Q1 2020 Earnings Call
The <unk> Charleston, I will be or conference facilitator.
<unk> I would like to welcome everyone should have harsco corporations first quarter release conference call.
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I would know like to introduce Dave Martine of Harsco Corporation.
Sir Martin you may become your call.
Thank you Charles welcome to everyone, joining us and I Hope you and your families are healthy and doing well.
Dave Martin V.P. of Investor Relations for Harsco with me today is Nick Grasberger, our chairman and Chief Executive Officer, and Pete Mine, <unk>, Senior Vice President and Chief Financial Officer.
In line with social distancing practices as a result of the pandemic. We are doing this call from different locations. Today. So please bear with us as we transition between speakers and address your questions.
This morning, we will discuss their results for the force first quarter in various initiatives at the company, including the integration of ESAU.
<unk> score program interactions in response to cope with 19.
Then take your questions.
Before a presentation. However, let me mention a few items first our earnings release as well as a slide presentation for this call our on our website.
Second we will make statements today that are considered forward looking within the meeting of the federal Securities laws. These statements are based on our current knowledge and expectations.
Enter subject to certain risks uncertainties that may cause actual results to defer materially from this forward looking statements.
For a discussion of such resend uncertainties. Please see our most recent 10 k.
The company undertakes no obligation to revise or update any forward looking statements.
Lastly on this call we may refer to adjusted financial results that are considered non gap for Assisi reporting purposes reconciliation to gap results is including included in the earnings release as well as a slide presentation.
I'll turn the call over to Nick to begin his prepared remarks.
Thank you day been good morning, everyone.
I appreciate your joining us today.
Actually in such a difficult environments, and I want to Echo Dave sentiment.
I hope you when your families are safe and healthy and remain that way.
Overnight gain has certainly changed the landscape in which horoscope was operating with continued demand for critical products and services recognize that horoscope has an important role to play in supporting essential industries.
To that end, we've moved quickly campylobacter covert mitigation plan, what three components.
He care.
Continuity liquidity.
We've been laser focus on monitoring evaluating the responding to the pandemic and making business decisions to deliver against our plan.
Against the backdrop I'm very pleased with our Q1 results, which were good bit better than our guidance range due to the rail and cleaner with businesses.
Performance into Horoscope Environmental segment was a line with our expectations.
By the material decline and volume late in the quarter as many you've already steel industry customers reduced production.
He will provide details of Q1 performance entered into a preview of our financial position in short order.
Oh commented admitted on the current trends in our businesses and the status of our key initiatives.
Me first provide some perspective on our transformation into a single thesis company, providing environmental solutions.
Since we declared this new strategy a year ago, we've taken several meaningful steps toward are cool.
The current state of the energy industry bolsters, the decision to be made to exit or energy related businesses.
And deploy that capital into businesses with better growth and cash flow profiles.
Along with a much lower degree of volatility.
In 80 per cent of our revenues are now derived from businesses, providing environmental solutions. So I'm very pleased with our progress.
At this point given the onset of covert 19 at a significant operational changes that are not wonder away at horoscope. We are less focused on continued portfolio changes.
Immediate priorities are addressing the pandemic.
Serving liquidity capturing the value of the so acquisition.
And executing the score program in a rail.
By narrowing our immediate focus to these initiatives, we believe horoscope will emerge from the pandemic has a stronger more durable company that as well positioned to execute additional steps in our portfolio transformation in 2021.
Yeah.
Like a focus the remainder my remarks on the trends we were sitting across our businesses in the x. Since we are taking to ensure that companies able to operate efficiently and perform well despite the downturn.
As part of it several also outlined progress we have made against two of our key initiatives.
<unk> acquisition and the clean Air segment.
And the supply chain it operational recovery or score program in the real business.
Starting with horoscope environmental while she continues to support critical metal production in most countries, which it operates.
The segments experience or greater impact from the covert 19 pandemic than or other segments.
A few weeks ago several of H.G. sites became an activist steel mills around the world close to the government mandated health and safety measures.
Since that nearly all of those sites every single production.
