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FUL H.B. Fuller

Participants
Barbara Doyle VP, IR
Jim Owens President and CEO
John Corkrean EVP and CFO
Ghansham Panjabi Robert W. Baird
Vincent Anderson Stifel Nicolaus
Mike Harrison Seaport Global Securities
Jeff Zekauskas J.P. Morgan
David Begleiter Deutsche Bank
Eric Petrie Citi
Rosemarie Morbelli G Research LLC
Paretosh Misra Berenberg Capital Markets
Call transcript
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Operator

Good day, and welcome to the H.B. Fuller Third Quarter Investor Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Barbara Doyle, Vice President of Investor Relations. ahead. go Please

Barbara Doyle

welcome call and XXXX. Fuller's quarter third Good the to fiscal earnings for XX, quarter XXXX morning, H.B. ended August

Our let Executive the Jim. H.B. Officer; speakers prepared I remarks, Financial Owens, turn and take our a are Executive questions. few will Chief before Please Officer. Fuller After to and cover President call Vice President Corkrean, over we and me Chief John Jim items

due measures and are a discussion currency references refer at result. release, from Actual adjusted filed to site financial specified, with other EPS, and in business to global First, revenue to materially of to environment These and that XX-Q and measures are during or and and with of to on in excludes to to On call. investors companies. EBITDA which risks non-GAAP our addition otherwise the today SEC our and these our and subject operating fluctuation Also, results results results expectations investors.hbfuller.com. call XX-K divestitures. statements comments of our this XX-Q. call, in measures Reconciliation risk nearest uncertainties. this of are are we the expectations and of uncertainties the assist impact foreign non-GAAP and measures margins to made factors that on assumptions XX-K performance include statements GAAP and comparability available differ could will exacerbated release. earnings that references in organic or These the this measures. reminder comments to based will included our factors the We earnings discussed of by in Many in will forward-looking to acquisitions Form and of the earnings revenues, believe these revenue, a the and sales the measure our discussions discussions release unless organic non-GAAP is understanding as COVID-XX, GAAP Web during of be and our risks making be these the impact useful our and of worsening in refer any is and of economic current Forms

the to Owens. turn over I'll Jim Now, call

Jim Owens

Thank adjusted third of reported in on you, expectations to quarter Barbara, and everyone sales, evening, EBITDA. call. our the $XXX Last quarter adjusted June, welcome and $XXX of with competitors' ahead were results, that of million EPS, reported In $X.XX million performance. strong ahead and we we results second of

took actions are performance direct we leadership result This result opportunities. in a in and our deliver third the were business quarter of of our industry. results last a adhesive leader to is ahead quarters quarter, a Fuller's position strength the of of results reorganize and XXXX. we fourth prior also In EBITDA expect of performance expected our and Our the over the with to fourth the two quarter line segments as and our expectations quarter. team The H.B. performance in invest and of growth also the ahead the

third into leveraged we share operational solid new market sales, exceeded a business In and quarter Our in the EPS, the performance and performance improvement resulted gains EBITDA. quarter, sequential expectations. our that wins in in revenue

and our from increased from performance versus XX efficiencies to enabled debt year-to-date, better us crisis. flow Cash during around operations last material million. paydown we our had teams that essential EBITDA capture us in cash raw continue than also connected factories savings year, to realize six especially months, be to have track results our supporting globe for business to for the of consistent same keep adhesives were target period goods operations paydown this for we $XXX delivery full-year XX% last the leveraged ensure chain restructuring, and of the flow and Throughout strong, and the supply and We on and operational cost continued exceed and globally quarter XXXX, forecasted.

not customers our down. have We let

leveraged applications adhesive customers broad solve technology to We to have supply or portfolio our expertise also our of the new products. problems, and develop needed who people support

other fastest on positioned have first actions, and to H.B. customers. may companies focus move deliver While global technologies have results dedicated taken and to capabilities Fuller's similar us adhesive for our

to tools increase digital service and deliver more We have decision-making. collaborate improve speed to leveraged faster, innovation customers, our investment effectively, in our the internally of

as and have downward Fuller our been for customers other shifts crucial global demand differentiators upwards are of and significant in products. in Our faced H.B. shifts agile operations products some

Our ability to remotely ensure troubleshoot qualify our be problems customer and competitive to capabilities meet have and applications proven supply, and advantages. new to increased complex demand

we have to a As second able business win outperformed and new market result, with share results we sales and were cycles, increase customers, as with been evident shorten competition. in the the These existing quarter customers.

