Joy Global at Morgan Stanley Industrials Conference Notes

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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.

“I’ve been at Joy now for over 10 years, it’s the first time that I’ve seen the industry in surplus capacity across a broad range of commodities, and that’s fundamentally a different position than we’ve seen for the last decade.”

“the outlook for the U.S. market is improving with coal-fired generation up and stockpiles coming down, and they’ll translate to production increases next year for our U.S. customers. We’re seeing corrections in China. The surplus of coal in the seaboard markets is impacting China and they’re going through the correction phase in that market.”

“we see a restocking phase in China, in particular in the metals markets. We see pretty low inventory levels of iron ore. Net coal prices are coming up. Copper inventories are lower than the exchange inventories would indicate. And they’re coming down and we’re seeing the prices in copper begin to move up again as well.”

“So there’s a lot of positive factors in these markets, but we still are focused in our business on taking costs out, lowering our cost base, and preparing for a wide range of outcomes.”

“we are in a downturn that started for us — we saw the peak order rates in 2011-2012”

“We expect to bump along the bottom for a longer period of time obviously than we did in 2009, and we expect the recovery to be a slower, steadier recovery.”

“we track the prospects that our customers are working on and we put that on our prospect list of those projects that we expect to come to equipment selection in the next 12 months. And in that list, that list has ticked up more recently. So we’re seeing some projects being taken off the list as those projects get reevaluated, but we’re seeing new projects come on the list. And more recently we’re seeing more projects come on the list that have been taken off the list.”

“I think we’ve seen the worst of the equipment CapEx reductions and I think that we’ll slowly start to see improvement in CapEx”

“n the U.S., we saw the rebuild activity go to zero. So all the rebuilds were just deferred indefinitely. So in 2012 we had about 900 continuous miners running in the U.S. market, today we have 700 continuous miners.

In operating mode, those miners would need to get rebuilt about every two years. So there’s a significant rebuild activity that in the U.S. market has gone to zero.”

“We’re strictly a mining equipment company. We’re not going to be diversified industrial. We may broaden our exposure in the mining space, but we’re not going to be, you know, we do one thing really well and we sell and support mining equipment. We’re going to continue to do that because we do it well.”

“We’re focused on bringing not lower prices to our customers but more value to our customers. How do we improve our value component for our customers? Other competitors are doing the same thing. So we’re not seeing that, you know, trying to gain market share by lowering their price.”

“Yes. What we’re seeing in the aftermarket is, you know, it’s an interesting phenomenon, as our customers take costs out of their operations. We saw this in the oil and gas space where the oil companies in the ’80s took a lot of costs out. And they took out a lot of their ability to engineer their own projects and then began to look at the suppliers to provide the engineering content for the projects.

So, yes, that developed into integrated supply capability with the major oil service suppliers. We’re seeing the same thing in the mining space, as they take more and more costs out, we’re seeing them look to the equipment suppliers to add more resources into those operations. We have projects today where we have a significant number of our engineering people that are officed with our customers, working on a project side by side.

So when a customer in the past would develop a spec and give us a spec to work to, now we’re co-developing the spec with them. And that’s — it is a change but it’s a change for the positive because it puts us in more of a partnership embedded relationship with our customers.

And so the tendency to shop around, you know, no one has time to do that anymore. Everybody is stretched to thin. The need to bring companies like Joy Global into, not just deliver equipment but to manage the project, you know, we’re doing a lot of turnkey work but we design and build equipment, we install and commission it, and we’ll take a lifecycle management contract for the first five or ten years. And that’s becoming more common in the market.”