Q1 2020 Earnings Call
[music].
Ladies and gentlemen, and welcome to the Constellium first quarter 2020 results conference call. At this time, all participants are in a listen only mode.
[noise] later, we will conduct a question and answer session and instructions will follow at that time, if you require any further systems driven.
Please press Star zero.
On your Touchtone telephone as a reminder, this call is being recorded I would now like to turn the call over to your host Mr. weighing whittling head of Investor Relations.
Thank you operator.
Welcome everyone to our first quarter 2020 earnings call.
The call today, our Chief Executive Officer, Dreamworks remain in our Chief Financial Officer, Peter Matt.
After the presentation, we will have a QNX session.
A copy of the slide presentation for today's call is available on our website at <unk> selling them Dot com and today's call is being recorded before we begin I'd like to encourage everyone to visit the company's website and take a look at our recent filings.
Today's call May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Such statements include statements regarding the company's anticipated financial and operating performance future events and expectations and may involve known and unknown risks and uncertainties.
For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward looking statements. Please refer to our so the factors presented under the heading risk factors and our annual report on form 20-F.
All information in this presentation is as of the date of the presentation. We under undertake no obligation to update or revise any forward looking statement as a result of new information future events or otherwise except as required by law.
In addition, today's presentation includes information regarding certain non-GAAP financial measures. Please see the reconciliations of non-GAAP financial measures attached in today's slide presentation, which supplement our IRS disclosures I would now like to hand, the called digital Mark.
Thanks, Ryan Good morning, Good afternoon, everyone and thank you for your interest in a couple study of.
Let's go stadium, the health and safety if our employees is up first priority.
We have implemented many initiatives to protect our employees in risk supposed to the Covina 19 pandemic, we have increased cleaning and Sydney station and full social distancing and provided our personnel, which personal protective equipment.
We have also implemented tricky visitor policies bad business travel and then tools to work from home policy where possible.
I will still you have is a key parts of the supply chain of many critical industries to that end in the U.S. All plants have received the distinction of an essential industry, which allows us to continue to operate the spike state stay at home holders.
All of our plan with the exception of automotive specific plan has continued to produce to meet demand for these critical industry, such as beverage food healthcare National Defense and transportation.
Hi, I'm very proud that despite challenging conditions the competitive team stepped up to meet the challenge.
I would also like to highlights I'll strong financial position to finance team led by Peter Matt has worked extremely hard over the past three full years to improve our cash flow profile increased liquidity and push out I'll debt maturities.
These actions will help us tremendously successfully navigating this crisis.
Now, let's turn to slide six and I would like to highlight some of the decisive actions to stadium has taken to leave it defining sitting back to defend it make rest assured that this is not a complete list.
I think it is important to lead from the tough therefore to build the executive committee and myself of old taken a temporary reduction you know compensation.
We have aggressively reduced spending to match the challenging conditions that we are currently facing this includes flexing variable cost to better match production levels.
The reduction in our workforce was necessary to reflect current operating conditions.
Nearly 5000, a fell 13000 employees or 40% of our workforce.
And subtype of subtype of both for the unemployment both temporary Leo scheme.
To build momentum around reducing I'll spend we have established spending committee is the most approved all spending over preset thresholds as planned and corporate levels.
For example, any corporate spend of 1000 euros. He is required to be approved by the corporate controller.
For instance, again are you saw plants in France, 80 spend over 5000 euros requires approval by the plant manager.
Capital spending we are reducing our 2020 target to 175 million euros 96 million euro of 35% reduction from two inch Nike and 75 million euros lower than to target provided in February.
We also the most both leave anything out capital spending to essential maintenance spending to ensure older Lee restarts of capacity when demand returns.
We are very serious about reducing spending and have already identified the specific cuts needed to achieve a read the revised target.
Any new capsule project requires executive committee level approval.
We are also utilizing governmental eight programs were available to help whether the crisis.
This includes utilizing both showed improvement programs in Europe that reduce off because during this period of reduced operating rates. In addition, we are deferring social contributions in Europe, and deferring system federal tax season pension payments in the us.
We are also extremely focused on optimizing working capital.
We are reducing our middle purchases to be line was up production rates and a shift out of finished goods inventory where possible.
