Q4 2019 Earnings Call
[music].
Thank you for your patience claims continue to lead the conference told again in approximately 10 minute again. Thank you for your patience. Please continue to wait the carpet till they get an approximately killing it.
[music].
Good morning, and welcome to the Ampco, Pittsburgh fourth quarter and full year 2019 earnings results Conference call.
All participants will be in listen only mode.
Did you need assistance. Please go away conference specialist by pressing the star T. followed by zero.
After today's presentation, there will be an opportunity to ask question.
Yes. Good question you May Press Star then one on your telephone keypad.
You withdraw your question. Please press Star then too.
Please note this event is being recorded.
I would now like to turn the conference over to Melanie Burleson Director of Investor Relations. Please go ahead.
Thank you Andrea and good morning to everyone joining us on today's fourth quarter and full year 2019 conference call I'm joined today by Britney rare or Chief Executive Officer, and Mike Mcauley Senior Vice President Chief Financial Officer, and Treasurer also joining us on the call today, our Sam line President of Union Electric Steel Corp.
Ration and theory Kenney President of Air and liquid Systems Corporation.
Before we begin I would like to remind everyone that participants on this call may make statements or comments that are forward looking and may include financial projections or other statements of the corporation plans objectives expectations or intention.
These matters involve certain risks and uncertainties many of which are outside of the corporations control. The corporations actual results may differ significantly from those projected or suggested in any forward looking statement due to a variety of factors, including those discussed in the corporations. Most recently filed form 10-K, and subsequent filings with the securities and exchange coming.
And then.
We do not undertake any obligation to update or otherwise released publicly any revision to our forward looking statements.
A replay of this call will be posted on our website later today and remain available for two weeks following the completion of a call.
[laughter] earnings release, where the webcast replay please consult the investor section of our web site at Amco P.G.H. dotcom with that I'll turn the call over to Brett Mcbrayer Ampco Pittsburgh CEO. Thank you melody good morning, and welcome to our call first let me begin with a note on environment health and safety.
We have an unwavering priority protect the health and safety of our employees as well as Im sure, we protect environment and the communities where we operate.
Although we are not pleased with our safety performance to date.
I'm encouraged by the actions, we're taking to drive improvements.
Across our businesses, we have increased safety observations leadership walks and fatality prevention assessments to ensure we safeguard the wellbeing of our employees globally.
From an environmental perspective, I'm proud to report that the corporation operated our facilities incident free.
We can summarize 20 high teen as a year of execution.
I'm excited about the work accomplished as we took targeted and decisive actions to improve our performance.
Our focus has been on reducing complexity in our manufacturing processes.
Well, many operational improvements and Rightsizing the business.
Defining our core businesses and required capabilities, we continue to divest non core in excess assets.
These divestitures began with vertical still our specialized parts and service provider to North American Rolling Mills during the second half of 2018.
In the third quarter of 29 team, we completed the sale of our North American cast roll operation and having more Pennsylvania.
During the same period, we also completed the sale of our Canadian specialty still business is w. still.
The divestitures of these assets significantly improved our cost structure without compromising our ability to serve current and future customers in our forged and cast engineered products segment and provide immediate positive improvement in operating results for our company.
I'm excited to announce that we're now seeing the benefit to our PNM with a return to profitability in the fourth quarter.
Our performance improvement actions for our core assets began in our U.S. forging facilities. During the first half from 29 team, where we focused on lowering operating and overhead costs and improved efficiencies.
Once we confirm we had systems in place to sustain and improve our U.S. forging businesses.
Quickly moved our efforts to our European Kasriel facilities.
Where we launched restructuring initiatives during the second half of 2019.
These efforts also focused on lowering our cost structure, while improving efficiencies.
Although these initiatives were lost during the second half the year, we've only begun to see the improvements in the fourth quarter.
The full impact of these actions will be realized in 2020.
We'll now turn the call over to Sam Lion Union Electric steel President, who will discuss in more detail some of the significant accomplishments of last year as well as some of the challenges we face in the forged and cast engineered products segment Sam.
Brett.
In the fourth quarter, we've continued our focus on safety cost reductions in the U.S. in Europe and restructuring in the UK in Sweden.
Notably our European operations turned the corner and delivered significant improvement improved financial performance in Q4 2019.
