Company News
May 7, 2024
L & P Urethane Highlights from Earnings Call
Leggett & Platt, Incorporated (LEG) Q1 2024 Earnings Call Transcript
May 01, 2024 11:07 AM ETLeggett & Platt, Incorporated (LEG) Stock
Q1: 2024-04-30 Earnings Summary
EPS of $0.23 misses by $0.01 | Revenue of $1.10B (-9.62% Y/Y) misses by $22.67M
Leggett & Platt, Incorporated (NYSE:LEG) Q1 2024 Earnings Call Transcript May 1, 2024 8:30 AM ET
Company Participants
Cassie Branscum – VP, IR
Mitchell Dolloff – President & CEO
Benjamin Burns – EVP & CFO
Tyson Hagale – EVP & President, Bedding Products
Mitchell Dolloff
Good morning, and thank you for joining our call today. First, I want to share that this will be Cassie’s last earnings call with us, as she will be leaving the company for an exciting new opportunity later this month. Cassie has been an instrumental part of our IR team since 2018 and has been an incredible asset to the company throughout her various positions over the last 19 years. We wish her the best in her new role and will sincerely miss her.
Before reviewing first quarter results, I’d like to spend a few minutes discussing who we are, where we stand today, and where we are going in the future. Across most of our businesses, we are positioned as a leading provider of differentiated engineered products with opportunities to increase content over time, while collaborating with our customers to provide solutions. Our core businesses have strong market positions in industries with large and attractive addressable markets.
In Bedding Products, our 2019 acquisition of ECS meaningfully increased our addressable bedding market, allowing us to expand into specialty foam and compressed mattresses, trends which have significantly changed the domestic bedding landscape in the last 10 years. Although the bedding market has been challenged recently, the strategic rationale for that acquisition remains intact and should enable us to drive long-term growth and product innovation.
In Specialized Products, all three of our businesses supply technical, critical components that are developed with a deep customer relationship and collaborative design. For example, our automotive business is aligned with trends of increasing comfort and convenience features. Our ability to partner directly with OEMs to solve specific problems means we compete on differentiation rather than just price. In Furniture, Flooring & Textile Products, most of our businesses are mature and stable with steady margins and solid cash generation. These businesses tend to compete based on high levels of customer service or product differentiation and include our home furniture, work furniture and flooring operations. Within textiles, our geo components business leverages sourcing synergies from our fabric converting operations to supply fabrics for applications such as erosion control and landscaping. Geo components competes in a fragmented industry with sizable opportunities for growth.
With that context in mind, I’ll now address our near-to-mid-term strategic priorities, which are a blueprint for ensuring the sustainable long-term success of our business. Our priorities are: One, strengthening our balance sheet and liquidity; two, improving margins by optimizing operations and our general and administrative cost structure; and three, positioning the company for profitable growth opportunities. We’re committed to maintaining our long-held financial strength and have recently taken action to support this objective. In March, we proactively amended the agreement for our existing revolving credit facility to provide us with additional liquidity and flexibility. The leverage ratio was increased from 3.5 times to 4 times through June 30, 2025, creating a bigger cushion in a time of near-term weak demand in residential end markets.
Yesterday, we announced that the Board of Directors declared a quarterly dividend of $0.05 per share. The decision to reduce the dividend was made following a very thorough evaluation. This action will free up capital to invest in driving improvements in our business and solidify our long-held financial strength. Additionally, we continue to advance our initiatives across our business to drive operational excellence and enhance our efficiency. We expect these initiatives will allow us to drive margin improvement and continue to strengthen our financial foundation in the near to mid-term.
Domestic bedding manufacturers are facing numerous challenges, including low demand, overcapacity and increased pressure for finished mattress imports, resulting in financial stress across the industry. The domestic mattress market has changed dramatically in a relatively short timespan. The landscape has shifted from a largely domestic OEM-produced innerspring mattress market to one where innerspring, foam and hybrid mattresses are sold at a wide range of price points through a variety of channels and produced by a mix of fewer large domestic OEMs, domestic private label producers and import manufacturers. These changes have effectively reduced the size of the domestic innerspring mattress market by a third.
While we anticipate that import mattresses will always have a place in the market, any volume reshored to the US as a result of the ongoing anti-dumping case is beneficial for the domestic industry. In such a dynamic environment, we recognize that we must also make changes to profitably compete in the bedding market today and in the future.