Lastly, we have moved aggressively to augment our liquidity position our strong free cash flow generation in the first quarter brought our liquidity balance to 616 million euros.
We signed a new $166 million delayed draw term loan that will add to our liquidity in April.
We also feel seemed low interest rate loans through European government sponsored boring programs in France, Germany and Switzerland.
Now, let's move to slide seven and discuss our very strong first quarter performance.
Shipments were 393000 metric tons, a decrease of 5% compared to the first quarter of two into 19.
Revenue decreased 6% to 1.4 billion euros. This was primarily driven by lower shipments and lower metal prices.
It is important to remember that we substantially best through metal prices.
Net loss of 31 million euros compared to net income of 24 million euros into first quarter of two inch 19.
The change in net income was largely due to a noncash unfavorable change inside unrealized gains and losses on derivatives related to our commodity hedging position.
Adjusted EBITDA increased 9% to 147 million euros into first quarter of 2020 Dolphin and T. continued did you feel strong results.
If tonight delivered much improved year over year results I am exceptionally proud of the Essen Ikeme and believe this was a great first step into right direction.
A very strong first quarter results came despite headwinds from the movies 19th endemic in March, which we estimate to have been a headwind to adjusted EBITDA of between 10, and 20 million euros across the three segments.
Our free cash flow was very strong at 87 million euros. These performance underscores our objective of being consistent generators of free cash flow.
First of all to free cash flow did benefit from some working capital release due to the slowdown in activity at the end of the fall so.
The leveraging remains our top priority for free cash flow generation.
As a result of the strong adjusted EBITDA and free cash flow performance in the first quarter of 2020, we reduced our leverage 63.7 times.
Our liquidity position at the end of the Quanta was strong at 660 million euros.
Now I will hand over to Peter to provide more details on our financial performance Peter Thank you, Joe Mark and thank you everyone for joining the call today.
Turning now to slide eight you will find the change in adjusted EBITDA by segment for the first quarter of 2020 compared to the same periods of last year.
For the first quarter of 2020, Constellium achieved 147 million euros of adjusted EBITDA, an increase of 12 million euros or 9% year over year.
Harp adjusted EBITDA of 66 million euros increased by 7 million euros or 12% year over year.
Anti adjusted EBITDA of 52 million euros was comparable to the first quarter of 2019.
Anthony adjusted EBITDA of 34 million Euro increased by 5 million euros or 17% compared to last year Lastly holdings in corporate call for 5 million euros was comparable to last year.
Now turning to slide 10, and let's focus on the PARP segment.
Adjusted EBITDA of 66 million Euro increased 12% compared to the first quarter of last year.
Volume of 6 million euro headwinds as shipments fell across packaging automotive and other rolled products, primarily due to reduced demand in Europe late in the quarter from resulting from the effects of probing 19.
Price and mix was a tailwind of 5 million euros as we benefited from improvements in pricing and a better packaging and automotive mix.
Costs were a tailwind of 7 million euros on solid cost control, primarily due to improved recovery at our plants and to a lesser extent favorable metal costs and reduced energy costs.
Well, we no longer report bowling Green results separately I am proud to note that bowling Green adjusted EBITDA was positive in the first quarter.
Lastly, FX translation with a tailwind of 1 million euros in the quarter.
Now turning to slide 11, and let's focus on a in T. segment.
Adjusted EBITDA of 52 million euros was comparable to last year volume was a headwind or 14 million euros on lower t. I'd shipments due to weaker end market demand heightened by the effects of covert 19.
Pricing mix improved by 19 million euros in the first quarter due primarily to a very good mix in aerospace.
Costs were a headwind of 6 million euros, primarily related to higher raw material cost.
Lastly, FX translation was a 1 million euro tailwind in the quarter.
Now turn to slide 12, and let's focus on the Asinine segment.
Adjusted EBITDA of 34 million euros increased 17% compared to the first quarter of 2019.
Volume was a 1 million euro headwinds as continued growth in automotive structures were offset by lower other extruded product shipments.
Both of which were affected by covert 19 relating weakness in March.
Price and mix was a tailwind of 6 million euros due to improved pricing mix across both automotive structures and industry.
Costs were comparable to the first quarter of last year.
