Joy Global 2Q13 Earnings Call Notes

posted in: Notes | 1

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Backlog fell to $2.2 billion from $2.4 billion at the beginning of the second fiscal quarter.”

“Our prospect list has bottomed and improved this quarter. Projects that were de-scheduled are being replaced…However, the new normal will sustain rather than materially increase our order rate, at least in the near term.”

“surplus mine capacity in most commodities is putting pressure on prices, customer margins and their cash flow. Management at most mining companies has been changed and they have new mandates. Second, CapEx spend on mining equipment is down 40% to 50%…projects will go forward selectively. They must be low risk and they must come in low in the marginal cost curve. Most of these projects can achieve returns without material improvement in market demand.

“projects will go forward selectively. They must be low risk and they must come in low in the marginal cost curve. Most of these projects can achieve returns without material improvement in market demand.”

“we’ll leave it to others to predict timing and we’ll continue to operate under the assumption that the inflection point is over the horizon. As such, we will continue to focus on process efficiency, a reduction of our base cost and on cash flow.”

“the outlook for the U.S. coal market has turned positive. I guess, this is first in, first out, if you will. With natural gas prices above $4 per million BTUs, fuel for power generation is increasingly switching back to coal.”

“China continues to slow and cannot seem to find traction. The growth in electricity production has slowed to 5%, below half the prior rate. And despite this slowing, domestic coal production continued to grow at 7% or 8%.”

“I think copper is an underestimated market, especially because of the inventory that has moved from private to exchange stocks. Our customers agree with copper strongly represented on our prospect list.”

“Our aftermarket order rates slowed in the first quarter, but quickly started to improve in the second quarter. This confirmed our belief that the decline in the international markets would quickly correct.”

“we saw that go through about 5 quarters to — for the order rates to come down, bottom out and begin to improve. We saw the order rates bottom between the fourth and first quarters and improvement for this quarter”

” I think it tells you that there’s — this is more about cutting costs and driving cost reductions”

“our customers don’t have the — they’re not carrying the inventories of parts that they used to, so now they’re going to need and expect us to have instantaneous delivery”

“Yes, I definitely think we’re at a low point. There’s no doubt about that. I think the question is what does the slope look like as things get better and how long will that take.”

“old projects that weren’t going to make the ROI thresholds have been cleaned out. New projects have replaced them so we’re looking at a new set of projects that have been reviewed by new management teams. And I think that they’re more likely to go forward.”

“equipment we delivered in 2011, 2012, those will come into normal rebuild cycles”

“The price levels have stayed sort of in that $3.20 to $3.40 kind price range. And that stays at an incentive level for copper producers. And so we’ve seen investments in copper. We’ve seen customers talk about continued expansion in copper without a lot of reservation. I mean, we’re — there are a number of projects that are underway in various phases.”

“both met coal and thermal coal, on a global basis, we probably have 5% to 7% excess capacity. It seems like a lot now because everybody’s fighting over — more supplies fighting over less demand. But it’s a single-digit kind of capacity excess. And so that’s going to take us a little bit of time to work off some combination of closing, some high-cost mines that need to come out and demand improving. But I think we need to see supply/demand balance get closer, which is probably not a couple of quarters away, maybe 1 year away before you begin to see the point where our customers are willing to accelerate their CapEx.”

“2 things, I think, we’ve done in the business that we feel very confident that we’re going to be able to hold margins pretty well. And one of those things is being very transparent with our customers on pricing. We’ve been consistent, open, transparent with them on pricing when we need to price. And we haven’t tried to overprice in the up cycle and they’ve — I think they’ve developed a confidence that we’re fair and balanced with them. And therefore, we’re able to execute pricing when we need to in the down cycle.”