Across our Bedding Products segment, we are executing on the restructuring plan announced in January to optimize our manufacturing and distribution footprint. We are making steady progress and remain on track to achieve our objectives. To date, we have closed four smaller US spring distribution facilities, transitioned manufacturing out of three facilities and into our four larger remaining spring production facilities, and closed a small specialty foam operation. We still expect the consolidation activities within US Spring to be completed by year-end and are currently downsizing our Chinese innerspring operation.
Finally, two additional specialty foam facility consolidations are underway and should be complete by year-end. As previously announced, restructuring actions will be complete by the end of 2025. I want to thank our entire team for their dedication and hard work during this time of transition. Our rod, wire and spring business continues to have healthy margins as a result of our refocused strategy targeting higher-value content, combined with disciplined cost management from our operations team. However, volume recovery, restructuring activities, and other operational initiatives will drive meaningful improvement.
Specialty Foam is a significant drag on our company profits, but we continue to drive operational improvements and margin recovery through our four-wall manufacturing improvement plan. Efforts to diversify our customer base have seen initial success, but we have more work to do in the current low-demand environment where many market participants are increasingly financially constrained. In adjustable bed, low demand and a market shift towards lower-value products have been a meaningful drag on profit. We are working hard to reduce cost and simplify the supply chain to drive profit and cash flow improvements.
Our European bedding business faces market conditions that are very similar to our domestic challenges. The team continues to drive profitability in innersprings but has opportunities to improve our Kayfoam business where the customer base has changed meaningfully since acquisition. We remain confident that our unique positioning in the bedding industry enables us to drive value for our branded customers and we are addressing our cost structure to do so as competitively as possible.
In Specialized Products, operational improvement activities are ongoing within each business. In automotive, the team continues to make good progress improving profitability. We continue to evaluate efficiency enhancement opportunities and options to leverage automation and vertical integration. In both aerospace and hydraulic cylinders, efforts to improve production efficiencies are underway. In hydraulic cylinders, we are shifting some production to our operations in India to reduce cost and improve profitability.
Restructuring initiatives in the Furniture, Flooring & Textile Products segment are also on track. We have closed a flooring products production line and redeployed the manufacturing equipment to one of our other production facilities. In home furniture, we closed one plant and have transferred that production to other remaining facilities. We expect to market that real estate by mid-summer. In work furniture, we continue to explore opportunities to reduce cost and improve profitability. Beyond our manufacturing operations, we are evaluating our general and administrative cost structure to drive further improvements in profitability.
Shifting our focus to the future, in the long term, we plan to invest in key focus areas, including Bedding, Automotive and geo components. The changes underway now in our bedding business support our future ability to drive product synergies across specialty foam and innersprings and capture greater product content through semi-finished and private-label finished goods. We are committed to leveraging our capabilities in springs and foam to expand our hybrid mattress programs and drive value for our customers through product development activities. Additionally, we expect that future growth in adjustable beds will stem from higher attachment rates and innovative product designs tailored to meet consumer needs.
In automotive, we see growth potential in our convenience products offerings such as motors and actuators, particularly as vehicle technology and electrification increases. Our geo components business has grown via greenfields and small bolt-on acquisitions over time, and we anticipate further growth as we continue to expand our product lines and geographic footprint. We are confident that the actions we are taking in the near to mid-term will better position us for the future and enhance shareholder value. Our current profitability does not meet our expectations, but we are taking the necessary steps to improve our performance.
Moving on to first quarter 2024. Results were in line with our expectations at the beginning of the year. First quarter sales were $1.1 billion, down 10% versus the first quarter of 2023 from volume declines, primarily in residential end markets and raw material-related selling price decreases. First quarter EBIT was $63 million, down $26 million versus the first quarter of 2023. Adjusted EBIT was $64 million, down $25 million versus first quarter 2023. EBIT and adjusted EBIT decreased primarily from lower volume, increased bad debt reserve, less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition, and the non-recurrence of pandemic-related cost reimbursements. These decreases were partially offset by lower current-year amortization expense.
Restructuring costs during the quarter were $11 million, comprised of $6 million in cash cost and $5 million in non-cash cost. The restructuring charges were mostly offset by gains from idle real estate sales and insurance proceeds of $8 million and $2 million, respectively. First quarter earnings per share and adjusted earnings per share were $0.23, a 41% decrease from first quarter 2023 EPS of $0.39.
