Barnes Group inc (B) Q2 2021 Earnings Call Transcript

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Barnes Group inc (B -4.01%)
Q2 2021 Earnings Call
Jul 30, 2021, 1:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Barnes Group Inc. Second Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to the speaker today, Mr. William Pitts, Director of Investor Relations. Please go ahead, sir.

William E. Pitts -- Director, Investor Relations

Thank you, Angie. Good morning, and thank you for joining us for our second quarter 2021 earnings call. With me are Barnes Group's President and Chief Executive Officer, Patrick Dempsey, and newly appointed Senior Vice President and Chief Financial Officer Julie Streich. If you've not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at BGInc.com.

During our call, we will be referring to the earnings release supplement slides, which are also posted on our website. Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to our investors. These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of the press release and in the Form 8-K submitted to the Securities and Exchange Commission.

Be advised that certain statements we make on today's call, both during the opening remarks and during the question-and-answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC. The filings are available through the Investor Relations section of our corporate website at BGInc.com.

Let me now turn the call over to Patrick for his opening remarks, then Julie will provide a review of our financial results in details of our updated outlook for 2021. After that we'll open up the call for questions. Patrick?

Patrick J. Dempsy -- President and Chief Executive Officer

Thank you, Bill, and good morning, everyone. Continuing with a clear focus on our business recovery, Barnes Group produced another solid quarter of year-over-year and sequential improvement in orders, organic sales, operating margins and earnings. With total backlog at its highest point since the end of 2019, expanding revenue outlook, strengthening industrial end markets and the progressing aerospace environment, we feel confident about the prospects for the second half of the year. More importantly, our improving financial results continue to be supported by significant investments in growth initiatives, that position us to sustain performance over the long-term.

In the second quarter, organic sales were up 31% with sizable gains in both our operating segments. Industrial was particularly strong, while Aerospace continues to build momentum after the significant effects of the pandemic on that industry. Similarly, orders were very good as we generated a book-to-bill of 1.3 times, with Aerospace driving that result. Our total backlog stands at $984 million at quarter-end, reflecting a 12% increase from the end of the first quarter. Adjusted operating income and margins were up 41% and 40 bps respectively. Adjusted earnings per share were $0.45, up 67% from last year. Again, really great results by the team.

Moving now to a discussion of end-market dynamics, beginning with Industrial. Our Industrial segment generated another strong quarter with each of our businesses generating excellent year-over-year organic orders and revenue growth. For the segment, orders were up 37% organically with a book-to-bill of approximately 1 times. Industrial sales grew 42% with organic sales growth of 35%. Of note, second quarter total industrial sales were ahead of pre-COVID second quarter of 2019.

As a macro level backdrop like last quarter manufacturing PMIs in the U.S. and Euro zone remains strong, with China in the expansion territory, though not as robust as the other regions. Now with expanding the ongoing semiconductor issue that's dampening automotive bills, IHS predicts -- still predicts 2021 global production to be up 10% over the last year and up an additional 11% in 2022. With respect to new platform launches and major refresh programs of light vehicles, 2021, 2022 and 2023 are forecast to be sustained at a healthy level.

Within our Molding Solutions business, we saw a good orders quarter up 17% organically. Automotive, Packaging and Personal Care, each saw double-digit orders growth, with Automotive being particularly strong. Medical mold orders took a dip in the quarter, not an unusual dynamic as these large ticket products can be somewhat lumpy. Organic sales were up 22% year-over-year, while sequential sales were up 13%.

On many occasions, you've heard me talk about investments in growth that we're making across the businesses to drive our sales and marketing efforts, innovation, and new product development. Recently I discussed the launch of our new vacuum gripper technology in our Automation business.

At Molding Solutions, we are also working hard to expand our leading technology-based solutions across multiple end markets. A prime example relative to the public health crisis we've all experienced over the last year or so, is our mold technology serving the global medical market and our investment and development of a new product offering known as Pipette Tips. Pipette tips are a high volume critical item used in the world of laboratory diagnostics for collecting a precise amount of liquid and transferring it to a test apparatus. This market has expanded recently in order to meet the enormous demand brought on by the pandemic. Our customers require a technology-based solution that consistently delivers high output rates with extremely tight tolerances. The pipette tip's geometry must be precise to ensure the test results are both accurate and reliable.

