Dover Corporation (NYSE:DOV) Q2 2020 Earnings Conference Call - Final Transcript

Jul 22, 2020 • 09:00 am ET


Dover Corporation (NYSE:DOV) Q2 2020 Earnings Conference Call - Final Transcript


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Richard J. Tobin

business revenue declined in the quarter as a result of shipment timing, we expect to -- for it to do well in the second half of a strong backlog. As you can see this segment continued to deliver a solid margin performance posting improving margin on declining revenue for the second quarter in a row, we expect this segment to deliver flat or improved absolute profit for the full year.

Refrigeration & Food Equipment declined as food retailers continued to delay construction remodels due to peak utilization and the commercial food service market remains severely impacted by restaurant and school closures in the United States. Our heat exchanger business showed resilience particularly in non-HVAC applications. On the margin side, negative absorption on lower volumes drove the margin decline. In Q2, we took structural cost actions in this segment, which paired with ongoing productivity and automation initiatives yield in a materially improved margin performance in the month of June. We expect these benefits to continue accruing in the second half and expect this segment to deliver year-over-year growth in absolute earnings and margin in the second half of this year.

I'll pass it to Brad here.

Brad M. Cerepak

Thanks, Rich. Good morning, everyone. Let's go to Slide 5. On the top is the revenue bridge. As Rich mentioned in his opening remarks, the top line was adversely impacted by COVID-19, with each segment posting year-over-year organic revenue declines. FX continued to be a meaningful headwind in Q2, reducing top line by 1% or $24 million. We expect FX to be less of a headwind in the second half of the year. Acquisitions were effectively offset by dispositions in the quarter.

The revenue breakdown by geography reflects relatively more resilient trends in North America and Asia versus the more significant impacts across Europe and several emerging economies like India, Brazil and Mexico. The US, our largest market declined 10% organically, with four segments posting organic declines, partially offset by growth in retail fueling. All of Asia declined 14%. China representing approximately half of our business in Asia, showed early signs of stabilization posting an 11% year-over-year decline in the second quarter, an improvement compared to a 36% decline in Q1. Imaging & Identification and Engineered Products were up in China while Fueling Solutions declined due to the expiration of the underground equipment replacement mandate and also slower demand from the local national oil companies. Europe was down 19% on organic declines in all five segments.

Moving to the bottom of the page. Bookings were down 21% organically on declines across all five segments, but there are reasons for cautious optimism as we enter the second half. First, as presented in the box on the bottom, June bookings saw a significant improvement from the May trough, with all five segments posting double-digit month-over-month sequential growth. Second, our backlog is up 8% compared to this time last year, driven by our longer cycle businesses and the previously mentioned intra-quarter improvement in our shorter cycle businesses. We