this quarter reflects proactive approach, applications including deliver ability remote improvement world-class line top directly customer sequential Our the provide support. our new to collaborative and

demands a new and same and India more third and and as increasing buying Hygiene, dissipated moving value consumable improved and China and At results health, in performance Brazil market strong in customers Engineering of remain toward positive opened gained, end patterns. were in the began meet very economic strong slowdowns surge we quarter up, time, performance to meaningfully also the but second Fuller's reinforces from on the Construction results. basis, particularly mix. in the the moderated in H.B. performance demand as Adhesives Our quarter sequential product, markets normal Adhesives' were well-positioned the impacted quarter, customer, Engineering

SG&A the of million savings realignment of $XX units in us win effectively at generate quarter. is segments. customers Our to including realized execute and third three The more business of helping in of realized with global of market million beginning is will savings, this XXXX, us reorganization our $XX enabling annualized into each the million in which, also be year organizational $X

review this a manufacturing and initiated earnings As of chain company's operations our an year of the consultant. we call, supply external utilizing the support earlier discussed on last

individual areas. lower our practices toward supply initiatives, to Based our cost roadmap a to identified improve facilities; projects on manufacturing One, operations inventory an footprint number chain identified, half of As in leveraging specific higher-cost two, of cost validated approximately in a $XX this plan be opportunities consolidation; of at in XXXX. sites processes. to these into million reduction manufacturing we outcome acceleration and review by these three best three, million of savings have from $XX realized savings with we

of initiatives. these are targeting in $XX reduction through XXXX, approximately million, We an also inventory

growth results on quarter quarter third and X% Health, will Consumable three. the this & including slide have Now, and seen third Beauty. Hygiene, Tissue second I third in our Adhesives' move on Hygiene, we Packaging, Towel, sales segment, segment increased organic the and Across throughout strong Health quarters to year-on-year. &

Glass year for a versus of primarily the Roofing. by Brazil slightly Third and the costs in continued restructuring good new but margins positive both Engineering declines solid Consumables some from in product part construction product when was Vehicles, GBU results second for versus restructuring Flooring introductions delivered year. This despite remained was offset improved segment raw of progress and points Technical which and significant due quarter operational and we the XX% sold disruptions last third of EBITDA higher mix related commercial commercial volume less muted mix than but revenues sequential the improved operational quarter India. is COVID-XX-related activity with in disruption, repositioning, improved Adhesives' quarter work to in and commercial Electronics, position expenses, versus These Adhesives' business. at lower significant was this last in improvements revenues Retail results volume increases. last and Engineering as year, strong, XX%, while Hygiene, from year Health, material activity, XXX lower versus our the do-it-yourself mix, EBITDA at Engineering EBITDA margins by reflecting and versus while HHC down was contractor of activity Construction sequential Adhesive revenue and margin X% prior Double-digit Adhesives' roofing were savings. to declined business. better Margin strong down margins raw in as a growth and last in timing the Construction solid year's Total in and slower markets. channels strong down portfolio flooring growth results and well costs, Woodworking were offset Adhesives' margin Transportation-related business very global improvements Construction reflecting at XX.X%. improvement the remain at slower margin basis was quarter. savings and second significantly from improving material and Textiles, strong improved Recreational organic XX% Adhesive Insulating restructuring. pace.

and will the impacts. impacted fourth in restrictions the for an that developed COVID-related environment continues evolve, have planning corresponding Our been to assumptions and by recessionary quarter be

by approach We and have granular our future segment analyzing geography results. taken in a

shutdowns Our and next will worsen, forces rest this contraction but core of year. result will year economic the planning in a not for COVID-related into year-on-year assumption is the recessionary

at in markets in supporting the As material year to more and and fourth exit fourth have likely with anticipate to flatten, homes. for the discussed to Adhesives' continue Elevated Raw be material volume versus time transportation through costs the fourth sequential trends towels in the goods the in impacts, and and QX the into from QX volumes levels sequential in raw and to Adhesives' improvement we that cost expect year. as to commercial similar throughout demand up and our fourth quarter will We the improve expected expect quarter the quarter. to our third we started improvement quarter continue us This durable drive spend down start acute the $XXX as HHC last commitment continue work believe debt third quarters. to improving to and flow. third ability down still reduced in continue trends, we paper our hygiene to enable the we raw packaging, quarter, down most quarter, and will QX requirements by to than for volume target. year-on-year. picked tissues, strong exceeding but restocking. capital will as savings, inventory capture three-year Engineering material second in activity. pay a quarter, slower continue us enable but in had consumers that the cash million to working the to improve will XXXX, cost residential Improving meet their health Adhesives rate demand products, performance manufacturers to should improve Construction markets with QX is demand those Engineering

nine While nimble, fast-changing our not environment. in our strategy the months and diverse deliver performance are H.B. this Fuller is levers first demonstrates that we our operations our and strong great, XXXX executing are resilient, to multiple of well. economic is has in the backdrop results business

quarter fourth based me quarter turn these results John let call our to planning for the assumptions. Now, on third over our review and the to outlook Corkrean