Our Molding Solutions business has developed a mold concept, specifically for production of pipette tips, which not only meets strict technical requirements, but also focuses on superior reliability, and ease of maintenance. To maximize up time in an operation that runs 24 hours a day, seven days a week, the configuration of the mold allows for required maintenance of worn parts to occur right on the machine to replaceable modular units or clusters allowing for minimum disruption and production to come quickly back online.

Delivering leading technology-based solutions such as the pipette tip mold system, and focusing on customer success allows our Molding Solutions business to demonstrate extraordinary value. To close my Molding Solutions comments, our sales outlook has improved once again, as we now forecast organic sales growth in the mid-teens, a bit better than our prior view.

At Force and Motion control organic orders were up over 50% with organic sales up double digits. FMC's two major end markets, sheet metal forming and general industrial, both saw robust orders and sales growth. On a sequential basis, sales increased 6%. We continue to see full-year 2021 organic sales growth to be up mid-teens.

Engineered Components once again generated high double-digit organic orders and revenue growth on a year-over-year basis. Sequentially, we saw a modest step in orders and sales as automotive semiconductor issues weigh on automotive end markets. As a result of this issue, we saw our second quarter revenue impact of approximately $5 million, very much aligned with the exposure we disclosed in April. We expect the third quarter semiconductor revenue impact of $3 million and another $1 million in the fourth quarter. Our general industrial markets remained very healthy and are helping to mitigate some of the impact. Our outlook for organic sales growth is now forecast to be up in high-teens, a step up from our prior view of mid-teens growth.

At Automation, as economies rebound, the migration toward industrial robotics, a more complex end-of-arm tooling solutions continues to be favorable. On a year-over-year basis, organic orders and sales growth were well into the double digits. Sequential growth in orders and sales also continues along a healthy trend. We now expect 2021 to deliver organic growth of approximately 20%, better than our April expectation of mid-teens growth.

To wrap up on Industrial, clearly our year-over-year growth rates across the segment compared favorably to last year's second quarter, which was the trough quarter relative to the impact of the pandemic. Comparables gets more difficult over the next few quarters, though we expect to perform well. At Industrial, we see 2021 organic growth in the mid-teens with operating margins of 12% to 13%. Our margin expectation is down slightly as we continue to make strategic investments in our people, products and systems. However, we view these investments as critical to setting us up for long-term growth and profitability. Additionally, in the near-term, we are managing supply chain challenges, which Julie will address in a moment.

Moving to Aerospace. It's fair to say that the environment continues to improve. Airbus and Boeing narrow-body production levels are anticipated to increase meaningfully, although wide-body recovery is still a way off. Global traffic and capacity trends are improving and that all bodes well for a strengthening aftermarket. At the segment level we've been seeing good sequential sales growth and expect that trend to continue. And beginning this quarter, we'll see favorable year-over-year comparisons as we move through the year.

Aerospace sales improved 23% over last year and 6% sequentially from the first quarter. OEM led the growth while aftermarket was down modestly, which we believe is simply timing. A highlight of the quarter was our strong OEM orders which generated a book-to-bill of 2.5 times. That's three quarters in a row with a strong order to book. This reflects our customer's confidence in a narrow body ramp, as most of the order volume relates to the LEAP engine platform. Our 2021 outlook for Aerospace is unchanged from our prior view. Total Aerospace sales are expected to be up low-single digits. Within the segment, OEM sales are forecast to be up mid-single digits, MRO down low-single digits, and spare parts down in the mid-teens. Segment operating margin is anticipated to be 13% to 14%, slightly higher than our April outlook.

In closing, the second quarter finished with excellent results, positive momentum and a healthy outlook for the remainder of the year. Several growth initiatives are been driven across the organization to help advance our recovery, and position us to execute on our profitable growth strategy. While supply chain and inflation risks are present, our teams are doing a good job mitigating the impacts, and implementing pricing actions as appropriate. We remain confident in the strength of our end markets and our team's ability to convert that into new business opportunities.

