Q4 2019 Earnings Call
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The conference to speaker today.
Giovanni's <unk> Investor Relations Senators. Please go ahead Sir.
Thank you week and wed come to come out as 2019 fourth quarter and I know the results conference call.
Well, we stopped I would like to remind you that youre. During this conference call. We wouldn't be disgusting forward looking information and that actually results may vary from those expressed or implied during the school.
With me on the call today, our <unk> chairman and CEO at least among our Chief Financial Officer, <unk>, Vice Chairman a member of our board of directors at my.
I just try to embark on board of directors.
Book Schools got price event, but Easter, it's very operational and Lukas I don't.
But I see then all of our U.S. operations.
I would like to start my main stream that we lost an investor presentation in London, and they bring to serve and we hope to see many of you there.
Before passing over the course Wow low fortys opening remarks, I would like to briefly comment on a quarterly results.
During the fourth quarter 2019 States reached 1.7 billion down 17% compared with those of the corresponding quarter over the previous here and 1% sequentially, mainly as a result, so the slowdown in activity not jumping up and lower prices in the Americas.
Our quarterly ABT eight.
Wandering night, the medium was down 10% sequentially and down EBITDA margin decreased went down 17%, mainly due to a drop in average selling prices and I have professional fees mainly related to the closing of the school because he should put around them.
Average selling prices, you're not cubes embrace these segments declined 3% compared to the corresponding quarter <unk> 18.
And 3% sequentially.
During the quarter cash flow from operation was blend that I'm 60 for me.
Net cash position rose by 60 million to 990 immediately following the payment of anything DB then.
53 million in November last year.
And capital expenditure 80 me.
The board of director has decided to propose the approval of the annual general shareholders meeting to be held at the end of April the basement overnight annual dividend of 41, centsper share or 82 cents better idea.
Which includes the interim dividend of 13 cents per share for 26 cents pretty there that we paid at the end of November of last year.
If approved a D.V. then of 28 cents better Shadow 56, Sainsbury D.R., we'd be bait on made a point.
Now I will ask about looks to say if he was before we open the call two questions.
That's pretty much right.
Right and they.
Good morning dual fuel.
2019, it was a more difficult to either for its an area is it.
We expect.
Yeah, just one thing drilling that TV team U.S. she is.
It sounds to lower cash flow and the lasik almost eating financing environment, what prolonged and only know as we begin in 2020.
Starting to see activities, the realizing that 11 salmon, 25% lower than it was either.
But I think in the Americas say were also affected by the drop in U.S. activity, coupled with a partial resurgence <unk> domestic where the type production.
Following the steep poor cultural Steve.
<unk> in the first about duty.
Meanwhile, in Argentina.
What do you do they need to going on weekends. So turn it into second half of the or is it resulted in a sharp fall in investment activity in back on board.
In Saudi Arabia, I'm cool toss it to lend to de stocking process.
Which may lasted through the end of D.C. you.
Against this background denarius has achieved important milestone strengthened its position in Cuba.
60.
We have made good progress over the past two years I lost time injury frequency rate the is out of it.
Two and then what leverage of 1.2 lost time accident that Amelia met how our war that includes.
And in the fourth quarter 2019, we weren't able to reduce it to be low.
These reflect the cost them to management focus.
Sure.
The cultural changes that we've been able to extend that to about 45 facilities around the world.
Financially, we have war that to maintain the strength of our balance sheet.
Well seeds of 7.3 billion.
Our free cash through margin was 16% for the <unk>.
As we reduce the working capital by over 500 million.
He ran that our net cash position at the reason site 495 million.
Nine out of it in 80 million after maintaining our unlike DB then payments in 484 million over the year and acquiring 40%, Saudi Steve type for what ended up.
The only gently.
Even with the acquisition of each school.
After the close of the or we have in in net debt free balance sheet.
We would find out are you able to completed the acquisition of deep school on John Rodis do.
After receiving clearance from the U.S. somebody that's odcs in late December.
He's brought it lasted nine month.
Much longer than we had anticipated.
During this time the MCE due to read did I know a rig direct competitor. So the distributor, but do you want to switch that a pipe purchase they said away from its going to other producers secondly.
Yeah, no integrating the company operating at the loss with high inventory and away from any production facility shutdown.
We will act as a drag on our first quarter results.