John Corkrean

keeping I'll Jim. and organic to unfavorable business material mix offset and pricing the with Year-on-year of financial the gross having last down the and reflecting Adjusting with for general Net $X.XX X.X% the slide additional per earnings year-on-year general, Thanks, top was our associated Adjusted line year. and performance, of surfactants and reorganization divestiture higher Year-to-date per quarter. reflecting from million plan. for debt actions down earnings Adjusted us continued cost with million is pay debt, raw quarter assumptions the lower Engineering of expense year, was expense on down XX.X%, adjusted lower selling, off particularly last were last us than interest material period was thickeners versus flow X.X% million reduce debt of announced improvement was performance. end and the last divestiture, allowed continue actions down as begin track quarter. by in the in with lower improvement $XX cash impact same strong of versus expense, related X.X% had the the raw same the X.X% details to Adjusted above in quarter. year period operations Adhesives. EBITDA versus debt revenue reduction planning strong a up and third revenue XX% X.X%. on $XXX in year for margin currency savings. travel improvements, by on last some Currency X.X% and than on volume capital of four negative business impact high administrative full-year down quarter, was volume paying in profit share a $XXX negative down controls. to year, volume reflecting This more versus combined a last share our savings, the working

flat-to-down and lower year-on-year, savings X% assumptions X our which $XXX forces. recessionary based related be to what to anticipate know Regarding today fourth sequentially on million out the and $XXX up quarter continued offset be laid earlier, to outlook EBITDA we revenue and to improving that QX, SG&A planning X% and in between disruption is from restructuring we the as million volumes and Jim

in XXXX, keeping of continue cash our allowing target maintain expect to late quarter out to flow plan $XXX million We our to approximately to debt during down us pay the be us de-leveraging strong original well XXXX. ahead laid of fourth in

adequate have includes Additionally, than $XXX $XXX needs. more facility liquidity feature revolving to we allows us continue credit This a the to a million with meet to facility needed. by built-in accordion that upsize million if foreseeable

have debt the using turn to closing call back that, I'll covenant most Owens even comments. also room conservative our ample scenarios. some under We for Jim the With

Jim Owens

say were confidently you six we we of result business. execution great is of we the even Last strategy consistent have ago. and our John. quarter, in in execution. stronger which of quarter than I another a This direct you, after told are Today, stronger that a way can were months the managed we we Thank performance position

We cycles. adhesives continue world, a value shareholders in ago we business When portfolio our to for all on XXXX, our the on A customer we benefit manufacturer capabilities. as position we began strong focused acquired focused in highly from our the are technical solutions. adhesive expanded creating and of largest Royal, our requiring leadership and through base markets high-growth building decade diversified specified dedicated we

begun our by of the generating Our savings to our cost and accelerated and to operational by across year, million to XXXX. efficiencies have plan respond footprint driving of our reducing $XX realignment million phase XXXX we manufacturing organizational million the improvement market next end trends, end this ability cost while $XX cost $XX by

the win our to of multiple continue world, we and markets leadership the Our team are to well including continue in is over At expertise chief economies the leadership the end we reopening additions address to proactively levels officer last the role. and operating near-term the experienced, to across Construction, strong right improve. have drive around the positioned as opportunities HHC, and business results. In year team the during to and in

electronics, applications, well are deliver in new lives of we H.B. improve Fuller for to consumer. evolve positioned the sustainable as differentiate customers the energy costs medical, as and new opportunities We help also and packaging, that reduce future our new products

are our we of evolve. grow persist end to to economic While continue forces show to global COVID-related uncertainties signs continue and markets as improvement, well positioned

as call focus We take fourth into Operator, some will on prepared us level our maintain this up our build that deliver please the quarter. from can helped the flexibility year leverage of remarks and so success those concludes wins strong questions. the quarter, this That we and and same today. open XXXX, results we

Operator

you. Thank

Ghansham We first will Baird. now question-and-answer the Our [Operator begin from R.W. Instructions] comes go question Panjabi Please ahead. session. with

Ghansham Panjabi

everybody Hope morning. Good guys. well. Hey, is doing

Jim Owens

well as are Good morning, Ghansham. Hope doing you well. Thanks.