Now, let me pass the call over to Julie Streich, our new Senior Vice President and Chief Financial Officer, for details on our quarterly performance. Julie brings to us a highly qualified business background and proven leadership in corporate finance. We're very happy to have you as part of our team. Julie?

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Good morning, everyone and thank you, Patrick for the warm welcome to Barnes Group. I'm happy to be here and look forward to working with you and the leadership team as we accelerate the ongoing transformation of our portfolio. It's an exciting time for Barnes and its likewise exciting to be part of cresting the go-forward story.

Let me begin with highlights of our second quarter results on Slide 6 of our supplement. Second quarter sales were $321 million, up 36% from the prior year period, with organic sales increasing 31% and foreign exchange generating a positive impact of 5%. As the impacts of the pandemic lessen, our well-positioned businesses are seeing recovery in almost all our end markets. Operating income was $38.5 million versus $10.1 million a year ago. On an adjusted basis, which excludes restructuring charges of $700,000 this year and $17.7 million last year, operating income of $39.2 million was up 41% and adjusted operating margin of 12.2% was up 40 basis points from a year ago.

Interest expense was $4.5 million, an increase of $600,000 as a result of a higher average interest rate, offset in part by lower average borrowings. We'll see a sequentially lower average interest rate beginning in the third quarter as our debt-to-EBITDA ratio has improved, driven by the recovery in our business and active cash management.

For the quarter, our effective tax rate was 25.3%, compared with 89% in the second quarter of 2020, and 37.6% for full year 2020. As compared to the full year 2020 rate, our second quarter tax rate is benefiting from the absence of tax expense related to the sale of the Seeger business in 2020, a net benefit related to certain foreign tax matters in the current year quarter, and a favorable mix in earnings based on tax jurisdictions.

Net income was $24.5 million or $0.48 per diluted share compared to $600,000 or $0.01 per diluted share a year ago. On an adjusted basis, net income per share of $0.45 was up 67% from $0.27 a year ago. Adjusted net income per share in the current quarter excludes $0.01 of restructuring charges and a net foreign tax benefit of $0.04, while the prior-year period excludes $0.26 of restructuring charges.

Now I'll turn to our segment performance, beginning with Industrial. Second quarter Industrial sales were $235 million, up 42% from a year ago, while organic sales increased 35%. As Patrick noted, the strong growth reflects volume increases across all our SBUs. Favorable foreign exchange increased sales by $12.4 million or 7%. As has been the case since June of last year, we have delivered another sequential quarter of sales improvement with second quarter sales up 7% from the first quarter of 2021.

Industrial's operating profit was $27.3 million versus an operating loss of $300,000 last year. Excluding restructuring costs of $200,000 this year and $15.8 million last year, adjusted operating profit was $27.5 million versus $15.5 million a year ago. Adjusted operating profit benefited from the contribution of higher organic sales volumes and the continuing impact of cost actions taken last year. Partially offsetting these items were higher personnel costs, primarily incentive compensation, and costs incurred in support of segment growth initiatives.

Adjusted operating margin was 11.7%, up 230 basis points from a year ago. Supply chain concerns including raw material availability, inflation, and increased freight costs continue to be a watch item. We do have raw material escalation clauses in certain long-term contracts, and are able to price newly quoted business to account for increasing costs. We continue to work these issues and are taking steps to mitigate our risk exposures. In the second quarter, we experienced approximately $1.5 million of combined freight and material inflation in the Industrial segment. For the second half of 2021, our Industrial outlook includes $2 million of inflation impacts.

Moving now to Aerospace. Sales were $86 million, up 23% from a year ago, driven by a 37% increase in our OEM business. Our aftermarket business which continues to be impacted by lingering effects of the global pandemic, experienced a 2% sales decrease, with MRO down 8% and spare parts up 14%. We expect the aftermarket to sequentially improve as we move through the second half of the year.

On a sequential basis, total Aerospace sales increased 6% from the first quarter of 2021. Operating profit was $11.3 million, an increase of 8%. Excluding $400,000 of restructuring cost this year and $1.9 million last year, adjusted operating profit was $11.7 million, down 5%, driven by higher incentive compensation and unfavorable mix. Adjusted operating margin was 13.5%, down 400 basis points from a year ago. Aerospace OEM backlog ended June at $694 million, up 16% from March 2021, and we expect to ship approximately 40% of this backlog over the next year.

