Chief Executive Officer & Director, GATES INDUSTRIAL CORP PLC
Gates Corp. (GTES) CEO on Power Transmission Belts & Fluid Power Products
Gates Corp. (GTES) is a manufacturer of power transmission belts and fluid power products. CEO Ivo Jurek joins Nicole Petallides ...
About Ivo Jurek
Ivo Jurek, CEO of Gates Industrial, participated in two interviews on September 17, 2024, at the New York Stock Exchange, where the company rang the opening bell and held a capital markets day. Jurek stated that Gates had approximately $3.6 billion in revenue in 2023 and serves every aspect of the industrial economy, manufacturing power transmission belts and fluid power products. He noted that automotive revenue represents about 25% of the company, with 75% coming from industrial applications. Jurek said the company has been an innovator in materials science for over 113 years and has continued to invest in that area under Blackstone ownership. Jurek discussed several growth opportunities, including replacing industrial chains with engineered rubber belts and supplying cooling technology for hyperscale data centers. He described the industrial economy as "somewhat muted" with the manufacturing index in contraction for over 16 months, but said Gates' revenue remains robust and the company is taking market share. Jurek characterized the U.S. economy as "reasonably robust" and noted strong performance in Europe and Latin America. He described Gates as a "high quality asset" with high free cash flow generation and high margins, suggesting that the exit of private equity ownership creates a good entry point for investors.
Transcript (15 segments)
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Host0:04
Welcome back to Trading 360. I have a special guest here on the floor of the New York Stock Exchange. Joining me right now, even though Europe is with us, CEO of Gates Corporation. The company rang the opening bell today. They have their Capital Markets Day. A lot of investors are interested in this one. It's been hitting some new highs, the recent highs, and the margins, some high margins for this company. What's going right over the last year or so?
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Ivo Jurek0:33
Good afternoon and thank you for having me on the set today. You know, we have gone post-pandemic through some really interesting disruptions, and the organization and company, our team, through material science and through innovation and engineering, has been able to further strengthen our business. And you know, we have come out of 2023 with margins that were very robust, and we are very optimistic about what we have in store ahead of us.
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Host1:03
So when we think about where all of these things for transmission and power solutions, is that mostly for automobiles or all kinds?
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Ivo Jurek1:14
No. You know, Nicole, we actually serve every segment of the industrial economy. So obviously our heritage has been in the automotive components, but automotive revenue represents about 25% of the overall company. So 75% comes out of industrial applications, and we do everything from offering an efficient power transmission, HVAC, industrial automation, automation logistics and warehousing distribution centers, and our fluid power and fluid conveyance products make the industrial economy move around. So when you have a John Deere combine, or you are thinking about developing cooling for the most advanced hyperscale data centers, you will find Gates products there. So it's a little bit of everything.
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Host2:10
So it's like diggers and dozers, but also in a warehouse, if you're cooling this thing and you have an HVAC or something, you're using all of your parts and products. You must work closely with all the other companies, all the CEOs, many of which I'm sure are Fortune 500 companies. Good economy is good for Gates.
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Ivo Jurek2:29
It is absolutely.
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Host2:30
How are you finding the economy?
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Ivo Jurek2:34
And do you know, the industrial economy has been more challenging over the last 12 to 18 months. All you need to do is take a look at the manufacturing PMI index that's been in contraction for over 16 months. But you know, the revenue stream for our company remains robust. We continue to take market share. We have some drivers that are very positive. We have lots of secular drivers for revenue. So even though the overall industrial economy is somewhat muted, you know, we feel pretty optimistic and we certainly believe that we are on the verge of the industrial economy returning to growth.
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Host3:14
There's certainly closer to, I think, industrial economy expanding and contracting. That's good news. More here at home or more abroad, and if so, where abroad?
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Ivo Jurek3:25
I think that the economy in the United States is actually reasonably robust. So you know, I think that we are reasonably constructive about what's happening in the US. And then you know, we have seen a very strong performance in our businesses in Europe. We have had very strong performance in Latin America, Brazil. So you know, we see some strength all across the industrial economy around the globe. And you know, it's interesting because agriculture is not energy, you know. Construction is not manufacturing. And so you might have one area that's pulling back up and one that's pulling back. When we think about these, all of these are hazardous issue industries. They are growing industries and much needed. Right? We need all of them to make the world work.
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Host4:13
Are you seeing any sort of bright spot when it comes to automotive or agriculture or construction or manufacturing or energy? Do you have any sort of color for us here today?
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Ivo Jurek4:25
Yes. So look, I think that the green energy revolution is happening. We participate. Whether you are mining for lithium or you're building a factory to convert lithium into batteries that power, you know, General Motors or Ford vehicles, our products make their way into the automation as well as the extraction of that energy. So I think that you know, we are benefiting from that move. Construction in the United States as well, you know, remains reasonably robust. You know, people I think in general are focused on housing, and housing is not in a bad spot, but the overall infrastructure build is starting to occur, and you know, we benefit from that greatly. There is a consumption of the products that support that move.
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Host5:15
And you know, I mean, when you look at the valuation of your company, you compare it to your peer set. You also still feel that there's a lot of... The company brings a lot of value and is probably attractive to institutional shareholders. A final thought, please.
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Ivo Jurek5:35
Absolutely. We believe that this is a high quality asset. We have been dealing with private equity ownership that is exiting. So we believe that that's a really good impetus for others to own these shares. Quality company with high free cash flow generation, high growth margins, high EBITDA margins. So we believe that this is a good point of entry for a high quality asset with undemanding valuation.
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Host6:01
Exciting conversation because, you know, this is not technology or something in outer space that we can't understand. This is the real deal. And as you said, a robust economy here in the US, and that makes everybody feel good. Thank you, CEO of Gates Corporation, GATES.