Sun Hydraulics 1Q16 Earnings Call Notes

Sun Hydraulics’ (SNHY) CEO Wolfgang Dangel on Q1 2016 Results

Environment continues to be uncertain

“From our perspective the environment continues to be uncertain with economic indicators signifying little trend movement either positive or negative we recognize that we cannot control microeconomic issues. Keeping this in mind we know there are many elements of our business we can control like product development, increasing productivity, maintaining delivery liability and developing new markets and customers.”

China ag and material handling have been very soft as well

“I think in China we have to be careful. So besides construction machinery and mining the two major target end markets for us are material handling and agricultural and both of those segments have been very soft during the first quarter still.”

“Tricia Fulton
Not following normal seasonal pattern, part may be due to weak Korean construction market
You know you’re absolutely right, Mig, we’re not following a normal seasonal pattern and when we looked at this last year which was one of the years that you brought up that we also did not see a normal seasonal pattern we were a bit confused by that as well. This year I believe that a lot of this is driven by what we’re seeing in the Korean Construction market that has been hit very hard and it’s dropping our Asian numbers and we’re also seeing a bit of the slowdown in parts of Europe certainly not all of it but parts of Europe are slow for us.

Korean business tends to be sold into China

“I believe that we had a lot of our Korean business for that type of equipment that was being sold into China. And we’re now seeing a decrease there because I believe some of the equipment is being made in China. Our business tends to be with smaller and medium sized OEMs in China so it’s possible that we’re not seeing the effects of the macro yet”

Some economic indicators are pointing to a stronger second half, but we have limited visibility

“ we have some economic indicators that are pointing toward a stronger second half this year or at least the latter part of the second half maybe stronger and certainly into ’17 show some promise as well. But I don’t think that we’re diverging from our normal pattern here, I really believe that it’s macroeconomic driven and we have a lot end markets that are being challenged, continue to be challenged and we also have geographical regions that are being challenged and it kind of depends on where those play out as we go through the year and at some point maybe they’ll better align but right now it’s kind of a mixed bag what we’re seeing and it’s a bit confusing as well going into the rest of the year especially with the lack of visibility that we have because of our short book to ship cycle.”