Moving on to segment results. Sales in our Bedding Products segment decreased 15% versus first quarter 2023. Ongoing weakness in domestic and international bedding markets negatively impacted volume this quarter as demand continues to bounce along the bottom. US Spring volume was down 15% versus first quarter 2023, driven by declines in open coil and wire grids, partially offset by growth in higher-value semi-finished products, such as combination pocket and EcoBase. Domestic mattress market production was likely down high single-digits and we saw similar trends in ComfortCore demand. For the full year, we expect US mattress consumption to be slightly down versus 2023.
Susan Maklari
Good morning. My first question is, I want to start on the dividend. I guess, Mitch, can you just give us a bit more perspective on how the Board arrived at that $0.05, and maybe even some color on what it implies for the future earnings of Leggett? How do you think about what the business can generate once you get past the restructuring and all the changes that you’re implementing? Just any color there on how we should be thinking about those two pieces.
Mitchell Dolloff
Sure, Susan. Making a change to the dividend was, of course, a decision that we took very seriously. And it was important for us to consider a variety of options in making that change, as well as near and long-term impacts to our business. So the downturn in our residential end market demand has continued to pressure earnings for longer than we originally anticipated.
As we went through this process, we shifted from considering it to be a question of how can we fund the dividend at the current levels to whether we should fund the dividend at the current levels, as it became harder to balance our lower earnings, the increasing leverage and the elevated dividend payout ratio.
So, we’ve landed at the $0.20, because reducing to that level allows us to deleverage our balance sheet in a reasonable timeframe, continue to invest in our business, which we’ve mentioned before, we hadn’t been compromising CapEx or things like that. But as this drag on and the payout ratio continued to be really high, it was putting us in a spot to maybe we have to make some changes. And it also gives us the flexibility to refine our portfolio in the future if we think that’s appropriate.
So we remain committed to returning capital to shareholders, and we’re not walking away from that priority, but we’ll balance that with retaining this flexibility to invest in future growth. And we’ll also think about that — the shareholder returns, both through dividends and share repurchases over time.
To your question about the future earnings, we still feel really good about the restructuring activity that’s underway and some of the additional actions that we talked about in our reporting of operational improvements and looking at our G&A cost structure, things like that. So we feel like we still see that improvement in our earnings even in this near-term low-demand environment. We continue to see improvement and growth in Specialized Products earnings. And demand will start to come back at some point, but it’s hard to estimate when that is. Probably it depends on interest rates and inflation and some things like that.
So we’re really focused on dealing with the situation that we have on our hands today and driving improvement in our earnings in the near term, the midterm, and then returning to longer-term growth when things normalize a bit. So we’re confident in the situation we’re in and the opportunities that we have. But we felt like this was an appropriate action to give us the flexibility that we need to run our business for the long term.
May 7, 2024
Urethane Highlights from Stepan’s Investors Call
Stepan Company (NYSE:SCL) Q1 2024 Earnings Call Transcript
Scott Behrens: Good morning and thank you all for joining us today to discuss our first quarter 2024 results. I plan to share highlights from our first quarter performance, and we’ll also share updates on our key strategic priorities, while Luis will provide additional details on our financial results. The company reported first quarter adjusted EBITDA of $51.2 million, up 5% year-over-year. Global sales volume was up 1% year-over-year. Volume weakness in the agricultural market due to continued inventory destocking and lower phthalic anhydride volumes due to ongoing operational issues at our Millsdale site, mostly offset the strong recovery in volumes across our other core markets. Global sales volume, excluding the impact of agricultural and PA was up 4%.
Surfactants experienced double-digit volume growth in Personal Care and Oilfield end markets and with our distribution partners. As expected, Latin American surfactant volumes grew strong double-digits as we recovered volumes in Mexico. First quarter sales volume in Mexico was a record. Overall, volumes in our global Consumer, Laundry and Cleaning and our Institutional Cleaning businesses have stabilized and we believe destocking has run its course. Within Polymers, Rigid and Specialty Polyols grew mid-single digits, while Specialty Products volume was up double-digits. From a company perspective, margins were in line with expectations despite unfavorable product mix. Net sales in the first quarter of 2024 decreased 15% year-over-year, primarily due to lower selling prices that were mainly attributable to the pass-through of lower raw material costs and less favorable product mix.
These lower selling prices were partially offset by a 1% increase in global sales volume, as mentioned above, and the favorable impact of foreign currency translation. We generated positive free cash flow of $11.4 million as capital expenditures returned to historical levels, and these results give us confidence that we will close 2024 with positive free cash flow. The company is on track to deliver our $50 million cost reduction goal for 2024 through disciplined efforts in supply chain and workforce productivity actions taken in the last quarter of 2023. We expect these reductions to help offset higher operating costs related to operational interruptions at our Millsdale site and pre-commissioning expenses at our new alkoxylation facility in Pasadena, Texas.