Nonetheless about half of all customers sites are currently operating at lower levels of production good a weak demand for steel products.
We have moved quickly to adjust to changes in demand by reducing employment levels as well as other operating and capital expenditures.
With a goal to support free.
<unk> support positive free cash flow generation.
Well, we expect these challenges and the ceiling to shrink to continue in the near term. We are confident that are healthy foundation, an increase focus on environmental solutions.
Enable us to manage through this situation at emerging and even stronger competitive position.
Moving forward or objective is to maintain an attractive return on investment capital in H.G.
It'd be more selective on our growth investments.
Or allocation of operating cash flow for the next several quarters at least.
<unk> heavily towards reducing debt unless towards new capital intensive contracts in this business.
Turning to our other businesses given the essential nature of their products services and the industry's they serve.
Both horoscope <unk> at maintained operations throughout the U.S.
Spite mandated closures of not essential businesses in certain states.
In clean Earth, all 90 of our operating sites, you're operating but many reduced levels of volume.
Across all waste streams, including industrial retail medical contaminated soil and dredge material.
Volume is down about 15% to 20% versus the Q1 run rate.
Volume changes are on even due to the regional nature of the business.
<unk> customers and waste streams.
In addition to state and local covert related restrictions <unk>.
Differing volume impacts among the states.
Sites.
We are reducing costs largely through furloughs at sites experiencing weaker volumes.
Or indications at the businesses at or near the bottom as some customers are reopening in project work is picking up.
With the acquisition of V.. So now complete focus started integrating the business into clean Earth.
The integration is receding according to our plan through several commercial operational and functional integration teams.
Beyond the integration the solid harsco teams have worked closely over the past month to evaluate the opportunities and refocus the business on this key value drivers.
We remain highly confident that we can at least double the margins in earnings in this business in the next few years.
I've had the opportunity to engage with several key he saw customers over the past few weeks.
Encouraged by their support for each <unk> and it's combination into horoscope.
There's a significant amount of enthusiasm around or new platform, both both within our company and across the industry.
Turning to our real business, if we as we discussed many times the order backlog is grown dramatically over the past two years.
We saw no order cancellations during the quarter after Orderbook remains strong.
However, we do expect some of the shorter cycle opportunities to soften somewhat in the next few months.
Oh totally we believe that harsco real should certainly produce a stronger here in 2020 that last year, which was impacted by operational challenges into fourth quarter.
Yeah.
We believe we are well on our way to addressing those challenges through our score program. In fact, we are progressing AD or ahead of schedule on each element of the program.
Capacity culture competency data quality and governance.
Or overall space and workforce capacity continues to increase it alignment with the demand profile included in our 2020 operating plan.
We've also instituted new planning an inventory control processes that are results in the lower inventory.
Bransom greatest important same proud to see how the culture is shifted under new operational leadership.
And that the team Italian engaged and as adopted the lead methodology Advantaging for daily improvement.
Well now trying to call over to <unk>.
Thanks, Nick and good morning, everyone.
You build on next comments, let me again highlight that we are very pleased with the quarterly results.
Over the past five years or so with very few exceptions, we've consistently met or exceeded the guidance provided to you.
We are again happy to exceed your expectations this quarter.
We've worked hard to capitalize on our strengths and improvement opportunities and these Q1 results demonstrate that our continued focus on execution is paying off.
Oh, Please turn to slide five Arkansas financial summary for the first quarter.
Of course goes revenues totaled $399 million in adjusted EBITDA, Yeah in the first quarter total $57 million.
Eva D. figure compares with an adjusted D.V.D.A. figure of $54 million prior year quarter on a continuing business basis.
It also places are Q1 performance well above the guidance range of 43 to 48 million then we provided in February.
As Nick mentioned, the better than anticipated result was driven by equally strong performances in our cleaners and real businesses.
Harsco environmental was in line with our expectations.
During the quarter cleaners benefited mainly from higher volumes for the processing of both drudge materials and hazardous waste in the New York area.
We believe that at least some of this incremental volume me it accelerated from future periods in part due to the mild weather in the northeast for much of that first quarter.