Ghansham Panjabi

Jim. Thanks,

versus the Going plus side outlier Engineering the the back expectations. seems to initial be the third to Adhesives quarter, in segment

you upside, you has the what Just through and end then us maybe talk the the transportation in color surprised more auto wondering, seeing also OEM in of on to Jim, globally? sort markets if you're give started that geographies, normalize as production can

Jim Owens

you as our growth at and growth of in the know, Ghansham, Engineering is the it Yes, Adhesives last years. over was number engine company, double-digit

share seen. biggest driver So the think is good that we've wins there some I

assembly really about came really also, did of a that the moving the as the forward, through China China cultural embracing so we've to has the as the improving, well job some innovations and that the as IG ourselves the adhesives, share did I projects fact back, business in as overall market to we So, market, came talked to and Insulating growing in U.S. and of market, great investment. China the electronics in been than little position IG, some the auto really combined as in auto is well innovations working faster we'd work well is gaining so bit market, nicely the market came technology on some auto to approach our in that with taken that Glass some are pandemic of Wins the quarter, of so of fruition. our qualify new way team done this a a there, the

the now, themselves, Textiles now, of Technical terms right mentioned, strong very China RVs auto I as markets strong. right In strong is is is

So, business winning just market if there you and thing differentiates that the Technical about our but the think in market I customers. with China think biggest Textiles, see forces, RVs, you auto, is the

Ghansham Panjabi

it, Got in what in your of improvement XQ. of to about an they then, into sell the construction and have that Construction peers relative markets Adhesives, terms end talked lot saw a

Just curious more construction pockets in construction? I delay given terms is secular but -- there's there some on the going something is haven't nuances you that challenges benefited of a know or exposure, just to commercial certain from just as commercial it in of

Jim Owens

think Yes, very I differentiated. construction the business is

me to So world, difference a XX% quarter, business. say to our business, and we're improved, of nicely, a we We last business, only Depots good is down exposed XX%, XX% XX.X% we're were between up down right. first, more is it's commercial, but for retail so our so Lowes, much very residential, and improvement. and us let quarter, which this only and closer We Menards, are commercial of the which XX% the they're of Home our see

the you're way very residential others think channels, exposed to So, those is but or it, will delayed, commercial little well, I if it's later that into construction if a little the a to pulling differentiated, pulling little to well, pandemic see into as but a definitely and strong; get look way then of retail in we later have very as in related piece, out. improved, delays to forward Ghansham, to and I the we might commercial come a that's positive the bigger think a so is exposure say, wholesale, that as back was QX

think It's retail bigger did positive about, improving, [that bump. are though, well. we excited] are see looking going you definitely So, I construction a and exposure More yes, [ph]. we're pretty forward to

Ghansham Panjabi

it, makes that sense. Got a so of Thanks lot Jim much,

Jim Owens

you, Okay, Ghansham. thank

Operator

Our ahead. with Vincent comes next go Stifel. Please from question Anderson

Vincent Anderson

job quarter. this Hi, and nice good morning, again

Jim Owens

Vincent. Thanks,

Vincent Anderson

sounded to weren't Yes. more little margins why like go briefly. I expand construction favorable operating I you business raw It had for I'm second was want the progressed bit leverage, did the a impact to trying detail specifically quarter. and versus to a hoping able the maybe favorable tailwinds. with margins positive understand through mix maybe. fairly just carrying utilities something guess was material I quarter. to back how

Jim Owens

and Yes, construction nice is that business your mix utility a very -- a that's and In QX. in Vincent, I'd so lot business positive quarter. positive spot-on, impacts, this weaker assumption right. comment commercial roofing for our also of business, us, a mix we is little that mix with a had was you're business our nice, infrastructure is

it's I just mix. quarter-to-quarter So think

margin. really we we're with where overall Although pleased brought the

in So the this margin. we're business realignment XX%, position is year did portfolio we put XX% -- above where a us has getting down and last

you you do the have I'd as to can this. out don't math. So, we imagine, of nice pull be very margins

there enabled more. think to has I John, repositioning is margins you us to want the anything add portfolio So expand to that?

John Corkrean

mean margins in flow think create standpoint, of don't a that cash we quarter, inventories I weighed businesses. did think reduce under we I all a although three and that absorption that little bit does -- help was the from good so. a on in I No, and

Vincent Anderson

year, the negative raw we shift what going what can Thank year you, [raws] construction in estimate with in you from look then companywide, into operating or but got into terms this if staying a and you you're that strong given of that [ph]? whether bit operating back of of leverage very on maybe to next between compared level on focused materials year, very next topic, leverage saw on that's and most back year you. a and got upside the you tradeoff you little last helpful, that mix portfolio if Got and kind

Jim Owens

GBU of have we now right. that savings seeing right We've what chain of more operating dealt year help benefits the We're lot so be with going SG&A leverage, given Yes, a we things, COVID. start course operations to project, this going and realignment. positive to better we've still get and next a to of the on little on that'll the volumes supply this see got year drive are

lot positives. of So we see a

in for as definitely flattening As raw really they're we year we on positive see Unless raw see far raws. economies took don't drag a but out, leverage materials, all off materials. next at

Vincent Anderson

more generally seasonal of your in order and on fair I more kind enough, anything the you book, just trends? bucking and are Adhesives, quarter levels one sneak if of Engineering fourth Okay, customer with kind comfortable typical inventory could is there that's in,

Jim Owens

see Yes, normally we've would. quarter; weeks into as seasonal the we four good, trends positive we

of happening the So, ordinary I there's of don't seasonality think terms in business. the anything of out the

get our electronics and stronger of business outside auto, and order next was the of into the quarter to turned business up to exited is slowest China, out I think improved year, end the as the positive business -- ramp auto was pattern. that's an the we Certainly slowest year.