Scott Behrens: Thanks, Luis. I’ll focus my comments on our cost initiatives, business strategy and the progress of our major capital investments
Our Polymers business continues to focus on developing the next-generation Rigid Polyol technologies that can increase the energy efficiency and cost performance of our customers’ insulation products. Moving to Slide 11, construction on our new alkoxylation production facility in Pasadena, Texas is approximately 90% complete and we now expect the plant to start up in the fourth quarter of 2024 due to a contractor delay. The underlining alkoxylation business that supports the Pasadena investment, excluding the agricultural destocking, continued its volume growth during the first quarter of 2024 at very attractive unit margins. After completing a 3-year capital investment program last year, Stepan now has the largest installed low 1,4-dioxane production capacity serving the North American merchant market.
Our first quarter volumes grew strong double-digits versus prior year and volumes should continue to ramp throughout the year as more customer and product qualifications are completed. As already reported in our February earnings call, our Millsdale site was impacted by a series of power disruptions combined with below freezing temperatures in January with the main impact to the phthalic anhydride and polyol unit operations. All operations other than phthalic anhydride have been in our back in production and we were able to minimize supply disruptions to our polyol customers through our production network. The PA unit experienced several restart challenges but has since been restarted and is producing products. In addition to the power weather interruption, we also experienced unplanned maintenance and operational issues with the Millsdale wastewater treatment plant.
Our team has been actively addressing these issues through infrastructure and process improvements. These operational issues impacted first quarter results primarily from higher maintenance and operational expense and higher tolling costs. We anticipate second quarter expenses related to these issues to be similar to the first quarter expenses. We anticipate to go back to normal and lower spending levels in the second half of the year. Looking forward, we believe sales volumes will continue to gradually improve due to the ongoing recovery in Rigid Polyols and growth in surfactant volumes, including the expected recovery of the agricultural business in the second half of this year. We remain focused on delivering $50 million in pre-tax cost reductions to help offset inflationary pressures, the expenses associated with commissioning our new Pasadena alkoxylation assets, higher incentive-based compensation and incremental expenses associated with the operational issues at Millsdale.
https://ca.finance.yahoo.com/news/stepan-company-nyse-scl-q1-144023127.html
May 7, 2024
Urethane Highlights from Tempur Sealy Investors Call
Tempur Sealy International, Inc. (TPX) Q1 2024 Earnings Call Transcript
May 07, 2024 10:29 AM ETTempur Sealy International, Inc. (TPX) Stock
Tempur Sealy International, Inc. (NYSE:TPX) Q1 2024 Earnings Conference Call May 7, 2024 8:00 AM ET
Company Participants
Aubrey Moore – Investor Relations
Scott Thompson – Chairman, President & Chief Executive Officer
Bhaskar Rao – Executive Vice President & Chief Financial Officer
Scott Thompson
Thank you, Aubrey. Good morning, everyone, and thank you for joining us on our first quarter 2024 earnings call. I’ll begin with some highlights from the quarter and then turn the call over to Bhaskar to review our financial performance in more detail. After that, I’ll provide an update on our proposed acquisition of Mattress Firm, which we expect to close by the end of the year. Lastly, I’ll open up the call for Q&A.
In the first quarter, net sales were approximately $1.2 billion, and adjusted EPS was $0.50. Our adjusted EBITDA was $198 million, consistent with the same period last year. These results are evidence of our strong competitive position in the market.
Turning to a few highlights. First, we continue to develop and launch high-quality bedding products in all the markets we serve. We are actively refreshing our US Tempur portfolio with our latest Adapt products. These products are designed to address the fundamental consumer need, alleviating aches and pains. They feature our most innovative Tempur material and are engineered to provide an impressive 20% improvement in pressure relief compared to standard material.
When our mattresses are combined with our proven range of smart adjustable basis, the result is a comprehensive advanced sleep system. The rollout of over 60,000 Adapt mattresses to retailers is on schedule and we expect to be substantially rolled out by Memorial Day.\
Early reports from our third-party retailers and our direct-to-consumer operations are strong. We also, to select national retailers, recently rolled out Active Breeze, our most customizable heating and cooling sleep system, priced at approximately $10,000 for queen and base set. This system caters to the discerning ultra-luxury consumer seeking cutting-edge sleep solutions, offering both active climate management and the benefits of Sleep Tracker AI.
