The Timken Company (NYSE:TKR) Q4 2022 Earnings Call Transcript

Page 4 of 10

Richard Kyle: Yes, on the chief competitor comment, I’m not sure where they would stand on going back to pandemic to current, if they would be behind that or looking to play catch-up on that or not. But as I said, we, as you go back and add ours up, we’re pretty close to neutral, and the more than 2% would build on that modestly. And again, we’ll see how the cost dynamic goes through the year just to how much of build that is. We would expect the greater than 2% under any normal moderating improving cost scenario. And then, if costs go up we’d probably expect that to go up a little bit more. So, I think we’ve got good coverage there. And we feel good about the 2%. There’s no — where we have indexed pricing to steel or currency, there could be some give-back there happening. But, in total, as we show our walks, our costs have not gone down in total. We need the 2%, and we’ll get to 2% net of the — any index clauses is the expectation.

Philip Fracassa: Yes, and just maybe a clarification, Steve, the fourth quarter walk would also include — mix was favorable in the fourth quarter. So, there would be favorable mix in there as well. But as Rich said, we’re targeting the two, looking to beat the 2% for the year, and feel really good about the outlook for both — for price-cost heading into ’23.

Stephen Volkmann: Okay. And it feels like you’re going to start the year, like first quarter is going to be significantly higher, I would think, just based on what we’ve seen recently. And I guess that implies that we exit the year flat or negative on price. Is that the way to think about it?

Richard Kyle: Well, no. I think price will still be up in the fourth quarter. But we have been improving price sequentially for nine are 10 quarters. So, every quarter the year-over-year comp gets harder. And as you highlight, that our fourth quarter number was pretty sizable, so that becomes a challenging comp for us in the fourth quarter, but would still expect it to be positive. But to your point, the first quarter would be pretty good because it’s on a lower comp than what the fourth quarter just was. And we just rolled some more sequential pricing in.

Philip Fracassa: And as we said, we’ve taken a conservative view on the second-half for purposes of setting the guide. So, I mean, if we are in a more robust environment, which translates to a more robust cost environment, we have the ability to continue to move price as needed, as we’ve shown over the last couple of years. So, I think we do have those levers if we need to pull them; it’ll all depend on where we’re at in time and space as we enter the back-half of the year.

Stephen Volkmann: All right, I appreciate it, thanks.

Philip Fracassa: Thank you, Stephen.

Operator: Thank you, Stephen. We have our next question, comes from Bryan Blair from Oppenheimer. Bryan, your line is now open.

Bryan Blair: Thank you. Good morning, guys.

Richard Kyle: Morning.

Philip Fracassa: Hi, Bryan.

Bryan Blair: It’s encouraging to see renewable energy transitioning back to growth mode, and it certainly aligns with the market projections we’ve seen on the wind energy side, and particularly for offshore. And just curious, in terms of the high single-digit-plus growth outlook for the sector, how is your team thinking about relative growth rates on the wind and solar side? And I’m assuming that your projections are going to be back-half weighted for the year? Again, specific to that space, and how should we think that about that cadence?

Page 4 of 10