Europe North feel lot as around, coming we in a QX see we enter and auto positive finally that of So, so we about. good trends America,

Vincent Anderson

you. All thank right,

Jim Owens

you. thank Yes,

Operator

Our next Seaport Please Mike Securities. go comes question Harrison Global ahead. with from

Mike Harrison

morning. Hi, good

Jim Owens

morning, Good Mike.

Mike Harrison

but or trading you that buying lower-end on also of new terms sounds you're you an and in of seeing provide subside, and what a wins? surge to to referred share business gains like, in you expected that like Any what decline, the use in and going that color some Brazil. end. kind that terms segment. more surge looks adhesive, India pieces Maybe of of there you're less seeing weakness of within the a products about Can X% and that that did to there within sequential down was to little had going you buying Jim, lot on a that's related customer adhesive coming are bit also HHC it moving it see,

Jim Owens

after QX. X% big; positive a question Yes, broad was we full. of That organic in organic that's growth QX. had in so growth Okay,

slacked QX. growth really and this factors down that two So us X% of of about materials bring have X%. India dealing kinds is, economy these they're is and economy. with There's necessities aren't products these in so that off from economies lot think that the if and in quarter being not around off much especially our Brazil in there, what a developed you organic

that think to X% taken organic of about HHC. as overall X% off of So for the growth

So HHC this been X% is a quarter and versus to de-stocking that have X% would X%, delta phenomena. mostly

So, we're certainly X% single-digit as is of what the little maybe at than as growth, as we not a overall I underlying kind less X% think targeting X% mid X%, we but X%, go forward, X%; growth. see or

gains, market for in area. of two that terms In share that there's I happening think things are us

keeping chain team our able by to has of we've open, maybe around to been to need, but able haven't team spread was employees COVID keeping the all our Our job safe, that a been advantage in. an step world by done factories take of opportunities of our where meet supply able competitors avoiding outstanding product export the

finding is of remotely. across The approach this we've second toward reality we've to thing done, Fuller, aggressive qualify living by H.B. the new in all and products very ways a taken

in Our and their the throughout the in and enhanced. connection lab teams the with technical technical customers facilities our our personnel field is XX crisis, world around have been

especially not against large we're environment. set So, that's competitors building competitors, against stay this connected skill us just in but small to helping a

we're how the that's gains. So getting share market

you and it's story. up and outstand if being start, news good job, the entirety strong QX, at So a with really QX still the a India of HHC great despite the year and their the look Brazil, is doing business

Mike? did So, cover I your in questions there, all

Mike Harrison

on Yes, everything. I you seasonality. thing the didn't one think the covered Maybe is touch you

again? summer that Did during has IG weakness months. sometimes see some that I think the business you

Jim Owens

China, enough. Yes, in it does, yes. Yes, interestingly especially

less yes, QX that sequential pick drive it's that in consumption products that, and of markets and has the few happened, here business pick in that fascinating does to up consumer-oriented China there's year. quarter hygiene we up see QX, it'll growth a every the months, other fourth QX that summer then seasonality but So pattern in normal and

Mike Harrison

nice on of challenging cash capital, in flow it how some Right, year, next years, we okay, should seem cash this of deltas flow some fiscal relate a you key the 'XX, Can paydown year? you and CapEx, and restructuring as to the have couple any year provide think particularly next thoughts question maybe for a pretty might to versus in early managing and about debt past this then cash John, costs working done over guys job environment.

