Harsco Corporation (NYSE:HSC) Q2 2017 Earnings Conference Call - Final Transcript

Aug 03, 2017 • 09:00 am ET

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Harsco Corporation (NYSE:HSC) Q2 2017 Earnings Conference Call - Final Transcript

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Executive
Nicholas Grasberger

year, double the figure in 2014. While debt to EBITDA should end the year around 2 times, down from over 3 times just 18 months ago. Furthermore, the end markets for each of our segments remained well below peak levels of a few years ago. So we expect profit growth to continue well beyond this year.

Metals & Minerals delivered another very strong quarter and exceeded its Q2 performance of last year, which had been M&M's best quarter in many years. The mix of our contracts continues to improve and we have recently signed attractive new contracts in growth markets such as Turkey, China, India and Egypt. We expect that our strong competitive position in these markets such as these will enable us to deliver growth well above the growth rate in the global steel industry and certainly above those of our competition.

We also expect the redeployment of our capital from lower-margin, lower-growth markets into such opportunities will boost our return on capital beyond the current decade-high level. At the same time, the developments in acquisition of new technologies, coupled with on-site advancements in productivity, environmental solutions and safety, are further improving our value proposition to our global customer base.

The Industrial segment also produced its best quarter in some time, led by our Air-X-Changers business, which has seen a quicker recovery in demand than expected. AXC margins have already reached highs beyond those realized at the peak of energy market in 2014, due to benefits from consolidating our manufacturing facilities and reducing product costs.

The improving competitive dynamics in the IKG grating business and the end market demand and new product gains in Patterson-Kelley also contributed to the strong results in the Industrial segment. In fact, we believe we're capturing market share in each of the three Industrial businesses.

Earnings in our Rail segment were a bit ahead of expectations due largely to timing, although the outlook for the business is a bit weaker over the next six months than our previous view. Although Rail traffic is beginning to grow again, the capital spending of our major customers on maintenance of way equipment remains very weak. However, we did win a significant new contract in the UK in a product category called stone blowers, where we hold a technological edge -- on our competitors.

As we begin to look forward to 2018 and beyond, I'm very excited about the prospects of our Rail business due not only to a recovery in the end market, but also to the benefits of several new initiatives aimed at growth and productivity under the new leadership team.

So before I turn the call over to Pete, I'd like to thank the roughly 10,000 employees at Harsco for their hard work and dedication, both to our company and to our values. The shift in our culture towards our values has certainly played a meaningful role in the success of Harsco over the past several quarters.

So over to Pete.

Executive
Peter Minan

Thanks, Nick and good