Our third party retailers and our company-owned Tempur stores are reporting that the presence of this product on the showroom floors generates a halo effect propelling interest towards the top-tier offering of our Tempur lineup.
Although, still early in the rollout when bundled with additional products, the ACTIVEbreeze is driving some tickets upward of $20,000, while we anticipate modest sales volume for this ultra-premium product, it’s significant live in the elevating the brand perception and foreshadowing the future of bedding innovation.
Please note that even with challenges like reduced brick-and-mortar retail traffic our innovative products are driving momentum in the category.
Excluding the impact of floor models, our US average mattress sales prices across all brand products increased mid-single-digits and our attach rate increased double-digits year-over-year, demonstrating the consumers’ willingness to spend on innovative quality products designed to provide better night sleep.
New products are also building momentum in our International business. Our new product collection features consumer-centric innovation and an expanded price range that meets the needs of a broader spectrum of customers. In the first quarter, we executed the launch of our all-new Tempur mattresses bed bases and pillows in the UK and are now fully rolled out worldwide.
We also optimized the new Tempur mattress beds construction to facilitate a higher level of customization while streamlining the manufacturing process, allowing us to effectively meet the unique demands of consumers across various markets and channels.
Second highlight, we invested in compelling marketing to support our brands and products. We continue to be balanced with our media strategy focusing both on broad-based and targeted digital outlets to meet consumers throughout their purchase journey. In North America, we developed new creative design to drive consumers’ interest in the category and our recently launched Tempur products.
In the first quarter, we introduced a new ad focused on the Tempur-Pedic Ergo ProSmart base and its exclusive SoundScape mode feature, which delivers an immersive relaxation experience designed to help people who have trouble following sleep. These ads are already resonating with consumers in driving attach rate and ASP expansion for our retail partners.
In the second quarter, we continue to support these lineups with our new targeted TV spots and digital assets focused on illustrating how the Adapt collection provides a solution to one of the leading barriers to quality sleep, aches and pains. Our consumer research shows that these new assets are our highest scoring ads to-date and we’re excited to put this new content into the market.
We also continue to invest in advertising to support our Stearns & Foster products with engaging messages that reinforces the superior comfort, quality and craftsmanship is the hallmark of the brand for over 175 years.
As has been the case with our successful Tempur-Pedic advertising, our recent investments in Stearns & Foster have also been successful, helping the brand to achieve excessive year-over-year growth in consumer traffic to stearnsandfoster.com every year since we first introduced the television advertising in 2021.
And in 2023, helping the brand to achieve the industry’s highest year-over-year growth in Google Search. Internationally, we continue to increase our marketing investments to support the positive momentum of our recently launched new Tempur product range. Our creative assets highlight the many benefits of the latest generation of Tempur materials, covers all retail assortments and reaches all relevant media channels.
We continue to see positive results with uplift in awareness, share of search, web sessions and retail traffic. Our market intelligence reaffirms that we are outperforming the market in a challenging retail environment. We recently announced the signing of David Beckham as our newest brand ambassador, for our key markets in the high-growth Asia Pacific region. The campaign consists of television assets, content for our online channels and point-of-sale material for our own stores and retail partners. The campaign launched in March in Australia. We’ll also go log in our other Asia Pacific subsidiaries later this year, and we will host an event with David Beckham and key retail partners in China during the second quarter.
Our advertising efforts worldwide are designed to break through to consumers at all points in their purchase journey, driving near term sales, while also continuing to build long-term support for our brands. Our research shows that our brands continue to be top of mind for consumers seeking high-quality sleep solutions.
Third highlight, we continue to expand and optimize our diverse omni-channel distribution platform to meet the consumer wherever they want to shop. Our brands and private labels continue to gain traction in the Wholesale segment across existing and new distribution channels. In the first quarter, we expanded our OEM relationship with a large specialty betting retailer. And in April, we expanded our products into additional big-box stores with one of the largest U.S. bedding retailers.
Consumers are also engaging with our product through our company-owned stores and e-commerce presence. Our North American direct channel performance was solid in the quarter, delivering a robust 8% sales growth year-over-year driven by strength in our e-commerce business.
Finally, we continue to drive year-over-year improvements in costs through sourcing and operational efficiencies. During the quarter, our operations team focused on enhancing supply contracts, improving labor productivity and optimizing logistics. These efforts, combined with the impact of normalizing commodity prices resulted in a 270 basis point benefit to the North America first quarter adjusted gross margin and 130 basis point benefit to International’s first quarter adjusted gross margin.