Moving to cash flow performance. Year-to-date cash provided by operating activities was $86 million versus $123 million last year, with free cash flow of $68 million, down from $103 million last year. Capital expenditures were $18 million, down $2 million from a year ago. Year-to-date operating cash flow in 2020 saw a $48 million benefit from working capital, as cash management with a significant focus during the pandemic. While we have seen a modest working capital improvement in the first half, we won't see the same benefit in 2021 as we did last year as business rebounds.

Regarding the balance sheet, our debt-to-EBITDA ratio as defined by our credit agreement was 2.9 times at quarter end, down from 3.1 times at the end of last quarter. Our second quarter average diluted shares outstanding were $51.1 million. During the second quarter under a pre-existing 10b5-1 plan, we repurchased 100,000 shares at an average price of $52.29, leaving approximately 3.6 million shares remaining available for repurchase under the Board's 2019 stock repurchase authorization.

Turning to Slide 7 of our supplement, let's discuss our updated financial outlook for 2021. We now expect organic sales to be up 11% to 12% for the year, an increase from our prior view of up 10% to 12%, driven by strong Industrial growth. FX is expected to have about a 2% favorable impact on sales, while divested Seeger revenues will have a small negative impact. Adjusting op-- Adjusted operating margin is forecasted to be approximately 13%, consistent with our prior year.

We currently expect a small amount of residual restructuring charges to come through, which we will take as an adjustment to 2021 net income. Adjusted EPS is expected to be in the range of $1.83 to $1.98 per share, up 12% to 21% from 2020's adjusted earnings of $1.64 per share. Our current expectation reflects an increase at the lower end of our previous range of $1.78 to $1.98 and we expect second-half EPS to be weighted to the fourth quarter.

Rounding out a few other items. Our interest expense forecast remains $16 million, while our other expense is forecast at $6.5 million, slightly less than our April outlook. Estimated capex of $50 million, average diluted shares of $51 million and a full year tax rate of 30% are all consistent with our prior outlook. Cash conversion is now anticipated to be greater than 110%, an increase over our prior expectation of 100%.

In closing, we continue to drive solid revenue gains across the organization and expect further improvement. With many of our end markets demonstrating sustained recovery, our businesses are positioned to seize upon the opportunities presented by a stronger economy. Improving financial performance, good cash generation, and a supportive balance sheet sets us up for a good second half of the year. With a clear focus on executing our profitable growth plan, we'll continue to fund our strategic initiatives and pursue accretive acquisitions that will help us deliver superior performance over the long-term.

Operator, we will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions]

Your first question comes from the line of Myles Walton with UBS.

Myles Walton -- UBS -- Analyst

Thanks. Good morning.

Patrick J. Dempsy -- President and Chief Executive Officer

Good morning, Myles.

William E. Pitts -- Director, Investor Relations

Good Morning.

Myles Walton -- UBS -- Analyst

And welcome. And I was hoping you could touch on the aerospace aftermarket MRO. It sounds like the spares were nicely up sequentially in year-on-year and that would be sort of consistent with GE spares. But the MRO business itself, it's only a little bit more challenging to know where you guys are going to come out. Is that lack of expansion sequentially more an indication of competition for MRO activity, constraints or just overall market, as you see it?

Patrick J. Dempsy -- President and Chief Executive Officer

No, I think it's -- Myles, I think it's basically timing. In that we saw our sales slightly down a couple of percent sequentially. However, our orders were up 4% in the quarter. So what we're-- what we saw was over the course, was a strong May, a little bit of a dip or strong April a little bit of a dip in May and then a strong June and that's continued into July. So again, it's nothing I think more than just the nuances of the how products are coming in to the shops and nothing that we see as other than the natural volatility of what's going to happen I think over the coming weeks and months, but nonetheless, with an upward trend then we see aftermarket is just going to continue to grow sequentially quarter-over-quarter as we move through the year.

Myles Walton -- UBS -- Analyst

Okay. And the full year outlook for that -- the MRO outlook for the year remains same and didn't really change that right?

