Sun Hydraulics 4Q15 Earnings Call Notes

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Tricia Fulton

Saw more normal seasonality from Q4 to Q1 this year

“Our normal seasonality Q4 to Q1 shows increased order rates and results from Q4 into Q1. We are seeing that normal seasonality this year. If you look back to 2014 Q4 with 2015 Q1, we did not see that normal seasonality. In fact, we also did not see it going into Q2 of last year, but we do see that now, and we think that that is one of the signs explaining to why we believe that we will see some improvement at some point in 2016.”

Distributors said they may see some modest growth in ’16

“When we pooled our distributors most recently, we had several of them that felt like they would potentially see some modest growth in ’16, some — about the same number, felt like they would see flat growth. So I think we maybe on the distributor’s side have bottomed out. It’s difficult to tell what the OEMs, because we don’t always have insight into what their inventory levels are, and we aren’t as close to them because we’re working through distributions.”

Allen Carlson

Distributors appear to have taken inventory down as far as it will go

“Let me just add a little bit to Tricia’s comments. We also follow our distributor inventory, and we saw that inventory started going South in late ’14, continuing into ’15. And it appears that that distributor inventory, they’ve taken it down to as far as they can take it down, so when they get an order from a customer, they now have to place orders on us.”

Consumer spending will eventually incite capital spending

“I think another thing that’s going to happen, I can’t predict when, and that is consumer spending will eventually turn into capital spending in projects. That hasn’t happen yet, but I think the way out of this slowdown — I won’t call it a recession, but the slowdown will be based upon consumer spending driving things into the capital markets.”