Q1 2020 Earnings Call
Ladies and gentlemen, thank you for scanning die and welcome to the Timkensteel Q. on 2020 earnings Conference call. At this time I'll participants are not listen only mode. After this speakers presentation to be a question and answer session to ask a question Janus session you will need to press star one on your telephone speech.
As it taste conferences being recorded if you require any further assistance. Please press start zero I would like to know him the conference over to your speaker today.
Mister Ed Jennifer Beamer.
Please go ahead.
Good morning, and welcome to Timkensteel first quarter 2020 conference call I'm, Jennifer payment senior manager of Communications and Investor Relations for 10 can still joining me today is Terry.
Interrupt Chief Executive Officer, and precedent, Chris <unk> Executive Vice President and Chief Financial Officer, as well as Tamales executive Vice President of commercial.
You all should have received a copy of our press release, which was issued last night.
Today's conference call, we may make forward looking statements as defined by the F.C.C.R. actual results may differ materially from those projected or implied do their variety of factors, which we described in greater detail of yesterday's release, please refer to R.S.C.C. filings, including our most recent form 10 K. and.
Form 10, Q. and the list of factors included in our earnings release, all of which are available on the Timkensteel website.
Where noncat financial information is referenced additional details and reconciliation to its gap equivalent are also included in the audience released with that I'd like to turn to crawl over to Terry Terry.
Thank you Jennifer and thank you to everyone for joining us this morning and for your interest in Timkensteel.
Let me begin with the worried about safety and or cope with 19 actions.
First I'm extremely proud the during this challenging time, we achieve some of the best safety results in company history, including our lowest Osha recordable rate on record I am thankful for the ongoing commitment and focus over employees keep everyone safe unhealthy every day every shift.
Regarding to cope with 19 crisis as you know timkensteel husband designated and essential business by the Ohio Governor and the department of Homeland Security.
Such as the company has continued to operate uninterrupted from the beginning of the pandemic providing products that are vital to the safety and security of our country.
Timkensteel team has performed admirably to keep employees say on our factories operating.
In early March we created a cross functional cope with 19 team. So we get our response and work collaboratively across the company to ensure the health and wellbeing of our employees.
Employees, who can work from home, we're doing so and employees on site or strictly following safe workplace practices established by the C.D.C.U.S. Department of Labor and Ohio Department of Health.
We have added enhanced cleaning procedures and all plants in offices encourage employees to be vigilant with their personal hygiene workplace hygiene and physical distinct thing and we regularly reinforced the message that no one should come to work sick.
In the last two months, we perform hundreds of audits in our plans to ensure we remain diligent in these efforts.
We're communicating regularly with their workforce and often with the community regarding the impacts of covert 19 and have established communication channels to alert us in real time to any concerns in areas in need of attention.
This includes engagement with United Steelworkers, and local government in health officials.
In addition, we have also taken actions to support our community and medical professionals, including the donation of and 95 respirators first eight kids another supplies to local health care and community organizations again, an extraordinary effort by our organization under extremely challenging circumstances.
I sincerely want to thank our 2200 employees and their families for their dedication and resilience during these challenging times.
Particularly proud of the operations team, who remained onsite working safely to serve our customers.
No one to the business results in highlights of the quarter.
From a financial operational perspective, I'm encouraged that we achieved our first quarter guidance for shipments net income Andy but.
Truly march the quarter unfolded much as we'd expected until the pandemic resulted in customer slowdowns during the final three weeks of the month.
In addition, cash flow continues to be especially positive in the first quarter was generated $61 million of positive free cash flow and over $90 million during the past six months.
This is the highest free cash flow generation, we have achieved in any quarter as a standalone company.
We continue to our focus on proactively and responsibly, reducing inventories across the business working closely with customers and suppliers as well as improving numerous internal business practices.
In addition, we've implemented improve accounts receivable and table processed cheese close nonperforming businesses and sold noncore assets.
Equally important we continue to improve the overall liquidity position and pay down an additional $30 million is that in the first quarter.
For the quarter total shipments increased 19% versus the previous quarter with improvements in all market segments.