This improvement along with the continued strong performance from the US operations allowed the segment to deliver an income from continuing operations, a 4.5 million in the fourth quarter and if we exclude the 10.1 million impairment charge associated with the sale of they have more facility formulated for the year.
Versus a coupon or loss of 5.2 million in a full year loss of 6.6 million in the prior year on the same basis.
As Bret stated from a safety perspective, we have focused on the highest risk tasks. We increased the focus safety observations in Florida leadership blocks.
The severity of the injuries in near misses were reduced as our efforts around mobile equipment and crane safety are paying off.
A bright spot was the U.S. operations in the second half the year, where our lost time incident rate was zero also our Slovenia Austintown at YRI sites, what recordable free for all of 2019.
We have slightly lower sales in the segment when compared to Q4 of last year due to the drop in non rule revenue driven by the downturn in the oil and gas industry.
This was partially offset by an increase in rule volume with a stronger mix. Despite this as stated earlier the segment was able to deliver a significant improvement income from continuing operations when compared to the same quarter 2018.
In the quarter, we did see improved order activity from non rural non oil and gas customers, which is the focus of ours.
For example, we expect sales from two of our larger customers that's applied to the tooling industry to increase from 1.7 million in 2019 to approximately 5 million this year, which is in line with our strategy.
Our investment our sales team are delivering results.
With the sales evermore and SW behind Us in Q3, we were able to sharpen our focus on the existing operations. We continue to see opportunities in the U.S. operations. In Q4, we had manufacturing cost savings of $600000 with full year over year savings of 2 million.
The majority of our European restructuring impacts will be realized in 2020, starting in Q2 as Bret stated earlier.
This restructuring savings combined with our efforts on raw materials and efficiencies are expected to deliver $3 million to $4 million, an annualized savings, which is consistent with my statement on the last call.
From a sales and backlog perspective, we see some uncertainty in the market, which is not inspect unexpected due to the current of ours.
Our customers are reporting improved pricing and order books, but are cautious with the capital said our segment backlog at December 30, Onest 2019 of $271 million was down 9% year over year due to the cyclicality lower frac locked demand and because several of our largest steel customers have not finished there.
Orderbook allocations for 2021, which typically would already be in our backlog.
We will be receiving these orders in the coming weeks.
Our actions to significantly change our cost profile through the entire business will allow us to better manage through any mark to market uncertainty.
Thanks Sam.
No area of our business was immune to our change efforts the air and liquid processing segment targeted key areas of their businesses for improvement in 2019 as well in these businesses the traditional product flow through our factories was redesigned to drive increased productivity improved material utilization and as a result.
To improve profitability.
I'll now turn the call over to Terry Kenny Air and liquid processing segment President Terry.
Thank you Brett and good morning.
Safety continues to be one of our major focus the air and liquid processing segment ended the year with a 60% reduction in Osha recordable accident when compared to the prior year.
In addition in addition, I am pleased to say that the segment did not have any lost time injuries in 2019.
Each and every employee is responsible for this improvement and everyone's commitment to watch out for each other is the key to our success.
Net sales for the air and liquid processing segment for the fourth quarter ended December 31, 2019 increased 13% when compared to the prior year.
This increase was led by improved sales of heat exchangers and custom air handling units.
We have built on the successes of our process improvement program during the fourth quarter, we continue to implement changes in our processes to increase productivity and improve material utilization.
Fourth quarter operating income for the segment when compared to the prior year, excluding expenses related to asbestos reserve charges increased when compared to the prior year. This increase reflects the rise in net sales as a result, the rise in net sales as well as.
The results of our cost savings efforts.
The year ending backlog for the segment approximated $50.6 million compared to $44.4 million at December 30, Onest 2018.
Our strategic planning has focused our efforts on key market, which has pre proven to be successful.
We are building on our successes and look forward to continuing growth.
Thank you Terry with that I'd like to hand, the call over to our CFO, Mike Mcauley to review our financial results in more detail Mike.
Thank you Brett and good morning to everyone listening on the call today.
My commentary includes the use of certain non-GAAP financial measures today I refer you to our disclosures regarding non-GAAP financial measures and the related non-GAAP financial measures reconciliation schedule included in our Q4 2019 earnings release issued yesterday evening.
I'll focus my discussion on our Q4 2019 financial results.
Because one of our full year results is included in the earnings release.
As Brian indicated Q4, 2019 marked a return to profitability for Ampco Pittsburgh.