Bhaskar Rao
Thank you, Scott. As mentioned, in the first quarter of 2024, consolidated sales were approximately $1.2 billion and adjusted earnings per share was $0.50. There are approximately $18 million of pro forma adjustments in the quarter, all of which are consistent with the terms of our senior credit facility. These adjustments are primarily related to costs incurred in connection with our planned acquisition of Mattress Firm.
Turning to North American results. Net sales declined 2% in the first quarter. On a reported basis, the wholesale channel declined 3% and the direct channel grew 8%. North American adjusted gross margin improved 160 basis points to 39.5% driven by commodities and operational efficiencies partially offset by changeover costs to support new OEM distribution and product launch costs. North American adjusted operating margin was consistent to the prior year at 15.3% driven by improvement in gross margin offset by investments in growth initiatives.
Now turning to international. International net sales were consistent year-over-year on a reported basis and declined 2% on a constant currency basis. As compared to the prior year, our International gross margin improved 140 basis points to 55.4% driven by commodities and operational efficiencies. Our International adjusted operating margin improved 20 basis points to 15.5% driven by the improvement in gross margin partially offset by investments in growth initiatives.
Scott Thompson
Thank you, Bhaskar. Before opening the call for questions, let me provide a brief update on our pending acquisition of Mattress Firm. As previously announced in the fourth quarter of 2023, we certified substantial completion with the Federal Trade Commission’s second request. We continue to work with the FTC to advance the transaction’s approval process and anticipate the FTC to complete its review in the second quarter.
As previously disclosed, we continue to expect the transaction to close in mid to late 2024. In connection with and contingent upon this acquisition, we are proactively pursuing a divestiture plan. We are also engaged with numerous Mattress Firm suppliers on post-merger supply agreements. I’m pleased to share that six of the seven suppliers, we’ve offered post-closing supply agreements, have successfully negotiated and executed a win-win agreement with us.
Lastly, a brief comment on Mattress Firm’s financial performance. Mattress Firm recently made their quarterly results available on their website. We encourage you to review Mattress Firm’s website for more information on their financial performance for the most recent quarter, which we believe was consistent to slightly ahead of the U.S. industry trends.
In summary, we’re making good progress on closing the proposed transaction and we look forward to joining with the Mattress Firm team.
Susan Maklari
Good morning. Scott I wanted to talk a little bit about how you’re thinking of the year coming together. I think coming into 2024 the expectation was that earnings in the first half would be driven more by margin recovery, while the top line was still perhaps a bit soft and then seeing some recovery in the volumes in the second half. I know you mentioned in your prepared remarks you continue to expect that.
I guess can you talk a bit about what gives you the confidence that we will see that second half improvement in the volume? And any thoughts on the puts and takes to how the earnings may come together as we move through the balance of the year now that we’re one quarter in?
Scott Thompson
Sure. Thank you for that very short and simple question. Look when we look at it, the first thing that you asked about the confidence in the back half, quite frankly the comps get easier. That’s probably one of the biggest things is with the comps in the back half are much easier than in the front half. Also, when we look at our products that have been launched, they’re resonating in the marketplace and they should have momentum, both from an international and a domestic standpoint. We also obviously had good margin performance this quarter. I expect that we’re going to have a positive gross margin performance throughout the year.
I guess the last thing I would kind of throw into your question is, if you look at the historical data and where the bedding industry is, I think everyone who had looked at that data and I’ll talk primarily about the US at this point that’s where the data is the easiest to look at is you’d have to say the bedding industry is in a depression and has been in one for a number of quarters. And so, it’s got to normalize at some point whether it’s this quarter or whether it’s a quarter out or two. There’s no reason to believe it wouldn’t normalize. There haven’t been any products or any changes or any structural changes and the need for mattresses. And we may be building up pent-up demand. I don’t know. It’s hard to always tell. But certainly, we’ve been bouncing around the bottom for a long time and it just seems very reasonable that we should begin to normalize into what I’d call relatively minor growth from an industry standpoint. And then quite frankly, even if the industry doesn’t deliver that growth as you know we’ve been a fairly robust market share gainer over a number of quarters. And we don’t see any reason why that won’t continue going into the back half of the year.
Peter Keith
All right. Good morning, everyone. Thank you. Just regarding the FTC decision, I guess I was curious on what gives you confidence on predicting the timing of that by the end of the second quarter?
Scott Thompson
Yeah. If you look at and this goes back to the original disclosure of the transaction and first of all let me say we’re on our original timeline, that we originally disclosed when we started this journey or gauntlet ever how you’d like to describe it.