For real or equipment mix was more favorable than expected and we saw some acceleration of after market sales and contracting work.
Rails administrative costs were also lower than anticipated in the corner.
Earlier, Nick spoke about our manufacturing improvement or score initiatives in real.
I believe this first quarter performance illustrates the steady progress we are making it real yeah. There's a welcome positive development after a difficult and to 2019.
Horse go environmental results were consistent with our guidance. Despite the fact that services demand slowed considerably late in March.
Or environmental T. managed well through the first quarter in his continued to do so in the second quarter.
Relative to our guidance corporate spending was also a few million dollars lower than we anticipated due to the active management over central overhead costs.
Horse goes adjusted earnings per share from continuing operations for the first quarter was 16 cents.
Figure compares with our guidance range of one to four cents per share.
And it's adjusted for strategic and financing costs related to are you so acquisition as well as restructuring costs in environmental.
Lastly are free cash flow was a negative $26 million in the first quarter, which was also better than we expected in the quarter.
Or cash flows in the first quarter as you know are traditionally negative reflecting the seasonality of our businesses.
It also reflects some large cash payments in the quarter, including more than $20 million for interest and $6 million, an incremental contributions to our U.K. pension plan.
Now please turn to slide six in our environmental segment.
Revenues totaled $242 million at E.P.D.A. was $43 million.
Compared with the 2019 quarter revenues in profitability were as expected impacted by lower services demand, including the impact of exited sites foreign exchange translation and lower commodity prices.
Steel output at our customers sites declined approximately 7% on a continuing site basis compared with the prior year quarter.
This change was a bit worse than we anticipated and includes a significant fall off an activity late in the quarter as a result of the pandemic.
The impact of exited sites that you see in the bridge is principally driven by the two sites, we decided to exit early 2019, and which we've discussed in the past.
The impact of these exits as well as a ramp up of our new sites are expected to improve results in the second half of the year.
Next commodity prices negatively impacted results by approximately $3 million year on year.
This impact is the result of lower stainless steel and carbon scrap prices and related scrap chemistry.
These negative factors were partially offset by lower administrative in other expenditures.
Well actually on environmental we encourage $5 million is severance costs related to a restructuring program in the quarter.
These actions, which should achieve annualized cost savings a $7 million were contemplated at the beginning of the year to offset market pressures and are independent of the actions. We are now taking as a result of the pandemic.
Oh come back to this in a few minutes.
Next please turn to slide seven and cleaner.
Cleaners delivered another strong quarter with revenues up 24%.
Well, it's profitability increased more than 40%.
It's gross was all organic with each line of business contributing.
Dredge material processing was the largest contributor to the you're on your P.D.A. improvement as a result of higher volumes.
Dredge volumes rose approximately 130%, primarily due to increased maintenance dredging activity in the New York Harbor.
Yeah.
Secondly, contaminated soil related E.P.D.A. increased $1 million exchange was again volume driven and this increase occurred despite one of our sites being off line for the quarter do a fire.
Which is now back on line.
Thirdly, hazardous materials contributed $500000 an incremental either D.A.
Lastly, at any point out that cleaner, it's free cash flow total $15 million in the corridor, which is impressive in the context of its cash earnings.
We are clearly quite pleased with the stability and strengthen the clean or its performance and look forward to building on this platform.
Now, please turn to slide eight and our real business.
Real revenues were $78 million up 14% over the prior year period.
Higher revenues on long duration equipment contracts.
Meanwhile, E.P.D.A. fell modestly doodle less favorable mix of equipment.
And this impact was partially offset by additional services work with a long island railroad and lower S.G.N.A. costs.
Last week or real backlog total $435 million at the end of the quarter, representing an increase of more than 40% from prior year levels.
Our largest wins in the quarter, where in India, where we sold a number of track renewal vehicles for approximately $20 million.
India is a huge market opportunity for us and this when again illustrates the group the growing global nature of horse go real and its value creation opportunities.
Next I want to build on the comments Mick Nick made during opening remarks regarding cobin 19 in our business continuity actions.