This was the first time and 16 quarters dating back to Q4 2015 that the corporation reported a positive income from continuing operations.
Amco is net sales from continuing operations for the fourth quarter of 2019 were $97 million.
This compares to net sales from continuing operations for the fourth quarter of 2018 of $95.8 million.
Net sales in the forcing Cas engineered product segment declined approximately 2% compared to the prior year quarter.
As weaker forged engineered product sales to the oil and gas industry outweighed stronger sales of mill roles.
Net sales for the air and liquid processing segment for the fourth quarter of 2019 increased approximately 13% compared to the prior year period.
Driven primarily by higher sales at heat exchange coils I'll cover more segment level details momentarily.
Gross profit as a percentage of net sales was 21.7% for the fourth quarter of 2019 versus 13% for the fourth quarter of 2018.
The improvement is primarily attributable to the 14 cast engineered product segment, which is benefiting principally from a lower cost structure due to the sale of the even more facility at the end of September.
Higher sales of mill roles and improved manufacturing and operating efficiencies for the domestic forced operations.
Offset by lower sales of forest engineered products to the oil and gas industry.
Additionally, the forcing cast engineered product segment receive business interruption insurance proceeds of $1.8 million in the fourth quarter of 2019.
Foreign equipment outage that occurred in 2018.
These insurance proceeds were recorded as a reduction the cost of goods sold in the current quarter.
For the air and liquid processing segment gross profit increased slightly benefiting from higher sales contribution and cost efficiencies.
Selling and administrative expenses, a $13.5 million or 13.9% of net sales for the fourth quarter of 2019 were down compared to $14.9 million or 15.6% of net sales in the fourth quarter of 2018.
We were able to deliver approximately a 10% year over year reduction NSG DNA expense for the quarter.
Due in part to our cost reduction enforced.
Actions earlier in the year.
Lower professional fees as well as lower volume driven commissions expense.
Depreciation and amortization expense of $4.6 million for the fourth quarter 2019 was down compared to $5 million for the fourth quarter of 2018.
Principally due to divestitures.
Income from continuing operations on an as reported GAAP basis for the fourth quarter of 2019 was $3 million, including the $1.8 million benefit.
Our business interruption proceeds.
Offset 5.7 million of restructuring related costs.
This compares to a loss from continuing operations in the prior year $40.1 million, which included an as best us related charge of $32.99 million.
A similar level of restructuring related costs, and approximately 3.7 million in excess cost of the aftermarket facility now divested.
Excluding the unusual items as defined in the non-GAAP financial measures reconciliation schedule included with our earnings release.
Non-GAAP adjusted income from continuing operations for the fourth quarter of 92019 was approximately $1.9 million.
This reflects an improvement of approximately $4.8 million compared to the prior year quarter on the same non-GAAP basis.
The improvement is principally attributable to higher sales of mill roles improved manufacturing and operating efficiencies for the domestic forest operations.
Partially offset by the impact of lower forward is engineered product sales to the oil and gas industry.
Other income expense net improved for the fourth quarter of 2019, when compared to the prior year quarter due primarily to foreign exchange gains this year versus losses last year as well as higher pension income.
At the bottom line the Corporation reported a GAAP net income attributable to ampco Pittsburgh of $3.1 million or 24 cents per common share for the fourth quarter of 2019.
Compared to a net loss of $60.2 million or $4.82 per common share for the fourth quarter of 2018.
Which included an as best as related charge of $32.9 million or approximately 263 per share.
And a net loss from content discontinued operations of 18.7 million or one point.
Dollar 49 per share.
There's some detail on our business segment results.
And the forest and cast engineered product segment Q4, 2019, net sales of 74.3 million declined approximately 2% versus prior year as weaker forward its engineered product sales to the oil and gas industry.
Wait stronger sales of no roles.
Segment's operating results improved from a year ago by $9.7 million.
This was primarily due to the elimination of excess costs associated with the advent more cast roll facility, which was divested in Q3 2019.
Higher sales of mill roles improved manufacturing and operating efficiencies for the domestic forced operations and 1.8 million, one and the $1.8 million benefit for the business interruption insurance proceeds in the current quarter.
Net sales of 22.7 million for the air and liquid processing segment in the fourth quarter 2019 improved by approximately 13% compared to prior year.
Higher sales of heat exchange coils was the primary driver, although sales of air handling units and centrifugal pumps increased modestly as well.
