TimkenSteel Corporation

Good day and thank you for standing by. Welcome to the Q1 2022 Timken Steel Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Jennifer Beeman. Please go ahead, ma'am.

Thank you and good morning, and welcome to Timken Steel's first quarter 2022 conference call. I'm Jennifer Beeman, Director of Communications and Investor Relations for Timken Steel. Joining me today is Mike Williams, President and Chief Executive Officer, Chris Westbrooks, Executive Vice President and Chief Financial Officer, and Kevin Rakitic, Executive Vice President of Sales, Marketing, and Business Development. You all should have received a copy of our press release, which was issued last night. During today's conference call, we may make forward-looking statements as defined by the SEC. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday's release. Please refer to our SEC filings, including our most recent Form 10-K and Form 10-Q, and the list of factors included in our earnings release, all of which are available on the Timken Steel website. Where non-GAAP financial information is referenced, additional details and reconciliation to its GAAP equivalent are also included in the earnings release. With that, I'd like to turn the call over to Mike. Mike?

Thank you, Jennifer. And I appreciate everyone joining us on the call today. During the first quarter, we delivered strong profitability despite melt shop interruptions early in the quarter. In this high demand environment, our teams performed well. and we continue to meet the needs of customers while keeping safety at the forefront. Market demand and pricing remain favorable, and we are relentlessly working to improve our commercial and manufacturing effectiveness to ensure sustainable success throughout the year and beyond. Before I move on, let me say a few words on safety. As we said in the past, our goal is to continually drive better safety performance through sustainable improvements. We began the year by creating a set of action plans based on last year's performance and feedback from our teams, including safety leadership training, hazard awareness training, and systemic improvements around life critical safety hazards. Additionally, housekeeping and COVID-19 safety protocols continue to be a focus area. Once again, we will conduct our annual Iron Shield program where we gather safety recommendations from our employees and recognize teams for innovative ideas. We also continue to collaborate with our union safety representatives. The well-being of our people is a core value, and nothing we do is more important than returning employees home safely at the end of their workday. End market demand remained healthy in the first quarter. and our order book now extends out to the end of the third quarter. In mobile, shipments increased by 5% sequentially as customer demand remained strong and dealer inventories remained low. Similar to previous quarters, supply chain disruption continues to weigh on our mobile customers. We estimate that our sales were negatively impacted by approximately $10 million in the first quarter. We are working closely with our customers as they continue to navigate challenging supply chains. We wrapped up our remaining annual pricing agreement negotiations, which impacts our mobile order book. And they went well, reflecting our customers' recognition of our quality, service, and overall value proposition. Our industrial shipments decreased by 7% sequentially, due to our melt shop interruptions early in the quarter. On a year-over-year basis, our industrial sales increased by 12%, reflecting the overall continued demand momentum, mostly in distribution. During the quarter, we saw strength in construction and heavy equipment, and particularly for mining. Energy demand continues to grow, and we've more than doubled our shipments on a year-over-year basis. We also saw a modest sequential improvement in our shipments. Last quarter, we outlined our five strategic imperatives centered around people, profitability, commercial excellence, and ease of doing business, and ESG, to help us deliver sustainable through cycle profitability and cash flow while maintaining a strong balance sheet and creating value for our shareholders. To achieve sustainable profitability, our teams are executing initiatives aimed at achieving best-in-class manufacturing excellence and reliability. We continue to drive improved performance of our single melt shop. However, we know there is plenty of opportunity for improvement. Currently, plans are underway to relocate our scrapyard to be adjacent to our melt shop, creating greater efficiencies and reducing our carbon footprint. The project is on schedule and is expected to be completed later this year. There are work streams to ensure strong safety performance, drive first-time quality assurance, enhance reliable service delivery while retaining flexibility in an ever-changing demand market. We continue to optimize inventories while structurally reducing manufacturing costs where needed. For example, we have now trained over 80 employees in Think Reliability cause mapping methodology, an industry best practice in risk identification and improvement. We will continue to train more employees so they feel confident in identifying problems and implementing solutions through commonly understood risk management protocols. In order to drive focus in key areas, we have moved many employees into new management roles and have recently begun high-performance team training. Our goal is to create deeper collaboration between team members and break down silos to improve business outcomes while evolving as one team. Thus far, we've trained a group of our leaders, and we will provide similar training to others across the organization and on the shop floor. On the commercial front, we continue to refine sales and service to enhance effectiveness and cost. We have recently reinvigorated our marketing and business development efforts in certain markets such as defense, renewables, and electric vehicles where we have had proven success. From an administrative perspective, we have kicked off a multi-year IT transformation as a part of our process simplification efforts. Our current challenge is the complexity of our systems, which we need to methodically remedy to drive greater efficiencies in an ever-changing demand environment. Lastly, I hope you had the opportunity to review our recently published sustainability report. This important report illustrates our commitment to operating responsibly and highlights progress on key initiatives. We are making continued progress toward our 2030 environmental goals related to reductions in greenhouse gas emissions, energy consumption, fresh water usage, and waste. With that, I thank employees for the strong start to the year. I thank our customers for their trust, our suppliers for their partnership, and our shareholders for their continued support. Now, I'd like to turn it over to Chris.