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah, no inside of Aerospace, we have our full-year MRO was down low-single digits, which is consistent with where we started the year. And the primary reason for that, of course, as you recall was a strong first quarter in 2020. And then also I'd bring note to the fact that we had a strong April. As the pandemic hit last year, we saw the strength continuing into April before it tailed off in May. So you had a comp that was pretty tough on a year-over-year basis as well.

Myles Walton -- UBS -- Analyst

Okay. And then on the supply chain concerns and in particular the inflation numbers you provided, the $1.5 million in the quarter and then $2 million for the rest of the year. Maybe can you just contextualize that? How much inflation is that? How much more -- maybe how much more than you expected is that, and maybe some frame of reference around it?

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Sure. Thanks, Myles. And if you might recall from our first quarter call, we had anticipated full-year inflation to be closer to $6 million for the year and now we're backing off of that slightly as a result of what we've been experiencing. So I would say what we've experienced year-to-date is largely in line with expectations, but we're a bit more optimistic going into the second half of the year.

Myles Walton -- UBS -- Analyst

Okay. Okay. And then the only everyone keen to voice is on cash flow, and I know you've raised the greater than 100 to a greater than 110 but-- and I heard you on the working capital in the second half, but unless there is a big working capital build, I guess I'm a little unclear why 110 is the right number as opposed to something materially higher than 110% conversion?

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Well, I'm certainly aligned with your line of thinking that we'd love to see something material -- materially higher than 110% and clearly we're going to strive to maximize our cash conversion, but as the business rebounds we do need to be cognizant of some build in working capital and therefore are comfortable at 110% or greater.

Myles Walton -- UBS -- Analyst

Okay. So, you do anticipate some relatively material level of working capital build or at least are allowing for that to happen in the second half, is that right?

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Yes.

Myles Walton -- UBS -- Analyst

Okay. All right. Thank you.

Patrick J. Dempsy -- President and Chief Executive Officer

Thanks, Myles.

Operator

Your next question comes from the line of Michael Ciarmoli with Truist Securities.

Michael Ciarmoli -- Truist Securities -- Analyst

Hey. Good morning, guys. Thanks for taking the questions.

Patrick J. Dempsy -- President and Chief Executive Officer

Good Morning.

William E. Pitts -- Director, Investor Relations

Good morning.

Michael Ciarmoli -- Truist Securities -- Analyst

How are you guys? Maybe just look at the margins in both segments. I mean Aerospace took a step down, sequential incrementals, I guess less than 4%. You had the spares improve which presumably carries higher margin than MRO. Can you just give us color on, on what's happening with Aerospace margins and kind of how we should be thinking about that?

Patrick J. Dempsy -- President and Chief Executive Officer

Sure. So, if you recall in the first quarter, our operating margin was 13.6%. And then as you noted, we're down 10 bps to 13.5% in the second quarter. The 13.5% I would suggest was a better performance than what we had indicated in the first quarter because we had given full year guidance of 13% for the full year. And the reason that guidance -- we gave that guidance was just some concerns over mix between the rate of which OEM grows versus aftermarket, obviously with aftermarket being higher margin. So, with that improvement in the mix we actually finished the quarter at 13.5% and now have up the guidance for the year between 13% and 14% for Aerospace, and clearly depending on the rate of which aftermarket comes back, that number could be significantly improved upon. It totally depends on the rate of which we see aftermarket recovery over the back half of the year.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. And I mean looking at the commentary from GE, from Safran and I mean, it -- clearly if we see the parts pull-through, I mean that's going to be the bigger lever for you guys than the MRO.

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah, spare parts, clearly is another area that we saw a nice sequential improvement, and year-over-year in the mid-teens from -- on the spare side so that bodes well for a trend that we continue to see improving and of course the repair side of the business continues to be a nice margin business as well. And as the engines come into the shops, clearly we'll see this the repair side also improve.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. Got it. And then just quickly on the Industrial margins. Obviously, some of the items you mentioned, from supply chain inflation related cost, the investment, how should we think about sort of the trajectory of the recovery of these Industrial margins. I guess, when do you think you guys can kind of really start showing the benefits here? I mean obviously once the supply chain raw materials ease a bit, that should help, but the investments, and I guess I'm thinking, trending back up to those levels, you have been kind of mid-teens. Just how should we think about the overall cadence and maybe even when does the investment subside a little bit?

