Joy Global 1Q16 Earnings Call Notes

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Edward L. Doheny – President, Chief Executive Officer & Director

End markets took another step down

“The past quarter, our end markets took another step down with supply-demand imbalances driving prices lower by an average of 10% over the last few months. This is further strained and already pressured customer base, which will drive further austerity measures in our installed base.”

Further cost reduction actions

“the step down in the marketplace has caused us to implement further cost reduction actions. As Jim mentioned, we are now targeting $100 million in year-over-year cost savings. ”

US coal production will fall another 100m tons in 2016 battling with elevated inventories

“Higher coal inventories at both power plants and producers will certainly put downward pressure on coal production for the remainder of the year. For 2016, we now believe U.S. coal production will fall at least another 100 million tons, particularly if there is a mild summer. The elevated inventory levels will take time to work through and we’ve already seen our customers responding with shutdowns.”

Seeing service starting to pick up in Australia

“we’ve seen in probably Australia, a large market for us where over the last few years, we put a significant amount of equipment, especially on some of the mega longwalls. But we’re seeing that service starting to lock up, the slots being booked and we have visibility that are coming through as well as some of our service initiatives.”

Opportunity in India

“The next region actually is, I’ll have to say growth and we’ve talked about, it is India. We’ve been quite cautious about India. India has been a potential. The government has announced that they’re going to privatize those coal blocks. ”

I know you’d love me to call a bottom but there is just so much inventory out there

“nobody can call the bottom. I’m sure that’s what you’d love me to say that we’re seeing the bottom there. We’re just trying to get ahead of it with what we see in the U.S. There is just so much out there, utilities, and I’m sure all of you have seen the inventory levels. So the customers are having to pullback on the production.”

Utilization is running at 25-35% of capacity

” as we ended 2015 is – or the reason we’ve upped our cost reduction, we saw our utilization drop in that 35% on that footprint. And as you know, we had a footprint out there that just a few years ago supported almost a $6 billion business. So, as we’ve done our restructuring and an optimization and moving our facilities and moving to service centers as well. In the first quarter, with this drop, we saw that actual utilization in that 25%.”

We’re trying to make cuts to get to 45% by the end of the year, 75% over the longer term

“So, with the actions that we have in place and accelerating our footprint plan, which basically what we’re doing is moving the 2017 plan into 2016, that’s the acceleration. We think we can get that utilization by the end of the year, that 45%. Now, to your long-term question, we’re designing that to where we see in the next three years, let’s say, to get our utilization and our capacity footprint to that 75% level.”

Don’t really have cancellations backlog is stable

“As far as cancellations, we didn’t really have. We feel that the backlog is pretty stable and that’s part of why we see us – our path to the second half of the year. But we still see the major projects that – we have quite a few more projects that are out there that we have hedged out because of the commodity prices where they are today. ”

Australian fleet has aged

“When I went – gave that walk around the world, we just see that the Australian fleet has been aging and they’re going to have to do some of those rebuilds and we just see that happening, because they’re already scheduled. As I went around the world, the South African business we see that stabilized and some growth potential. The U.S. we see that taking a step down and we have that into our guidance. So, can’t say we’re seeing any foretelling macroeconomic things that you can go from region by region, each one is pretty much dependent on the – or their mining and what our installed base looks like and our service initiative penetration capability. So, I wish I could give you one macro number, but we probably have to answer those region by region.”