There are things after they need to reduce cost a little bit of market share and implemented the synergies we didn't decide.
I was actually despite a change in America condition, and the nowhere else easy day, they like the meals. So all the assumptions regionally justified it yet because he shouldn't remain but.
It will strengthen our commercial industrial and technological leadership in do you as Mark.
Just a couple it it's it got furnaces diesel, but we now have our first you making facility in the U.S.
Which we'd be able to supply with limited investment a significant portion of our Steve requirement for the Enbridge and base emails.
Damages seamless by the mean complemented the product range of our BC demean and the geographical distribution over the acquired I said, we led by us to strengthen our rig direct service added usually tight but equally in the northern pass through the U.S.
The contribution all the enhanced theme and expansion of our technology portfolio, we've talked to strengthen our positioning and do as much.
Also in the U.S.
What a b C mean has reached target that later this oprah and efficiency and he is fully prepared the to further enhance our competitive advantage.
During the year, we strengthened our position in Saudi Arabia through the integration also so that seems like you have any encarta market condition. This is not yet to fully reflected in our cash flow.
Well Dhabi, we successfully Warner long term come truck the value that 1.9 billion.
Blade the majority of I don't know all CTG requirement over the next five years.
Yes, it will start to be reflected the you know what goes through real made it to it.
Oh.
2020 to say, we have a strong focus oh, but you're seeing that the environmental impact the overall, what a pretty sure whether locally you know what communities automotive globally through addressing the challenges of climate change.
During 2019, we completed important investment it went through it for you D and I'd use Oh wanting better mental foods bring into it or what it means in Argentina and Mexico.
In other parts of our industrial system, we also have industry, leading a nation.
On a b C mean for example.
Yeah I work they see the mean for example, you the only operation of its died qualified and U.S. It is a minority source will finish.
With respect to feel to it may show, we have relatively low levels over the mission compared to our competitor and other steelmakers since we only use electric arc furnaces in gossipy is the dynamic reduction will fight unforeseen Rick.
We have also integrated gas fired combined cycle power generation for a large proportion of our production.
Over the past five years.
We have reduced the CEO to mission emission intensity off a little bit Asian.
By 18% to one potency 18 stones.
Oh steel too, but I don't know Steve the sees it said if I understand the below the global ever at Jetforce Dealmaking I bought it did.
By the we'll see these data as refereeing to do this war.
Major facility that also had but still make as I mentioned before do we have well that old worldwide.
45 that facility already being to.
But the steelmaking liquidation or focus on the floor and now on five once he didn't go so.
Like I.
I said thing.
Sustainability is longer being embedded in our managing.
Management practice, he said and we look forward, what two leading industry responsive to the global climate change.
During 2020, we do not expect this substantial change in the market environment, but it's still difficult to assess the impact, though the could own of Ito Sun, the global economy and oil prices.
However, the repositioning the U.S. said, we in the integration of keeps go the action we are taking worldwide to reduce cost duties efficiency, you know what investors Houston and to reduce leap day, I mean, our supply chain. So that I want to recall that are what am I danced around 20%.
Yeah, I will stop here and leave.
It's wrote opened for any questions Matt.
I was reminded you asked the question you need to press Star one on your telephone.
To address your question Christopher Alky.
My first question will come from the line of Igor Levi from P.T. Archie you may begin.
Hi, good morning.
So.
Based on the North American numbers, you reported being slightly up assuming Mexico was up in Canada slightly seasonally up it implies that the U.S. was only down marginally a when the rig count was down more than 10% in a in the quarter could you talk about.
The reason for this outperformance of the rig count than just a bit more on the market in the U.S. and whether we've seen the trough and a U.S. so CTG demand.
I think you're right I think.
Right Okay.
Reduction or in the size of MCE, we've been able to men's Dana elimination, but I would ask do Luke goods and all of the comment on leave the into the situation at the American Americas.
Thank you Paul good morning Igor.
As you certainly nobody's international competitors that traditionally targeted the U.S. market that eventually encounter the difficulties to ask portals market. So as a consequence imports.
Well I significantly to 35% over the demand in the fourth quarter with went to 19.
And Oh leveraging.
<unk> <unk> and that was a large manufacturing footprint in the United States that we were able to top into these ah space up and therefore labeled.
My and things like Oh, I will say it's.