I want to Echo John Mark's comment recognizing the good performance of amplifying the quarter. The business returned to a year over year adjusted EBITDA growth through solid execution and a focus on cost control.
While we're not ready yet ready to declare victory, we remain confident that we're on the right truck.
Now, let's turn to slide 13, and discuss our balance sheet and our liquidity position.
At the end of the first quarter, our net debt was 2.1 billion euros, and we have no significant near term maturities.
Our leverage at the end of first quarter was 3.7 times.
We generated strong free cash flow 87 million euros during the first quarter supported by strong execution in each of our businesses.
Our cash while if available plus amounts available under committed facilities was 616 million euros up the end of the first quarter. During April as John Mark noted, we closed a 166 million dollar delayed draw term loans to further improve our liquidity position.
We're also pursuing approximately 200 million euros of low interest loans through European government sponsored volume program. We are targeting 350 million euros of additional liquidity through these.
Through these initiatives.
In challenging times like these reducing costs and preserving liquidity are paramount.
We are well prepared to deliver on both as your Mark noted, we are aggressively cutting fixed costs and our flexing our variable cost to better match production level.
While our ability to cut cost depends on many variables. We believe in the current environment. Our cost structure is approximately 75% variable or semi variable and 25% fixed.
This split includes model, which is largely a variable input.
We will leave no stone unturned to further reduce costs, while also staying prepared for volumes to return.
While we are unable to provide guidance at this time, we want to provide a scenario to demonstrate the strength of our business.
In a case, where our plants run at an average utilization of approximately 70% across the system.
We would burn less than 100 million euros of free cash flow for the remainder of 2020.
The majority of this cash burn would occur in the second corridor as we adjust to go lower operating rate.
This scenario when combined with our strong liquidity position gives us confidence in our ability to navigate through the cobot 19 crisis and potentially challenging economic environment to follow.
Our preference in the near term will be to preserve liquidity. So we are prepared for the unexpected once our visibility improves we expect to continue deleveraging our balance sheet I'll now hand, the call back to Jeff.
Drama excuse me thank you Peter.
Now, let's turn to slide keen and provide an end markets update.
We believe our balanced portfolio of end market exposures is a competitive advantage during challenging times like these.
I'll start with the packaging market packaging represents 37% of our LTM revenue.
We continue to see strong market demand in both North America and Europe.
Further evidence that these marketing booth recession, resilient and particular growth.
We believe the packaging markets as long term secular growth tailwinds driven by customer preference for aluminum cans.
Aluminum cans are infinity, recyclables, and clearly the most sustainable beverage packaging container.
Our customers continue to move forward with investments in new Ken lines, which should drive incremental demand forecast in the coming years.
The consumer preference trend easily one of the Tailwinds for can shift in Europe. The demand for can sheet continues to grow based on substitution of aluminum both steel.
In the U.S., we continue to expect the growth of auto body sheet demand tightened supply to the packaging market over the medium to long term.
Clearly we are constructive on the can chief marketing and near medium and long term.
Now, let's turn to automotive as I mentioned earlier automotive Oems began curtailing production in knowledge and their facilities remained largely idled.
Mostly ends are expected to we styles.
Production in May.
The demand for our products will be dependent upon the speed and trajectory of the recovery once off customers resumed production.
However over the medium to long term, we believe automotive remains a secular growth market for aluminum.
Customers continued to prefer a larger of equals wed regulations are aimed at increasing fuel efficiency or reducing emissions.
The automotive market, we need to continue to likely.
In addition, we expect hybrid and electric vehicles to continue to gain share of the seat.
Leaves the goals, our aluminum intensive due to their need for range.
Stadium is well positioned to realize the benefits of the secular shift to aluminum in automotive and de electrification of the fee.
Let's turn now to aerospace aerospace represents 15% of our LTM revenue.
The near term outlook for aerospace is uncertain due to the effects from Cobiz 19, and the 737 Max.
Aerospace Oems announce temporary stuff that using March and April.
Operations have largely restarted but that lower build rates.
We expect these reduced feel rates to continue through twentytwenty and potentially longer in the long term, we believed that the fundamentals driving aerospace demand growth remain intact.
Demand shops suggest that passenger traffic should recover over the medium term.
