Chart Q1 2020 Earnings Report
Key Takeaways
Chart Industries reported a decrease in overall orders due to large LNG project orders in the prior year, but saw increased demand in medical oxygen products due to COVID-19. The company executed on cost savings and achieved higher gross margins. They are withdrawing full year guidance due to COVID-19 uncertainty.
Orders for medical oxygen critical care products increased by 34% over Q1 2019.
Gross margin as a percent of sales increased to 28.5%, up 530 basis points from Q1 2019.
Executed $49 million of annualized cost savings year-to-date 2020.
Adjusted earnings per diluted share was $0.57, a 46% increase over Q1 2019.
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Forward Guidance
Chart Industries withdrew its prior 2020 full-year guidance due to uncertainty related to COVID-19, but provided data points including Venture Global's Calcasieu Pass project revenue expectations, short-term increase in demand in medical related products, and continued prioritization of debt paydown.
Positive Outlook
- Venture Global’s Calcasieu Pass project remains on schedule, with $100 million of expected revenue in our E&C Cryo segment in 2020.
- We are seeing a short-term increase in demand in our medical related products.
- We continue to expect strong free cash flow generation in the year.
- We continue to prioritize debt paydown.
- Year-to-date, we have taken cost reductions totaling $48.8 million of annualized savings. This is in addition to the $38 million of savings from cost reductions taken in 2019.
Challenges Ahead
- Uncertainty surrounding the duration and impacts of the global pandemic leads to withdrawal of prior 2020 full year guidance.
- Customers are further utilizing their existing inventory.
- Softening in demand in air cooled heat exchangers for midstream and upstream compression projects.
- No longer expect natural gas processing plant related equipment orders in 2020.
- Trailer demand has been softening.