Now looking ahead, what we see the.
Given current circumstances, we don't see.
This a situation.
You change as a middle FOXA high frequency that the you pull license of generally twentytwenty there won't be the law school, we expect that to be able to maintain our oh wow levels.
Hi, John Thanks.
Thank you guys.
Thank you and our next question comes from where I know in Macpherson from Simmons, maybe again.
Thank you good morning, a good afternoon I was wondering if you could.
Perhaps talk about the level of results that you saw from the Epsco assets in the fourth quarter.
Maybe quantify for us how much of a drag it represents a in Q1, because I know that you have a.
An objective true to capture integration benefits and synergies as we March through the year, but maybe if if you're talking about margins being flat from Q4 into Q1, how much of that is the impact of the epsco drag in Q1.
Hey, whether you're right that's a due to the.
Lend the process or to clear the transaction to the.
So the Mt trapped in the DJ.
And the company <unk> as being the suggested to Boston that I said during 2019.
So the it'd be down the company Standalone away it's down.
Yeah, It became a negative in the <unk> and it's gotten even more negative in the fourth Q.
Oh for 2019 now.
Are you.
In the first Q.
This will have a drag on our results the because we just don't.
Turning around the de situation up within the Buddy very short period of time, but we are acting.
Uh huh.
On to it do expected to.
<unk> due to reduce the fact that the dragon and get a though they do.
Yes that is seen as he said that wed embedded the you know a business plan as he is the very beginning.
As I mentioned before.
In my prepared statement that all the and the consideration.
That's led us to.
To the acquisition at the very valid.
And ER.
In the first of month, so in which we get contact with people do operations technology work on firming.
Let's say the rationale there and objectives set off a Z Sean.
Two we would have a drag that these drag is also.
Uh huh.
Embedded in a high level then study.
The company with the company and Dan.
Yeah.
Reacted the.
Lowly do the change of policy by the distribution system.
So we have a level of investment today that are priced at the level that so.
Is that if lifting.
The cost in the different from the cost the do we.
So they will be a good or bad weather.
Deduction.
Anthony and these will be part of.
The direct that I mentioned for the first Q.
I will ask a luca comment Oh, not the path that older math, the and the Seanergy.
We plan to get to.
In the coming into kind of equal yes, Paul. Thank you have a money yet is specifically to CNS is won't we have seen when we sell okay. The company.
Carefully or we see that compared to Walter we previously announced that we see a higher level synergies, we estimate that I'm on what run rate.
The answer all 80 to one on the maybe on a used or.
No those synergies would come from a four main buckets are the first one is the optimization all with your location or not we want to be.
The most efficient at lower cost me is.
And at the same time reduce logistic cost a I locating a aim books you meet the over their consumption is forecasted to.
The second is gonna be capacity reduction on a and I believed that the what are we done following that because management. These already publicly but yeah. We rightsize the pedestrian capacity. The third one is coming from a a the fix cost reduction that having formatting.
Hi, Sean and the fourth.
He is a they're driving for a form of the operation.
And purchasing slash nagel by a this season, so I said before these four main buckets.
The wing between 80 and whatnot, so unless we expect those CNS <unk>.
Good I was really a foodie yoga and to actually the full benefit towards to the handle a twentytwenty there last quarter when the plant.
Thanks look I think how.
Hi, My follow up question I Wonder wondered if you could maybe provide some range of expectations for.
First quarter revenues given the stabilization of your of your base business and then.
You know that the for almost a full quarter capture of top line, even though what to do at a dilute of margin.
Let's go at that would help provide helping a helpful starting point for us.
Right and in the first quarter, if you remember in the three months ago.
[music].
We were considering that we should have had the positive impact from reduction in our cost.
Coming from a at the lower price so fault or call is getting to a wedding band story from a lower level of maintenance because last year, we had Sam.
They run a maintenance.
And some change.
He makes no.
What do we see today, it's been a we'd be affected by the drag Oh.
These heap so busy show some of the cost related to the closing of the transaction we have.
No we are and Oh sell them to that are supporting hasn't been will be some cost related to the final ruling that happened in January but the data.
Specific issue that we need to complete the you want this man's concerning inventory assessment and Swan.
Mm <unk> and that the pipe logix or reduction we didn't anticipate the.