In key I'd, we expect to continue to expand in niche products in a diversified range of markets over the long term in the near term the defense and rail markets remained strong, but most industrial and transportation markets. All week. It is unclear when these markets will rebound.
In closing I again want to things to come stadium team for their tireless efforts. During these trying time.
Given the uncertainty around the extent and duration of the effects of the pandemic, we always throwing our financial guidance until our visibility improves.
Again, our first priority remains the health and safety of our employees and their families.
We are committed to working with our suppliers and customers to whether the current still together.
As always we remain committed to operational execution harvesting the benefits of our investment disciplined capital deployment debt reduction and shareholder value creation.
With that operator, we would note into Q any session.
Operator.
Ladies and gentlemen, if you have a question at this time. Please press Star then one number one on your touched on telephone. If your question has been answered all you wish to move yourself from the Q. Please press the pound key.
Your first question comes from the lineup, Chris Terry with Deutsche Bank.
Hi.
Sure Mark and Peter are you going well.
I have few questions the weren't one to run through on the markets and then and then on on cash flow.
I just wanted to starting in the error spice sector at first.
I think previously you talked about having decent visibility to the middle of the year and then more uncertain after that obviously Boeing and Airbus to provided updates and it was 24 hours and just wondered whether you could give another update on what's what what you're actually know how far out you know.
What orders might be et cetera, if you could just told through that specifically in their relationship with the customers on the aerospace thoughts. Thank you.
So a good loan increase and we are doing well. Thank you.
Or as well as can be into circumstances. So on aerospace we do have visibility typically a 306 months out in terms of older Booth and we continue to see.
Even though there is a little bit of the reduction in the older rates pretty decent orders.
But what that means when you combine it with the reduced rates that they have announced at some point you to demand we'd have to catch up with you meant for all products would have to catch up with demand for aircraft and I think that's what we meant in the prepared remarks, we think that demand will go down into second half of the year and.
Suit also continues to go down.
2021.
Okay. Okay. Thanks.
And then.
Just a question for Peter I. Appreciate the scenario you went through a little bit earlier I just wanted to wanted to clarify a couple of points on that.
Firstly can you maybe just timing on the overall year on working capital you, obviously had a very very strong one Q.
Is that main sort of you'd made a step change already in Q. So the starting bites is tougher from working capital from here or just why did you get stepped through the opportunities and then just tying into that scenarios just literally confused about twoq versus second half. If you could just talk through that thanks.
Sure.
Okay. So so first of all I just want to emphasize the scenario is not meant to be guidance right. So.
We're we're trying to just create a scenario that would kind of that would construct what the business might look like under this average utilization rate.
So in terms of trade working capital I think what you can expect as well.
As you slow down as the billed business Decelerates theres going to be some trade working capital generation and Anna and the situation, where we are now we've got this combination of businesses that would be slowing down to that rate. So therefore cash flow generative, but we've also got from businesses that are shutdown.
Tony would be ramping up so therefore consuming trade working capital so.
It's a you know as we kind of think about the model. There's a theres some puts and takes on either side and I would expect trade working capital in the in the model trade working capital shows up I've kind of a modest positive in the for the course of the rest of the year.
Okay. Thanks, maybe just a follow up on that 70, let's say God part is still I mean can you talk through.
Current utilization Reits have pain, just just to sort of benchmark looked at how that 70% is in context.
Sure so.
Again.
This is a case study right that's not with we're forecasting for the rest of the year, we don't know, but what we're seeing is if you look at the different markets right Aerospace as I mentioned has continued to be okay, but we believe it's going to go down at some point like Oems already at the same rate as what are we in salaries, reducing they'll build rates. So.
30, 2030 person down we still a sharp deceleration in the T. I'd right till the niches where in two if you're in that AMC segment at the moment, we've been running into.
70% range roughly.
If you look at the end sorry, I'm talking here about April rights to during condition.
If you look at.
Packaging.
Pretty much been in tax right. So we've been running it grew 200% with the exception that late in the knowledge in early April we had to shut down our plants in if we back for a few days we've been into it goes down to implement Sylvia.
Sanitation measures into social distancing, we work so full so that we're back to that 95% kind of for run rate.