We got off to a good start during the first two and a half months of the year, but as I mentioned cope with 19 restrictions began to suppress demand over the final weeks of the quarter, especially in her automotive business, where the o. yams and suppliers it implemented widespread shut down.
Our team will remain a daily contact with automotive customers to understand the ramp up plans and specific inventory needs. It may June and beyond.
Our industrial customer business was not a significantly impacted by covert 19, and the first quarter as many of our large customers remained open.
Or shipments to industrial customers increased 13% versus the prior quarter.
In recent weeks, we have seen slowdowns in order to demand tomorrow industrial customers and distributors as the align their inventories with customer demand.
But there are pockets of strength in this business, especially in the defense and market, which has remained steady.
And our energy business first quarter shipments were up 75 per cent from a very weak 2019 fourth quarter.
Recently, we have seen a significant reduction in energy market demand driven by record low oil prices, an excess inventories of oil and gas products.
Overall, we estimate the covert 19 related impact of our first quarter 2020 result was approximately $10 million in Las sales, primarily due to the sharp decline and automotive.
The pandemics impact on her second quarter remainder of the year and beyond remains unknown, but at a minimum we expect customer demand to be sharply lower in the second quarter of 2020.
In response to the significant reduction customer demand, resulting from the cope with 19 crisis. We have taken additional actually is the further reduce operating expenses conserve cash and maximise liquidity, including.
Reducing my pay as well as senior executives base salaries by 20% and other executives base salaries by 10%.
This was effective may 1st.
Our board of directors says elected to reduce their cash retainer by 20%, which began in the second quarter 2020, and reduce the value of their annual equity grant by 20%.
We will suspend the company's four one k. planned matching contributions for a salaried employees affective June 1st.
In early April we began implementing unpaid rolling furloughs for approximately 80 per cent of salaried employees.
We expect this to continue throughout the second quarter.
We have aggressively reduced production schedules that all plants to align operations with customer demand, resulting in the temporary lay off of manufacturing employees.
And as you would expect we've also reduced our plan 2020 capital expenditures to a maximum of 25 million.
5 million dollar reduction from or previously stated guidance.
In addition to cost reduction actions related to cope with 19, we continued to take actions and have made progress on our profitability improvement plan.
We completed the previously announced closure of the Timkensteel materials services facility in Houston in the first quarter of 2020.
We expect to realize approximately $8 million, an annualized savings going forward.
Addition, we sold $8.9 billion in machinery equipment, an excess inventory in the corridor.
In February we restructured our commercial organization to improve efficiency and response times to customers.
In addition to the operational improvements these actions will drive approximately $2 million an incremental annual savings.
Over the past year, and a half Tim can steals workforce has been reduced by 25% as a result of numerous cost reduction and restructuring actions implemented to improve the efficiency and cost competitiveness over business.
These actions took place prior to cope with 19 crisis.
Overall, we remain confident in our ability to deliver the approximately $70 million of Runrate savings, which we discussed in previous calls.
Turning to growth plans the expansion project in our value added components facility near Dayton, Ohio remains on timing on budget.
This investment is being made to support growth with strategic automotive customers are evaluated components business.
Well two of our customers that pushed out program launched 830 to 60 days due to cope with 19, we fully expect qualification trials and production ramp up schedules to proceed in the second half of the year.
Regarding scrap pricing the three city average of American metal market number one Busheling index rose another $30 in the first quarter continuing the upward movement that began in November of 2019.
In the latter half of the quarter to decrease in the supply of Bush linked to the automotive plant shutdowns continued to drive Bush thing scrap prices higher while the price for obsolete scraps began to drop in part due to lower steel mill production rates around the country.
Our expectation is busheling prices will continue to see substantial increases well obsolete scraps will rise any more moderate fashion.
With that I'll turn it over to Chris who will walk you through the numbers Chris.
<unk> good morning, everyone.
Also like to express my gratitude to our employees for their commitments were healthy and safe working environments, well actively engaging with our customers suppliers another partners.
Movie now in financial matters in the second half a 2019, you initiated a proud but to improve our working capital efficiency.
