Donaldson FY 1Q16 Earnings Call Notes

Donaldson’s (DCI) CEO Tod Carpenter on Q1 2016 Results

Mining and ag have remained weak and are unlikely to rebound in the near term

“Mining and agricultural end markets have remained particularly week. And perspective from some of our largest OEM customers suggests that build rates are unlikely to rebound in the near term.”

Outlook for construction equipment market has worsened

“Since our last update, our outlook for the construction equipment market has worsened. We now expect that sales will be flat to down 5%, compared with a more stable outlook in our prior guidance.”

Slowdown in heavy duty NA truck

“The anticipated slowdown in heavy-duty North American truck production next year is well documented, and we have been including that in our forecast.”

Our order intake slowed as we got towards the latter half of the quarter

“what we did see is that our order intake slowed as we got towards the latter half of the quarter. And that was one of the considerations when we looked at our guidance, is that we entered the year with a fairly healthy backlog, but as the quarter went on that began to get depleted, even though we were shipping fairly strongly throughout the quarter. So as we ended the quarter, we were less optimistic, particularly in the U.S., with regards to the project inventory, or project-related sales and I think that’s the biggest difference since three months ago.”

The softening we see in construction is from a global perspective

“The softening that we see in construction is really we’re talking about from a global perspective. So we saw additional softening in some geographies like China. We clearly see it hard in Brazil right now. So when we roll it up comprehensively, it’s not necessarily driven for us by an end-market in our comments to you on why we’ve reduced that outlook, it’s more a geographic rolling up to a consolidated number at the company level.”

We know there’s a decline in truck builds coming

“we know that in the U.S. first rate truck builds there is a decline in the future, and we’ve just tried to take a more cautious approach in the second half of our fiscal year and bake that in for the U.S. market.”