The <a title="EU" href="/search/EU">EU</a> foreign policy chief on Dec. 4 said <a title="Turkey" href="/search/Turkey">Turkey</a> and the bloc share common interests on developing a good neighborhood.
Addressing the Rome Mediterranean Dialogue Forum, Josep Borrell said that at the last European Council meeting on Oct. 1, EU leaders decided to seek positive engagement with Turkey and evaluate the situation according to whether more positive approach would be seen from the Turkish side.
“There are not very much positive signals that came from Turkey during these months both in Cyprus and on the drillings [in the Eastern Mediterranean], the talks between Greece and Turkey has not been developing” Borrell noted.
He stressed that the EU has to take steps in light of the developments.
“I am strongly convinced that Turkey and European Union has a common interest on developing a good neighborhood. Turkey is there and will still be there [in the region]” he said.
“And it [Turkey] has regional ambitions. And we have to understand that Turkey also is hosting 3.5 million refugees from Syria that we have to help to take care of them. And we are doing, and we will have to continue doing that because the help is not to the Turkish government but to the Syrian refugees,” he added.
Borrell said they need to ask for better engagement to resolve territorial water disputes, to respect the sovereign rights of EU members, and to seek a better understanding of how to share gas field revenues, adding that Turkey is also asking for it.
The EU foreign policy chief said it is time to look at whether Turkey and the bloc can have a better partnership and neighborhood.
“If it is not possible, the European Union Council will have to take the decision that the only European Union can take. Because, the sanctions regime is a matter of the member states.
“So, let’s see what we can do [at the] next European Union Council [meeting]. I cannot advance the result of the discussion and just preparing it and offering alternatives,” Borrell added.
CHENNAI: Superstar Rajinikanth’s spiritual politics has got nothing to do with any particular religion and the actor will embark on a political journey of inclusiveness without any kind of discrimination, his close aide Tamizharuvi Manian said on Saturday. Spiritual politics was first proposed by Mahatma Gandhi, he noted.
Rajinikanth had on Thursday announced he will float his political party in January 2021 to face next year’s Assembly polls and take forward spiritual politics.
Manian, a former Congress leader, has been appointed by the actor in a supervisory role in the proposed party and for its launch.
Speaking to reporters here after holding discussions with Rajinikanth, Manian said there was no link between spiritual politics and religion politics.
“Spirituality has no religion. A spiritualist is one who sees him in every living being and all of them in him. He has no caste, religion, no discrimination. Spirituality is all about embracing everyone with love. Rajini is going to do that,” Manian said.
Rajinikanth’s spiritual politics should not be construed as for or against any particular religion as the actor is “indebted” to all of Tamils who have taken him to great heights, he added.
“There is nothing like only a particular caste or religion stood by him. Beyond caste and religion, the entire Tamil Nadu has taken him to such heights and therefore he brings in a brand of spiritual politics encompassing all,” he said.
Mahatma Gandhi first proposed spiritual politics where the one practising it should remain selfless.
“Spiritual politics is not some discovery of Rajini. Mahtama Gandhi said it first… there will be no selfish interest and it is all about public welfare which Rajini will strive for.”
“Further, the actor does not want the party to be strengthened by criticising others or “talking about the mistakes of DMK and AIAMDK” but will reach out to people with “what I intend to do for people,” he added.
Rajinikanth aims to provide corruption-free, transparent administration where there will no discrimination based on caste or religion, Manian said, echoing what the superstar said on Thursday.
The actor’s politics will be a departure from the current “hate politics” in Tamil Nadu where attacking each other is the order of the day, he said.
Asked about Rajinikanth’s earlier announcement that he did not intend to be Chief Minister even if his party captured power, Manian said that matter was not being discussed now.
Negotiators from the EU and African, Caribbean and Pacific community signed off on a broad 20-year partnership deal to succeed the Cotonou Agreement on Thursday night (3 December) after nearly three years of difficult talks.
ACP chief negotiator Robert Dussey and the EU’s International Partnerships Commissioner Jutta Urpilainen confirmed an agreement that focuses on six broad areas: human rights, democracy and governance; security; human and social development; environmental sustainability and climate change; sustainable growth; and migration and mobility.
The agreement, which was signed in 2001 and covers trade and political relations between the EU and the ACP, was due to expire in March. However, the talks have been repeatedly delayed, in large part because of internal divisions between EU and ACP member states, and the new treaty will not enter force until December 2021 at the earliest.
EU member states have been divided over whether to offer more generous or tougher conditions on migration, legal migration pathways, and re-admission for failed asylum seekers and economic migrants. Sex and reproductive health issues and human rights questions are also yet to be resolved.
However, there is still space to make more adjustments to the text before Dussey and Urpilainen are expected to initial the agreement in January. The ratification process will then proceed throughout 2021.
In the meantime, the Cotonou Agreement will be extended until 30 November 2021.
“We have prolonged Cotonou but it’s high time we agreed a new one,” said a senior EU official.
“There is a real shift in a structure of the agreement,” the official said, pointing to the ‘3+1’ composition of the new deal, composed of a common foundation to all countries, which sets out shared values and priorities, along with three regional protocols for Africa, the Caribbean, and Pacific.
The regional protocols will have their own specific governance regimes. The European Commission says this will “allow for an unprecedented regional focus”.
The sub-Saharan African protocol is set to dove-tail with the negotiations between the EU and the African Union on a new ‘strategic partnership’ between the two continents. EU and AU leaders are set to meet for a mini-summit on 9 December.
The regional protocol was a key demand of African leaders. After initially agreeing to negotiate a continent-to-continent deal brokered by the African Union, which would have effectively scrapped the EU-ACP process, Africa states had a last-minute change of heart, opting to maintain the EU-ACP process, but with continent-to-continent protocols.
The treaty has also been adjusted to take account of the UN-agreed Sustainable Development Goals and the Paris climate change agreement. It no longer has a development aid component as a result of the European Development Fund being integrated within the EU budget.
Meanwhile, the new text forbids discrimination on any grounds, including sexual orientation and gender.
However, on trade, the controversial economic partnership agreements will remain unchanged. They have been widely criticised for perpetuating unbalanced trade relations between the EU and African countries, and left unratified by a large number of African countries.
The European Commission will next week publish its EU-Africa ‘strategy’, which the bloc hopes will form the basis of a new ‘partnership’ with the African continent. EU Foreign Affairs chief Josep Borrell will launch the blueprint on Monday (9 March), kick-starting seven months of negotiation between ministers and leaders from the two continents.
Alongside the regional protocols, the new agreement will also replace the Joint Parliament Assembly composed of MEPs from the European Parliament and ACP parliamentarians with three separate joint assemblies for Africa, Caribbean and the Pacific respectively.
That has prompted a threatened veto from the European Parliament unless it has guarantees that there will be sufficient parliamentary oversight of the agreement.
“A parliamentary dimension with a real consultative role for the ACP-EU Joint Parliamentary Assembly as well as at a regional level is a non-negotiable condition for the European Parliament in order to give its consent to a new Agreement,” Tomas Tobé, the chair of the European Parliament’s development committee, said in a statement.
Perhaps the main new addition is the text on migration which includes new commitments from ACP countries on return and re-admission – an important inclusion for the EU.
“We want to get away from a system (on migration) where Cotonou had vague principles but couldn’t be legally enforced,” said the EU official, a reference to the refusal of African countries to agree to readmit failed migrants, despite having promised to do so in the Cotonou treaty.
If there is no cooperation, the official added, there are ‘proportionate measures’ that can be taken in dispute settlement.
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<div class="lightbox-content">As NFU Scotland (NFUS) president Andrew McCornick’s term of office draws to a conclusion, his frustration and anger at the Scottish Government’s lack of leadership at this critical time for Scottish agriculture boiled over in the AgriScot debate with Rural Economy Secretary Fergus Ewing.
In a hard-hitting speech, he called for the Scottish Government to “stop dithering and start delivering”.
“Where is the future policy?” he demanded.
Where is the road map to help Scottish farmers meet the multiple challenges of a Covid-wrecked economy and a climate emergency?
As the president pointed out, Fergus Ewing’s desk is buckling under the number of reports he and industry stakeholders have commissioned into the future path of Scottish agriculture.
Starting with the Pack report, then the Rural Advisers report, the Griggs report, the Rural Champions’ reports and now the Suckler Beef report and the Farming for 1.5 Degrees report.
So many trees cut down and so much carbon released in producing reports and yet most of them are gathering dust on the minister’s shelf.
His response to the NFUS criticism would be laughable if it were not so serious – he announced the setting up of yet another committee called the arable sector climate change review group.
Is it any wonder NFUS are frustrated?
