Allison Transmission Holdings, Inc. (NYSE:ALSN) Q4 2022 Earnings Call Transcript

Sherif El-Sabbahy: I just wanted to ask, we’ve seen OEMs and dealers see strong demand from off-highway markets, in particular, energy and mining. What are you seeing in your markets that seems to indicate low single-digit growth over the course of this year?

David Graziosi: Sherif, it’s Dave. Appreciate that question. Really, a number of things, as we mentioned. If you look at our markets, North America is largely tied to hydraulic frac, as I’m sure you’re aware, the stated intention of end users to be very disciplined around capital allocation. And I think that capital allocation, being what I would term, regulatory considerate, which is when you’re being told what your outcome is, what others would like your outcome to be, you’re generally going to constrain the capital intensity that you’re putting out there. So what you’re really expecting, what we’re expecting and seeing, is more sustainment of capacity versus any real additions. And even on a sustainment side, you’re not necessarily seeing new rigs being built.

What you are seeing is rigs having components replaced. So the net of all that is the guide for at least relative to North America frac is more of a holding serve, if you will, from a capacity perspective. Outside North America is a bit different in terms of the dynamic there where you had, I think — continue to have a bit of a challenge around meeting demand for equipment. So — and that’s a market that’s still really catching up with itself. So we are expecting stronger demand for both energy and mining construction outside of North America for that off-highway market. So — and again, I think consistent with the regional issues that you’ve seen. I think there’s been more variability, I would say, in those regions for a number of reasons really tied to reopenings and closing and reopening and such.

So that’s a market that’s probably not as far down the path as North America in many ways.

Operator: There are no further questions at this time. I would like to turn the floor back over to David Graziosi for closing comments.

David Graziosi : Thank you, Camilla. Well, we’d like to thank all the call participants for dialing in and participating. We certainly appreciate your continued interest in Allison and look forward to our next quarterly call. Enjoy your evening.

Operator: This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.