Dover Corporation (NYSE:DOV) Q2 2020 Earnings Conference Call - Final Transcript
Jul 22, 2020 • 09:00 am ET
Richard J. Tobin
demand in our pumps and precision components business is levered to maintenance and repair and aftermarket. The oil and gas mid and downstream markets served primarily by precision components business continues to slow as a result of deferral of capex and refurbishment spending in refining and pipelined operators.
In Refrigeration & Food Equipment, we believe the worst is behind us for this segment. Bookings were relatively resilient for this segment and we have improved in June, resulting in a robust backlog that we are prepared to execute against. We also saw growth is restarting the construction and remodel projects resulting in us being fully booked for refrigeration cases into Q4. Additionally Belvac is scheduled to begin shipments against it's significant backlog, which will be accretive to segment margins. Recovery in volumes along with cost actions we've undertaken should result in positive margin and profit trend through the remainder of the year resulting in the segment posting a second half comparable profit increase.
Let's go to Slide 10. As a result of the fluidity of the COVID situation, we are cautious about guiding top line trajectory at this time, but everything points to sequential improvement from here across most markets. The proactive cost management stance we took in Q1 and continued in Q2 has positioned us from a margin performance standpoint, and today we are improving our target for annual decrementals margin to 20% to 25%. We continue work in the pipeline of restructuring actions, including those targeting benefits in 2021, and we are positioned well to deliver on our margin objectives. We remain confident in the cash flow capacity of this portfolio and reiterating a conversion target above 100% of adjusted net earnings and a cash flow margin target of 10% to 12% compared to 8% to 12% target we had last year.
The rest of the slide, Brad covered earlier in the presentation. I'll conclude with the following. We have reinitiated EPS guidance as a result of our confidence in our ability to manage costs in an uncertain demand environment. We have a good team, and they understand the playbook. Having said that, make no mistake, we are on the front foot from here on driving revenue growth, both organically and inorganically. We have strong operating companies and a strong balance sheet with which to support them. This is not the time to hunker down and wait for the storm to pass, so we are equally focused on market share gains, new product development initiatives as we are on our main pillars of synergy extraction from our portfolio, all of which we continue to fund, despite the market challenges. Inorganically we have available capital to deploy and I fully expect to be active in the second half. In summation, I'd like to thank everyone at Dover again for their continued perseverance in these difficult times.
And with that let's go to Q&A. Andrey?