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah, it's a great question. And what I would highlight is that if you think about where-- what is weighing right now on our Industrial margins, which are still pretty healthy even as I compare them back to pre-COVID performance, and so I referenced in my prepared remarks that we had seen total sales higher in the quarter in Industrial than we did in Q2 of 2019 before COVID. Our margins are just slightly below that performance in Q2 of 2019 as well, with significant investments being made into the Industrial side of our business. So the areas that we're making those investments are primarily, we announced last year, the launch of our Innovation Hub, and that has continued to build momentum into 2021, and we're excited about the opportunities of the key technologies the team there are developing.

Secondly, obviously, personnel costs on a year-over-year basis, and particularly as it pertains to incentive comp, where last year was basically zero, this year, obviously, we're seeing the improvement in the business. The inflation is a factor, and I'm pleased, very pleased with how the team is managing that. And while we try to put some parameters around it, we've built those parameters into our guidance for the full year.

And the last thing I just mentioned, and I mentioned that in the first quarter, the way we allocate out to the two segments is based on sales, and so Industrial has taken a little bit more of the weight this year with Aero being down, and that'll self rectify as well as Aero comes back and we move forward through the year.

So I would just highlight that our goal and our target of mid-teens with Industrial is still very much where the team is focused, and we're looking for Industrial margins to continue to improve sequentially. And just with the -- so the underlying margins to improve the offset in some of the investments we're making.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. Thanks very much. Julie, just a housekeeping. I think you said, what was interest expense for the year you are going to shake out through? $16 million?

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Yes, $16 million.

Michael Ciarmoli -- Truist Securities -- Analyst

Great. Thanks a lot, guys. I'll turn back into the queue.

Patrick J. Dempsy -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Matt Summerville with D. A. Davidson.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Thanks. Maybe just first for a little finer point on what Mike was talking about with Industrial incrementals at 17%, total company at 13%. Given the volume increase you're seeing running through that business, maybe can you parse out? And you mentioned the input cost per share, $1.5 million, that would give you a little bit higher on an incremental basis if we were to exclude that, but I guess I'm a little surprised that incrementals are materially better than what they are right now. I know you mentioned some growth investments, but can you maybe get a little more granular on what's driving that and how we should think about incrementals in the back half?

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah, so the incrementals as I pointed out, I look at it from -- internally, we look at it from a perspective of the underlying businesses and what the businesses are doing operationally. And there we remain very confident that we're continuing to see improvement and that incremental flow through occurring. The areas that I just highlighted, investments in terms of long -- the mid to long-term, those investments are the hub that I highlighted, our Innovation Hub, and we see that as a key strategic initiative for our long-term, and that is primarily focused today on the Industrial business in particular as it pertains to technology around Molding Solutions, digitalization, and the whole area of how we use our technology to become a major solutions provider in the quest for reducing plastic waste. And so there, as I highlight that, and with the clear opportunity within that industry and in that space, we think we can be a leading provider of what is a breakthrough solution in the future.

The digitalization side of things is where we're looking to move our products and services more toward being smart and connected, and there we have a number of key projects that are working around, again opportunities to create recurring revenue streams in the future, again, another investment that we see as key to our future success.

And then the last investment that we're making, which I expect to be -- see a return on in more of the short to mid-term is strategic sales and marketing. And there we've added significant resources in terms of talent, on the marketing side as well as feet on the street salespeople to continue to position ourselves for future growth.

So they are what's weighing, Matt, on the incremental margins externally, and as I mentioned also, if you just parse it out to Industrial, it's clearly a little bit of a shift in the allocations as well.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

So as I -- well, maybe it might be helpful, Patrick, within the Industrial business, how much would you say growth related investments are up on a year-on-year basis, '21 relative to '20?

Patrick J. Dempsy -- President and Chief Executive Officer

So they're up. I would say in the $5 million to $10 million range.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Okay. Got it. And then as a follow-up, with Industrial book-to-bill at 1.0, given kind of where we're at with the trajectory of the recovery, I'm a little surprised it's not higher. Maybe that some lumpiness in Molding. So can you talk about that a little bit? What SBUs are trending maybe above that, what's trending below that? Maybe just a little more granularity there.