Total there, but the favorite allergic wind down between October engine in January by another addition on five per se. So this has an impact the that easily affecting the the improvement that we were.
I'm going to see that being for the first so we now assume that in the first few it'd be daddy should be and the margin should be in the range.
All the fourth Q.
First you will be mode or less a line you know well you in denim of managing work you know from that point on we expect things to start to improve.
And we expecting the second part of the era.
To be able to to get a delay of a lot of margins that we had the in the first how for fall 2009 DNA.
Which is around the 20% imagine by that time.
Thanks, Pavel I understand the margin guidance I don't understand what we're talking about in terms of top line as a starting point for the year.
In the top line.
Hey.
I think that considering that didn't deduction.
Okay, and being five logic that occur or up to now.
We will also be able to recall, where a good I've only been if you look at a let's say.
Yeah that company, we expected that in the second the household styles and then 20.
We will be the top line.
Endanger again of the first a handful of 2019.
Got it.
Thank you that's that's helpful I'll pass it huh.
Thank you and our next question comes online Sean Mcguckin from JP Morgan you may begin.
Hi, Thank you.
So maybe just to continue on to that line of thinking.
[music].
We think about the decline in pipe logics pricing in the fourth quarter.
What's the average pricing that we should be thinking about in the first quarter relative to fourq, meaning how much do we need to.
If we are for stabilizing here, how much do we need to catch up first quarter relative to Fourq you.
And then just can we distinguish between seamless in welding.
I think he said he is a.
Glossy letting it is shifting the mix award why the between.
Let's say different age and only if we are referring to.
Due to.
To the company as a whole lot.
Well they forgot to and then the two biggie there if you get answering that level of pricing for.
Well these.
5% reduction on a that we've seen that between the four Q.
And that is it first Q easing their pipe logic, but indeed interflex entirely in our pricing so from that point on 'em. We also will be equally.
The difference in contracted long term contract a short time sales to.
Makes a little more difficult to forecast a how did he cool bidding price may happen during 2000 into it.
Okay.
Thank you for that and then.
Maybe talk a little more about its go.
So.
Oh, no started a year, maybe not as good as as you were thought to be months ago glut understandable given all the moving parts.
It seems like the distributors, maybe or are getting through a lot of the de stocking process.
In North America could you give us a sense of your expectations for its goes contribution to cash flow and 2020.
As I mentioned before.
They said.
The a growing over time, but.
No kind of maybe you can add the.
Some comments on the cash flow crafting Mama school.
During 2000 and plan asset and let's say well.
But it would be [laughter], yes, you stuff.
Yes follow on Sean is I was ready before we see each school.
And they got the the ability and then.
Thanks to what they do things that already mentioned here and he is it I'm, hoping you can go.
Recovery and volumes and this full implementation all this you know just watch.
Well go and I see a profitability to improve and gets up or do you see about two in the second how to fall, but twentytwenty.
And so think about capex associated with the business.
For your basis do we think that its cash flow positive order or is it in 2020 as we're working through that process is it maybe a net use of cash for the year.
And well at this point in time, a there we're looking at the they didn't even.
Let's say the investment level for the entire company plus either into facility.
Hey that it wouldn't be all the radio Fady, Sean I mean, they say, we still see the that the company should the is the whole thing that is true have competition.
Hey, guys spending that angels, three on that and 5300 $60 million, including the investment that I mentioned.
And the range Oh for the call. They let it go do you know Scott so to be able to supply the entire.
Anti at a American system Basi, Indiana race, we would have been based on data. So as a whole these would be that angels, rather than 16 investment income, but that's no there'd be no. We expect the readout of the single di di di heaps glass it to become positive into say.
Uh huh.
Right Okay.
Thank you for that feedback.
Thank you and next question was offline Mark Yankee from Cowen maybe again.
Thank you I guess first back on the pipe logics question, maybe not not so much related to how it affects your revenue here in the first and second quarter, but just on a leading edge basis, given the commentary about low in ports and maybe where inventory said how do you see.
The the pipe logics pricing index progressing from here.
Yeah, we expect city cool, but we expect the recovery.
[noise] after that.
Let's say.
The point that has been reaching these massive frankly.
Hi, I.
I think we shouldn't be bottoming out, but I would ask a luca.
She.
She had these feeding in DC logica.
Is bottoming out.
