Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Hey, great. Good afternoon, Ira and Michael. I just wanted to talk to you about the Marine, your outlook on Marine, you gave second quarter thoughts and does that mean you're going to decline sequentially on the operating income when you say it's going to be like 23? Or I just want understand if you could clarify that a little bit.
A: Yes, I think you got that right or if you did get there, right, um, we we we said we're going to be closer to the year over year. Comparisons have been weak for a while now because of the phenomenal year that Marine had in 22, which really lasted through the first quarter to some extent. So that's starting to normalize. So we said we'd be pretty close to last year's number, but you're right, we also I also said we'd be down sequentially. That's not a volume. I think volumes will be generally consistent with Q1, but we're starting to see a little bit of softening in margin the team's done a great job in keeping margins well above historical norms. We still expect them to remain well above those norms in the second quarter. But from what we're seeing so far in April that they're coming in a little lighter than they did in the first quarter.
Q: And then just for my follow-up, you talked about land getting impacted by weather I just want understand how much kind of came post Analyst Day. And then if we delve into that, where it seemed like you had eliminate work to eliminate seasonality, right from what was just UK to kind of balancing out the network? And should that be balanced with 1Q at these low levels or you expect a rebound? And given given the elimination of the weather. I just want to understand kind of your messaging on the land side.
A: Yes. So there were two elements of weather. As you know, we have a bit of Reliance in the UK on heating oil in the winter months. And the first quarter was a quarter where it was a lot warmer than we anticipated. The room remained warmer through the end of the quarter. Obviously, Investor Day was only two weeks before quarter end up, but the weather conditions continued through up through the end of March. On the on the domestic side, it was also probably the impacts are probably from middle of the quarter through the end of the quarter. On the nat gas side of the equation, yes, there was actually going back to the UK, there was wet weather. Also, there was unseasonable amounts of rain, which impacted the agricultural segment, which we support in the UK. So there were there were several moving parts there. Some of those continued into April, but normally the UK drops off season seasonally when you get into May and June, which is going to be no different than we would normally see in nat gas often drops off a bit as well as we head into as we head into May and June. So that's why we signaled that Q2 for land will be pretty similar to the outcome in the first quarter. You'll get you get some more uptick in the liquid land business in North America. There's some seasonal. It's some seasonal growth there, but a big chunk of that will be offset by the seasonal decline in the UK.
Q: And then just my last one, if I can. Just your thoughts on the SG&A comp and benefits and G&A all wrapped up, right? You kind of have been working on that for a few years. You talked about that a lot at Analyst Day in terms of what you can do, do you feel like you're running as lean as you can on that? Or do you ever feel like there's room?
A: I have heard a perfect fit, never is ways we can be leaner than where we were and we're continuing to focus on as we as we talked a lot about it at Investor Day, a finding opportunities to be as efficient as possible across the board. On the expense side, this quarter, we we picked up some wins on on G&A. Some of it is basic blocking and tackling some of it maybe a little more complicated. The M. the big variable comp piece is more of a bit of a timing, depending upon where results come through quarter over quarter. And as we go through the year, we'll continue to look for for more G&A opportunities, more opportunities to drive efficiencies across the board. That's still work in progress. It is definitely more work left to be done. And that's why we've set a target up well beyond where we finished off 2023 from a from an operating leverage standpoint, and we'll keep we'll keep plugging away and keep reporting on our progress every quarter.
Q: Thanks for taking my question. So standard question to start last year, low carbon was 11% of profitability. What was it this past quarter at 12% of gross profit this quarter, the what we include in that basket of connects businesses, so just up slightly.
A: Okay, perfect. I'm three months ago, one of the EM geopolitical headlines, I suppose it's been overtaken by other events was the the Red Sea, even though logistics bottlenecks and you had kind of a notable role in helping customers manage around that if that's still something that needs to be managed or is the Red Sea issue in the rearview mirror? Well, thanks for the question. And it's extraordinary. The resiliency of the marketplace and certainly shipping understands how to respond to disruptions. So that's settling out a bit and app. So while there was no impact to some extent and certainly that had a material impact and still does on the fortunes of dry cargo and container and tanker, the impact in terms of the market coming together and I'm sort of solving for that has settled down. So not not enormous impact. You've got a little bit of a bump there, but that is it pretty much settling down.
Q: Now let me ask another kind of maybe more big picture question. One of the some hot topics of conversation recently has been the prospect of meaningful growth in electricity demand on both sides of the Atlantic, driven by AI and data centers and obviously not transport related specifically by giving your kind of broadening into the electric power space. I'm curious how you're thinking about that and what kinds of customer conversations.
A: This is generating real AI, the compute required. It is significant and the energy demand associated with that is real and there's a general increase in just power consumption. And so that certainly bodes well for our growing competencies within and all aspects of the power side. So whether it's development as a service for hydrogen power to act up solar wind offshore wind its impact on the demand for marine solutions. So all of that bodes well for our products and services in our positioning, whether it's our advisory or brokerage or every single part of the Adam,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