It was the first quarter evolved you realize significant benefits from this hard work as evidenced by her first quarter of 2020 free cash flow of $60.9 million.
I remember this work was ideal as we entered what we believe will be a very challenging second quarter with a higher than historical level of cash and the most available liquidity since I'm, except for the company.
In the last six months, we've generated over $90 million a free cash flow.
Absolutely $110 billion and passed from operations.
<unk>, we accomplish that first quarter shipments <unk>, how many but.
When the coming months in light of public 19, our options remain focused on cost reduction task preservation when answering your turn financial stability, which will serve the benefit us as the <unk>.
On a gap analysis first quarter of 2020 about loss was $19.9 billion, excluding certain items adjusted not loss was $11.3 million in the quarter.
Adjusted EBITDA was $9 million in the first quarter with the high end of our guidance range.
First quarter financial results Representatives significant improvement from the larger net loss negative you, but we report into fourth quarter of 2000 monkey.
Moving to the drivers for the first quarter results.
Shipments of 213400 pounds, we're 19% higher across start unmarked that's compared with the fourth quarter of 2000 monkey.
Was higher level of shipments drove an improvement in adjusted EBITDA approximately $6 million.
Permanent Martha perspective shipments the mobile on highway customers were 88800 pounds in the quarter nine per cent increase over the fourth quarter of 2019.
Normal seasonal improvements in the quarter were partially offset by the negatives impossible to cope with 19 in March 9000 pounds or approximately $10 million of lost revenue.
Shipments of 81200 times to industrial and 18400 times the energy Ross so positively impacted by normal sues knowledge in the quarter and build shipments were 25000 times in the quarter.
<unk> 19 on our industrial energy shipments in the first quarter was minimal.
Krysten Mips declined in the first quarter with an event the impact of approximately $4 million compared to the fourth quarter last year.
Lower 2020 contract pricing, given underline market pressures as well as higher shipments are most T.T.G. bullets negatively impact would pricing bucks.
Surcharge, Reverend or $45.9 million and the quarter was an improvement over $11.3 million compared to the fourth quarter of 2019, but $43.8 million below the first quarter of 2000 a month.
Lower <unk> as well as a decline in the sort of hard revenue per ton on a lower number one busheling stuff and ducks negatively impacted surcharge revenue in comparison to the first quarter of 2019.
Manufacturing cost benefited by approximately $8 million, primarily from improve six costs leverage compared with the fourth quarter of 2019.
Melt utilization remain low 47% than the first quarter, but was up from 35% and the fourth quarter of 2000 matching.
Additionally, first quarter cost reduction options in the areas of maintenance and outside services will benefit <unk> sold.
That's you know expense for the quarter was $23.4 million and it was relatively consistent with the prior your first quarter reflects an increase in by but expense and variable compensation substantially offset by lower wages and benefits as a result, with the company's restructuring options.
Moving on to cast and liquidity, our total available liquidity was $290 million at the under the first quarter of 2020, an improvement of $60 million since December 2019.
Increase liquidity was a result of them into reductions in all categories effective management that <unk> and they continued benefit of prior your cost reduction options.
<unk> significant options and they told us to generate $60.9 million a free cash flow in the first quarter and closed the quarter with $65.6 million with cash.
Additionally, casperson some asset sales during the quarter contributed to our improved liquidity.
R.T. remains focus on liquidating the remaining assets in close touch this facility to generate additional path.
Overall or liquidity position at the end of March remain sufficient will continue to take the necessary options to conserve path and aggressively reduce costs in the months ahead.
From a pension plan perspective, the company recorded the non Kathleen measurement loss of $9.5 million in the first quarter of 2020, but it's been excluded from our adjusted the but the results.
<unk> measurements of the U.S. salary pension plan obligation in assets was driven by 2020 lump sum payments projected to see the sum up service interest costs.
Going forward and 2020, we will be required to remember <unk> salary pension plan on a quarterly basis.
Following this first quarter Remeasurements. The total funded status of all company pension plans was approximately 85% as of March 31st 2020 down slightly from one to 2019.
There are no additional required pension contributions and 2020 falling approximately $1 million contributed in the first quarter.