Patrick J. Dempsy -- President and Chief Executive Officer

Well, as you highlight, I think the primary is the mold side of the business, and as I highlighted in my prepared remarks, we did see a little bit of lumpiness in medical orders in the quarter, which is not on -- surprising or not something that is -- not something we've seen in the past because from quarter-to-quarter, they tend to be a little lumpy. But within Industrial overall, I would suggest that each of the businesses were in that consistent range of about 1 times.

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Okay. Great. Thank you.

Patrick J. Dempsy -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Pete Skibitski with Alembic Global.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Good morning, guys. Nice quarter.

Patrick J. Dempsy -- President and Chief Executive Officer

Good morning, Pete.

William E. Pitts -- Director, Investor Relations

Good morning, Pete.

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Hey.

Pete Skibitski -- Alembic Global Advisors -- Analyst

So guys, just sticking with Industrial, revenue-wise you grew 42%. So it's kind of hard to ask this question but we've heard a lot about the chip shortages in the automotive industry and people having plant shutdowns. We've heard about the impacting revenue at other firms. So I'm just wondering, have those kind of phenomenon impacted your sales at all so far kind of year-to-date from a revenue perspective in your automotive end markets?

Patrick J. Dempsy -- President and Chief Executive Officer

Yes, they have. They have, Pete, impacted us and predominantly in the production side, which is within Engineered Components, and what we've seen is, in the second quarter we saw about a $5 million impact to revenues with an outlook that we've built into our forecast of another $3 million in the third quarter and $1 million in the fourth quarter. So it dampened a little bit, the Engineered Components performance. However, I would highlight that the Industrial side of Engineered Components has grown from strength to strength and that has been a offset to some of the dampening effect of the top-line on automotive.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Okay. And so it didn't really impact Molding Solutions and it really sounds like Molding Solutions...

Patrick J. Dempsy -- President and Chief Executive Officer

No. Molding Solutions is primarily driven by the new model launches and the new model changes and to that end, they saw some nice increased activity in the quarter, particularly I think as it pertains to new electric vehicles and the announcements that have been made around that.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Okay. Okay. So let me -- next question. Let me beat the dead horse a little bit on the Industrial margins. You took down the full year modestly, but even with that it looks like you're expecting, call it 14% to 15% type of a margin in Industrial in the second half of the year and obviously, it seems like volume will be your friend for a while, it seems like in Industrial. So I'm just wondering that 14% to 15% and that's a back end into the corner on 2022, but is that type of range something that is reasonable to think about for 2022?

Patrick J. Dempsy -- President and Chief Executive Officer

Well, I think we're definitely looking at margins improving over the course of the back half of the year and I would suggest that it's going to be a combination of volume and in turn of activities that the teams are driving. So we are looking to see an improvement in margins, both from a operational standpoint and the initiatives been driven by the Barnes Enterprise System. But-- and then also obviously as you mentioned a little bit of an uplift as a result of volumes. The -- as we move into 2022, I expect again that Industrial will continue to improve and build on that momentum back, as you said and as we've continued to communicate with a goal of getting back to mid-teens.

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

And since -- to build on what Patrick thing since Industrial margins are very much in focus, I would also add that, remember $12.4 million of the sales increase was driven by FX in quarter, which has virtually no margin drop through associated with it. So that is another factor contributing to in-quarter performance in Industrial.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Okay. That's helpful. Thank you, guys. So, just one last question. Switching to Aerospace. On the OEM side, lot of good things there. And Patrick, I would think that the strong OEM results in Aerospace is -- I would think you're having some headwind on the 787 program, I would think there is not much as is going on for you on that program at the current time.

Patrick J. Dempsy -- President and Chief Executive Officer

That's correct. That's correct. Let 's say we're at -- we're seeing clearly lower volumes as it pertains to most of the wide-body platforms, and what's driving our activity at the moment is all narrow-body and particularly the LEAP program.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Okay. Okay. It sounds great. Thanks for the color, guys.

Patrick J. Dempsy -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Christopher Glynn with Oppenheimer.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Thanks. Good morning.