Yes, I think.
Good morning, Mark Yeah, I believe that year, when he took us either different a different species and the first one.
That a you certainly have also seen that is that a essentially there is a number that we're not ready on it we've got the what he's obviously like I mean get enough for them off on the users you have seen a increase in or negative they need a generational from some competitors all signs that does saturating for my luck.
But it doors I think capitalization of will moderate as well and this is the first bought a this second that you're seeing that towards the end of or 29 Tina.
Competitors to announce price increases.
And although at all.
All signs that the University is actually doing Sean that really needs what I see.
Two up.
Hi, I share your point and I believe that are we on a scraping the bottom of the barnwell and they see but I see is going up in a in the future.
Yep.
I think.
Yeah. That's really we are a this will be touch about turning the diesel David off pipe logic to.
And price he said.
Is it going and sustainable them in the medium term.
For the <unk>.
It's a domain.
And ER.
Global compared the door.
For the U.S.
As Mac.
Okay.
Thanks for that I wanted to go back to IP SCO and the losses, a few questions related only had one naughty no matter what another one calling it doesn't make me to Justin <unk>.
He had we are considering or no.
The reason knowing more relevant impact from go to another you know I mean, if ER.
Because he discussion we have.
Without considering.
Additionally, the disruption coming from that go to own of Ito said on a level of economic activity worldwide that in China.
And maybe consequently on the price afford in China. So is this scenario they want that weve.
Mentioning to you that he is that consistent a wafer level of rigs said the leveled off a it on that at the leaks I mean and no major disruption that.
In the main a variety of all of these if something happened sounds good.
Obviously things.
ER would be could be different though.
Sorry to interrupt you know thank you that that's helpful makes sense.
In terms of the IPSCO.
<unk> impact on results here. So it's it's negative right now it sounds like it's gonna be negative in the first half can you help quantify just on an EBITDA basis, what we're talking about here or is it like a 10 million dollar kinda drag per quarter or is it is it much more substantial to that and then.
Yeah.
Are we talking about breakeven declared war I mean.
Yeah, as I mentioned before Oh, what do we expect will they come see that indeed, a impacting considering the added the other element of that I mentioned is still our margin in first quarter should be in line that Weve Demod you know for sure.
<unk>.
Okay and is there a you mentioned some professional fees and and such.
I would suspect that there might also be some restructuring if you're.
Changing some of the fixed cost there is there.
A number that you care to quantify as to how much of a one time headwind some of those things could be in the first half.
Good day. This was a component that was I was including in the consideration to offer.
Cost related to the integration of people go.
Hey.
[noise], let's say I don't know a these moment that would then.
Either.
Figure, but I don't know Luca you could.
Having anything they say they will be.
Hey, there wouldn't be because there will be some additional cost Oh, we have people get together, the numbers and ER and ER and but certainly we need to concede that Oh top off.
Well tell you just mentioned before some say what I saw that we bought me that to materialize or the.
She needs is on the on the fixed cost.
Okay. Thank you very much I'll turn it back.
Thank you and our next question will come from line no Stephen Gengaro from Stifel. You may begin.
Oh, Thank you wouldn't good morning.
Just I think two things one just a follow up on Mark's question. Those those costs associated with the integration are they part of your flat EBITDA margin guidance for one cures are they not included in that number.
I think people that I mean, when I say a fatal.
This is their forecast, but they never before the fourth fuel, we expect to be able to reach out and maybe a imagining that ray in line with the fourth quarter, including that they said.
Or let's say a.
Extraordinary expenditure for.
For the integration Oh, so if go and the using first the stuff could actually restructuring.
We will incur between.
And now and then and the flash.
Okay.
And then I guess two other things actually the first is.
If we looked at it just goes numbers for 2018, we sort of thought about some.
Decremental margins to get the negative EBITDA. It seems like the revenue run rate on a quarterly basis. It's kinda like in the 175 to 200 range right now is that reasonable gas for first quarter.
[noise] and get can't see again because a.
To understand that.
<unk> I think.
<unk>.
It it seems like Im sure did about a billion three in revenue in 2018, and just looking at what the market's Don I'm looking at the fact that they've moved to win EBITDA negative position. It for third and fourth quarters of 19. It seems like their quarterly revenue is running a little bit under $200 million.