John Corkrean

Right.

say, I mean of positive driver cash flow. has would So, working yes, I main capital the been the

the although to on terms revenue, little get different we we As to we're and partly year, of reducing down, probably but a next actions working let's capital delivering of cash, has kind of source taking due inventory. due been revenues that's partly be lower but in be metrics, of working increasing kind payables, into get conversion it'll This flow say, similar, expect to of, cash will a bit set levers. year,

of year. So, I off in drive capital source of that us neutral be inventory. revenue project should kicked operations increases, next as will slight we've and more to say, help probably continue have improvement we will a that this would terms improvement working those cash in

see going going to cash type you're set of the conversion think but metrics, be to flow little I it's levers. probably different bit of So, same a

Mike Harrison

All next CapEx right, and pretty a year? year up to bit little or similar this

John Corkrean

I on probably be so will a the more back next to track. bit pulled it of projects, kind environment, pulling given and opposed a back, year. them on those themselves probably little back, few us it get as would would back probably We up say pulled

be bit it would a to I So, up little next year. expect

Mike Harrison

right, All everyone. very it. thanks Got much

Jim Owens

Mike. Thank you,

Operator

Our next question comes ahead. Morgan. from go Jeff J.P. Please Zekauskas with

Jeff Zekauskas

Thanks very much.

that the you it that? What have, is returns down? are but largest is the the lowest margins. business has Your Why pulling HHC in are business your EBITDA businesses there

John Corkrean

Yes.

Jim Owens

say, would -- be more business our know, I to Yes, you to it's work specified highly we adhesive. transform Jeff, as

With our business said, we that drive competition. I real have. see a think localized segment of have improvement, So, where which this the is to do we margin more we opportunity continued

It's when mentioned margin are can a I It's the all above probably think know, we're We I This consolidation Jeff. plants we things couple this can XX%. plant there those. business. we was I opportunities, do joined push improve think which I some in efficiently, more doing. the You my comments, our single-digit running help details, company think nuanced it those to

faster. really to work then is We thing drive that our Andy opportunities growth continue strategies in business. pricing the And certain to trying that today is on grow making important the this

So, up know, you I on we opportunities and new turning we that us target growing the setting place, place. and health in in look quickly health beauty. fastest part HHC our enable at to healthcare which as initiatives put segment some into growth sustainable focus packaging of strategy, have beauty. we was The of in It's to

So, dynamics we of EA, will in adhesives, that higher. drive is margins getting the business specified highly terms in kind that of those the really that growth more in strategies have

Jeff Zekauskas

flat the business doesn't it's like, it business? cost on flat, because like yet, construction cost Yes, year-over-year HHC sales really has focused touched the of the are of program the look your is more reduction funny, are sort program engineering and margins and the sort reduction

Jim Owens

result of in year-to-date and say, would realignment done, XX a talked we margins up are the that Well, we've quarter; think that again, some business, about year-to-date, this I and I that's GBU basis definitely points Jeff.

is more a had improvement year-to-date in we have but think good I points a more growth, little XX improvement, basis environment. if we -- would So, this a

Jeff Zekauskas

it fourth third your quarter would business stronger you construction be in your than in your say was Did quarter? fiscal

Jim Owens

would rate improved. growth be the Sequentially

be and next Jeff. we'll I XX, the say single-digits So, -- we're in year, would down down

Jeff Zekauskas

XXXX? $XX that then expected think and your lower it average million. I level you to What's said you inventory for John, Is your the base? inventories by in Thanks,

John Corkrean

Yes.

business there know, as is our in So, you some Jeff. seasonality

say, reduction it's kind would be a to -- year-on-year. So, it's I going going not to be of --

you our and into move see rate we volume a part of see go rise year-on-year. $XX year to you'll the of them by be of will but that'll year is as inventory inventories down where next slower, we lower have during So, million year, end parts expect the at the run overall,

Jeff Zekauskas

year-over-year are could in you it's fourth that? and engineering, can business growing, volumes lastly that in would really it although other was Okay, positive businesses quarter, tough, roaring in and imagine then, really and back year-over-year up be the have your I

John Corkrean

today point but model it's say very the Yes, we fourth we're now, slightly right at momentum very is has. standpoint not bullish come on I continues China forward business, to the this but is it strong, you but out going say to the a positive, from difficulty]. still it, Jeff, down, autos as when I'm [technical quarter, back. projecting modeling as but momentum would drive

Jeff Zekauskas

great. you so Okay, Thank much.

John Corkrean

you, Jeff. Thank

Operator

comes with Begleiter David Deutsche go from Our ahead. question Bank. Please next

David Begleiter

looking at a low and expecting Thank comments QX Ross? impact morning. release mentioned the materials, from in times can and you. the what about Jim, quantify and Good you QX in in you're raw few you

Jim Owens

sequential on to well, I me you flat where John have let John? obviously QX roles give our specifics you and mentioned year-over-year Yes, some think QX, down as then are, but

John Corkrean

I X% to so Yes, down X% year-on-year. I probably think David, would say

million $XX $X So will that's to it roughly million, sequentially to and be QX. flat

David Begleiter

loss a Very good, in John incremental do perhaps in this on year? various and early the next actions and continuation low Jim, margins given 'XX of and you cost probably versus and year impact the have read