Given the challenges Scottish agriculture faces at this time you would think any politician worth their salt would be champing at the bit to come up with Scottish solutions to tackle the problems farmers are facing.
Yet over the last four years the minister’s track record has been one of inaction and taking the easy option of kicking the can down the road.
He inherited a broken IT system from his predecessor, but despite his many claims that it has been fixed the reality is the £200 million system still can’t deliver farm payments on time.
Instead the Government hands out loans to farmers each year to cover up its complete failure to sort out the IT system.
The EU’s decision to close down Less Favoured Areas (LFA) schemes and switch to Areas of National Constraints (ANC) by 2020 has been well known to the Scottish Government for the last 10 years yet the minister sat on his hands and took no action to head off the threat.
Every country in Europe replaced its LFA schemes with new ANC schemes to protect payments to farmers in their most disadvantaged areas with the sole exception of Scotland.
It is deeply ironic that Brexit, which the Scottish Government is utterly opposed to, has rescued the minister from the embarrassment of having to close the LFA scheme down and end payments to farmers.
Nearly two years ago the first minister claimed we were facing a climate emergency and promised urgent action to reduce carbon emissions by 2030 and make Scotland carbon neutral by 2045.
Scottish agriculture is in the firing line as the third largest emitter of greenhouse gas emissions in Scotland and has faced a barrage of criticism about the impact of livestock farming on the environment.
Naturally farmers are looking to the Scottish Government to provide a roadmap and a plan for how to tackle the crisis.
There is an urgent need to replace the outdated Common Agricultural Policy (Cap) with new farm policies with strong financial incentives to help farmers transition to a more sustainable agriculture.
Given the urgency and the scale of the challenge you would expect the Scottish Government to be working flat out with NFUS and other stakeholders to work up a new Scottish farm policy to tackle the problem.
Instead all the industry is being offered in the months ahead are yet more committees to look at climate change in the pork, dairy and upland sectors and no prospect of a new Scottish farm policy until 2024 at the earliest.
Talk about fiddling while Rome burns.
If you look around at other countries, it is a different story.
In Ireland their livestock based farming industry faces a very similar challenge to Scottish producers but the Irish Government recognised that and published its climate plan for Irish agriculture nearly a year ago, setting out a future road map for the industry.
This week England published its proposals to transition to a new support system by 2024 that will provide substantial financial incentives to drive the transition to a more sustainable agriculture.
Back in July the European Commission published its Farm to Fork and Biodiversity Strategy setting out challenging targets to make EU agriculture more sustainable. The plans include a 50% cut in pesticides, 50% reduction in antibiotics, 20% reduction in fertilisers and an increase in organic production to 25% of total farmland in the EU by 2030.
All these countries will be well down the road in the transition to a more sustainable agriculture while Scotland is left behind having to play catch up.
I absolutely disagree with Boris Johnson’s view that devolution has been a disaster but there is no doubt that the Scottish Government’s consistent failure to take action is a disaster in the making for Scottish agriculture.
George Lyon is a former MEP. He is a senior consultant for Hume Brophy.
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UK Prime Minister Boris Johnson has been warned by his own backbenchers against caving in to pressure from the EU on Brexit deal sticking points despite the looming deadline for the transition period, writes the Daily Mail.
Time is fast running out for the negotiating sides, with concerns that the current stalemate in talks might result in a no-deal scenario after 31 December, which will mean that the EU and the UK will have to trade according to the rules of the World Trade Organisation (WTO).
However, even as an orderly exit from the bloc is under threat, the die-hard pro-Brexit Tories have reportedly told Johnson that conceding to Brussels on issues such access to UK fishing waters and the concept of a ‘level playing field’ could result in the UK becoming a permanent ‘client state’ of the EU. The level playing field refers to state subsidies and regulatory standards, with Brussels concerned that Britain could cut standards and heavily subsidise its own industries, gaining an unfair advantage.
A fishing boat at work in the English Channel, off the southern coast of England, Saturday Feb. 1, 2020. The fishing industry is predicted to be one of the main subjects for negotiations between the UK and Europe, after the UK left the European Union on Friday.
As for the fishing issue, UK officials are said to be concerned amid reports that the Prime Minister has agreed to defer repatriating up to half of the fishing quotas for several years. This is perceived as a sign that Johnson might renege on his original promises, made to voters during elections in 2019.
The Tories have also been decrying attempts by French President Emmanuel Macron to allegedly pressure EU Chief Negotiator Michel Barnier to adopt a hardline stance at the talks.
A UK source was cited by the outlet as saying:
“At the start of the week we saw Macron agitating with other EU capitals that they were giving away too much. Then you see Barnier bringing this back and the whole process goes backwards. I think everyone can join the dots. We want a deal but it has to be on the basis that we are a sovereign country again. Some people still seem to be struggling with the concept that we are going to be an independent country setting our own rules. If it stays like that there will be no deal.”
One of the persistent hurdles throughout the rounds of Brexit trade deal negotiations has been fishing, with ex-Tory leader Sir Iain Duncan Smith referring to it as a ‘totemic issue’. Lauding the example of Norway, which sets its own fishing quotas, Smith is reported as saying that the UK needed to start with control over ‘100 percent’.
“We have to be treated like Norway is treated. We’re not looking for an increase, we are looking for control. From there, we negotiate with other countries what access they get. It’s as simple as that,” Sir Iain Duncan Smith was cited by The Telegraph as saying.
Dire warnings that Britain could find itself ‘locked in as a client state’ unless it secured regulatory autonomy – another sticking point at the talks – were issued by Theresa Villiers, the former Environment Secretary. She added that the issue might be used by Brussels as the ‘main means’ by which it could ‘tie us into their laws’.
“There are level playing field agreements in the Canada deal and arbitration mechanisms that are acceptable. But on the other end of the spectrum we are locked in as a client state,” said Villiers.
Some Tories have reportedly been fearing that Boris Johnson might concede to the relentless pressure from Brussels.
“I am very worried that the Prime Minister is about to sign up to something unacceptable. If Boris sells us out on Brexit then he is finished, and I think he knows that,” said Conservative MP Andrew Bridgen.
The developments come as the UK and EU chief negotiators, David Frost and Michel Barnier, announced on Friday that they were putting talks on hold to summon their respective political leaders to take stock. In a joint statement the sides said the conditions for an agreement had still not been met.
PM Boris Johnson and European Commission President Ursula Von Der Leyen will be embarking on an emergency meeting Saturday to try and break the stalemate over a post-Brexit trade deal.
Nevertheless, David Frost is said to believe there is little hope for progress unless EU leaders persuade Emmanuel Macron to back down from his relentless stance.
France, Germany at Loggerheads
Amid a desperate scramble to clinch a post-Brexit trade deal, France and Germany have been at loggerheads over whether or not to compromise with the UK.
As ongoing disputes over fishing rights and common standards continued to block any potential breakthrough, the French government did not show any signs of readiness to cede ground.
Furthermore, Michel Barnier was seen as caving to pressure from the French side to make last-minute demands, elevating already-high tensions.
The stalemate comes as the French President has been adamant in his insistence that French trawlers maintain their current access to UK waters. Emmanuel Macron is believed to have demanded a 10-year transition to any reduction in EU fishing access.
However, Downing Street has been regarding the demand as unacceptable, with a senior government official quoted by the Times as saying the proposal is ‘not something that we can agree to or sell’.
On the issue of state aid, Michel Barnier has also called for further concessions from Britain, amid Macron’s determination to protect French firms from UK competition.
European Union chief Brexit negotiator Michel Barnier, right, speaks with the British Prime Minister’s Europe adviser David Frost during the start of the first round of post -Brexit trade talks between the EU and the UK, at EU headquarters in Brussels, Monday, March 2, 2020. Long-awaited trade talks between the EU and Britain kick off Monday amid deep tensions over Prime Minister Boris Johnson’s threat to walk away from the talks if not enough progress is made within four months.
Earlier, tensions soared as France’s Europe minister, Charles Beaune, announced that Paris was prepared to veto a post-Brexit trade deal that went against French interests.
“France is attached to the interests of its fishermen, is attached to the fair business conditions. It’s also the case for our partners that if, if there were a deal that isn’t good, which in our evaluation doesn’t correspond to those interests, we will oppose it. Yes each country has a veto, so it’s possible,” Beaune was cited as saying. Beaune added:
“We owe that to the French people, we owe it to our fishermen, and to other economic sectors.”
However, German Chancellor Angela Merkel insisted the EU needed to cede more ground if it wanted to avoid a no-deal scenario.