Is that a reasonable starting point.
I think is a.
I would say even lower than the water you mentioned I mean, it the compression and rather I know that happened during.
And at nine months and wage.
We completed discussion with them to address that.
It's been ER.
So sense so the company enter the strong squeeze a war or on the topline.
What would be low.
Say into for the due under the media that you mentioned.
And on a negative EBITDA.
So these are right.
Now they own change.
In the first quarter, but in the fourth quarter has been.
Below what you mentioned as a top line for even Scott.
Okay. Thank you and then just one final one when you when you think about your rig direct model you think about moving if SCO volumes through rig direct you know based on conversations with customers that you've had since the deal closed or are you.
Are you, what's your sort of optimism around how rapidly you can kind of get there. The gifts go volumes ramp back up through the rig direct distribution system.
Well I you know at this time.
He will be.
And then I used to act as a cool or expanding it is a portfolio with the existing client.
And.
Yes, Dan finishing.
[noise], let's say in contract the salmon declines existing clients also.
Oh feedstock.
We will gained ground I think a during 2020 pretty fast.
But I won't ask Luca how the client that reacting and they use the rule.
It's a catch up.
And the rebuilding though the cost some of these and enhancing the bench.
<unk>.
I guess Paulo, Yeah first of all I, we need to mention that we have a a call me when that was taken by each school and of course are we going Oh, we go not respect those commitments. So I mean, the speed at which you would want to be switching to either it also depends on the previous commitment that.
Second my going into the specific or the specific question not what we you don't see d., so any more difficult than what we did a there'd be any actually we see these much easier because that's a member that we started from scratch and went to 50 in any plant. The 17, we were waiting the range of 60% allowances.
Do they the understanding go over the U.S. customer base that is much high yield and want to be able to beginning so we don't have to wait and expanded their finger form a from scratch. So I do you see I I see these happening and go through Wednesday, and according also.
To the commitments that that's a war, but they can buy each school in a in the bus, but I believe that we can complete these oh. So these are this year.
Thank you.
Thank you and then next question comes online else the highest phone from Goldman Sachs. You may begin.
Thank you for taking my questions. If I can follow with another one on its okay. How should we think about the normalized through the cycle margins at scale and how would that be deficit on deal management. That's his previous management.
Yeah, I'm not sure.
Nobody <unk> in this indeed degradation on a that we are carried on India say.
Yeah really we will.
Manage the entire assist them in a unified way since day one.
So it's correct to say.
The level of me voice you know if he used to wind down through 2019, a Dutch set on the 200 million in a in the third you and then wind down again substantially in the fourth Q, but at this point in time, we're looking at DC is that it tenacity said a challenge it would be defeat.
Go to understand the well to separate the EPS go from Daddy, they're looking at Oh, what to combine a marketshare and ER.
I would say that he will not be something like a normalized or maybe a little sheep school, but Asia.
We will also.
Okay to de area or in the most efficient mail or for rolling.
Adjusting for finishing.
Well he treatment.
In a system that.
We will be based on many different into me to say in the U.S.
What we.
I think we.
We should do better.
Betty coffee do we go do that so we win or be able or.
To establish a the leadership because it tonight he says that.
Voted on the in service and technology in our market share.
We are.
Good day.
To the level that Tweed design, and we heavy mine when do we now own true the acquisition of people still.
More than one year ago.
Thank you and then my second question can be away from the U.S. can we get some more color on pricing in international markets need.
Thank you Uh huh.
I would ask Gavin and.
Two Dolby vas or to be that if you how we perceive the tension to these lease up till now.
And if it doesn't condition, yeah thinking about all the Morningstar they pricing in the in these to compute international market there remain competitive.
Really has a they've got pulled from the pipe logics dynamic that.
You were mentioning before so that is not a direct link that he's a very limited impact.
Hopefully pipe logic into that.
Indoor formidable summer work on the international market, but this is very limited.
We have a positive momentum you know what average pricing, even though our backlog.
And rich mix you do the gotten better ones you need at least on some of short as well so year over year.
Pricing moves in a positive economic within a competitive environment.
We also see.
Some tightness in south specific niches sour Saturdays corrosion resistance I know he's well, we're able to propose some price increases by these are the.
A limited impacting the overall before you use any deal the dynamic of the general level.
Thank you.
Got it.