Also in this context I'll comment on our financial situation and balance sheet.
So please turn to slide nine.
First it's important to emphasize what Nick indicated earlier all of our businesses are operational given that we operate in and serve critical or central industries.
Also as Nick discussed since early March we've taken significant action to protect their employees well, we continue to serve our customers.
And at the same time, we've moved aggressively on the financial front.
Taking a number of actions to reduce costs increased cash flow and improve our balance sheet and liquidity position.
In early March each business unit in the corporate function began taking cost reduction actions, including hiring freezes travel restrictions and differing discretionary spending.
We also began evaluating planned capital expenditures differing or eliminating some previously planned spending.
Specifically, we committed to lowering our original capital budget by $75 million.
The majority of the cap X. reduction will occur within harsco, environmental and largely reflects that we pulled back on growth spending in this business.
This total also reflects a decrease in maintenance as well as renewal capital spending environment.
We then closed a new term loan for $280 million to partly financed the east all acquisition and very attractive rates.
And we modified our credit facility to increase covenant headroom under our net leverage test from four times to five times.
Very much appreciate the strong support from our relationship banks.
Yeah.
Since then we began executing on a number of other cost reduction in cash flow improvement actions.
These actions will reduce costs by $15 million over the next two quarters or by $30 million on an annual basis and exclude any incentive calm changes.
I'm on there are other casual improvement actions, we plan to defer certain cash payments for taxes in pension contributions as allowed by legislation in the U.S. and around the world.
The amounts differed into 2021 will likely approximate approximate $20 million.
Objective here is to maintain positive cash flow and improve our for your cash flow compared to our expectation at the beginning of the year.
Or net leverage position was 2.6 times at the end of the quarter or roughly 3.8 times on a pro forma basis for the new term loan and the acquisition of VSL on April 6th.
These ratios compared to our revised leverage covenant of five times.
We presently have significant room under a covenant.
Moreover, we do not have any material debt maturities until 2024.
Or liquidity positioned also remain strong at the end of Q1 or liquidity was roughly $660 million, which includes cash available revolver capacity.
Pro forma for the sole acquisition or liquidity totaled approximately $400 million at the quarter end.
As you would expect we have stress test it on average position a number of ways and still see compliance with our covenants inadequate liquidity.
Nonetheless, we continuously monitor customer and market conditions and have identified in already to affect additional more aggressive actions if and when needed.
As as the case with most industrial companies of late and as we discussed earlier given the volatility of the effects of the pandemic or four visibility is quite limited.
As a result, we are not in a position to provide guidance on cue to where the four year.
Although we are discussing forward looking information Nick provided a few high level comments and what we've seen in recent weeks.
It shouldn't be a surprise to you that business activity has slowed in April, particularly for harsco environmental as our customers reduced production indoor temporarily shut down sites.
Or other businesses also experienced headwinds in April but to a lesser extent.
At this point, we see indicators, which point to Q2 as being the low watermark for results in 2020 with April appearing to being the most challenging month for environmental.
Let me close by saying that we're very pleased with how the harsco team across the globe as proactively responded to this pandemic.
And are confident we had the <unk> financial capacity to managed through this downturn.
We have a solid balance sheet and importantly, we expect to be free cash flow positive.
Also even though we're taking a number of significant imprudent actions to improve liquidity and preserve capital.
Leave we are well positioned in poised to benefit.
As in when a recovery materialises.
And that concludes are prepared remarks, altering the call back to the operator Charles for questions.
This time I would like to remind everyone in order to ask a question. Please press taller than the number one on your telephone.
You have a question on the line from Jeff Hammond <unk>.
Hey, good morning, gentlemen, Hey, Jeff.
So I want to get back get into April trends, a little bit more some good color certainly a cleaner, but you know can you talk about what you saw in L.S.T. volumes in April for your your sites and you know maybe an expectation for L.S.T. volumes based on that for two q.
And then just in rail kind of where you're seeing potential you know risk for slowed down or deferrals, you know given such a you know good backlog there [noise].
Yeah.
