Actuant Corporation (NYSE:ATU) Q1 2018 Earnings Conference Call Transcript
Dec 20, 2017 • 11:00 am ET
Ladies and gentlemen, thank you for standing by. Welcome to the Actuant Corporation First Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, December 20, 2017. It is now my pleasure to turn the conference over to Karen Bauer, Communications and Investor Relations leader. Please go ahead, Ms. Bauer.
Thank you. Good morning, and welcome to Actuant's First Quarter Earnings Conference Call. On the call with me today are Randy Baker, Actuant's CEO and Rick Dillon, CFO. Our earnings release and the slide presentation for today's call are available in the Investors section of our website. (Forward-Looking Cautionary Statements) Consistent with prior quarters, we will utilize the one question, one follow-up for all, in order to keep today's call to an hour. Thank you in advance for following this practice. And with that, I'll turn the call over to Randy.
Thanks, Karen. Good morning, everybody. Let's start on slide three. I was pleased with the results in the quarter. Total sales exceeded our expectations, and we delivered EPS at the high end of our guidance range. Our Industrial segment grew nicely in the quarter. Tool sales were up 9%. Heavy lifting technologies increased by more than 40%. Engineered Solutions was up 20%, repeating the great performance we saw in our fourth quarter. Energy sales stabilized in the quarter and project forecasting has improved.
From a margin standpoint, though, our Industrial segment delivered weaker-than-expected performance due to our higher mix of the heavy lifting sales, coupled with discrete cost of legacy projects. This effectively weakens rate performance on our tool sales in the segment margins. Engineered Solutions continues to achieve higher profitability and margin performance, growing at nearly 270 basis points in the quarter. And finally, Energy continues to suffer from lower sales volume, but we'll begin to see the effects of our cost-reduction actions. Despite these factors and a modestly higher tax rate in the quarter, we still achieved the high end of our EPS guidance. On December 1, we completed the divestiture of the Viking business, which was an important first step in reshaping our Energy segment portfolio. As I've communicated, our objective is to minimize Actuant's exposure to upstream oil and gas exploration and well development. We also completed the acquisition of the Mirage company, which is a great addition to our tool product line and gives us a full range of machining equipment.
In summary, it's a great start to the new fiscal year. We have great evidence that our objectives are beginning to deliver on our strategy, but we have to continue to drive on our sales performance. We have to fix our margin issues. And we need to continue to drive new product development. And ultimately, we know that we need to pull cost out of our Energy business and reshape it. So with that, I'm going to turn it over to Rick to walk through the details in the quarter. And I'll come back with guidance and a few