The segment's operating results improved significantly for the fourth quarter of 2019 compared to prior year, given 32.9 million dollar as best as related charge recorded recorded in Q4 2018.
Underlying operating results improved from the higher sales contribution cost reductions and material utilization improvements.
Backlog at December 30, Onest 2019, approximately approximated $321 million.
A decrease from the $343 million at December 30, Onest 2018.
The decrease reflects sales outpacing order intake per mill roles and lower demand for forged engineered products, primarily due to a retraction in the Frac block market.
But as Sam indicated earlier the reduction in backlog for mill Rolls is not a reflection of any loss of market share, but rather an adjustment in order patterns for several of our larger customers.
Backlog for air handling units improved due to an increase in business activity.
Backlog for centrifugal pumps improved due to higher orders of pumps for from US Navy ship builders.
In backlog for heat exchange coils decreased slightly due to lower business activity in the industrial OEM market.
Next to your a few balance sheet and cash related items for for continuing operations.
Accounts receivable at $81.8 million at December 30, Onest 2019 increased by $12.3 million compared to December 31, 2018.
Primarily attributable to improve sales in the latter part of 2019 versus 2018 customer mix and slower collections.
Inventories of $82.3 million at December 30, Onest 29 team declined $11.9 million compared to December 30, Onest 2018, primarily due to higher shipments in late 2019 versus 2018.
Lower cost of raw materials in 2019 versus 2018.
Improved inventory utilization.
And in inventory optimization benefits associated with the exit from the Aviemore cast roll, finishing operations completed earlier in 2019.
Accounts payable of $33.3 million at December 30, Onest 2019 decreased by $5.6 million compared to December 31, 2018, which is linked closely with the reduction in inventories.
Capital expenditures for the fourth quarter, 2019 were $3.8 million and our 11 point $11 million even for the full year 2019 for continuing operations.
Cash and cash equivalence of for continuing operations of $7 million at December 30, Onest 2019.
Decreased compared to the December 30, Onest 2018 balance of $19.7 million.
As indicated on previous calls our domestic receipts are now being swept daily against the credit line to lower our borrowings.
As a result, we are maintaining minimal domestic cash and the reported cash balance reflects primarily foreign cash.
Drawings on the Amco revolving credit facility with $34.3 million at December 30, Onest, 2019, which is down versus $38.4 million at September thirtyth.
The decrease in revolver borrowings compared to the December 30, Onest 2018 balance of $14.3 million reflects the use of the credit facility as planned to repay the promissory notes and interest which were retired in the first quarter of 2019.
Offset in part by the benefit of the domestic cash sweep.
In fact total debt at December 30, Onest 2019 of 70 $970.9 million is down $6.8 million versus prior year.
At December 30, Onest 2019 in addition to the cash balance.
Corporation also has remaining availability on the revolver of approximately $27 million.
I'll now turn the call back over to Brett for some closing remarks. Thank.
Thank you Mike.
Throughout our change process, we face many challenges, which only reinforce the need and pace of changes we made.
Forged engineered product sales through the oil and gas industry. As we've noted earlier were down significantly from the prior year as fracking activity declined in 2019.
In addition, our role customers faced lower order volumes as they stated that many of their customers had purchased beyond normal demand levels in 2018.
Hi, still inventories in the general Motors strike resulted in reduced flat rolled steel shipments in the second half of the year.
Steel prices declined is in markets work through their inventories.
Entering 2020, the initial insight from our customers indicates that still markets in North America are recovering and that the market conditions for flat roll steel have stabilized in our improving.
From the work completed in 2019, we would expect ampco Pittsburgh to remain profitable under normal loads.
Our continually continuing work in 2020 should further strengthen our expectation.
The developing human impact as well as the market impact of co bid 19, However is a variable that could alter our view in projections.
20, United team was a year of significant progress for Ampco Pittsburgh.
Well, we followed through on our key priorities to strengthen our businesses.
In addition to executing successfully against our strategic plan, we've built a strong foundation to support sustainable and profitable growth moving forward, we've entered 2020, a stronger and more streamlined company.
Proud of quarter employees have achieved.
We will continue to address additional opportunities in 2020 to further consolidate our manufacturing footprint and streamline our businesses.
In addition to realizing full year effects of our restructuring activities from 29 team.
