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Q & A Highlights

Q: How did the first quarter of fiscal 2025 play out compared to expectations, given the weak industrial environment? A: Paul Sternlieb, President and CEO, stated that the quarter played out as expected, considering the tough comparisons and challenging environment. They are optimistic about better top-line performance for the rest of the year, driven by potential new policies and positive feedback from customers and channel partners.

Q: What impact could potential tariffs with China and Mexico have on Enerpac? A: Paul Sternlieb explained that Enerpac is in a relatively favorable position regarding tariffs. Imports from Canada and Mexico are negligible, and imports from China represent less than $20 million in value. They have strategies in place to mitigate potential impacts, including cost management and dual sourcing.

Q: Can you provide insights into Enerpac's performance in the EMEA region, given the challenging business environment? A: Paul Sternlieb noted that Enerpac continues to gain market share in EMEA despite macroeconomic pressures, particularly in Germany and France. This success is attributed to effective commercial strategies, leadership changes, and successful new product rollouts.

Q: What are the drivers behind the strong growth in Enerpac's services business, and is there a path to improve margins? A: Paul Sternlieb highlighted that service revenue, which includes rental and manpower services, tends to be more stable and can offset product business weaknesses. While service margins are generally lower, Enerpac sees opportunities for improvement through operational efficiencies and focusing on higher-margin service lines.

Q: How is Enerpac addressing pricing strategies in the current inflationary environment? A: Paul Sternlieb mentioned that Enerpac evaluates its pricing regularly and typically implements price increases once or twice a year to recover inflationary costs. They recently announced low-single-digit price increases in the Americas and EMEA, effective January, and are prepared to adjust pricing if necessary.

Q: What are the expectations for infrastructure spending in the US, and how might it impact Enerpac? A: Paul Sternlieb indicated that while infrastructure spending hasn't significantly impacted Enerpac yet, they see favorable indications of increased activity. Enerpac is well-positioned to benefit from this trend, particularly as projects progress to stages where their tools are needed.

Q: What are Darren Kozik's initial impressions and priorities as the new CFO? A: Darren Kozik expressed a positive view of Enerpac's culture and brand strength. His priorities include leveraging the continuous improvement mindset and the strong team to drive success in the market.

Q: What drove the return to growth in the Asia-Pacific region, despite the softness in mining? A: Paul Sternlieb attributed the growth to broad-based performance across core products and the heavy lifting technology business. The second brand strategy also contributed, with increased commercial focus and additional distributors in the region.

Q: How is the integration of the DTA acquisition progressing, and what is the market reception? A: Darren Kozik reported that the integration is going well, with strong order volumes. The combined capabilities of vertical and horizontal lifting technologies are being well-received, and Enerpac is expanding DTA's reach beyond Europe.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.