And then if you look at to automotive will clearly at the moment, who are running at less than 20%.
And Thats been the case in Europe since the nearly the early early.
Early period of knowledge. So it's a mixed bag of all those different rate and as you can tell it's impossible to do how it's going to shape that because we don't know for instance, our Oems in automotive agreeing to restart we don't know when exactly the give dates but they can get who scouts and then we do.
No the rent that either.
Therefore, its are difficult to make any kind of prediction in the future, but I think the whole points about these case was to demonstrate a resilient. We are to really what you would describe as dial market conditions right. We've got about half of our business, which is not really impacted by the crisis and the other asset cheese quite impacted.
Prices.
And.
And Thats a you know the defected who will be was burning less than 100 million of the free cash flow running at the 30 person down and allowing for.
The decline and then a rent run back at the there is I think very good news.
Okay. Thanks, Thanks, very much good luck for sure Chris Sorry, just started up on cross lost about Q2 trade working capital So just to pick up on Q2.
The Big thing that we are going in Q2 on the trade working capital side as we've got the restarted the auto business right. So.
That is a that will be a consumer of trade working capital. The other thing that I would note is as we said in the in my comments about the scenario the bulk of of the negative cash flows in the second quarter, because as we reconfigured the business for a lower operating rate.
Theres working capital consumption in that it's hard to up maybe just a better way to put it as it's hard to optimize trade working capital in that scenario. So we would expect Q2 to be a use of trade working capital.
Thanks. Thanks appreciate it thank you.
Yes.
Your next question comes from the line of David Gagliano with BMO capital markets.
Hi, Hi, Thanks for taking my question just picking up on the on the Twoq you commentary just for a second just.
Yeah I appreciate the castle commentary I was wondering you know now that we're a third of the way through the quarter.
As you could just give us a little more color on on on the actual operating expectations.
Both in terms of volumes and margins per ton in each of the three segments I'm sure given that.
The timing here in the order books, you can probably provide more color on that.
To reset Microseismic center.
Yes, David Thats, a difficult question I don't think anybody's got the reliance us to its been we don't know in some segments, we do new.
Right you never can sheet, we have.
Decent I'd in the aerospace is strictly aerospace we go to decent I'd and the other markets. We just don't know so I think it will be completely.
Crude and from this project anything scolded second quarter is our first priority as we said is making sure that we operate in a safe.
And healthy factoring for our employees in the second priority is getting very close with our suppliers and our customers to be able to constantly.
Adapt our system to changing market conditions.
So.
You know.
When we went to the crises we growth goals on Friday morning, asking US argued delivering next week builders and from the same customer on Friday afternoon, sorry, we're shutting down the plan going to taking any old there's anymore any deliveries anymore, and we had to turn back some trucks and we are still in that same.
Environment, where there is complete uncertainty as to what's going to happen and so what we're focused on getting that very close connection customers suppliers running the supply chain as efficiently as possible and then the chips, we full will they fall.
Knowing that we said enough to make sure that we adapt our fill structure will reduce office and we Oh, we do the reduce out working guests, but this will reduce our capital expenditures that we protect cash to protect liquidity and were able to respond to the market environment.
Beyond that I cannot tell you.
Well, we're going to land.
And David just to put it in perspective as Mark said in his prepared remarks, just the impact on EBITDA in the March was 10 to 20 right. So.
That's a significant impact to that came quite quickly.
Right and I appreciate that and I was going to actually follow up on that.
So the impact in margins tend to 20.
And so sort of the expectation.
Got a couple of moving parts here seasonally second quarters, historically anyway stronger than the first quarter.
Is it reasonable to assume that.
No that 10 to 20 million dollar impact.
On a monthly run rate basis or is he going to be higher in the second quarter than what we got in March or at least in April.
So I think the.
One thing that needs to be said about the effect in the non chief.
It's an impact into 20 versus what could it be right.
The other thing is.
The seat we've got to remember that the crises started in Europe sooner the North America and most of the cell based in North America 30, the U.S. that we've seen things happening to US two three weeks data. We started earlier in Europe, but at same time. You know you started just really impacting us beginning of March so essentially what you.
Have you go to system that he's doing full rent that move getting ready for the busy season, you got all the coast did you got all the older as I mentioned, you guys customers pounding the table thing deliver deliver.