We are targeting stronger operating cash generation and reduction of 10% to 15% in corporate expenses for 2020, strengthening our ability to invest in capital improvements increased productivity and improve margins.
In 2020, we will remain focused on cost reduction in rightsizing, our assets and resources to align better with our corporate objectives.
As we look back on an eventful year for Immco Pittsburgh I'm confident we're on the right path for success, both now during uncertain times in our markets and more so in the futures, we continue to execute our strategic plan.
On behalf of Ampco, Pittsburgh corporations leadership team I want to thank our employees for their focus and commitment.
The results of 2019 reflect the hard work and dedication of our employees around the globe.
At this time, we'll open the line for your questions.
We will now begin the question and answer session.
Ask your question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
We withdraw your question. Please press Star then too.
In the interest of time, we ask that you. Please limit yourself to one question and one follow up.
If you have further questions you may reentered the question Q.
Again I know the question Q that was star then one.
At this time, we will pause momentarily to assemble our roster.
And our first question comes from Marco Rodriguez of Stonegate capital markets. Please go ahead.
Good morning, Thank you for taking my questions.
I apologize if you covered this I was a little late on the call, but I was wondering if maybe you could talk a little bit more by your comments. There you made in terms of Kobe 19.
And how that could potentially alter your projections if.
Perhaps you can just take take us and walk us through.
How you are sort of thinking about your business in fiscal 2000 from a base case scenario on and how.
Koby 19 could potentially impact those expectations.
Yeah. This is Brad Marco Thanks for the question.
I mentioned that based on under lows that weve typically seen such as loads in 2019, we expect our business to remain profitable that's our expectation.
The co Cobot 19 is obviously a developing issue for for all of us.
We are still booking orders as we speak orders or continue to come in a similar order patterns from our customers have changed and really prior to I would say the cobot 19 events. So it's not as result of coded 19.
Some of our larger customers allocations as Sam mentioned will come.
In the following weeks and we'll get a better layout of what.
At the low looks like for the year, but we have consciously than proactive about what are we need to do from from a next step perspective.
To ensure that we position this company for success in so we have.
Several identified actions that we will take based on what does or does not happen in the marketplace.
We're obviously at the same time trying to invest in and opportunities that will help us grow our topline significantly moving forward and so we're not going to walk away from from those opportunities.
While we are sorting out.
What were the world is going through all this.
But you know I would say that.
I feel very confident in the team in the the plans that we we have in place in on a and we will respond quickly as we will need to.
Something.
More detrimental happens in the marketplace that will require.
Response from the from this group so.
Hopefully that.
That answer your question.
Absolutely very helpful. Very helpful. And then lastly here if you mentioned a focus on reducing expenses.
Additional 10% to 15% in fiscal 20, I'm, assuming compared to fiscal 19 expenses.
That above and beyond the other expense reductions you've already guided to into into fiscal 20 or is that inclusive.
Barrios, Mike, who the 10% to 15% both as a reference to our expectation for 2020 corporate costs versus 2019 to give a little bit of.
Indication of what were what Weve the things that we've done that we feel that weve.
Our deliverable in 2020 from actions we've already taken.
So that refers strictly to.
Corporate costs.
Okay and.
I'm, sorry about that we've gotten into that before with Bob.
With the with the Investor group that we.
Disclose that we have completed or 2020 planning of course, and that's all part of that but actually function of the actions that have been taken.
In the fourth quarter and things of will continue to that we'll continue to rollout.
In early 2020, but we think thats a good.
Solid number two to expect if you're modeling corporate costs for 2020.
And anything else.
Right on this call would be.
I'd like to set us up Sam's comments are additive to that.
Got it so so just to make sure I understood you correctly, so that that 10% to 15% reduction in corporate costs is above and beyond the cost savings that you've guided to with the adding more sale the phase one reduction in the European.
The reduction adjustments correct correct.
Yes, I got it thank you.
Our next question comes from Justin Bergner of key Dot Research. Please go ahead.
Good morning, everyone.
Good morning adjustment.
Couple of clarifying questions I think a number of the numbers came at me a bit quickly, but just to start with the last question.
When you're referring to corporate costs I mean, the number that we see in the P. and now as a sort of the reconciliation at the segment level, the other expense, including corporate costs.
How should we think about sort of.
The corporate cost number sort of in 2019 versus that line item in the P. now just to figure out what the 10% to 15% applies to in terms of the 2019 cost base.