And it’s based on, we’ve always said, look, if we need to go through litigation, we’ll go through litigation. And we’ve always kind of put that in the budget from a timing standpoint, because we’re very comfortable if that’s the road that we need to take.
We clearly have given the FTC additional time, because those conversations have been constructive and productive. We’re dealing with high-quality people, who are taking their job very seriously and learning more and more about the industry. And we think the more they learn about the industry, that’s more likely that we’ll have the meeting of the minds.
But there’s certainly, no guarantees and we’re certainly not finished yet. But the timing framework has always been we assumed that we would have litigation and win through litigation.
But I think the most important thing when we started the process was, it was important to do this what I’ll call right and get the right answer, as opposed to just maybe do it fast. And we’re using that principle as we work through with the FTC in all areas.
Operator
Thank you. And we will take our next question from Seth Basham with Wedbush.
Seth Basham
Thanks. Two-part questions, if you don’t mind. First a follow-up on your response regarding FTC, if we do need to litigate this do you still expect to be able to close the transaction this year? And then secondly, regarding your sales trends in the quarter, can you give us a little bit of perspective on the cadence and then how the second quarter started off? Thank you.
Scott Thompson
The answer to your first question is, yes. We still would expect to be able to close it within this calendar year. On cadence, I’m going to break up the cadence question in kind of two buckets which I don’t normally do. But this time, I think the two buckets kind of differed a little bit.
There is a cadence of sales at retail okay, call those end user sales. And then there’s a cadence of sales wholesale, on how we get orders. And as I think if you go back and listen to the fourth quarter earnings call in Jan, when we disclosed it last time, we were getting mixed messages.
So if you look at it from a retail perspective, end user there’s no question that January was a tough market in the U.S., so one because January was tough; and two because of weather. Then February was positive. And I think probably comped positive February over February and was obviously a holiday period.
And then I think March was down at retail. Then moving to the beginning of the second quarter, I would say that retail sales were flattish is what it feels like. Again, information is not too precise.
If you’re talking about our orders and our sales, we’ll call it wholesale, we were actually up in January and started the quarter slightly positive as I think probably retailers were stocking up in anticipation of President’s Day, then our orders kind of flattened out we’ll call it, in February as they kind of were working through the stock and they were slightly down in March and then have picked up and are flattish in April, again in a non-promotional period.
And although flat is not a word I particularly like, I like it better than down. I like things that are different than flat to go up. Actually flat in our orders, in a non-promotional period would be better than we’ve experienced over the last call it three or four quarters. Generally the trends have been during non-promotional periods, orders have been slightly negative and then they’ve been positive during promotional periods. So I don’t know if it’s a green shoot or not, but that’s the best information we have as of today.
May 7, 2024
Pearl Expands into Germany
Pearl Group expands west with launch of Pearl Deutschland
Pearl Group (Dubai, United Arab Emirates), an international leader in polyurethane (PU) insulation solutions and other PU-based applications, has achieved another significant milestone in its geographical growth, launching Pearl Deutschland in Leverkusen, Germany.
This strategic expansion is the latest development in Pearl’s ambitious PearlX2 strategy, which aims to double the organisation’s size by 2026.
Following the acquisition of Covestro’s majority stake in the joint venture in 2021, Pearl has established itself as a standalone powerhouse, delivering high-quality PU systems and solutions with agility and a customer-centric approach. The launch of Pearl Deutschland in Leverkusen not only signifies a return to Pearl’s German roots but also places it in direct proximity to suppliers and customers.
The opening of Pearl Deutschland follows a series of global expansions by Pearl, including the inauguration of a production facility in Saudi Arabia in 2023, which has recently doubled its production capabilities. Additionally, Pearl has extended its global footprint by opening sales offices and distribution hubs in Egypt and India.
Martin Kruczinna, CEO of Pearl Group, said: “Customers in the polyurethane system space, both in Germany and any other country globally, not only require high quality products but they also value strong technical service, both of which are core strengths of Pearl. At a time when many bigger players are looking to decrease headcount and cut costs, Pearl has decided to focus on people instead to cater to customer needs. It is boldly investing in its team and infrastructure, attracting international talent to significantly enhance our capabilities and increase operational efficiencies. Returning to our German roots, which have always been a mark of quality among our customers, underscores our dedication to excellence and offering in-country technical expertise and local stocks to our customers. By establishing a presence in Germany, we are not only closer to our European customers but are also demonstrating our resolve to be an international leader in the PU systems industry.”
