Harsco Corporation (NYSE:HSC) Q2 2017 Earnings Conference Call - Final Transcript
Aug 03, 2017 • 09:00 am ET
[Operator Instructions] And your first question comes from the line of Rob Brown with Lake Street Capital.
Can you give some further color on your heat exchanger trends? I know that they were doing well, but sort of where are you at in terms of kind of the cycle? How much, I guess margin expansion can you see there? Maybe a longer-term goal and sort of how that plays out?
Yeah. Well, the revenues in Air-X-Changers are still about half of what they were at the peak in 2014. So we think there's still some ways to go before we get back to the next cyclical peak. In terms of margins, as we noted, both Pete and I noted that the margins have been, I'll say, even a bit surprisingly strong, we're already at the peak margins even though revenues are half of what they were at the peak.
So many of the investments that we've made are clearly beginning to pay off in better operating leverage. And so I certainly would anticipate that the margin will continuing to go north as we move towards the peak of the next cycle. I'd hesitate to make any predictions, but certainly a few points would be a reasonable assumption.
Okay, great. That's good color. And then, maybe the Rail business, could you give us a sense of maybe the weakening you expect, is it more of a flattening or is it more of a down situation? Just some kind of directional color there would be good.
Yeah, I think it's -- the weakness is kind of at the margin. It's not a significant change from what we had been expecting. We have done well the first few quarters of the year to exceed our internal expectations. But if we just simply look at the backlog now and where we see the trends in after market, we're just being a bit cautious on the second half of the year. But it's not at all what I deem a significant change.
Okay, great. Thanks. I will turn it over.
Your next question is from the line of Jeff Hammond with KeyBanc Capital Markets.
Hey. Good morning, guys. This is James Picariello.
Yeah. Hi, James.
Just since we're on the Industrial topic, for Air-X-Changers, you mentioned revenue up 40% for the full year that's your expectation. But what are you seeing in orders, given recent oil price volatility? In terms of how we should start thinking about next year because, clearly this year is very strong.
Yeah, well, we've not yet begun to really model out 2018. Although, I suspect -- we expect that if oil remains in the $50 range, that we'll continue to see growth in 2018. I'd be surprised, although pleasantly of course, if the growth rate in 2018 matched that of 2017. But we certainly would expect further top line and certainly profit growth in Air-X-Changers in 2018.
So you really saw no deceleration in bookings