, and we are adapting to this new reality. But fundamentally, our end markets, our competitive positions, and our value propositions are well aligned to create shareholder value going forward. I'll now turn the call over to Anshuman.