First of all in terms of A.G., the or the L.S.T. decline and April is probably around 20 per cent, maybe a little bit more.
As I indicated I think they did as well we expect that to improve for that declined to lessen over the balance of the port or I don't have a.
Solid estimate of what that might be for too too, but we do believe that it will it will improve from what we've seen in the month of April.
On on rail.
Up to date, we really haven't seen any significant impact on the business we're anticipating.
That some of the shorter cycle opportunities.
It may be impacted but again, we've not seen that yet so I.
I mentioned that we've had no order cancellations on any equipment some of the after market business could be impacted.
But again three or four months, we're very happy with the way the business is performed and with the and where the market is we we have seen and you've probably seen.
The class wanting to have all reduce cutbacks estimates for the balance of the year, which affects our business.
Probably not to the extent that we figured they would.
So that's that's all so perhaps a little more positive than a than we've been thinking.
Okay, Great and then you know real definitely you know much better profitability, Oh, I think than you were kinda guiding too and you know maybe maybe some of the score initiatives or or tracking better, but if you can just give us a sense of you know how much of that upside was timing and you know what we should think of.
You know in terms of margin rates, you know on a sequential basis as you make more progress on on the score initiatives [noise].
Yeah.
Yeah, well I I think there was a bit of timing late late in a cue one that that helped us a bit but certainly not not nearly to the extent of the it'd be versus expectations.
In the real business.
I think that if you if you look throughout the year, we would expect margins to improve sequentially each quarter and probably be in that 12% to 14% <unk>.
12, 14% range for the four year absence of significant.
All off due to the pandemic.
Okay. Perfect. Then then and then just last one just any early observations on he saw in terms of you know where you're seeing the most substantial near term opportunities for you know profitability improvement and then just on the you know kinda longer term, how the pandemic and some of these short term.
Packs, you know impact your ability to kind of really get going on some of those you know structural improvements.
Yeah.
Well take the second question first and I I think we feel highly competent very encouraged by the execution of the integration and all of the process improvements and and and discipline that that's been installed in the business at a very short period of time, So I I realize you're not see any impact of the pen.
Dammit.
On our ability to achieve our financial an operational targets that we set for the business.
So I think I stated earlier that we we've not relaxed are very strong view.
That either die and margins will at least double in that business and the next few years. So I really been very happy with how that's been executed. Despite the fact that we're all working remotely.
We are right on plan in terms of all of our integration of related activities.
You know in the in the shorter term.
There's been a real mix in the business some retailers.
Volumes that are much higher is you might expect some are much lower.
<unk>.
Some some of our customers that produce personal in the household hygiene products. The the waste it we're processing for them is way up.
Others, such as retail paint are way down.
So I I, it's it's a real mix, but I I think in the short term.
And I I think we've commented on this before just that.
The the lack of a process disciplined and he saw frankly, it was was a bit stunning.
<unk> and but these are.
Kind of basic processes in the industry that were highly confident that we can fix relatively quickly and and we're doing that as.
As we speak so I I would say this overall well volumes are down in the short term.
And he saw as I mentioned.
I do think that the second quarter will also be the low point 40, Solomon Queen Earth.
And the the ongoing benefits the integration will be we realized on a four year basis.
Okay, great. Thanks stick.
Again to ask the question. Please press Star then the number one on the telephone.
You have a question from Larry Saul.
Airline your cell phone.
Right. Thank you Oh, the one got good to hear your voice.
During your families are healthy and you're in there just a couple of sort of longer term questions. Because obviously I think though.
Yeah, we could beat the depend on many come over the head and it's kinda hard to figure out exactly what's gonna happen during it but how did you guys feel and on the environmental side as you come out of this you know as you come out of this and then maybe we maybe mired in it for quite some time either on the economic and all that but we'll customers beep.
Looking to you to you know maybe you can add customers as you actually provide a savings benefit and draw it may be more outsourcing or outside of U.S. and maybe you know I know, we're going to mature stage in terms of outsourcing the U.S., but not in terms of the amount of services you guys provide submitted expansion.
Services, you, how do you sort of do that longer term opportune.