And then all of the said and we for office lease. So you basically have all the goals that you don't have the revenues. So obviously the impact that tend to twentys knowledge of than what it could have bdcs that asset you doing more gradual fashion, where you can adjust your cost structure. So we've done a lot to adjust the cost structure. We've done it looks who are just hold.
At amounts of cash flows are we going into April.
In a different shape that we went into March so I think it's difficult to extrapolate.
Tentwenty into a month you run rate of both of your run rate.
Okay. That's helpful. Then just just one last question for me on.
The clarification question.
I appreciate the additional information regarding the.
No different capacity utilization rates in Aero packaging and auto.
Currently obviously the way the results we reported each of those end markets are kind of mixed in each segment. So I certainly, it's a little challenging to extrapolate.
Where we are overall currently relative to that 70% figure that was flag.
In the prepared remarks, where our overall operating rates.
Now.
They would be a.
In that range.
Knowing that photos basically had zero.
Listen 20%.
Okay. So roughly 70% currently is that we're seeing and when you say in that range.
Yes.
Okay. Thank you.
Your next question comes from the line of Gus Richard with Northland.
Yeah. Thanks for taking my question.
Could you talk a little bit about you taking cost out of the system, how much has come out of.
Cost of goods.
DNA in R&D at this point.
And then of the remainder that's in cost of goods, how much is variable versus fixed.
So okay. So as we have as we.
Dave the comment before in the prepared remarks are our six variable split is kind of 25%, 675% variable right and that includes metal.
So if you unpack that what you get too as you get to a excluding metals, we would say that we're kind of 40% variable and 60% sexed on the other cost.
Just by look on it that's just a math of of our metal if you look at metal at 60% to 63% of our raw material or of our total cost business.
Got it Thats very helpful. And then how much came out of assuming an R&D.
Well, so what I would say is.
On a honest unit there there are more theyre more it's hard to it's hard to give a precise number I'm not per se because we lump them in other non metal costs I think it's fair to say is that a lot of those costs are a little bit more sticky in the sense, a little slightly less.
Variable, so maybe a slightly lower percentage than what I, just provided but I would say in general.
Kind of thoughts are a good rule of thumb to use.
Okay. Thank you and then.
The other one for me is can you talk a little bit up cost churn markets.
How much inventory is that your customers or what I would call the channel.
Well.
I think if you look at the packaging you've got noble inventories if anything.
Lot of some of our customers of both a bit more to make sure that they would initially than sales from the you know any supply disruption, but this is fast moving inventory.
In aerospace as I mentioned I think we're building at the investor in the supply chain a few.
Look at our I'll sales compared to.
The is the.
Both the build rates, where they're going I think we're building up as an industry inventory the supply chain and in the auto.
There was such a sharp reduction in immediate to a units.
Stumpage to a uptake that I don't think there is that mix inventory into supply chain and.
So will you know thats going to create some challenges when we were restyled because everybody I guess will you see the euro supply chain depends in many many many different suppliers and the ability to as the right inventory in the right place to get re stuff going to be a challenge for the meetings.
Many suppliers and depending on a on gradual or.
Fast these a restart will be that may create some changes.
Got it thank you.
Excellent job minimum bad environment, Thanks, a lot.
Thank you.
Tickets as an encouragement.
Your next question comes from the line of Matthew Fields with Bank of America.
Hey, John Marquee, Peter and Ryan.
Couple of questions on the balance sheet for me, but the first was.
Just wanted to confirm that the 166 million euro delayed draw term loan is secured and it's not Don yet.
That's correct.
Okay.
And then.
You mentioned some other liquidity measures early in the call down.
So low interest government loans, Europe et cetera for a total value of I might have missed the number was its 330 or did I hear that right 50 353.
Yeah.
Right.
Yes that they might include yeah, sorry to be clear that includes the delayed draw term loan. So that the total liquidity add would be in the area of Threefifty and we have very good line of sight.
The the piece that's not in play Chesapeake beyond the 166, but there are a couple of different pieces to it that's why we're saying kind of in the area.
Are those mostly those those government sponsored loans, yes, yes. They are.
Okay, great and are those secured loans as well.
