TRIMAS CORP Q3 FY2024 earnings call

• Market Momentum: Positive trends in key end markets, with Packaging and Aerospace showing growth, while Specialty Products face lower demand.
• Operational Efficiency: Packaging has operating leverage gains but capacity constraints; Aerospace had a 10-week work stoppage resolved; Specialty Products saw margin improvement from restructuring actions.
• Treasury and Portfolio Actions: Share buybacks, divestiture of Arrow Engine, acquisition of GMT Aerospace (€20M annualized sales, adds European manufacturing), and progress on Packaging M&A.

TriMas Packaging: Net sales in the quarter were $130 million, up ~12% y-o-y. Operating profit was $19 million (14.6% of sales). Adjusted EBITDA was $27.6 million (21.2% of net sales). TriMas Aerospace: Net sales were $71 million, up ~5% y-o-y (excluding work stoppage, up over 15% y-o-y). Operating profit was $8.7 million (12.3% of net sales). Adjusted EBITDA was $13.1 million (18.5% of net sales). Specialty Product: Net sales were $28 million, down from $51 million prior year. Operating profit was $2.4 million (8.5% of net sales). Adjusted EBITDA was $3.4 million (12.1% of net sales).

• Packaging: Maintains 2024 sales growth 9%-10% and adjusted EBITDA margin 21%-23%; expects improvement in 2025.
• Aerospace: Maintains 2024 sales growth 18%-22% and adjusted EBITDA margin 18%-19%; sees over 100 basis points of upside in 2025.
• Specialty Products: Maintains 2024 sales decline 25%-30% and adjusted EBITDA margin 10%-14%; expects moderation in 2025 with cost restructuring and inventory system changes.

• Potential impact from prolonged Boeing work stoppage on demand and supply chain.
• Uncertainties related to Specialty Products' demand recovery and execution of restructuring actions.

Q: Hey, good morning, guys. Maybe for my first question, just starting with Aerospace. Look, I know that it's a challenging environment out there with Boeing, but I'm curious if you maybe remind us how much of your workforce is unionized in that segment and whether or not you see any risk of another labor dispute here in the near term?

A: Well, we only have one facility that is unionized and that was a facility that we completed a new three-year deal on. So, we don't anticipate any more workforce issues within Aerospace.

Q: Got it. That's helpful. Just sticking with Arrow then. I was surprised to hear that you haven't really seen an impact from the Boeing strike this quarter. It wasn't as incremental as maybe we would have thought. Do you have a sense -- and I know visibility in the channel is always really tough, especially on the fastener side, but just how much inventory is maybe out in the channel that these guys are maybe burning through or not burning through? And how does that impacting order rates at a go-forward level?

A: Yeah. Look, that's a good question. That's a difficult one for us to predict, but you're exactly right. Within our largest product lines, we tend to track with a little bit of a lag factor. So, we're hopeful that a resolution will occur hopefully today and that production will get turned on again. So, it's difficult for us to predict if there is -- will be any impact. I don't expect it much, if any in Q4, could be a little bit of some rebalancing in 2025. But remember that for much of this year we've been behind on shipments. So, we have a lot of open orders that we still have to fill. So, I'm not -- I don't feel like for some of our product lines, some of our major product lines, that there's a heavy amount of overstocking. But we'll update you next quarter.

Q: Hi, good morning. So, first off, on Packaging, I guess, you were seeing some orders come in and some inefficiencies. Why is it taking so long to right size the business and get the bottlenecks out of the way?

A: Hi. Good morning, Hamed. That's a good question. In a particular case that we're referencing, it specifically has to do with installed capacity. So, we sometimes when we have to add capacity can take 40-plus weeks. By the time equipment comes in, it gets qualified and approved by the customer and brought online. So, we actually ordered equipment late last year, earlier this year, and it's on our factory floors in fourth quarter. So, we're in the process of ramping it up. So that's the issue. As we've been talking about capacity pinch points, what that really means is we had to add another assembly line.

Q: Okay. And then could you comment about this GMT acquisition, what the price point is on this?

A: Yeah. I can't at this time, because we just signed the agreement and it's subject to a number of conditions before we close. But assuming everything is cleared appropriately, then we will provide that later or early into next year. But as I mentioned, it's 20 million in euro in revenue, so you can sort of handicap from that point in terms of overall size relative to TriMas.

Q: Hey, thanks for taking the follow up. Maybe just to touch on that last question, in terms of how you view the portfolio. Obviously, you've got a new shareholder here and I'm curious if there's been any talk at the Board, or just how you view his intention, whether he's got a view on the Ford portfolio or that you could talk to.

A: Well, yep, we've certainly read the public filing, I think as a normal course, irrespective of that particular shareholder or other large shareholders that we have as a company, and certainly with our Board, we're always reviewing each of our portfolio -- our set of portfolio businesses and assessing which have the best long-term value for us and for our shareholders. So, I don't think anything has really changed. It's something that we do as a normal course as a Board, all the time.