Government spokesperson Steffen Seibert said said the bloc should be ready to “compromise”, adding:
“For the Chancellor, and that hasn’t changed for weeks, the willingness to compromise is needed on both sides. If you want to have a deal, both sides need to move towards each other. Everybody has their principles, there are red lines, that’s clear, but there’s always room for compromise.”
In Germany, around 460,000 jobs are linked to exports in Britain, with an estimated 60,000 in the automotive industry, according to a study by the Nuremberg Institute for Employment Research (IAB).
A no deal outcome in the UK’s talks with the EU could deliver a resounding blow to sales and have lasting negative impacts throughout the industry.
Unless Britain and the EU strike an agreement by the time the transition period ends on 31 December, the sides will have to deal with each other on World Trade Organisation terms. This would result in the imposition of tariffs on a wide range of goods. Levies of at least 40 percent could be anticipated on lamb and 10 percent on cars.
On the prospects of further talks, European Council President Charles Michel said:
“We will see what will happen in the next days. But the end of December is the end of December and we know that after 31 December we have 1 January, and we know that we need to have clarity as soon as possible.”
I am in charge of the Volunteer Leader programme for the UN Children’s Fund (UNICEF) which is part of the I Am UNICEF initiative. We have some 22 volunteer leaders in communities across Thailand, who told me that while there is sufficient information and support for parents about COVID-19, there is nothing specifically for children. So, I had the idea of designing and distributing a children’s activity book to teach children about best practices in avoiding COVID-19 while keeping them entertained at home.
The initiative consists of three engagement opportunities; a story for children showing what they need to do to stay safe during the pandemic, a painting or illustration activity with winning designs chosen to illustrate a UNICEF booklet and a challenge to get volunteers to distribute UNICEF COVID-19 information.
At first, we planned to produce only 4,000 copies of the story booklet, but the requests have far exceeded the production quota. The kids love it, which fills my heart with joy. I went to the community to help the emergency response distributing toolkits and supplies to those families in the slum areas. I saw quite a big smile on their faces. Some of them shouted to their neighbour “I got something!” After that, all the kids in the area were standing at their doorstep waiting for us to walk over. There was one little girl who ran to me after I gave her the booklet who said “Can I have one more, please? I have a little brother; he is still very tiny but when he is bigger, I will give it to him”
A few weeks after that we received more feedback from the community. They said that the booklet was effective. Children are learning while coloring the booklet and the content helps parents and caregivers to initiate conversations with them. I have read all the social media posts about the booklet, and my eyes are filled with tears of joy.
UNICEF/Nipattra Wilkes
UNICEF volunteer Rasa Pattikasemkul at work in Khon Kean, in northeastern Thailand.
Role of volunteers “absolutely changed” during pandemic
COVID-19, which is now our main focus, absolutely changed the role of our volunteers. Before the pandemic, we were able to go outside, organize a walk, talk to people, and advocate for children. Now, we have to be more cautious with no unnecessary physical contact between volunteers and children. That’s for the safety of both sides.
Most of our activities now are online. For example, we recruited professional psychologists to volunteer with us to provide counseling sessions for youth who need mental health support.
We also recruited a videographer and editor, to produce an interview with a doctor and psychologist who provided tips and advice on how to cope with the lockdown.
All the UNVs are now working from home. Personally, I don’t think this change is a problem. We have to adapt to it, be flexible and have the right mentality of “nothing can stop you”. We have worked with great team spirit and we were able to launch the three initiatives.
Vulnerable children facing a “wide range of risks”
Even prior to the pandemic, children were vulnerable in our society. Lockdown measures due to COVID-19 have exposed children to a wide range of risks. Many families lost their sources of income so there can be heightened tensions in the household; stressed parents or caregivers, social isolation and increased risk factors for violence at home.
The children I have spoken to are very resilient; Some say it’s good that they get to be with their parents more, some say that they want to go to school and play with their friends.
Acting as “big sister”, following family loss
My little brother died on a rainy day in September 2018. I loved watching him grow up, how he took his first steps; sadly I had to see the place where he took his last steps, as well. Ever since I lost my brother, I have wanted to recapture that feeling of being the big sister again; that is my passion.
As a volunteer, I now have thousands of brothers and sisters who could benefit from my strength, my personal skills and my professional abilities. I think this is my calling, this is my passion. No matter what I do at UNICEF if I could make one child’s life a little bit better. It’s worth everything to me.
Some people take pleasure in making someone’s life a little bit better. I am one of those people.”
After one week of intense trade negotiations in London, the chief Brexit negotiators from the UK and the European Union (EU) have agreed to “pause the talks” due to “significant divergences”.
Releasing identical statements on Friday night, the EU’s chief negotiator Michel Barnier and his UK counterpart David Frost said: “After one week of intense negotiation in London, the two chief negotiators agreed today that the conditions for an agreement are not met, due to significant divergences on level playing field, governance and fisheries.
“On this basis, they agreed to pause the talks in order to brief their principals on the state of play of the negotiations.”
If an agreement is reached it will need to be turned into legal text and translated into all EU languages and ratified by the European Parliament, the BBC reported.
The UK government is likely to introduce legislation implementing parts of any deal reached which MPs will be able to vote on.
The 27 EU national parliaments could also need to ratify an agreement depending on the actual contents of the deal.
In a bid to break the impasse, European Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson “will discuss the state of play” on Saturday.
The UK and the EU resumed face-to-face talks in London on November 28 after an EU negotiator tested positive for coronavirus earlier last month.
The negotiations are at a crucial stage as time is running out for both sides to secure a deal before the Brexit transition period expires on December 31.
Failure to reach a free trade agreement with the EU means bilateral trade will fall back on World Trade Organization (WTO) rules in 2021.
The UK and the EU had started their lengthy and bumpy post-Brexit talks in March after the country formally ended its membership with the bloc on January 31.
Ahead of World Soil Day, marked on 5 December, FAO launched its first ever report on “The State of Knowledge of Soil Biodiversity“. The report examines the potential of soil organisms in ensuring sustainable agri-food systems and mitigating climate change.
“Soil biodiversity and sustainable soil management is a prerequisite for the achievement of many of the Sustainable Development Goals“, said FAO Deputy Director-General Maria Helena Semedo. “Therefore, data and information on soil biodiversity, from the national to the global level, are necessary in order to efficiently plan management strategies on a subject that is still poorly known”, she added.
According to the report, despite the fact biodiversity loss is at the forefront of global concerns, biodiversity below ground is not being given the prominence it deserves and needs to be fully considered when planning how best to boost sustainable development.
“We hope that the knowledge contained in this report will facilitate the assessment of the state of soil biodiversity as an integral part of national- and regional-level biodiversity reporting and any soil surveys”, Ms. Semedo advanced.
Being one of the main ‘global reservoirs’ of biodiversity, soils host more than 25 percent of the world’s biological diversity. In addition, more than 40 percent of living organisms in terrestrial ecosystems are associated with soils during their life cycle.
The report defines soil biodiversity as the variety of life belowground, from genes and animal species, to the communities they form, as well as the ecological complexes to which they contribute and to which they belong; from soil micro-habitats to landscapes.
These include a wide range of organisms, from unicellular and microscopic forms, to invertebrates such as nematodes, earthworms, arthropods and their larval stages, as well as mammals, reptiles, and amphibians that spend a large part of their life belowground, and a great diversity of algae and fungi.
Keep soil alive, protect biodiversity
Plants nurture a whole world of creatures in the soil, FAO notes, that in return feed and protect the plants. It is this diverse community of living organisms that keeps the soil healthy and fertile, which constitutes soil biodiversity, and determines the main biogeochemical processes that make life possible on Earth.
This year, by addressing the increasing challenges of soil management, the Food and Agriculture Organization (FAO) campaign “Keep soil alive, protect soil biodiversity” aims to raise awareness of the importance of sustaining healthy ecosystems and human well-being. By encouraging people around the world to engage in proactively improving soil health, the campaign also aims to fight soil biodiversity loss.
Threats to soil biodiversity
Although soils are essential for human well-being and the sustainability of life on the planet, they are threatened by human activity, climate change and natural disasters.
The overuse and misuse of agrochemicals remains one of the major drivers to soil biodiversity loss, thus reducing the potential of soil biodiversity for a sustainable agriculture and food security.
Other threats include deforestation, urbanization, soil structure degradation, soil acidification, pollution, wildfires, erosion, and landslides, among other issues, the agency alerts.
Soils and climate action
Nature-based solutions involving soil microorganisms have a significant potential to mitigate climate change. They play a key role in carbon sequestration and reducing greenhouse gas emissions. The report also found that farming activities are the biggest source of carbon dioxide and nitrous oxide gases emitted by soils, which derive from the overuse or misuse of nitrogen-containing fertilizers.