Yeah.
Well that's right you just stated the value proposition that we offer our customers all all over the world I I do believe very strongly.
Coming out of the pandemic, we want to see a a a flood of opportunities for us to grow in part because we'll be in a better competitive position.
But but also because that value proposition continues to shrink than mostly around environmental and and cost benefits that we can provide so.
I think we we will be much more.
Focused on on securing the very best of those opportunities. We're not we're not going to as I mentioned, we we need to really focus on.
Debt reduction for the next several quarters. So my my view is we will likely be passing.
Oh and investing in many of those those more capital intensive growth opportunities but.
I I really believe as I said, what the foundation that we'd go to leadership team.
I made an innovation and applied products.
That are competitive position will just continue to strengthen and that that value proposition will will be more compelling to customers in it that it has been the past.
Great.
On a rail side, how about you know similarly, you know hopefully in the short term, obviously won't focus on operational improvement.
How about you know the long term if we're in sort of a multi year you know not depression, but you know, we'll we'll we'll drop a lot. The next whatever a couple of cord and then hopefully improve on that but if we're again moderated sort of a sluggish economy is their potential chances that that some of these mould.
Rail initiatives from your customers get which to out you'd you know funding or you know already yeah, obviously, maybe a hard question to answer today, but any thoughts on that.
Huh.
Yeah, I think that unlikely that the large projects are are really funded by the state bones or.
<unk> railroads and these are critical infrastructure projects for them, where the the the the real industry in in those countries is is is.
More critical perhaps than we've you rail sometimes in the U.S.
So I I think that it unlikely these were projects.
Awful lot of time is but been put in by by us and the and the customer.
And I I'd be shocked if they pulled back their commitment to completing those those projects.
Okay, Great and then just last question on clean or just a couple of here I I they come into the year with a pretty big back one of them on the hazards wayside right. So even if you get some declined.
Operationally from your customers.
<unk>.
<unk> companies.
You should have sort of someone a bunker that you know you could obviously chewed through the next couple of corners, but his data a good way to accept that and how about on the yeah. The dredging. So there's the opportunities and maybe the menu.
Yeah, Yeah, no it's less of a of a backlog issue and and cleaners and he saw than it is just a steadily recurring stream that then so is by the customers and and we are their solution provider.
Right. So I think in that sense, there's a a very large backlog, but it's not it's not backlog like you might think of into into rail business for example.
But that again speaks to the they're rather steady nature of of the environmental solutions business overall in the U.S.
And it's you know quite quite unusual to see a 15% to 20% decline and volume.
A month in this in this business then that's probably unprecedented so you know that's why in part we really.
I believe that April.
It's the the bottom and if we're going to and we've already seen signs as I mentioned of a of those volume is to come back up.
On on the rail side.
Again, I I think the the the very large order.
Backlog that we have.
I think.
Really under pen a a a fourth floor of of good earnings in that business.
Okay right. Thank you very much appreciate it.
I can't ask that question. Please press tar them the number one on your telephone.
You have a question from Rob Brown airline or something.
Morning.
Hi.
No you said that you've you feel good about the initially saw progress, but what's what are your thoughts on getting the margins, they're back or up to the cleaner level do you still see that as a goal do you see that as possible sort of gotten in there and it got it if you want it.
Well it certainly is a goal and and just to restate the cleaner with margins are about three times does or even done margins what they are in a a diesel so.
To get the the targeted return on the acquisition were really only need to kind of double that you saw margins, but again, we believe over time. There's no. Good reason why we we can't get the he saw margins up into that 20% range, where the where the cleaners margins.
Yeah.
And so you know, we're we're talking about doubling margins, but our internal target set expectations or or beyond that.
Okay. Okay.
Spell out of the environmental business, but as his things sort of stabilizing improve their how how what sort of the timeline between your customers getting back running and volumes sort of recovering before you start to see revenue flows sort of one to one or is are deleted pack for you there.
No it's pretty much one to one once their production.
Picks up and they're utilization rates pick up a we we see the immediate benefit volumes that we process.
I think it's sort of.