Jim Owens

XXXX. far and of XXXX above that EBITDA a environments Yes, drivers happen but the going economies kinds We're will as so be have internal and factor. grow all different in How to built committed David, big that's volumes a big benchmark you and lot going to to revenues, on factors, we of different above EBITDA and what's significantly scenarios. know, depends set an to

very at be we're think quarter I visibility today out, premature. exactly will but XXXX can't little getting predict we what it happens good in

David Begleiter

but right opportunities other EMEA in M&A market get next level down look you I a on some debt at the the could developing years front? see you And pay and do as know of the where you to over not pipeline you're how couple the really now,

Jim Owens

before as I, know, get our we're so Royal below to ratio leadership team down a and myself, and strategy three debt-to-EBITDA the number get you market, targeting the in but Ted identified and a we we have between Yes, targets. active and of M&A

understand we we strategically So a where would invest. and think we very good there's there. fragmented a think pipeline It's I out market,

we'll think share, we're still I opportunities, in and we will overall as debt-to-EBITDA globally. of number be two there the So our ratio, have to a and lower pipeline market look X%

in paying road. years of think lot we opportunities investing of there couple opportunity down as move debt I M&A down a to So the there's from

David Begleiter

very Thank you much.

Jim Owens

Okay. Thank David. you,

Operator

go Our ahead. next Petrie Eric question Citi. comes with Please from

Eric Petrie

John. and Jim morning, good Hi,

Jim Owens

morning, Good Eric.

John Corkrean

Eric. morning, Good

Eric Petrie

just There's been emissions. energy Fuller's you how discuss a positioned recent a advantage to reduce push trends? carbon renewables green to towards Can economy of take and those

John Corkrean

Most leader strong the panels Yes, position. solar other globally the we're world so and for to adhesives in China today but world. around positioned in are manufacturers made of those very we're strongly with

some positioned a solar bigger electric wins, see vehicles. we applications well we also the in have trend is So we energy ourselves see very that standpoint, from as

about opportunities, focus we in in So, that space also growth electrical a the targeting focus mentioned opportunities. packaging real towards earlier for that's strategic see our on have we sustainable solutions. I HHC, vehicle a and us,

R&D making have construction, focused new those packaging, packaging, buildings a straws more paper number opportunities, things. projects energy those applications that's less disproportionate we we whether types that sustainable efficient. our in of of then types on So of target are And

around building energy our buildings out make about think one a the new goes driver energy systems big the there and sustainability construction. business, lower which is a has more again that Most assembly our insulating energy So interestingly focusing roofing been in in in durable final focus enough innovation business. business and driver a there. big in a Then building, of efficient glass and on of our is of is

we of integral frankly. and it paying an So it's see driver as innovation off, our strategy,

Eric Petrie

how adhesives been either I and see in supply then that's for Thank sealants much line and a aerospace, you those about just line? on you of Royal, bottom drag talk you can the believe, top or comments,

John Corkrean

was Royal. share development enabled was as aerospace developed It has business technology built for so we lighter that some be and fruition had fortunately opportunity. a bought weight. airplanes gain coming significant been that that a project to Yes, Royal the faster to us,

share those through. So, gains are still coming

team So while gaining a that's build out you'll less we're the numbers share. aerospace and great negative a still year, doing that because negative of is job we're than see the there, this lot

been team Royal leverage to is that The thing able the has do aerospace other some technology. H.B. Fuller

not in a that getting as growth pieces that number up there's we're had that qualified a was of numbers, showing opportunity. now So aerospace, we see that's traction technology in that of the Fuller

we is us, as while on drag a and it's see a it big big growth drag, not So, aerospace opportunity. a

Eric Petrie

John. Thank you,

John Corkrean

Thanks, Eric.

Operator

Please go Rosemarie ahead. comes next from Our question with Morbelli Research G LLC.

Rosemarie Morbelli

you quarter, quarter. Are on which trends hearing could a second from yes, wave during far COVID you you. congratulations wondering Good touch going going you likely. if morning, look about on Thank happen deal Can most customers? talk is the your everyone in the at months, there Europe, I you to seen here Jim, if the different you're it? you the and what was as are through anything of Have so September? seeing and they

Jim Owens

were both Both so our little was region was less America QX. down were a and North QX, than in strongest more definitely Europe Asia Yes, regionally Europe down. America, than down North but

biweekly of trends, in demand there's a lot from John we with Europe, granular an terms don't stay forward and close standpoint, have see out on that's recent on see, a our the gotten team manufacturing of we're basis news In there recent I know Europe. environment very an this a on do we keeping but projection. don't business of coming know it, by we news about the of certainly and COVID this, we I eye impact in We most

tell that a So seen seen this month. you latest Europe, it of and so our far there's as projection, not can haven't downtick in I we

Rosemarie Morbelli

I'm -- ahead. see You sorry. Go

Jim Owens

add to to that? want you anything John,

John Corkrean

Nope, that covers it.

