LINCOLN ELECTRIC HOLDINGS INC Q1 FY2025 earnings call

• Top line sales up due to acquisition and price, but volumes softer; half of volume decline from Turkey labor negotiations resolved mid-March.
• Implemented additional pricing, expect mid-single-digit price increase in Q2; will take further pricing if tariffs apply.
• Generated $16M in savings, adjusted operating income margin down 60bps; Turkey and acquisitions impacted margin by 110bps.
• ROIC 21.5%, cash conversion ratio 130%, returned $150M to shareholders.
• Continuing savings actions, expect $15-20M in Q2 savings, suspend merit increases.
• Americas Welding sales up, International Welding volumes down except Asia Pacific, Harris Products Group growth in HVAC.

Reportable segments:

• Americas Welding: Sales increased ~5% in Q1, driven by nearly 8% from acquisitions and 2% higher prices, offset by 4% lower volumes and 1% unfavorable foreign exchange. Adjusted EBIT decreased ~9%, margin 18.2%.
• International Welding: Sales declined ~7% primarily due to 6% lower volumes; excluding Turkey, volumes up 3% in Asia Pacific. Adjusted EBIT decreased ~17%, margin 10.2%.
• Harris Products Group: Sales increased 9% with 9.5% higher price and 60 basis points higher volumes, driven by HVAC strength. EBIT increased ~22%, margin 17.9%.

• Full year organic sales flat year-over-year; mid-single-digit price increase expected, lower volumes anticipated.
• Adjusted operating income margin flat to down 50bps versus prior year.
• Full year share repurchases estimated $300M-$400M.
• Corporate expense expected ~$2M-$3M per quarter for remainder of year.

• Uncertainty in trade policies and tariffs impacting volumes.
• Customers deferring capital spending affecting automation demand.
• Supply chain and tariff exposures affecting cost structure.

Q: Talked about growth in all markets excluding heavy industries, volume base and remainder of year?

A: Four out of five end markets stronger, but uncertainty remains; construction/infrastructure, automotive, general industries positive, heavy industries challenged.

Q: Customers deferring capital spending impacting automation demand, color on what heard?

A: Lots of quotation activity, but customers delaying decisions due to trade policy and macro uncertainty.

Q: Announced pricing, split between direct price and surcharges?

A: Not disclosing split, but mix of traditional pricing and surcharges to respond to tariffs.

Q: Updates on RedViking and Vanair integration?

A: Integrations progressing on schedule, but first three years of integration expected to be dilutive; pipeline sluggish, focus on share repurchases.

Q: Americas margin performance, integration of Vanair and RedViking?

A: Americas margin impacted by lower volumes, acquisitions, and corporate reallocation; integrations expected up to three years to be margin accretive.

Q: Automation visibility, automotive-related automation?

A: Longer lead-time automotive activity positive, but monitoring trade policy impact on automotive industry.

Q: Price/cost discussion, drive margin with price increases?

A: Goal is price cost neutral, maintaining profitability through pricing, productivity, and cost savings.

Q: Tariff fixture improvement, hold on pricing gains?

A: Will be agile and responsive to conditions, manage to predict outcomes.

Q: Sourcing components, reshoring?

A: Reshoring steel and electronics long cycle; working with suppliers to mitigate tariff impact.

Q: Pricing offsetting volume in Q2, what went into that?

A: Seen through April, pricing and volume roughly offsetting; expectation for Q2.