Barnes Group Inc. (NYSE:B) Q2 2023 Earnings Call Transcript

There are investing choices to make in terms of emphasizing higher growth markets, like we pointed out in the call, medical technologies, biotechnologies, consumer packaged goods. So we’ve been shifting our commercial team’s focus for those areas where the growth is good. You can see in some of the automotive market, excuse me, automotive hot runner market that we’ve not seen as strong of a market. Hence, we’ve been in more competitive struggles and particularly in Asia and those markets. So we are making investment choices based on health of our operations and health of our business and positioning our product lines, but in fairness, we’re also looking at the strategic balance across the portfolio of where we are today and where it should be in the future.

Nothing to communicate there other than it’s under active operational and strategic assessment and has been over the past year of my tenure within the company.

Christopher Glynn: Thank you. Last one. Any issues related to the product quality issues? Any direct exposure in the current portfolio or prospectively?

Thomas Hook: In the current portfolio, Barnes does not have any GTF content, so no direct exposure and we would not anticipate that the MBRO [Ph] would have any direct impact given that this is on the OEM content side. And Brad also communicated the current production rates and plans are not changing. So it’s obviously we haven’t closed that deal yet. So we don’t have a complete perfect line of sight. But overall, we think that both the current Barnes portfolio and Aerospace will have no impact in the prospective portfolio post the MBRO space acquisition. We think that the production rates for the GTF for Pratt will be the same for MBRO

Christopher Glynn: Thank you very much.

Operator: And we will take our next question from Myles Walton with Wolfe Research. Your line is open.

Myles Walton: Thanks, good morning.

Julie Streich: Good morning, Myles.

Myles Walton: I was hoping to maybe touch on Aerospace first and in particular, the growth rate for OEM upload 20s for the full year. I think year-to-date you’re at plus 10 and you’re talking about some productivity challenges. So just curious, what is causing the acceleration there? The orders you pointed to are lumpy, but still they weren’t necessarily in the quarter pointing to acceleration in the second half. So maybe just talk to the confidence on the OEM side.

Thomas Hook: Yes, sure. Well, the market obviously fundamentally, Myles, is extremely healthy. We’ve done an excellent job of partnering with our OEM customers and the feedback from all those customers, both our current customers and prospective new customers with the acquisition have been highly supportive of the direction we’re going with the combination of Barnes Aerospace with MBRO space. We’ve done a solid job in terms of operational performance and delivery through our OEMs. And that has really opened up a lot of opportunities, given the perspective close of the MBRO space acquisition later in the year, have a lot of good strategic dialogues with customers. We have been through the COVID period, a significant reemployment of large operating teams globally.

That has, we’ve struggled first to fill the positions. Second, we’ve been struggling, as you know in the first half of the year with training, educating and getting those positions productive. We continue to struggle with that in several facilities with getting productive output. And there’s a balance between how much we can output. We don’t want our cost of poor quality to be high and we don’t want our scrap to be high. So there’s a rate at which we can launch and ramp the business based on those workforce training and onboarding. There’s a lot of work in these areas that are being done internally to allow us to have better output. So the expectation is those continue to get implemented and are proven out. We’ll continue to improve our output performance and we’ll continue to ramp the business consistent with the industry.