[laughter].
Thank you and then next question will come from I know I listened closely from Mediobanca.
Maybe again.
Good morning on the first question is on on cash flow from 2020, just wondering how did you get a how'd you expected working capital to a two of all though I clearly we've seen that positive contribution in 2019 I was wondering how much positive contribution do expect if any from.
Working capital in 2000, and a 20.
Thank you a there's another we also a we continue to intervene in <unk> on the entire supply chain that on the lead time, and we think that the integration with IPSCO will also support after the initial theater and then we have to.
And then it used inventory that we are receiving school. We will continue to did you say event, Saudi and we expect to have voted the contribution.
That angel.
Some 200 million dollar or de stranger. During 2020. So these we contribute a two out of control. We're confident that we will get to very strong cash flow in 2020.
Yeah.
The the.
That's cool ready in the moderating in the second part of the year.
Combine and we said they let David that contain leveled off investment a and the reduction in working cap. It data showed the should allow us to be able to.
Who gave it a robust the cash flow into thousand into it.
Thank you you already have in mind, what net cash you could end up with that yearend.
Yeah as I can tell you a weekend or.
Only.
Well see setting.
Let's say that this traditionally used today without.
ER.
Let's say if anyone slow down over the economy or reduction in that in the level over the next day.
We can see there that so as we mentioned before we can have a 11 <unk> cash flow.
See me data to the level that we had the.
Thousands and thousands safety.
Okay, and just one thing on the topics I think you mentioned, let's say 50 to see 60 and that doesn't include the it's colm topics as well.
Yes, we had including the investment that we had a planning.
The one that will take a in the especially.
Correct.
The shopping to advance.
Indeed capability to supply didn't die at a need the of the your way said already Sean a phone call open.
Okay, that's fine and just a and the last one on the and all of you mentioned that global CTG demand its bad so I could fall into that as an entry into much wondering if you can maybe give us a bit more color one what you see which regency's team I'm more strength now.
[noise] it well.
I would say that names that doesn't in 20.
If we are considering that we'll be there would be isn't.
Lower recall that in Argentina, we do not expect so match from Andy the demand in Argentina in the first part of the it until.
Some of the key who Oh the economic plan.
We'd be a and b define the and and there was he should also for the there wouldn't be completed.
But then we will see I've, just you know could be a.
Wouldn't be Catholic would be.
Yeah, let's say.
[noise], creating expanding the market to into second half huh.
And then secondly area. So you know what do you is important is the Gulf of Mexico.
From the Bulls, the American into Mexican that the Mexican side of it.
The nation really company are working actively Mexico, but the in the Gulf of Mexico, We are seeing project going on.
We have the contract I dunno or whatever it was mentioned in my prepared remark.
We have the.
Very large contract the majority of the need of an okay. We estimate that down to 1.9 billion in a period of five year. This will kick in during the second part of de Novo would view depends also from how fast the.
The other up would work on these are another area that simply positive.
Those are in French second part is Brazil, you know, we have an important America trading, but as you know for sure.
Hey, if a it seems.
Peter but I say in private come international the company or a.
Maintaining that programs Oh drilling these would be also voted to area.
Yeah.
One.
Nish, but these deals important is it.
Go next door to that he says.
Worldwide and for the offshore.
Roger the I'd also an area in which we will.
Expand that was it. So this these out at the N., we should we may have.
I'd say.
ER positive.
Development during the course in 2020 that it may compensate for a relatively weaker.
The main the due to the stocking so they ended the agent denio situation.
As far as that we can see today.
Okay. That's very helpful. Thank you.
Thank you.
Next question comes online I haven't spent from Jefferies. Sir you may begin.
Hi, there. Thanks, I've just got to the first one regarding those extraordinary expenses you mentioned still related chips go for Q1 can you give us a rough ballpark or estimate of what those will total during the quarter.
A extraordinary Sandro heap school or.
Luca.
Yes, bottle and as thin as I said before we're still finalizing the number but we expect these.
The window to enjoy 15, just went to me.
Yeah.
Okay apologies if I Miss you stand out number there. It's the second one when you talk about the second half 20 improvement NIPSCO and it turning to a positive contribution is that driven by any forecast around improved pricing or is that predominantly due to your expectations around synergy.
Ladies and maybe some better volumes.
Yeah.
