Colfax (CFX) Q1 2016 Earnings Call

Colfax (CFX) CEO Matt Trerotola said their end markets remain choppy 

“We continue to make good progress on our cost-reduction efforts, but our progress on growth initiatives has been offset by the end-market environment, which remains choppy with a mix of positive and negative indicators and no clear sign of recovery in the near term.”

Continuing to find ways to cut costs in order to right size the business

“Our previously announced cost-reduction activities are on track to deliver $50 million of incremental cost-savings this year. As we have discussed, the majority of these savings will be from SG&A and we expect the read through to improve in the second quarter. Our plant consolidations and other cost-savings projects will add to the quarterly savings as we move through the year.”

China is slowing their power plant infrastructure build out 

“There are changes in the China power market that may impact 2017 and beyond.  The high number of new coal-fired power plant permit approvals in 2015 combined with the slowing pace of the industrial economy has the Chinese government increasingly concerned about overcapacity for electricity generation. In response, China has announced the delay or reconsideration of certain power projects in several provinces, which may reduce order rates this year and newbuild activity next year.

Seeing customers delay their orders 

“There’s a degree of caution that I think has people dragging their heels. We’ve seen projects pushed from 1Q to Q2, some others pushed from Q2 to Q3. And it remains to be seen whether they’ll get traction in Q2 and Q3 and those projects will go through to fruition or whether they’re going to continue to push back. That’s going to be a critical thing that we’ll be watching here in the second and third quarter.”

In regards to acquisition candidates, buyers and sellers are still too far away on price to reach an agreement 

“But our primary focus on the capital allocation front is around the acquisition pipeline. We’ve been driving a pipeline of more bolt-on acquisitions. And if we can find the right ones to do there, we’ll be moving forward with bolt-on acquisitions. It is a bit of a tough environment right now with the choppy markets in terms of buyers and sellers.”