Patrick J. Dempsy -- President and Chief Executive Officer

Good morning, Chris.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Julie, Patrick, and Bill.

Patrick J. Dempsy -- President and Chief Executive Officer

Good morning, Chris.

William E. Pitts -- Director, Investor Relations

Good morning.

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Hi.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

So, I was curious, the sales outlook remains down mid-teens but you did up mid-teens in the second quarter and look at the sequential increases, it seems like that trend line would -- going to eat up the big down in the first quarter more than the outlook. So just curious about the arithmetic there.

Patrick J. Dempsy -- President and Chief Executive Officer

Well, the, as you highlighted, there may be some conservatism inside of the outlook for aftermarket. But it is something that is going to continue to be driven by air traffic and moreover, I think the dynamics of the airlines and how they're managing cash. So there are a number of factors in play, but clearly, domestic travel here in the U.S. has seen a marked improvement and everybody is pleased about that. And also within, I'd say Asia, particularly China, a marked improvement in passenger traffic. So a little bit of a laggard has been Europe, and I think that also stands to be an upside in the event that the Europeans -- and vaccinations rolled out a little quicker there. So, all in Chris, we see sequential improvement in MRO and in spares through the back half of the year. The question is how much we gauged the rate of that increase and I think we've reflected in the guidance accordingly.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Okay. Yeah, I think the comps actually get a little easier, but I'll revisit my notes. And then on MRO upstage, I'm wondering if you run into any periodic pockets of inventory that are causing some of the volatility? Any idea how that spares channel in front of you is situated?

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah. Well, clearly what happened over the course of the pandemic was with a view to conserving cash, the airlines that everything within their power to bleed down inventories. And to that end, that all bodes well. I think in the -- there and they're going reach -- they have reached, if they haven't reached it already in the first quarter or the second quarter, the point of where the restocking, and so that I think is something that is another positive outlook on the aftermarket side of the house as well as they've run probably a lot of what's known as green time engines, which they've allowed them to defer maintenance. I think they're going to run to the end of that and required to pull the engines back into the shops as well.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Thanks. Switching to Industrial. You said in automation orders are up well into the double digits. Curious, we get a little more specific on what the orders did there? Sort of a state of play on that dramatic acquisition, the operations and the pipeline around that, both inorganic and organic?

Patrick J. Dempsy -- President and Chief Executive Officer

Sure. So I said it was well up into the double digits just to put a number on that, it was up north of 70% in terms of organic orders and up north of approximately 60% organically in terms of sales. So just a super strong quarter and actually I would highlight a record quarter within dramatic, in the history of the company. So just a very strong all-round performance by the team there and of course that's been driven, I think in part by virtue of the industrial sector waking up to some of the vulnerabilities in a pandemic and a shift toward more automation and robotics to complement existing work forces and so that's driven demand across each of the end markets into Q2 and we expect that to continue on a healthy trend going forward.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Sounds great. I missed the updated Industrial margin. Glad if you could repeat that.

Patrick J. Dempsy -- President and Chief Executive Officer

Yeah. For the full year, we guided 12% to 13%.

Christopher Glynn -- Oppenheimer & Co. -- Analyst

Okay. Great. Thanks guys.

Patrick J. Dempsy -- President and Chief Executive Officer

Thanks, Chris.

William E. Pitts -- Director, Investor Relations

Thanks, Chris.

Operator

At this time there are no further questions. I would like to turn the conference back to Mr. Pitts for any additional or closing remarks.

William E. Pitts -- Director, Investor Relations

Thank you, Angie. We would like to thank all of you for joining us this morning, and we look forward to speaking with you next on October 29th, with our third quarter 2021 earnings call. Angie will now conclude today's call.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

William E. Pitts -- Director, Investor Relations

Patrick J. Dempsy -- President and Chief Executive Officer

Julie K. Streich -- Senior Vice President, Finance and Chief Financial Officer

Myles Walton -- UBS -- Analyst

Michael Ciarmoli -- Truist Securities -- Analyst

Matt Summerville -- D. A. Davidson & Co. -- Analyst

Pete Skibitski -- Alembic Global Advisors -- Analyst

Christopher Glynn -- Oppenheimer & Co. -- Analyst

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