Pearl has appointed Dr Wilhelm Lamberts as Managing Director of Pearl Deutschland. Lamberts has been a non-executive director on Pearl’s board of directors since 2021, and in his new role, he will be focused on growing Pearl’s European operations and strengthening relationships with new and existing customers. In a career that has spanned almost four decades, Lamberts has held senior management positions at Covestro Deutschland AG, Bayer MaterialScience AG, Bayer Polymers AG and Baulé SAS.
Commenting on the opening of the new European location, he said: “We are thrilled to return to Europe with the launch of Pearl Deutschland. This expansion is not just a milestone for Pearl but a significant step towards fulfilling our PearlX2 strategy. It reflects our commitment to meeting the evolving needs of our customers by offering high-quality systems and expert solutions closer to them.”
Pearl’s strategic expansion into Germany and its continuous global growth underline the company’s ambition and readiness to serve a broader market, ensuring high-quality solutions and services are accessible to customers worldwide.
Photo: (from left) Martin Kruczinna, CEO of Pearl Group, and Dr Wilhelm Lamberts, Managing Director of Pearl Deutschland
May 6, 2024
BASF to Sell Plants in Ludwigshafen
International Process Plants (IPP) enters agreement to market ammonia, methanol and melamine plants in Ludwigshafen, Germany, from BASF 
Ludwigshafen, Germany; Princeton Junction, New Jersey, USA – MAY 6, 2024 – BASF and International Process Plants (IPP), a global leader in the acquisition and sale of process plants and equipment, have entered an agreement to market ammonia, methanol and melamine plants located at BASF’s Verbund site in Ludwigshafen, Germany. The plants have become available as BASF implements structural measures at its Ludwigshafen site to ensure competitiveness in a changing European market environment as announced in February 2023.
BASF will continue to produce ammonia and methanol in other assets at Ludwigshafen site. The two companies have agreed not to disclose financial details of the deal. The agreement includes the integrated production assets for ammonia (380,000 metric tons/year), methanol (165,000 metric tons/year) and melamine (51,000 metric tons/year). IPP is offering these world-class production units for relocation and sale to qualified buyers with projects for such assets who are looking for opportunities for lower capex and shorter project execution timelines.
“We are excited to add these world-class ammonia, methanol, and melamine plants to our portfolio of excellent plants for relocation,” said Ronald Gale, President of International Process Plants. “These facilities represent a significant opportunity for companies seeking to expand their production capacity with existing assets that operate at a high level of energy and raw material efficiency. IPP is committed to finding a new home for these assets in a location with sufficient and economic gas supply or as part of a green ammonia or methanol project where they can continue to operate efficiently and productively.”
The 380,000 metric tons/year ammonia plant consumes 0.97 Tm3 of natural gas as feedstock and fuel per ton of ammonia. The 51,000 metric tons/year melamine plant consumes as little as 2.6 tons of urea crystal per ton of melamine and has a low energy requirement of 0.27 Tm3 of natural gas per ton of melamine. The methanol unit is a synthesis loop that can be used in a green methanol project with available green feedstocks.
“BASF is partnering with IPP on the divestment of the idled ammonia, methanol, and melamine plants to ensure that these well-maintained assets are sustained for chemical production. The units were in operation through 2023 and only shut down in the context of the structural adaptation of our production setup at the Ludwigshafen site. The sale represents a more sustainable and economic approach to the deployment of these production units, and with a net benefit to the global process industry,” said Ruediger von Watzdorf, Senior Vice President Technology, BASF Monomers division.
About International Process Plants (IPP)IPP creates a sustainable lifecycle for manufacturing assets. IPP is a global leader in the purchase and supply of complete plant sites, process units/systems, and used, new, and rebuilt major pieces of process equipment. The company has offices in 14 countries, helping manufacturers save time and money with immediately available assets to grow their capabilities. With a consultative approach, the IPP team focuses on a clear understanding of client needs to deliver solutions quickly and at significantly less cost. Over 160,000 customers worldwide look to IPP to meet their needs. IPP’s holdings include 17 complete plant sites, 110 plants for relocation and 15,000 equipment process systems and major pieces of equipment. For more information, visit ippe.com.
About BASFAt BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility. Around 112,000 employees in the BASF Group contribute to the success of our customers in nearly all sectors and almost every country in the world. Our portfolio comprises six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions. BASF generated sales of €68.9 billion in 2023. BASF shares are traded on the stock exchange in Frankfurt (BAS) and as American Depositary Receipts (BASFY) in the United States. Further information at www.basf.com.
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