Again to ask the question. Please press par then the number one that's on the phone.
You have a question from <unk>.
They're lining something.
Oh good morning, everyone.
Morning.
Morning.
Had a few questions left here I'm just following up on some of the Great times that you had earlier as far as on a segment level basis as far as exposure.
I'm too cold in 19, and less exposure to cope with 19, you went through some of the puts and takes a within the east all business that we're seeing.
As it relates to the other segments cleaner, how should we think about parts of the business that perhaps have a little bit more exposure.
In in in this quarter ending June.
And as I look at your comments <unk> is it safe to assume that your goals doubling the either dumb marching in the next few years here. So is a relatively conservative targets.
Yeah and.
Given what we're going through right now.
Yeah.
Yeah, I'll I'll I I will agree with that I I think they stopped liking margins is is a bit conservative.
I I think we'll do better than that and certainly what we've seen over the past month wouldn't wouldn't would validate that.
Back to the first part of your question Chris.
I I actually.
So called M. and I, the manufacturing <unk> volumes relative to say retail and medical.
And and contaminated soil would would be the most affected because there are drawn from industrial production and of course, you've all seen those rates to climb precipitously. So we have.
Customers that have simply shut their manufacturing in the volumes have gone to zero you know we've had others.
Had a producing products that are in very high demand right now and and there are volumes you're up so it.
Yeah, it really berries, but overall the state industrial portion.
Would be the weakest medical probably the least affected.
Probably up even a little bit versus expectations as you might imagine <unk>.
Retail with a mixed bag right you've got some of the large retailers Amazon correct.
Or volume is up substantially.
Right, whereas you can think of.
Cosmetics and sporting goods.
Other retailers was the volume is way down.
So.
It's it's just a mix, but but overall the industrial volumes would be the most exposed to cope.
And but as I mentioned that I think it as well we are saying some of those industrial customers beginning to reopen.
Oh, that's one thing that gives us confidence in saying that we believe that month of April may maybe the bottom.
That's great very helpful and I wanted to shift the focus to the real segments. You mentioned you saw some acceleration after market in the corridor.
Some impacts.
As it relates to capital equipment as we focus on the profitability of the segments.
And what that looks like out of this recovery.
Has there been any change to the runway that you see where the potential that you see for this business and should we expect on a full year basis that after market still continues on its wrote trend in its contribution to profitability in the second.
Yeah, I think that's absolutely right again, the after market is a shorter cycle business, it's difficult to project at this point, what the impact might be an after market I I think we're more positive on equipment in this market given that it's in backlog.
It it's very much needed by by the customers, but but coming out of this.
And I've set it before I I am just very optimistic about our real business. If you look at the the innovations that that we've introduced and and the the the uptake on those innovations if you consider.
New segments of the business and technology for example, the global footprint and a rail has expanded dramatically and and we've won contracts for bidding on contracts that we'd never even would've been aware of a few years ago and and the harsco real brand, it's never been stronger.
All around the world So I I.
We had a very challenging queue for.
It was a it was a significant Miss force, but it was production of related it was not demand related.
And we are well on our way towards resolving those challenges and getting back on track to this business being a significant growth component for our company.
That's great and lastly, Ah just following up on those comments.
You mentioned, how it's progressing well into one.
And regarded to South Carolina facility, if we look at that moving slightly ahead of plan in combination with some of the.
Receivable issues that impacted or timing in q. or.
What type of contribution to the positive free cash flow expectation could that potentially be.
Yeah, Pete I'll, let you a comment on it.
Yeah, Yeah. Thanks, Yeah, we're already starting to see some significant improvements in working capital Yeah. We we knew they were coming because we had some issues at the end of fourth quarter, but the there's been some positive developments not only in terms of receivables and collections, but also in terms of the way the manager payables as well as advances so across all of the businesses I think the working capital improvements that we're going to see.
Benefit us yeah, north of $60 million this year and I think real is going to be very very significant part of that.
[noise] excellent. Thank you all have <unk>.
I think again for joining us today.
Things conference call.
Oh this is going to have great.
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