Although it still to determine the stunts and duration of to cope with 19 them past our business and the overall economy, we've experienced a significant decline and customer shipments in April <unk>.
Order bookings have also declined as a result of customer production downtime and reduced demand.
I'm a supplier perspective, we've not experienced a significant disruption raw materials supply chain to dates and remain in close contact with our supplier network.
Over the past month, we've taken quick and decisive action to reduce operating expenses and the for cash expenditures with the objective maximizing are available liquidity.
Burst from our manufacturing perspective, we've aggressively reduced production schedules to line with customer demand related downtime in the stuff in 19 environment, while continuing to provide uninterrupted customer service.
In April or Mel utilization was 25% to support 32000 ship sounds in the month.
We anticipate our <unk> utilization rate and shipments to remain low and might as well.
Plans operating schedules are being reviewed weekly and revised as necessary to support demand.
Our production schedule will be heavily dependent by Wendy automotive supplied shown ramps up.
During plant downtime periods are operation team is working diligently to reduce variable costs with represent approximately 70% of our total plant costs.
Second from an employee options perspective is Terry mentioned, we've implemented the mean unrelated employee furloughs in April and May for approximately 80 per cent of our salaried staff.
Next week for example, we have approximately 450 salaried employees on on paid for low.
Yes to make but the furlough absence in April and May will save over $2 million.
You will continue to monitor our order book in the coming weeks and adjust for low plans going forward is necessary.
Additionally, the base salaries of our leadership team were reduced in cash inequity compensation to the board of directors were similarly reduced in total the board leadership team cash compensation reductions will save approximately $800000 somebody reductions continue for the remainder of 2020.
East compensation accidents will be reevaluated his business conditions approved.
Lastly from an employee options perspective, we made the difficult decision to suspend the company matching contributions to our salaried employee four one k. retirement accounts effective June 1st.
This action is estimated to save approximately $1.9 million for the remainder of 2001.
You can find further details on booze employee compensation actions in the form eight k. that we filed yesterday with lots of seat.
Switching gears now to the recent government legislation early in the impact on our company employees.
The most significant benefit that we've identified to date from the legislation is a social security payroll tax the thrill option. It was part of the <unk>.
We began to take advantage of the payroll tax the for awhile option in April and expect US to result in differed cash payments of approximately 7 million.
Dollars for the remainder of 2020 it'd be paid into equal installments at the end of 2021 and 2022.
Regarding available loan programs the company evaluate the programs do not believe that we qualified at this time.
From an employee perspective individuals on furlough or not eligible for an additional $600 per week of unemployment compensation afforded by the Theresa.
Wrap up to covert 19 reloaded actions were reducing our full year 2020 plan top up spending to a maximum of $25 million reduction of $5 million for aren't really your guidance.
Previously, we qualified $70 million of Runrate savings to be delivered in 2020 from our prior your cost reduction options.
Over half of the savings are attributable to structural changes we've implemented in our business such as the 25% reduction in our workforce since the beginning with 2019 closer to the toughest facility and changes in pumps and retired in medical plans.
A portion of the savings are attributable to purchase and that sort of these the manufacturing operations.
Implemented many of the actions required to realize the savings. However, the savings are dependent on a reasonable level of purchasing activity implant utilization.
The market begins to recover we expect to deliver on the $70 million of running late so.
Additionally, we're currently evaluating additional restructuring options to further improve our costs structure in the current economic environment.
He's plans are finalized we will communicate the details.
Given the uncertainty around the extent and duration of cope with 19, it's related impact on the company, we've suspended providing quarterly guidance at this time.
This wraps up my prepared remarks, and now we would like to open up the call for questions.
[noise] as a reminder to ask a question you need to press start went on your telephone to withdraw your question press the pound or hash key please stand <unk> roster.
Your first question comes from the line obsessed frozen field and examine D.N.P.
You're nine is now open.
Morning, and kept take my questions today, it more may I guess two different.
Two different questions. Please person working capital and then secondly, with regards to from the labor cost savings on working capital can you just give us a little bit more color if possible if it hurts the drivers that that working after releasing q. wine I certainly very positive in very strong performance in that period I want to better understand sustainable that isn't.