Future steps
Generally, there is a lack of detailed data, policies and actions on soil biodiversity at local, national, regional, and global levels.
The report highlighted the need to promote the necessary shift to include biological indicators of soil health along with physical and chemical ones.
According to the report, the adoption of sustainable soil management practices by farmers, as a basic premise for preserving soil biodiversity, remains low due to the lack of technical support, provision of incentives and enabling environments, and needs to be scaled up.
(RNS) — This week, the University of Vermont announced that it is eliminating two dozen academic programs, including its entire religion department. This comes as a surprise, given the caliber and credentials of the department’s faculty; in addition to being prolific scholars, they are regular recipients of grants, awards and fellowships for teaching and research.
The real shock of UVM’s announcement is its timing: devaluing of religion after an election cycle in which the president’s spiritual adviser called for African angels to intervene on election results, when our president-elect ran on restoring the “soul of our nation,” when the Supreme Court is busy reappraising the establishment clause and the outgoing secretary of state has sought to redefine religious freedom.
Even more troubling is that this is not an isolated incident; the University of Vermont’s proposal comports with a larger pattern of cutting religion programs in academic institutions.
Teaching about religion is not just about understanding politics. It’s also about creating cultural literacy, ensuring that our young people are familiar with the diverse people they meet on the street. University brass often refers to this kind of literacy as a civic good, but as a brown-skinned, turban-wearing, beard-loving man in Donald Trump’s America, I submit that people knowing who I am and having an appreciation for my religious heritage can mean the difference between life and death.
Think about it from the perspective of those who are minoritized: By stripping away our commitment to religious diversity, we are actually making our communities less safe.
At a moment when everyone is clamoring for more resources devoted to diversity, equity and inclusion, why would an institution take away resources that already exist and are not easy to replace?
The University of Vermont in Burlington, Vermont. Photo by Michelle Maria/Creative Commons
The counterargument goes that cutting programs like these is purely business: The departments don’t bring in enough majors and therefore don’t serve the university’s bottom line.
We have spent the better part of the past few decades thinking of our educations as pathways to professional careers. Look what has happened to our society in the process. We may have a more polished workforce, but at what cost? There’s nothing wrong with going to college to get a well-paying job. But what are our educational institutions doing to shape our moral and ethical outlooks?
What expanded my mind in college, more than anything else, was coming to terms with the reality that my way wasn’t the only way, or the best way. Learning about others’ faiths and cultures challenges our self-centered chauvinism and helps us meet others where they are.
When done right, the work of the humanities is the work of anti-racism. If this sounds limiting, let me put it this way: It’s the work of undercutting assumptions and stereotypes about the people around us and bringing nuance to our perspectives, so that we stop seeing in black and white and begin seeing the richness of our human experiences.
It also, I might add, makes business sense. In this moment when corporations and institutions are leaning into diversity and inclusion and equity, some still see religion outside of this scope. I have consulted with corporations long enough to see that there is a discomfort with religion. Of the traditional categories represented in diversity and inclusion work — race, gender, religion, sexual orientation — religion is often overlooked and neglected. Organizations are often uncomfortable talking about religion for fear of doing it wrong.
Public universities, meanwhile, often worry about the separation of church and state. But this concern belies a fundamental misunderstanding of what a religion scholar actually does. While many worry about being accused of proselytizing, religion scholars aim to understand historical developments in context. We’re scholars with an interest in religion; not in imposing our views on religion.
Take from me, a practicing Sikh who has spent a majority of his academic career teaching Islamic studies and Buddhist history. I wish that I had a penny for every time someone asked me how I could teach a religion other than my own. They don’t understand that I’m not in it to seek conversions; I’m in it to open hearts and minds and to help people grapple with the beautiful diversity of our world.
If we want our kids to grow up to appreciate people from all the various backgrounds they will encounter in their lives, we must first equip them with the appropriate knowledge. To not do so, to tell them that understanding faith is not important, is setting them up for failure.
Q1 2021 Donaldson Company Inc Earnings Call MINNEAPOLIS Dec 3, 2020 (Thomson StreetEvents) — Edited Transcript of Donaldson Company Inc earnings conference call or presentation Thursday, December 3, 2020 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Brad Pogalz Donaldson Company, Inc. – Director of IR * Charley Brady * Scott J. Robinson Donaldson Company, Inc. – Senior VP & CFO * Tod E. Carpenter Donaldson Company, Inc. – Chairman, CEO & President ================================================================================ Conference Call Participants ================================================================================ * Brian Paul Drab William Blair & Company L.L.C., Research Division – Partner & Analyst * Bryan Francis Blair Oppenheimer & Co. Inc., Research Division – Director & Senior Analyst * Daniel Dalton Rizzo Jefferies LLC, Research Division – Equity Analyst * Dillon Gerard Cumming Morgan Stanley, Research Division – Research Associate * Nathan Hardie Jones Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst * Richard Charles Eastman Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst ================================================================================ Presentation ——————————————————————————– Operator [1] ——————————————————————————– Ladies and gentlemen, thank you for standing by, and welcome to the Donaldson’s First Quarter 2021 Earnings Conference Call. (Operator Instructions) I would now like to turn the call over to Charley Brady, Director of Investor Relations. Thank you. Please go ahead. ——————————————————————————– Charley Brady, [2] ——————————————————————————– Good morning. Thanks for joining Donaldson’s first Quarter 2021 Earnings Conference Call. With me today are Tod Carpenter, Chairman, CEO and President of Donaldson; Scott Robinson, Chief Financial Officer; and Brad Pogalz, who you all know. This morning, Tod and Scott will provide a summary of our first quarter performance, along with an update on key considerations for fiscal 2021. During today’s call, we will also reference non-GAAP metrics. A reconciliation of GAAP to non-GAAP metrics is provided within the schedules attached to this morning’s press release. Finally, please keep in mind that any forward-looking statements made during this call are subject to risks and uncertainties, which are described in our press release and SEC filings. With that, I’ll now turn the call over to Tod Carpenter. Tod? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [3] ——————————————————————————– Good morning, everyone. I want to start by welcoming Charley to the team. He joined Donaldson last week after 2 decades on the sell side, which included 15 years of covering our company. He already knows us well, so our Investor Relations program is in good hands. Welcome, Charley. Turning to the quarter. We feel good about our results. First quarter sales were up 3% sequentially, which is not typical seasonality, signaling that the worst of the impact from the pandemic on our business may be behind us. Sales of replacement parts outperformed first-fit by a wide margin, providing valuable stability. And we saw continued evidence of share gains in strategically important markets and geographies, helped, in part, by our robust portfolio of innovative products. First quarter profit performance was another highlight. Gross margin was up 60 basis points from the prior year, resulting in the highest first quarter gross margin in 4 years and the best sequential improvement in at least a decade. We reduced operating expenses by 5% while maintaining investments in our strategic growth priorities, particularly as they relate to the Industrial segment. And altogether, we had a decremental operating margin of only 4%, which we view as very positive given the uneven economic environment. Finally, our company remains in a strong financial position. We had excellent cash conversion during the quarter, and our balance sheet is solid. We’re on track to deliver our strategic and financial objectives in fiscal ’21, and we’ll talk about those planned later in the call. But first, let me provide some additional color on recent sales trends. Total sales were down 5.4% from prior year or 6.4% in local currency. In the Engine segment, more than 1/3 of the decline came from aerospace and defense due largely to the significant impact from the pandemic on commercial aerospace. We have a great team and strong customer relationships, so we expect our aerospace business will recover. In the meantime, we are pursuing optimization initiatives to put our cost structure on a firmer footing during this rough patch. In our other Engine businesses, trends seem to be improving. On-Road sales were down 21% in the quarter, which is still a steep decline, but notably better than the past few quarters. Although Class 8 truck production in the U.S. remains depressed, order rates are increasing and third-party forecasts for the next calendar year suggest that Class 8 recovery is on the horizon. Should that happen, we believe our strong position with OEM customers would give us nice momentum in the On-Road first-fit market. In Off-Road, trends were mixed by region. In Europe, sales from new Exhaust and Emissions programs were not yet enough to offset the lower rate of production for programs already in place. In the U.S., lower production of construction and mining equipment is still a headwind for Off-Road, but we had a meaningful sequential increase in first quarter and year-over-year trends are also improving. We had a very strong quarter in China with Off-Road sales up more than 50%. Their economic recovery appears to be underway, and we are also benefiting from new relationships with Chinese manufacturers that want our high-tech products, including PowerCore. China produces more heavy-duty equipment than any other country in the world, and our team is doing an excellent job building and strengthening relationships with large local customers. While we expect to have some variability in quarter-to-quarter trends, we are also confident that we have a long runway for growth in China. First quarter sales in Aftermarket were down only