Joy Global 2Q14 Earnings Call Notes

posted in: Notes | 0

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. Full transcripts can be found at Seeking Alpha

Conditions remain difficult

“It goes without saying that conditions in mining remain difficult and while we see some signs of stabilization in terms of our order rates and service activity, there are still challenges on the horizon”

Coal facing more headwinds in the second half

” challenges remain as U.S. coal production now faces some headwinds in the second half of 2014 from continued depressed coal prices, decreasing export opportunities and a cooler than normal summer.”

Met coal prices seem to have found a floor, but producers are still liquidating inventory

“Met coal prices remain under pressure, but seem to have found the floor to pricing as stock prices have trended in the $110 to $120 range since March. Pricing at these levels continues to pressure over half of global producers. Despite the announcement of over 20 million tons of curtailment, these cuts have not yet materially impacted the market as many producers had stockpiles built up that are still being depleted.”

Pricing environment is likely to last through 2015

“Steel production is expected to grow 3% to 4% this year and that will help support the demand side, but the current oversupply is likely to persist through 2015 capping any marginal upside pricing improvements around $130 per ton’

Iron Ore price ceiling at $100

“The 3.8% growth in global steel production has not been enough to absorb global supply increases and will likely result in a price ceiling on iron ore at $100 per ton in the absence of any major supply disruption.”

service business should stabilize in 2015, but probably still not a lot of new build

“I’ll give you just our initial thoughts on 2015, because it’s tied. We don’t see much changing. We see the service business settling. So we feel good about that. We would like to see this increase going. On the OE piece, we don’t see any major – unless there is a push on the pricing, we don’t see major projects coming through. But what we do see is some of these rebuilds have been extended for long enough period of time, some of that could show up as OE into 2015, so we’re looking at that”

We have to find our own growth in this difficult environment

“– with our acquisition, we think we have an opportunity to bring mechanized mining to hard rock. So we think that’s a growth for us. So all these are growth elements on top of the business that we think we’re going to have to have created. We’re not going to get the uplift of the past 10 years with commodity prices booming. So that’s what we mean by that.”