Rosemarie Morbelli

you customers they whether past, how wrong their seen much they it I were occurred have assumptions? their was as or in with and visibility in business whether your actually have the wondering

Jim Owens

is a if Rosemarie, say, think more of right, look Yes, we've QX optimistic I because been would what we to, of you're -- think some have are at at some projected say, customers, and you the aren't, end which what such and pretty QX, we've able I'd array done because diverse triangulate was I difficult. in I we people

than good good had little I but was same was QX. going happen the think when think view geography-geography, I a -- in it look job. we We It a segment-by-segment, better in was what we QX. I expected, a did of did we

when and I experience, happen, think I always Not all but those have do we a with along view. have good know-how picture. going So, to own our good triangulate a is says pretty we we customer customers what our

Rosemarie Morbelli

your thanks, Okay, looking people us then much size back moving and at how around discretionary could be will coming those give start as of you expense, the and again?

Jim Owens

Yes.

might sense long and a can what maybe of back? savings So, you T&E the John, are, that give think how we

John Corkrean

me. Excuse

a coming QX. and of saw little bit we yes, in So, that back

to come on QX, that spend, a to magnitude probably we start middle T&E the QX of I the back. saw terms the million saw a and of of month dollars in think a of of sort middle reduction we

little a picture, it'll number sequentially from So, significant QX would expect -- to to in we it's up the not QX. but big be be a SG&A bit

Rosemarie Morbelli

All right, thank much. you very

Jim Owens

Rosemarie. you, Thank

Operator

question next Paretosh with Markets. Berenberg Please Capital go Our from comes Misra ahead.

Paretosh Misra

we cellphones adhesives Thank a is business, and devices getting and XG you. is and and opposed more more tailwind tablets, carry telecom of use and in to industry ahead more growth electronics along that we as the guys? look those for electronic produced lines, business driven I understand meaningful that ahead, I by just guess, hardware, the think wanted goes as you Good much of morning. how to the to just electronics new In as

Jim Owens

Yes.

into say, each Paretosh, sold as the space. still would in new driver are us and share relatively I products we are low for sizeable So, we gains while the We a applications and business, -- share, gaining it's a turning these are biggest redeveloped redesigned. electronics year now

that's for a So, growth change of opportunity the us. Yes, as driver we bigger our itself. see best the market than

us new we are as strength into comes automotive or or more other applications areas. see as our leveraging and occur that business put to opportunity and devices, new for hardware has XG into electronics So, developed, be devices

driver across us. we strategy for that So, a So, we are is automotive building those conversion have group call a electronics, we right? also two

is get problem speced So, that opportunity, right? quite to yes, XG a the for solve think change happens will we get opportunity That's we get when a our stay and a because meaningful opportunity I in that into new product place it's a when while.

evolution for business. XG the is very good see we our So,

Paretosh Misra

the about those sounds like that earlier expecting a is comments the follow-up specific across China automotive I automotive color, you just in your growing? Thanks and markets That's are guess strong sector. or the in on are like there quick the are then, end momentum right, for QX only globe, that it sector. detailed

John Corkrean

think No, already China is I growing.

So, the China good is positive a spot.

share place We the we've a got there. market and gains in positive have

for China very us in auto. So, is positive

I to think auto is was than the that comment make some markets. trying slower was I other ramp up

to than in that's in going up. saw some we'll of we and So, will have am because up, ramp we new North this some a numbers quarter whole Europe the think if continue. these boom and know better us in here auto be QX, just predicting I finally America I revenue August don't for ramp that

it than definitely it more be So, QX in positive was will in QX.

Paretosh Misra

squeeze anticipating I Understood, QX? could I special impairment and just John, you in any restructuring goodwill am guess QX a if are thinking cost any or test, that one last in one, charges like in might through for flow I

John Corkrean

we end those place mean charges year. special are I what are put the restructuring of at that you in No. last mostly seeing I in the think

We are in the of operations middle project. this

this on something don't So, out we anything in QX, planned we that, but point. have have what at could depending comes of

Paretosh Misra

everyone. Thanks Great.

John Corkrean

you, Paretosh. Thank

Jim Owens

thanks… And

Barbara Doyle

any Operator, more questions? there are

Operator

no showing currently in questions queue. further I'm

Jim Owens

Thanks H.B. Fuller. everyone Thanks for and has great your you. in support time. your it Thank a everyone day. Hope for

Barbara Doyle

we up Operator, will close the now. call

Operator

presentation. today's That conference attending has for you. Thank you Thank now concluded.

now may You disconnect.