Yes, if you look if you go thank you take our.
Yes, our 10-K will be coming out shortly.
And as you point out in that it it shows segment level details <unk>.
And so it will show income loss from continuing operations for the portion castle here product segment for the around that but processing segment and then it will show a line for corporate costs.
And then the total will add up to the corporations tall consolidated operating income or loss that that corporate cost line on that table as Robert what we're talking about with respect to 10% to 15% and it is it is a piece of SGN night.
Okay understood. So it's the entirety of the other expense, including corporate cost line. There is not like a portion of that that is.
The relevant for the purposes. This calculate right okay right at the corporate costs is shown on the.
Consolidated results of operations on that and the 10-K when when you do the segment breakout you'll see it there okay.
Understood and then.
Just a couple other clarifying question. So the 600000 in cost savings in Q4 2 million in 2019 was specific to the U.S. forged engineered.
Forged and cast engineered products business and then the three to 4 million of savings expected in 2020 is for the international European operations.
Yes, Thats correct.
Okay.
Thank you and then I think he said that begin your comments that your income from continuing operations in forged and cast and your products was 4.5 million in the fourth quarter. When you adjust out some of the onetime expenses or was that.
No.
Reported a GAAP basis.
[noise], forcing cast engineered product segment, yes.
That's as reported 4.5 million.
Okay Thats.
Thank you and then maybe just.
Big picture question.
To wrap up.
How does the sort of global shift.
From blast furnace steel production to minimills steel production, either advantage or disadvantage your role business if at all.
Well.
It really doesn't affect it other than.
The speed, who we sell to and where the business is moving too. So as you US deal. For example was heavy in blast furnaces and now they're changing that and that's a big customer of ours.
Due to support them that companies like steel dynamics, and Nucor are growing and we're in we're in virtually all of those those customers. So it really doesn't.
Change things for us.
Okay, there is not likely different.
Sort of amount of rolls needed per ton of steel depending upon.
Whether you're looking at a blast furnace or mini mill operation just to clarify.
No. It doesn't I mean theres been changes in the industry years ago, where you cast afinitor slab and so you need less hot Hot rules, which will be the cash side of our business, but that's occurred a long time ago.
Okay. Thank you.
Our next question comes from David Wright of Henry Investment Trust. Please go ahead.
Good morning in your in your and your budget for the year, where are you planning for any debt reduction.
Well in our.
I guess I can give some indication we're not.
We're not giving full full year earnings guidance, but.
We should see I think we were kind of expect <unk> I mean, we should see debt levels kind of staying stable David.
Yeah. We're we're in it that I mean, we're going to invest some more and I mean that could put a little pressure I'm on the borrowings.
But.
When we look at our 2020 outlook.
There's not a heavy uptick and and debt now.
Or heavy down too.
Right.
Okay do you have the operating income in Q4 for air and liquid.
Yeah as reported David It's a 2.6 million.
And corporate costs were.
Corporate cost for 4.1.
As reported 4.4, Okay [noise].
And I want to ask about forge engineered products as a business I mean, obviously, though the oil and gas is gone way way down, but it sounds like.
You have other customers and you're trying to get more customers.
Reference in the press release and also Sam's remarks is this is this a discrete business units.
No it's.
It's all part of the the same business. However, we have.
Changed our Salesforce and hired people specific to that industry.
As opposed to trying to just sell forged engineered cat's pride that non roll business on the side and we actually higher some people that are from that that world and that's a that's why I commented on we're seeing some additional opportunities outside of oil and gas based on that.
And do you do that out of a particular facility.
Our Bergot style facility is where the majority of it is made if it's a stainless alloys, we buy though on the outside but we still fourg our birds Tom facility. So it all comes out of there.
Okay, all right well you guys continue to do what you say, you're going to do and and that's impressive thanks very much.
Thank you thanks, David.
Our next question is from Greg Bennett, a private Investor. Please go ahead.
Thanks for the great quarter I appreciate it.
In Europe.
For this year or are there are costs restrike additional restructuring costs that you expect it maybe you already mentioned that but you mentioned in Europe. We expect three to 4 million annual savings is sort of cost for that.
There will be there will be Greg a in the first two quarters, we're doing some other things that will generate some but it's going to be rather modest relative to what we've seen a in 2019.
But yeah, there was a little more coming but it'll be modest it'll be relatively small.
