The Timken Co (TKR, Financial) released its 8-K filing on July 31, 2024, reporting second-quarter 2024 results. The Timken Company is a manufacturer of bearings, gear belts, industrial motion products, and chain-related products. The company sells its portfolio of bearings through a network of authorized dealers to end users or directly to original equipment manufacturers. End-market sectors include general industrial, automotive, rail, energy, heavy truck, defense, agriculture, metals, mining, civil aerospace, construction, pulp and paper, and cement industries. Its segments are Engineered Bearings and Industrial Motion. Timken generates the majority of its revenue in the United States of America.
Performance Overview
The Timken Co (TKR, Financial) reported second-quarter sales of $1.18 billion, a 7.1% decrease from last year's record level. Organically, sales were down 7.7%, primarily due to significantly lower renewable energy demand in China. Sales were relatively flat compared to the first quarter on an organic basis and in line with company expectations.
Net income for the quarter was $96.2 million, or $1.36 per diluted share, compared to $125.2 million, or $1.73 per diluted share, for the same period a year ago. The net income margin was 8.1%, down from 9.8% in the second quarter of last year. Adjusted net income was $115.2 million, or $1.63 per diluted share, compared to $146.1 million, or $2.01 per diluted share, for the same period in 2023. Adjusted EBITDA was $230.2 million, or 19.5% of sales, compared to $263.0 million, or 20.7% of sales, in the second quarter of last year.
Financial Achievements
Net cash from operations for the quarter was $124.6 million, and free cash flow was $87.3 million. During the quarter, Timken increased its quarterly dividend by 3% and repurchased 360 thousand shares of company stock. In total, the company returned $53.6 million of cash to shareholders through dividends and share repurchases.
In May, the company completed the sale of a portion of its stake in Timken India Limited (TIL), generating pre-tax proceeds of approximately $232 million. Timken continues to hold a majority stake in TIL and plans no further sale transactions. As of the end of the second quarter, the company’s net debt-to-adjusted EBITDA ratio was 1.9 times, with no significant debt maturities until 2027.
“The Timken team continues to execute well in this dynamic environment, achieving solid second-quarter results that were in line with our expectations,” said Richard G. Kyle, president and chief executive officer. “We delivered strong margins in both segments, including excellent performance from our recent acquisitions. And we continued to advance our strategic initiatives during the quarter to strengthen the company for the future.”
Segment Performance
Engineered Bearings sales of $783.4 million decreased 8.6% from the same period a year ago, driven by lower end-market demand and unfavorable foreign currency translation. Renewable energy saw the most significant organic decline, driven almost entirely by continued weakness in China. Among other market sectors, industrial distribution, aerospace, and rail shipments were higher compared to the same period a year ago, while off-highway revenue was lower.
EBITDA for the Engineered Bearings segment was $163.3 million, or 20.8% of sales, compared to $185.5 million, or 21.6% of sales, for the same period a year ago. The decrease in EBITDA was driven primarily by the impact of lower volume, partially offset by favorable price/mix and improved manufacturing performance. Adjusted EBITDA was $166.2 million, or 21.2% of sales, compared to $189.6 million, or 22.1% of sales, in the second quarter of last year.
Industrial Motion sales of $398.9 million decreased 3.9% compared with the same period a year ago, driven primarily by lower end-market demand, partially offset by the benefit of acquisitions and higher pricing. Organically, most platforms were lower compared to the prior year, with drive systems and linear motion posting the largest declines.
EBITDA for the Industrial Motion segment was $75.6 million, or 19.0% of sales, compared to $80.9 million, or 19.5% of sales, for the same period a year ago. The decrease in EBITDA was driven primarily by the impact of lower volume, partially offset by the benefit of acquisitions and favorable selling, general, and administrative (SG&A) expenses. Adjusted EBITDA was $79.7 million, or 20.0% of sales, compared to $85.9 million, or 21.5% of sales, in the second quarter of last year.
2024 Outlook
The Timken Co (TKR, Financial) has updated its full-year 2024 outlook, with earnings per diluted share now forecasted to be in the range of $5.00 to $5.20 and adjusted earnings per diluted share in the range of $6.00 to $6.20. The company now expects revenue to be down 3 to 4% in total from 2023.
“Our outlook reflects our solid first-half performance along with a slightly tempered view on the rest of the year,” said Kyle. “We remain focused on delivering resilient performance in 2024 through operational excellence, targeted growth initiatives, and the continued execution of our strategy. In addition, we expect to generate significant free cash flow over the balance of the year, which will further fuel our ability to create shareholder value through disciplined capital allocation.”
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from The Timken Co for further details.