slightly from the prior year and they were up 6% from the prior quarter. All of the year-over-year decline in Aftermarket came from the U.S. The independent channel is still being impacted by the oil and gas slowdown, which we partially offset with pricing actions implemented earlier this calendar year. And large OE customers are still tweaking inventory to match demand. Outside the U.S., Aftermarket performed very well. In Europe, first quarter sales were up 4% in local currency as conditions improved in Western Europe. In China, first quarter sales of Engine Aftermarket were up more than 30%, reflecting strong growth in both channels. We are gaining share with the new OEM customers and end users are paying greater attention to equipment maintenance. Part of our success in China is due to PowerCore, which is growing rapidly from a small base. Importantly, PowerCore continues to do well outside of China. Global sales of PowerCore replacement parts were up in the low single digits last quarter and we set another record. PowerCore is our most mature example of how our razor to sell razor blade strategy works, and the brand is still going strong after 20 years. Turning now to the Industrial segment. First quarter sales were down about 6%, including a benefit from currency of about 2%. The decline was driven primarily by Industrial Filtration Solutions, or IFS. The pandemic is creating a headwind in terms of equipment utilization and a lower willingness to invest. Quoting activity for new dust collectors was down in the first quarter and the quote-to-order cycle remains elongated. Generally, customers are focusing on must-do projects while deferring expansion and productivity investments to a future date. With the market under pressure, we are focused on building our brand and gaining share. We have strengthened our capabilities related to market analysis and virtual selling, and our e-commerce platform gives us incredible reach. We also continue to leverage our technology advantage, and we are encouraged by the opportunity that presents in an underserved market like China. For quarter — first quarter sales of dust collectors were up modestly in China and the needs in that region are changing in our favor. Some manufacturers are dealing with compliance upgrades related to the Blue Sky initiative, while others are going beyond the minimum requirements and striving for better air quality. That shift represents an exciting opportunity for us, so we will continue to invest for growth in that region. Process Filtration for the food and beverage market is another exciting opportunity. We launched our LifeTec brand filter late in 2016, and we have seen tremendous growth since then. Sales of Process Filtration parts were up again last quarter with a low single digit increase, which partially offset the pandemic-related pressure on sales of new equipment. Our strategy for growing Process Filtration is solid. We are focused on winning new contracts with large global manufacturers, which gives us the opportunity to sell their plants. Some of these customers have hundreds of plants. So we are, once again, doubling our sales team for Process Filtration. We also made an organizational change to better align our team with the needs of our food and beverage customers. While these types of optimization initiatives are standard work for us, I’m calling it out because during our fourth quarter call, we said Process Filtration sales were about $50 million in fiscal 2020. Following our reorganization, that number is more like $68 million. Our IFS numbers are unchanged, but we wanted you all to have the right baseline as we talk about year-over-year trends in this exciting business. Trends across the balance of our Industrial segment were mixed. Sales of Gas Turbine Systems were up 11%, driven by strong growth of replacement parts as we continue to gain share. In special applications, we faced pressure from the secular decline in the disk drive market, combined with lower sales of our memory products. We partially offset the decline with strength in our Venting Solutions business, which is also benefiting from share gains as we expand into new markets, including the auto industry. Overall, we see strong evidence of how our diverse business model is providing some insulation from the pandemic. We are gaining share in strategically important markets and geographies. We are investing to keep the momentum, and we continue to show progress on our initiatives to increase gross margin. I’ll talk more about our longer-term plans in a few minutes. So I’ll now turn the call over to Scott. Scott? ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [4] ——————————————————————————– Good morning, everyone. I also want to welcome Charley. He’s got great perspective, and he’s a strong addition to our team. We are excited to have him join us, and I hope you all will have a chance to connect or reconnect with him soon. Now turning to the quarter. Like Tod said, we are pleased with our results. Economic conditions were better than what we had in the fourth quarter, and we made progress on our strategic initiatives. First quarter margin was a highlight for us in terms of year-over-year and quarter-over-quarter performance. Versus the prior year, operating margin was up 50 basis points, driven entirely by gross margin. That translates to a decremental margin of 4%, but that’s probably not the level to expect over time. For a better comparison, I’d point you to our sequential trends. First quarter sales were up 3% from the fourth quarter and our operating profit was up almost 6%. That yields an incremental margin of 24.5%, which is in line with our longer-term targets from Investor Day and several points ahead of our historic average. As I’ve said many times, we are committed to increasing levels of profitability on increasing sales, and we have solid plans to keep driving margins higher. We saw evidence of those actions last quarter, so let me share some details. First quarter gross margin increased 60 basis points to 35% despite the impact from lost leverage and higher depreciation. On the other hand, gross margin benefited from lower raw material costs. Our procurement team has done an excellent job capturing cost improvements by working with existing suppliers and identifying new ones, which added to the benefits from lower market prices. We also had a favorable mix of sales in the first quarter. Specifically, aggregate sales of our Advance and Accelerate portfolio, which includes a significant portion of our replacement part sales along with many of our higher-tech businesses, outperformed the company. And our Advance and Accelerate portfolio also comes with a higher average gross margin. As we continue to drive investments into these businesses, we are shifting more weight towards higher-margin categories. Over time, mix should be a constant factor in driving up our gross margin. Our strong gross margin performance in the first quarter was complemented by disciplined expense management. Operating expenses were down 5% from the prior year, which resulted in a slight increase as a rate of sales. We had significant savings in discretionary categories like travel and entertainment, due in large part to pandemic-related restrictions. At the same time, we continue to invest in our strategic priorities. We are building teams and adding resources to areas like R&D, Process Filtration, connected solutions and dust collection. These investments are tilted heavily towards the Industrial segment, which contains most of the Advance and Accelerate businesses. Given that dynamic, we are not surprised that the first quarter Industrial profit margin was down slightly. Importantly, first quarter gross margin was up in both segments, so we feel good about where we ended. As our investments translate to growth, we expect our margin and return on invested capital will go up over time. Moving down the P&L. First quarter other expense was $1.5 million compared with income in the prior year of $2.6 million. The delta was largely due to a pension charge and the impact of certain charitable options. During the first quarter, we contributed to the Donaldson Foundation and there was also a charge for securing face masks that will go to frontline workers in our communities. We generally spread these contributions over a fiscal year, so the impact was more timing related than a change in trajectory for us. I also want to share some highlights of our capital deployment in the first quarter. As expected, capital expenditures dropped meaningfully from the prior year. With our large projects related to capacity expansion mostly complete, we are turning our attention to optimization and productivity initiatives. We returned more than $40 million of cash to shareholders last quarter, including the repurchase of 0.3% of outstanding shares and dividends of $27 million. We have paid a dividend every quarter for 65 years, and we are on track to hit another milestone next month. January marks the 5-year anniversary of when we were added to the S&P High-Yield Dividend Aristocrat Fund. So this anniversary signals that we have been increased our dividend annually for the past 25 years. We are proud of this record, and we intend to maintain our standing in this elite group. As we look to the balance of fiscal ’21, there are still plenty of reasons to be cautious. The magnitude and ultimate impact from the pandemic are still unknown, and we continue to face uneven economic conditions. Given these dynamics, we feel prudent to hold back on detailed guidance, but we did want to expand our information provided during our last earnings call. In terms of sales, we expect second quarter will end between a 4% decline and a 1% increase from the prior year, and that means sales should be up sequentially from the first quarter. We also expect a year-over-year sales increase in the second half of fiscal ’21. And sales are planned to migrate towards a more typical seasonality, meaning the second half will carry slightly more weight than the first. We are modeling a full year increase in operating margin, driven by gross margin. Our productivity initiatives should ramp up over the fiscal year. And we expect benefits from lower raw material costs and mix will still contribute to a higher gross margin, but to a lesser extent than what we have been seeing. Of course, the caveat to gross margin impact is from a strong recovery. While we would be happy if our first-fit businesses accelerate beyond their expectations, that could create a scenario where mix goes from a tailwind to a headwind. That’s obviously a high-grade problem, and we would address the situation if that’s the case. As the rate of sales, we intend to keep fiscal ’21 operating expenses about flat with the prior year. Specific to the second half of the year, we are still expecting headwinds from higher incentive compensation. And pending a return to a more normal operating environment, we would anticipate year-over-year increase in expense categories that have been significantly depressed by the pandemic. But as always, we are exploring optimization initiatives to offset these headwinds. I am confident that we can maintain an appropriate balance, allowing us to invest in our longer-term growth opportunities by driving efficiency elsewhere in the company. For our full year tax rate, we are now expecting something between 