Medium term.
I guess.
Expecting further release into Q2, given the sharply lower volumes, but as soon we got back and burnt decent blink in the second half of the year would we require more of a cyclical reinvestment over that time period, and then secondly, with regards to the manufacturing staff production P.C., given the low utilization rate.
I can you can just give it a bit more color on what portion of the manufacturing stuff is currently Ben temporally laid off and also the Union response for these efforts. Thank you so much.
Oh, great. Thanks, that's so in the working capital we we've taken numerous actually this is Chris pointed out in his comments.
On every front if you will we've gotten a lot of the low hanging fruit that was available to us over the last six months, but there's plenty more opportunity and we're working on on those every day across the business.
In all areas of inventory. So we think there's more more to be had for sure in improving our processes and the way we run the business. Some of the some of the easier targets have been been taking care of and so now there's in in the work spend ongoing for six months. So we think we have a more opportunity as we.
Go forward, but it but certainly will we're into some yeah. The difficult actions that we have to be taking into business practice changes I'm going forward secondly on the manufacturing cost you know side I'm Gonna, let Chris talk about this one but I I can tell you what's working with the.
The steel workers in the United Steelworkers, we'd meet with them constantly every week I personally talk to them on a very frequent basis and they have been nothing but just totally support above everything we're doing and all the work that's going on to to keep the company operating and and keep it running well over the coding period.
They've been incredibly supportive been helpful couldn't be better partners throughout this whole thing and they fully understand the volume activities.
Is related to covert too so I'm full support from from the Union, Chris you want to pick up on some of the manufacturing costs questions.
Yeah, I mean, the headcount moves that we've made or are being manager week to week to a lot of those actions that we're taking.
You know can be changed as necessary as demand gets adjusted.
That that's been our focus here as we continue to bounce production with the man.
And then just to add a little bit on the working capital side, we do feel like the changes that we've made our sustainable.
As the business continues to improve there will be a need to invest some as you buy and then ultimately sell to the customers, but we feel like we could manage through that than the processes that we put in place here will benefit us into the future.
Thank you just wouldn't follow up on working capital then you know we wouldn't couldn't really expected quite sizable release working capital of cute too given the color on reduced utilization rates and shipments are you expecting to achieve additional working capital and it's cyclical basis and q. too for having some of that perhaps and pulled forward into Q1 already.
Thank you.
Chris <unk>, Yeah, we've taken as much action is we is we can't here in the first quarter I'm optimistic that there could be some additional opportunities, but it all remains to be seen on on how the demand environment progressive throughout the quarter. So we're not going to comment on specifics or or even direction. We here in the second quarter, but we did.
Worked really hard to first quarter to deliver as much as we could and we believe that there are some opportunities still.
Great. Thank you.
<unk>.
Your next question comes in line of tie their Kenyon from calling your line is now open.
Yeah.
Hey, good morning hope, they're all doing well wondering if you could comment a little bit more on on what Utilizations look like today, I think chrissy mention utilizations where around 25%.
And and wondering if you could help US you know try to understand as well just kind of the the shouldn't volume and pack your quarter to date.
And how that.
Fancy dress through through April and and intimate here.
Chris you want to grab that one.
Yes, no problem, yeah, you're you're right Tyler I did mention April at 25% indicated that may was going to be low as well you know we're we're looking at our production schedule every week in taking outages as necessary to match that demand environment, they're shipments that we had in the month of April of 32000.
As you know pretty <unk> small in comparison to what our original business plans were where I indicated I expect that the remain low into may as well mobile shipments specifically getting a month of April we're very light, whereas industrial and some energy held up you know better than you may expect but it was the mobile that was down so signal.
Secondly, it's all those automotive facilities were shut down sad those begin to open backup we expect that our production also in our shipments will or ramp that it's similar fashion, although it's gonna take some time and be dependent on where that automotive inventory moves and and how it gets sold into the consumers.
Got it okay.
On on Yeah, I, just sat on Tibet just to add on you you read the same stuff, we do about the automotive ramp up so that was really the biggest impact by far so we're paying really close attention with our customers about the ramp plans for May every day, there's new news about it and went to pacing is and what the inventory levels are like.