As I mentioned before I think the present level of pricing in favorite allergic. It didn't go to sustain says we're not assuming that there would be there could be some a limited the rebound but at least in Lisa.
But the mainly was weird accounting on a a the synergies said that Luke I was mentioning before you do a location or two.
ER.
And he structuring that all steep reduction sees them at efficiency and they said and that so I'm at a cost reduction that weekend or that we can get to working.
ER integrating it too.
Okay. Thank you very much.
Thank you.
And our next question comes from the line Lillian Starke from Morgan Stanley You may begin.
Hi, and just one quick question from mine and you mentioned the accumulated inventory and it's got let me just wondering if at any point do you think we could expect an impairment on the back of these or are these.
Do you expect to leap and putting in them I can just I don't know it might change.
Hey, where do you know according to a confidence we attribute the then the event so do we.
Sure.
[noise] say said.
Call it the.
Condition of the inventor and then have to close.
Contracts to Andy the agreement will be fab.
Tim KBC, Lisa once we complete the de say, yeah, I expect or no.
Betterment no we expected to be able to said to the market the but.
As I mentioned before the cost of seed is set for these product and these inventory is higher than the average cost of sales go down or whatever they might do you didn't we provide some but I still at the facility. So this is part of the drag good. They do we would have in the first.
ER I mean, I do that gradually the new production and then you went to you then you know what have you will be competitive.
Pasta or after they sort of mentioned that the restructuring, but right now.
We didn't complete the first stage, which is you'll get an assessment of inventory we have according to the content 75 days to complete the DC.
Uh huh.
So the in general disease.
The Saints we have.
No major or <unk>.
Issue coming from these.
Okay. Thank you very much.
Thank you.
Our next question will come from nine of those real our name them from Santander, maybe again.
Oh, Hi, guys. Thanks for the calls have a couple of questions from my side, the first ones with it.
School acquisition and the margins dimension to the 20% level for the second half of 2020. It's just a quick question. If you do include the synergies did you mention to 80 $200 million in synergies afford this 20% margin for for the second off 2020.
And my second question is related to the GE V. you made in Russia.
Type you if you how is that going you sure I'm spending any Angie Angie.
Cash from that and if you could you shoot you feel if you are if you could give us a breakdown of how much is going towards that.
There would be interesting tunable also ah. Thank you.
Thank you.
No. They go on the on on the response to what I mentioned medical video the American <unk> <unk> to get it back to where they enjoy a 20%.
A.
I'm considering these emerging photo fall off a.
The the Enad he said.
It is considering all of the 11 or.
Company.
ER, including.
The synergy that we plan to have that.
In ER gradually.
Into these.
Yeah.
Dimension 80 to one another million dollar European allies for Europe, but we can expect these into.
Got things are gradually.
Yeah, the what evacuated and easily plant what each extended by the fourth <unk> or <unk>.
Is he told me he show on a.
Russian venture we are proceeding from an investment that [noise].
We will be investing to do it into doesn't guarantee maybe.
Got it and you can comment on how things are [noise].
India, India.
Right.
Yeah Pablo Thank you very much good morning have already got indeed, the JV in Russia is progressing very well have a great understanding kind of dialogue on companies and we don't partner sever stuff.
Device advancing well speed in the engineering on the construction.
Thought of it being offline Commission commissioning.
Maybe by the second half couldn't be when do you want.
And so we're looking forward to complete the facility. Another line of business in terms of Capex, our provision is around $70 million.
All right Twentytwenty I'm, probably a similar number, albeit a lower.
Into Twentytwenty what.
Thank you very much furnaces are clear.
These are you.
Very good is not included the.
I mean it is in the 300, there 50 million a nice not included in that 360 me on because he is oh I participation in that Shine Benjamin.
We are expecting too I mean, that's many plenty plenty way be selling for me I know last on in 2019, we invested.
About 20 million.
This is that what participation evangelist, there's nothing else either.
Part of the study and that are then 60 million than we had a mentioning it is capex Andy Casey I want buys a according to the in the overall vision of the cash flow that I gave before.
Thank you and I'm not showing any further questions at this time I.
I'd like to turn the call back over to Giovanni for any closing remarks.
Okay. Thanks for joining us in the coal and we hope to see you in London I. It brings a third thank you.
Thank you very much.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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