It depends on the country, but in most cases, yes.
Okay great.
And then my follow up to that as you guys do have a decent amount of secured capacity.
Understand 350 goes a long way, but but do you think with the.
Strong rally your bonds have had over the last month that you might want to hit the market to kind of term out maturities, especially the 2021 I know, it's not that big but you know the market has rallied back a lot and.
Clearing out good amount of years in the front end might go a long way.
Yes so.
It's a it's a great question and it's something that we are looking at and we are obviously kind of thinking about all the time one of the things we like about liquidity structure. We put in place is it gives us time to kind of observe and take stock on where the markets are and also kind of bridge some.
Of volatility that's been in the market so, but it's a it's something that will definitely look out.
Alright, thanks, very much everyone and good luck.
Thank you.
Again, ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your Touchtone telephone. If your question has been answered all your with some of yourself from the Q press the pound key.
Your next question comes from the line ups, Sean Wondrack with Deutsche Bank.
Hi, John Mark Theater and.
I appreciate all my question Paul.
I'm not sure yes.
One quick clarification on anything to do this but just on the 70% utilization rate does that in.
And that the downside scenario does that include Q1 or would that be the run rate for the rest of the year.
That's a run rate number.
Okay, the recipe and yeah.
Okay understood yes.
Thank you and then when you think about the automotive market I totally appreciate that visibility is really comes from here.
Can you maybe talk about what you're seeing in Europe versus the U.S. are you seeing sort of a more activity there.
He is from the Oems on little bit more.
Relative to the U.S. and is there any difference you're kind of thing there I think that'd be helpful.
Not really I think everybody's a.
It will be to ensure that when they can we start using cadre stuff and I think those restart so dependent on the some effects as right as I mentioned earlier, you need to supply chain to be able to restart with you otherwise you go. Thank you got a problem.
You need employees to want to come to work and since season can be a problem.
Okay.
Europe, all the U.S., So you got the clusters or the.
You know if you didn't make ariads, you've got us to.
Issues around what demand will be so I think is very a bogey.
Thank you for that and then just my last one when you think about the parakeet segment.
Congratulations on getting to a positive EBITDA there in bowling Green on you still expect the mix shift here over time to auto sheet to sort of help offset any kind of pricing weakness, maybe some of the absorption cost on EBITDA per ton basis.
Yeah. So I think what's happening here is a so first we're really super happy with the floating greed fulfillment center, we have to shut down bowling green for two weeks of that month right. So it's a big EBITDA fuzzy with just a two and a half months units three month period. These.
Real difference from what we with two years ago or even less skills. So we're really happy with it and Winnie three stuff, which will be a great.
Great to effect to reintegrate to thoughts of vehicle Stadium system now that said.
Yes, I do anticipate that overtime auto sheet will continue to grow can sheet will be continues to be strong and as a consequence that would be a little bit of technique, but in the medium. So if you look at the any scenario in the past, where you know automotive to the nose dive to if you look at a 2008 2009.
Sometime before or to build rates went back to pre crisis levels too.
That will impact the supply demand dynamics over the period when.
The build rates.
Yeah go back to.
Noble put in both levels.
So if we go to V shaped recovery. If you go to U shape recovery, an l. shares, which I don't think he's a recovery really.
Depends on your category.
We would have a different a fixture in terms of what the supply demand dynamics will be in what the pricing will be who again, we were but were up we're ready for any scenario and I think with Peter was describing around all the states so thinking about.
Managing our cash shows to working capital that Capex, managing our cost structure.
Extend variables managing liquidity and doing it prudently fix that we we won't have access to liquidity, but we want to be cheap right doing all the things of giving us the runway to be able to with the whatever comes at us.
Thank you for that sound like appreciate it.
Sure.
I would now like to turn the conference back to Schon Marques Your man CEO of Constellium.
Well. Thank you very much everyone for again for your interest income fed him as you can see were refocused on the health safety of aren't really first.
I think very close to our suppliers enough customers to us.
Google to operationally respond to the ever changing market conditions.
And as you. So we are very a cautious and aggressive about managing our cost structure. So that we emerged from this crises stronger we've got a great platform I think the Q1 results of showing it and to will or whether you still and come out stronger. Thank you again.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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