So we can't be we can't work any harder in staying close to our customers to to be aligned.
Inner lining our factory operations with with what they're telling us and what they need.
We expect that it'd be a.
Normal course, a business for the next the next couple of months.
And just you know on automotive <unk> can you share a little bit about what you're hearing from your customers right. Now I mean, you know we've all been reading about the the expectation for these plans to restart middle may.
Are you seeing any improvement yet according or bookings and and you know do you sense with the P.O.G.M.'s are are sitting on some inventories that they need to burn through first before you before you realize any any outside shipments.
Tom you want to take that one.
Yeah, I'll I'll offer some some color on that good morning, everyone as Chris was alluding to the move on highway market was down in the quarter and that was largely a result of coping 19 pandemic that led to.
The auto O.M. shutting down there transmission engine and assembly plants in the latter half of March.
As well as the dealerships closing.
The anyways like vehicle sales rate for the corridor dropped to approximately 15.2 million units.
That's down 10.5% from the 2019 sales rate of approximately 17 million units.
Now are volumes were actually up 9% relative to the last quarter, primarily driven by the normal seasonality improvements that Chris mentioned in a few new program launches and again as Chris stated our volume would have increased end up approximately 20% without the 9000 tonnes shipment law.
At the end of Mark's due to the plant closures.
Now the O.G.M. and tears suppliers are suggesting that plant restarts range from early to late May and we are seeing that activities start to happen.
They are also suggesting a gradual ramp up to full production.
That could span several weeks and that would include the impact of about one to two weeks of inventory in the supply chains.
For both long product and value add component products.
The current light vehicle sales in production forecast for 2020.
Is 12.5 million and 12.2 million units respectively.
And that is down 25% relative to 2019.
Oh, the O.M. still need governor approval, and United Auto worker agreement for say start up and operational protocols.
On a positive note light vehicle sales and April we're actually a bit better than what was forecasted.
The forecast was four 7.6 million units annualized rate.
Oh, and they actually sold it at 8.6 million annual ice rate.
Incentives good full size pickup truck activity and efficient online sales were or key drivers to coming in a bit better than forecast.
Obviously mixes keyed or participation on auto markets.
Passenger cars sales continue to be sluggish relative to total sales.
Our participation is mainly and truck S.U.V. and C.U.V.s. So our exposure to declining pass car market really is very modest.
So from our perspective.
Motive market was in good shape prior to cope with 19 are volumes were increasing.
Significantly relative to recent quarters.
But there's still just an extraordinary level of uncertainty due to cope with 19 right now.
Making it very difficult to forecast, but the man will certainly be lowering q. too.
And we have to watch how the auto plant restarts progress.
Their ability to operate safely and see how interested consumers will be and buying vehicles going forward.
And as terrorist stated.
You know we are staying very close to our customers watching indicators at the macro level as well as the micro level.
And we will stay in close contact with customers and continue to work alongside them to fulfill their material requirements. So we will no doubt be ready when they are ready to start ramping up their production.
Thanks very much.
Again, if you would like to ask a question Prestart went on your telephone.
Your next question comes on line Justin.
<unk> from G. research, you're nine is now open.
Oh, good morning, Terry the morning, Chris.
The morning Justin.
It's hard just started to delve a little ones. The cares act just to make sure I understood the primary benefit.
You guys outline is the social security payroll tax deferred dimension to 7 million.
A million how how are they are separate.
<unk> 17 million or cash outwards from 2000 22021 22.
<unk>.
Yeah. So it was seven to 10 million that would kind of ran together. So 7 million is the low end of the range 10 millions the high end of the range.
Depending on compensation and benefits for the rest of this year.
And that gets pushed into the end of 2021 2022.
Gotcha, Alright, and then are you able to work that <unk>.
[noise] annual Wales.
That you have on your balance sheet.
As part of the Care Act to your you know pass profitable years or is that provision something you don't see yourself or has been eligible for.