Okay. Thank you and that's one final question you mentioned in the tooling industry that your sales that new sales I guess I'd gone from 1.7 million to 5 million.
Could you give us more information more color on that what what industries or you're targeting and what's the size of those markets.
We were to look out you know a year or two Hal.
Besides the market or the size of our.
Fortunately with what you put your spot yeah. The the I guess I'd say you you went from 1.7 to five which sounds pretty him well. It is impressive percentage wise I'm just wondering how big of what where are you targeting.
And what what's the potential size for that.
We are would be extremely small player at a at that size.
So you know less less than.
5% I would say I don't know outside of the market is but I do know that my past I know I've worked at a carpenter, we had a disk distribution facility that that purchase 5 million, probably $5 million a month of that kind of material. So that's just one one customer so there's a big opportunity.
For us there.
What what is can you share with us what it is there are certain industry that I'm not familiar with carpenter that you're targeting.
It's like for plastic injection molding, a lot of it or for forging pulling for dies. So when you forge a material you have to have a certain material to depress it with so the dies or made from this kind of material like an example will be H. 13, if you look that up or plastic injection molding for.
Automotive dashes in any plastic parts that you'd make is a is kind of a more material that the significance of why bring it up as we were primarily producing oil and gas related things and so this is a diversification away from that.
Okay. Thank you for in addition, not away but.
Our next question is a follow up from David Wright of Henry Investment Trust. Please go ahead.
Thank you just a going further on the forge engineered projects to do they typically have a different margin profile didn't mill rules.
It varies greatly.
Right now in the short term as we're growing that business.
And we've been successful on the rules side.
With some mix changes some pricing.
It's the same are probably a little less at this time.
So it is this a useful and just trying to pick up some extra <unk> you know slack in capacity at the facility.
That is extremely useful for that as a you know.
As we run more full in our Bearkat style facility that that certainly helps us with a fixed cost absorption.
And are there any any asset sales contemplated for the year.
No not not at this time, David This is Brad we were continuing though to to look at where you know as we continue to make improvements in the business improving efficiencies.
Materialization et cetera, it starts to create a access if you will capacity as we've created new capacities within or.
Within our buildings and so as we move down this path.
Our focus is continue to shrink our footprint.
As you know is is the opportunities present themselves, but you know as we look at 2020.
At this point in time, we're not targeting anything in particular.
From a.
And asset sell perspective.
All right. So you're you're you liked the footprint personally.
Like you can always be smaller [laughter] get always I mean, you know it is we're looking at it investments in the business to David a in others were we are utilizing assets that we've had for quite some time and.
And quite candidly weve underutilized possesses for for quite a long time and so our focus has been is let's make sure we get our value out of out of the assets that exists and then this week, we continue to improve.
How can we continue to significantly alter our cost structure.
Moving forward with these improvements in make small changes.
In our.
Our asset structure to allow us to to remove costs from the business and that will continue to be.
A focus that we go through in our strategic plan, we have certain key opportunities laid out in front of us where we we know we can go further.
But you know we were going to go to pace that is going to allow us to make sure. We don't disrupt our customers and also make sure we don't negatively impact.
The improvements we made and we put a lot of focus on sustainability as we've made improvements in our business and making sure that said earlier that.
With each a change I know that we've taken we've made should we have processes and systems in place to help us sustain those improvements and so we do not want to move.
Too fast where we disrupt.
I guess, the new the new.
Step we've taken taken up in the right direction <unk>.
If we have another minute I'm on the last call Sam had some comments about Europe getting better and wanting to do some work in Europe and am I don't know if if if you can tell us anymore about how things are going in Europe presently and if you can't that's fine but that would be my last question.
Oh, yes, we've.
We've done a lot of work during the last six months as Mike was pointing out and I stated that the all the work on.
The restructuring is completed its just the notification periods for people as to when they're actually going to exit the business.
A lot of work was done on the raw materials side, where we're aggressively looking at the the charge materials, it's maybe no.
Roughly and don't write downs, a third or a little more of our costs were huge opportunity there that were exploiting.
We had some some quality issues in the last several years that have been resolved so.
It was quite a lot of worked on and and the fourth quarter.
Results.
Portion of that.
Benefit came from the UK in Sweden.
All right well thank you again.
Thanks.
Again, if you would like to ask a question. Please press Star then one.
This concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.