24% and 26%. The forecast range is more narrow than last quarter, simply due to having a clarity with the first quarter complete. There were no changes to our other planning assumptions, but let me share some context. Capital expenditures are planned meaningfully below last year, reflecting the completion of our multiyear investment cycle. Our long-term target is plus or minus 3% of sales, and we would expect our CapEx to be below that level this year. We plan to repurchase at least 1% of our outstanding shares, which would offset dilution from stock-based compensation. Should we see incremental improvement in the economic environment, it is reasonable to expect that we would repurchase more than 1% this fiscal year. Finally, our cash conversion is still expected to exceed 100%. We had a very strong cash conversion in the first quarter, driven by reduced working capital, lower capital expenditures and lower bonus payoffs. As sales trends improve versus the first quarter, we would expect our cash conversion to drift down a bit over the year, which is typical of a more favorable selling environment. Stepping back from the numbers, our objectives for the year are consistent with what I shared last quarter. We will: invest for growth and market share gains in our Advance and Accelerate portfolio; execute productivity initiatives that will strengthen gross margin; maintain control of operating expenses, including the implementation of select optimization initiatives; and protect our strong financial position through disciplined capital deployment and working capital management. As I close my section, I want to take a moment to thank my colleagues around the world for their continued resilience. We had a solid start to the fiscal year despite the pandemic fatigue that I know everyone is feeling. I am proud of what you all accomplished, and I look forward to continued success. I also want to thank Brad for his great contributions and his friendship. I wish you and your family my best as you move to Europe. The good news is we will still work together. With the mushy stuff out of the way, I’ll turn the call now back to Tod. ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [5] ——————————————————————————– Thanks, Scott. This year, we have a straightforward plan, we play offense where we can and defense where we must. Our defensive efforts are all about managing costs and one way we are doing that is through optimization. The most significant example relates to productivity improvements in our plants, which are being enabled by the capital investments we made over the last 2 years. But it’s not just about large projects for us. Our employees have a continuous improvement mindset, and our culture has a shared commitment to operating efficiently. Our teams are consistently finding ways to leverage tools and technology, and their work allows us to deploy more resources to support our strategic growth priorities. As we look forward, we’re excited about those opportunities. For example, food and beverage is the first step on our journey into life sciences. We expanded production capabilities of our LifeTec filters and our new R&D facility in Minnesota, we believe we are in an excellent position to press forward. At the same time, we’re pressing forward in our more mature markets. Driven by our spirit of innovation, we continue to bring new technology to applications that have been using old technology for a long time. A great example is a recently announced product for baghouse dust collection. Baghouses have used the same low-tech solution for decades, and they represent about half of the $3 billion to $4 billion industrial air filtration market. Our game-changing product, the Rugged Pleat collector, delivers improved performance and lower cost of operation for customers’ heavy-duty applications like mining, woodworking and grain processing. So we will deploy new technology to gain share in this significant market. In the Engine segment, we continue to lead with technology, which is critical given the size of the opportunity. We are currently competing for projects with an aggregate 10-year value of more than $3.5 billion, telling us the market for innovation is healthy, and we have a significant opportunity to win new business. Our OE customers are working to improve fuel economy and reduce emissions from the diesel engine, and they are also increasingly interested in growing their parts business. Our products meet both of those needs. We have a multi-decade track record of providing industry-leading performance, and we can also show that our technical and design characteristics help our customers retain their parts business. Based on the opportunities in front of us, we believe the diesel engine will remain a valuable part of our growth story for a long time. But we also know the market is changing. So our focus on growing the Industrial segment while expanding our global share of the engine market, including new technologies related to air filtration for hydrogen fuel cells, puts us in a strong position for long-term growth. I also want to touch on the role of acquisitions in our growth formula. With capital markets recovering from the pandemic, we’ve been getting more questions lately about our philosophy. So I thought I’d take a minute to realign everyone. Our focus is very consistent with what we laid out 18 months ago at our Investors Day. At a high level, we remain a disciplined buyer. We’re most interested in new capabilities and technologies, especially those that accelerate our entrance into strategically important markets, and we are targeting companies that will be accretive to our EBITDA margin. As always, we will pursue companies that align with our long-term plans versus simply buying share. The filtration market is split between a small number of large companies, us included, and a significant number of smaller companies. The timing for executing an acquisition is always uncertain, so we will continue to work our process. Additionally, we recognize and appreciate that filtration is a high value market. So our goal is finding the best opportunity at a reasonable price. With a robust acquisition strategy and significant organic growth options, we feel confident that we can continue to drive strong returns on invested capital for a long time to come. Before closing, I want to thank our employees for their continued commitment to our company. The level of global coordination and collaboration continues to impress me, and I believe we have done very well during the pandemic as a business and as a culture. To the Donaldson employees around the world, thank you for your commitment to advancing filtration for a cleaner world. Now I’ll turn the call back to Denise to open the line for questions. Denise? ================================================================================ Questions and Answers ——————————————————————————– Operator [1] ——————————————————————————– (Operator Instructions) Your first question comes from Bryan Blair with Oppenheimer. ——————————————————————————– Bryan Francis Blair, Oppenheimer & Co. Inc., Research Division – Director & Senior Analyst [2] ——————————————————————————– In terms of your second quarter sales expectations, can you offer a little more color on what you’re thinking about by segment? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [3] ——————————————————————————– Sure. So Bryan, as we look outward, we would suggest that the On-Road story is led by U.S. recovery. And an emerging portion of the On-Road story is China for us. And so we would look for a pickup in those markets. Second, we would look for agriculture — an agricultural market end market pickup worldwide. So that’s really broad-based. Construction still feels a bit more muted, and mining is still bouncing around at low levels. ——————————————————————————– Bryan Francis Blair, Oppenheimer & Co. Inc., Research Division – Director & Senior Analyst [4] ——————————————————————————– Okay. Helpful detail. And I’m sorry if I missed this detail on the prepared remarks, but how did innovative products perform in Engine Aftermarket for the quarter? ——————————————————————————– Brad Pogalz, Donaldson Company, Inc. – Director of IR [5] ——————————————————————————– Bryan, this is Brad. The performance overall was really good. Tod touched on PowerCore. We hit another record, and that was up a little bit in the quarter. And then if we look at the total IP products, so that was maybe 25% of Aftermarket, they were up in the mid-single digits in the quarter. ——————————————————————————– Bryan Francis Blair, Oppenheimer & Co. Inc., Research Division – Director & Senior Analyst [6] ——————————————————————————– Got it. And then any more color you can offer on Process Filtration trends? I know that on the new equipment side, there has been pressure for a while. Are you seeing stabilizing orders early in the second quarter? Or is that still pressured on that side? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [7] ——————————————————————————– Yes. So on the new equipment side, we’d say we still see some pressure, some headwinds across that CapEx-based investments, just like we do on our dust collection business, on Process Filtration. But on the replacement part cycle, we’d say we still continue to gain share, evidenced by the fact that it was up in low single digits in the quarter. ——————————————————————————– Operator [8] ——————————————————————————– Your next question comes from Rick Eastman with Baird. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [9] ——————————————————————————– A couple of things. And by the way, welcome to Charley, and Brad we’ll miss you. But just a quick question. Tod, could you maybe throw just a little bit more color? I’m still maybe a little bit surprised that the U.S. Aftermarket business didn’t perform better, just — in Engine, just given the easy comp that we saw. So maybe you could — and was there any — did any of the China growth in Aftermarket come out of the U.S., meaning did we previously serve that through exports? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [10] ——————————————————————————– Yes. It’s a great question, Rick. So the China growth is just true share gain growth. It’s not a realignment of exports or anything like that. So China is really share gain. Within the U.S., you’re seeing many parts of the end markets pick up clearly within utilization. The headwinds that we still have is oil and gas and the oil and gas comps, where fracking really stepped down and still remains a headwind to us on the comp side. So that’s really the story in the U.S. All other parts are that. Now there’s one other nuance. So you talked about the potential for China. That didn’t happen in China, but it did happen a bit in the U.S. So we did have some movement out of the United States to Latin America where we now service customers in Latin America. And so that’s a bit of a headwind as well. So it’s oil and gas and that line transfer as well. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [11] ——————————————————————————– Okay. And is the expectation around the Aftermarket business — Engine Aftermarket business, is the expectation that, that business is — finally laps the negative comparison, we can have a positive compare in the second quarter here, the fiscal second, just around Engine Aftermarket? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [12] ——————————————————————————– Yes, that’s our view. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [13] ——————————————————————————– Okay. Okay. And then, Tod, you had flagged this in your comments, but when I look at the On-Road business and Off-Road business sales in the fiscal first quarter relative to the fourth, and I just look at it in dollars, what are we kind of to make of this? I mean, how comfortable do you feel here with the On-Road and the Off-Road Engine business ticking up fairly meaningfully in dollars? On-Road was — you had a $32 million quarter, Off-Road 60 — almost a $65 million quarter, pretty substantial step-up. So in your mind, when you think about those 2 businesses, OE businesses, are you seeing the order flow support that acceleration? Or is the first quarter maybe more a testament to the third and fourth quarters to be in the bottom? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [14] ——————————————————————————– Yes. So Rick, it goes back to kind of how I opened with the first answer, right? So On-Road U.S., it’s clearly a U.S.-based story. And all the statistics with ACT and all of what you see out there on the new truck orders filling in is clearly what we’re experiencing. And so we would see that we have some tailwinds within that market, still unsettled as to how long that will last or how big that step-up would be. But we are seeing more positive momentum in the On-Road, particularly our U.S. story, but also an emerging part of that story is our share gains across China. And then on the Off-Road side, it’s really an ag story. It’s a broad-based story, and you hear that out of Deere’s report and many of the others. And so we do see some momentum in that area as well. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [15] ——————————————————————————– Okay. Okay. And just my last question, promise here. Tod, when you mentioned Aftermarket sales versus first-fit or equipment sales. In the quarter, from a total Donaldson perspective, what did those growth rates or declines look like across Engine and across Industrial? Is that a number you have? ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [16] ——————————————————————————– For the sequential performance? ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [17] ——————————————————————————– No, just year-over-year. So against your revenue decline of, what, 5%, was Aftermarket in total flat or was it up a little bit versus the equipment or first-fit? ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [18] ——————————————————————————– So Rick, a little confused with that. On the table that we put within the release, of course, we show that Aftermarket was essentially down 1% over last year Q-to-Q. And Off-Road was down about [5.5%]… ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [19] ——————————————————————————– Yes. I’m just — yes, not to interrupt you, but just… ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [20] ——————————————————————————– (inaudible) I’m not getting it. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [21] ——————————————————————————– Just total sales for Donaldson. I mean we have — we obviously have Aftermarket sales or replacement sales on the Industrial side as well in dust collection. I think you kind of referenced those — parts of those are better. But I’m just curious if you have a number like that. ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [22] ——————————————————————————– Got it. Got it. Sorry, I misunderstood, Rick. Apologies. Yes, so both segments were — Aftermarket was down low single digits versus low doubles for first-fit in both segments. ——————————————————————————– Richard Charles Eastman, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [23] ——————————————————————————– Down low double digit. Okay. ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [24] ——————————————————————————– Yes. So pretty consistent with Tod’s opening remarks about how Aftermarket significantly outperformed, that was pretty much true in both segments. ——————————————————————————– Operator [25] ——————————————————————————– Your next question comes from Nathan Jones with Stifel. ——————————————————————————– Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst [26] ——————————————————————————– Maybe just talk a little bit about gross margins. Nice to see those get back to 35% here. Just looking back at the Analyst Day presentation a couple of years ago, I think your targets were probably 35.5%, 36%. Clearly, we’ve had a little demand disruption in the interim here. Do you guys still think you’re on target to get kind of — to those kind of 35.5%, 36% gross margin level if we get volume back to, say, 2019 levels? And then what’s the path forward for net? ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [27] ——————————————————————————– Nathan, this is Scott. So we still feel good about our Investor Day targets. As we’ve said, the time line certainly got pushed out due to the pandemic and the revenue declines we’ve experienced, but we still feel good about those targets. We will continue to work to drive up that margin. We were pleased with the performance in the last quarter and in the fourth quarter of last year. So good growth in gross margins. We still see that Investor Day target of op margin between 15% and 15.8% that we gave out in the Investor Day as a reasonable target for us. And as revenues grow, we’re going to be working to continue to improve our operating margins. So I think we still have those targets in sight, and we’re still driving in that direction. ——————————————————————————– Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst [28] ——————————————————————————– Okay. Then a question on inventory. I think, Tod, in your comments, you mentioned that the OEMs were still tweaking inventory levels. Do you feel like there’s still a little destocking in the OEM channel? I think for the last quarter or 2, you’ve said the Aftermarket is pretty much flat. And with the prospect here that we’re going to see sequential growth in your end market demand, should we also start to see some restocking, both at the distributed and OEMs? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [29] ——————————————————————————– Nathan, I actually visited customers in the quarter here on the independent channel, and I would tell you that I feel comfortable that it’s at pull-through levels. I’ll be with more customers tomorrow. So I would say the independent channel is pretty stable. On the OE side, you get a little bit of fits and starts with that. And so that’s why the word tweaking, if you will. The end of the year is here now in December. They typically do some balance sheet management, pull it out. We see the comeback and then the bounce in January, et cetera. so net-net, it’s just small movements, but it feels like the pull-through. The one place where we are starting to feel a little bit of pickup and you can see some restocking is China, but that’s really driven by our personal share gains. ——————————————————————————– Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst [30] ——————————————————————————– Do you think that calendar year 2021 should see some meaningful restocking in these channels, just given your demand outlook over the next few quarters here? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [31] ——————————————————————————– Tough to say, Nathan. I — how will this thing unfold relative to the pandemic, will it walk up or will it step up? I’m not really sure. But as economies open up worldwide, clearly, they might add back carefully because cash is still very important to many businesses, especially the independent channels. And so we’re really not sure what the behavior will be like this time out of this recession. It may be different on the restocking behavior than previous. ——————————————————————————– Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst [32] ——————————————————————————– Okay. And just one more on the dust collector business. You did say that dust collector orders were down in the quarter you just reported. Are we still in the phase where we’re going down at a faster rate or going down at a slower rate? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [33] ——————————————————————————– Slower rate, still elongated at least double on quote-to-order cycles. But must-do projects are being done, other projects are just being put off as long as they can. So we’ve clearly worked through much of that, but there’s a carefulness cloud that hangs over that type of investment still. ——————————————————————————– Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division – Analyst [34] ——————————————————————————– Not surprising in this environment. ——————————————————————————– Operator [35] ——————————————————————————– And your next question comes from Brian Drab with William Blair. ——————————————————————————– Brian Paul Drab, William Blair & Company L.L.C., Research Division – Partner & Analyst [36] ——————————————————————————– Charley, looking forward to working with you. And Brad, I’ve already sent you probably 80 mails wishing you good luck, but good luck again. ——————————————————————————– Brad Pogalz, Donaldson Company, Inc. – Director of IR [37] ——————————————————————————– Thanks, Brian. ——————————————————————————– Brian Paul Drab, William Blair & Company L.L.C., Research Division – Partner & Analyst [38] ——————————————————————————– Did you say or can you say what percentage of revenue for Engine and what percentage of total revenue is generated in China in the quarter, in the first quarter? ——————————————————————————– Brad Pogalz, Donaldson Company, Inc. – Director of IR [39] ——————————————————————————– Sure, Brian, this is Brad. I’ll take that one. Engine was — about 6% of Engine sales came from China in the quarter, and Industrial was higher at about 12%. But I’d remind everybody that our Disk Drive business, about half of that comes out of China. So that’s inflated a bit. And the nice thing with Engine is with these growth rates, we’ve seen that share grow pretty meaningfully over the last 5 or so years. So Engine as a percent of China — the percent of China for Engine coming out of that is much higher than it’s been. ——————————————————————————– Brian Paul Drab, William Blair & Company L.L.C., Research Division – Partner & Analyst [40] ——————————————————————————– Okay. I appreciate that. And then, Tod, you talked about the Advance and Accelerate portion of the portfolio and specifically Process Filtration. Just wondering, can you comment on some of these other areas you mentioned at the Investor Day, like venting, semiconductor, hydraulics? I think you might have touched on some of that. But what are the — how are those businesses growing outside of Process Filtration? And also, is this Advance and Accelerate category still growing? At the time of the Investor Day, it was like 5 to 7 points beyond what the corporate average was. ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [41] ——————————————————————————– Yes. So first I’ll touch with our venting business. We’re very pleased with the share gains we’ve had in venting. It’s still coming off of a low base to the company, but we’re looking to get that to be a 4% level of the overall corporation. It’s still between — it’s gone from less than 1% to between 1% and 2%. So we’ve had some nice growth, and we also have some significant program wins ahead of us. So very pleased with the team and the progress and the growth on the venting side. Relative to other portions of the portfolio, hydraulics, we also continue to grow more of a mid-single-digit in this type of an environment situation than venting, which is clearly within the double digits. So we — we’re very pleased with the investments we’ve made across the Advance and Accelerate portfolio. It’s delivering quite nicely. As far as performance outside or above the overall company averages, yes, we would say that mid-single digits above company average is clearly our expectation and the reason why we continue to invest within that particular segment of our portfolio. ——————————————————————————– Brian Paul Drab, William Blair & Company L.L.C., Research Division – Partner & Analyst [42] ——————————————————————————– Okay. And then just last, I’d be interested if you had any update on the market reception of the remote monitoring technology that you introduced recently? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [43] ——————————————————————————– As you can imagine, within our IAF with our dust collection-based businesses, where the overall market is still very careful on quote-to-order cycles. They’re also very careful on any types of investments. And so we’re still in that push type of a mode out to the marketplace. We do have hundreds of installations, but we still continue to push it out to the marketplace. And the market has not switched to a pull yet. We would look for that sometime in the future, and we would have to get more market normalcy certainly before we would expect that to happen. ——————————————————————————– Operator [44] ——————————————————————————– Your next question comes from Laurence Alexander from Jefferies. ——————————————————————————– Daniel Dalton Rizzo, Jefferies LLC, Research Division – Equity Analyst [45] ——————————————————————————– This is Dan Rizzo on for Laurence. You mentioned savings in A&D, some optimization — or you mentioned an optimization program. I was wondering if there’s a target for the savings you expect over the next couple of years. ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [46] ——————————————————————————– We’re still working on the plan on that. We clearly will come out with some additional guidance once we firm those type of activities up. But those kind of adjustments really still lie ahead of us. ——————————————————————————– Daniel Dalton Rizzo, Jefferies LLC, Research Division – Equity Analyst [47] ——————————————————————————– Okay. ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [48] ——————————————————————————– And this is Scott. I just want to say, as we mentioned, we’re working hard to explore cost optimization initiatives across the company. And we work hard to manage that OpEx, especially as we move into the next few quarters here. ——————————————————————————– Daniel Dalton Rizzo, Jefferies LLC, Research Division – Equity Analyst [49] ——————————————————————————– Okay. And then you mentioned being disciplined and sticking to the plan in terms of looking for inorganic growth. I was wondering if the pandemic has altered the landscape of potential targets, whereas there might be more or less or if anything’s changed in the last 9 months, whatever it’s been? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [50] ——————————————————————————– It has changed things a little bit. So for example, if you’re in the mask business, it’s pretty interesting, you can buy mask making companies these days, which you couldn’t in the past. So maybe people are trying to cash in within that filtration piece, but that’s really — believe it or not, it’s a low technology space. So that’s been one of the changes that’s happened. But the balance of the areas where we are interested in, there has not been really any change in behaviors. It’s still a very highly valued segment, and we continue to knock on doors and work our lists. ——————————————————————————– Operator [51] ——————————————————————————– Our last question comes from Dillon Cumming with Morgan Stanley. ——————————————————————————– Dillon Gerard Cumming, Morgan Stanley, Research Division – Research Associate [52] ——————————————————————————– Just first, Tod, you mentioned that you’re kind of doubling the sales force around Process Filtration and food and beverage. I guess, first, what does that imply about the level of growth that you see for that business, both, I guess, this year and next? And related to that, Scott, I think you mentioned that you front load some costs being associated with those sales force adds in Industrial. Do you feel like you’ve front loaded enough of those that we can get back to kind of year-over-year EBT margin improvement in Industrial next quarter? Or is that still going to kind of play out in the next quarter or 2? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [53] ——————————————————————————– Yes. So maybe I’ll start and then I’ll let Scott pick up. So relative to the growth rates that we would expect out of that type of an investment, particularly in this type of an environment, we have to be able to be let into the plants to be able to make those sales. So we would expect mid-single digits to high single-digit type of growth rates across our Process Filtration business, and I’ll let Scott pick up from there. ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [54] ——————————————————————————– Yes. And I think you’ve heard Tod say, we’re essentially doubling the sales force, so we’re making a big investment there. And certainly, new sales folks when they come on, take time. You could say things are a little bit challenging right now with the pandemic, but we still feel that’s a strong investment for our future. We noted Industrial margins were down 10 basis points this quarter. And that’s because we’re making investments in the Industrial. So I can see the need for your question. And I would submit that as those people come up to speed and hopefully, things get a little bit better here with the pandemic that those investments will begin to return at a higher rate, and that Industrial margin will start to increase. So we need to leverage those investments. Certainly, there’s front-loaded costs which are impacting us now as revenues are a little soft on the Industrial side, but we expect that situation to improve over time. And we’re going to continue to invest in high-margin opportunities in our Advance and Accelerate portfolio. But over time, we expect the margins of the company to increase. And our Advance and Accelerate portfolio carries a higher-than-average corporate gross margin, and that will be a positive tailwind for the company. ——————————————————————————– Dillon Gerard Cumming, Morgan Stanley, Research Division – Research Associate [55] ——————————————————————————– Yes. Okay. Got it. That’s helpful. And then maybe kind of switching back to some of your longer cycle businesses in IFS and dust collection. I think you guys have been calling out CapEx [hesitancy] in kind of longer growth cycles for several quarters now. It’s certainly understandable, and you were talking about that earlier. But I guess, what do you think these customers are kind of looking for at this point? Because it seems like PMIs are broadly more — are more stable than a couple of quarters ago, and we’re bumping up against about a year of project deferrals at this point. So I guess, how sustainable is it for customers to kind of be maintaining this current level of CapEx spending in that business? ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [56] ——————————————————————————– Well, a dust collector’s lifespan is between 15, 20 years, typically. And so consequently, they can go a little bit longer and continue to run and just have the replacement parts changed out, if you will, and that’s on the upgrade side. The other part of it is new equipment or plant expansion. So you haven’t seen a whole lot of plant expansions going on. So that cycle is still pretty dormant out there, which would normally give us a good lift. So overall, we do need more confidence across the economic recovery, both in the U.S. and Western Europe, in order to really be able to be comfortable that we’re looking at an uptick within that business. ——————————————————————————– Brad Pogalz, Donaldson Company, Inc. – Director of IR [57] ——————————————————————————– Dillon, this is Brad. I’ll add one point. If you think about PMI and just activity, that’s good for the Aftermarket side of that business. We would watch capacity utilization as probably more a trigger for new equipment. So keep your eye on that metric, we are, too. ——————————————————————————– Dillon Gerard Cumming, Morgan Stanley, Research Division – Research Associate [58] ——————————————————————————– Okay. Got it. That’s helpful. Maybe just my last question here. The cash balance is starting to creep up a bit. And I know, Tod, you went through and kind of reiterated some of your capital allocation priorities. But you guys have the 1% repurchase framework laid out. Is there kind of a level of cash that you’re kind of targeting for the end of the year or as a placeholder number that we can benchmark towards? And I guess, if you want to assume that you can’t kind of execute M&A by the end of the year, is there still kind of a placeholder we can kind of reference for buybacks versus that benchmark in terms of kind of a level of cash you’d be comfortable holding at year-end? ——————————————————————————– Scott J. Robinson, Donaldson Company, Inc. – Senior VP & CFO [59] ——————————————————————————– Yes. So we kind of run the company on a net debt-to-EBITDA target of 1.0. So that’s our target. We’re slightly below that now. We want to be conservative in light of the situation we have. Our capital deployment strategy is invest either organically or inorganically in the company, pay that dividend, which has been going on for 65 years; and then buy back shares. We knew this is kind of an awkward year, which is why we came out with a share buyback target initially at 1%. We bought 0.3% of the outstanding shares for the first quarter. And I made the statement that if things continue to improve, you could very well reasonably expect us to increase that 1% up to — up a fair amount. And so that’s kind of where we sit right now. As things crystallize here, we’ll be a bit firmer with our guidance, but we’re committed to 1%. And we said, if things continue to improve, we’ll likely increase that because we are generating very strong cash conversion in the first quarter. That will come down a bit as revenue trajectory changes and our CapEx is down. So we feel that our free cash flow is a very strong kind of print right now. So we’re happy about that, and we’ll manage it as we go forward, and we’ll keep you appraised of our estimates. ——————————————————————————– Operator [60] ——————————————————————————– I’d now like to turn the call back over to Tod Carpenter, CEO, for closing remarks. ——————————————————————————– Tod E. Carpenter, Donaldson Company, Inc. – Chairman, CEO & President [61] ——————————————————————————– Thanks, Denise. That concludes today’s call. I want to thank everyone listening for your time and interest in Donaldson Company. And I hope that you, your families and friends are safe, and I wish you all a happy holiday season. Goodbye. ——————————————————————————– Operator [62] ——————————————————————————– This concludes today’s conference call. You may now disconnect.