And not as big of a benefit for us because we haven't been a taxpayer since the spin off given arianna well position. So we still have a very high level of diner wells here at the end of March.
And there will be some impact you know that could grow but you know not a a <unk> recapture of any prior taxes given our position.
Okay understood just wanted to confirm that and in terms of the additional cost savings that you quantified.
You quantified I guess 2 million.
Save as I think in April may from the for allows for about 2 million from suspending the four one k. through the end of the year.
And make sure those at the right person you know the other actions you outlined.
One is sort of quantify you know the savings there as well for sort of a total incremental you know a number of savings that you might be tracking for the year 2020.
I can talk about <unk> <unk> <unk>, Yeah go ahead, and you want to take them.
Yep, Yeah, if you add up the actions that we announced and I summarized in my release, it's about $5 million of cost benefits in cash benefits. Here is we complete 2020 for the items that you mentioned now the furlough estimate that we included in there it's about a million a month and I've only included April and May and we're continuing to evaluate Ah argh.
The man levels and could make adjustments to that plan as we get into June. So that every month of additional furloughs you call. It a million dollars an incremental savings, but right now I've captured 2 million for two months and that 5 million estimate the four one k. that you mentioned is approximately $2 million for the rest of 2020, assuming it continues.
In the last piece was the salary reductions that there'll be reevaluated his business conditions improve and that's about $800000 of cash there as well so those items or what adds up to the five no. The actions were taking within manufacturing to align with demand I I didn't put numbers on those those are typically.
Fairly significant the benefits as you try to align that production went demand and reduced cost.
Okay. Thank you. That's very helpful. You made a comment earlier that energy markets were you know not doing as badly as might be expected in the first quarter.
Volumes were up sequentially. Other other based pricing was meaningfully down sequentially any sort of color on on what that statement means is that you know forward looking or just more backward looking.
That would be helpful.
Yeah, Tom someone grabbed that one.
Yeah. Thanks, you get yeah. The energy market was was decent and the first quarter.
Traders constrained they're spending in the back half of 2019, focusing heavily on reducing their inventories.
They started to come back into the market and Q1 and our volumes were up.
64% relative to last quarter.
Percentage wise, that's a big increase but when we were coming off very low volume levels and two four of last year were also able to pick up some additional O.C.T.G. spot Phillip business and Q1.
But the energy markets is is without questioning weakening again.
Most of our customers are operating in in the coveted environment.
But volumes have been impacted by reduce consumption rate of petroleum based products that is largely coded related.
More pack for the macro economic factors currently and play.
<unk> inventory levels are high and prices are are low.
U.S. recounts have dropped approximately 50 per cent from earlier in the year two approximately 400.
And could go lower in the second half.
Oil prices are approximately $25, a barrel unforecasted to be approximately $30 a barrel and the second half.
Again, there there is extraordinary level of uncertainty due to cope with 19.
And the macro economic factors again, making it difficult to forecast.
In this environment investments and exploration of oil and gas.
Are likely to be severe severely curtailed and would not be expected to recover.
And the near term.
No the pricing average values that you saw in energy for the first quarter, we're actually along pretty closely with what we had expected and can forecast it.
They have to be cautious with those as they are those average value selling prices are so heavily influenced by mix.
Mix of product type that way content he treat requirements.
In the energy sector in particular.
We had a larger.
Volume percentage of billets than what we had forecasted.
And the energy products that were more traditional were more focused on those products not requiring heat treatment less completion type products.
So there's average values that you saw in Q1 are pretty indicative of what I would expect going forward.
Lower demand environment.
Thank you for that.
Alright detail. Just lastly, you mentioned 30 to 60 Gray Gray I think it automotive programs were you.
Referring to the deer sizable contract there that you expected the liver beginning in the second half at this year I think you know on the order of 35 million of of revenue.
I can half as envisioned a quarter ago are you referring to something else.
Oh those were the the the launches we talked about with our value added business in the last last quarter and they've been pushed out is you would expect the plans for down the.
But they're expecting.
The ones, we talked about they're fully expecting to to pick right back up with but the 30 60 day delay so nothing.
Thing too extreme at this point, which is good news, but we'll keep talking with them every day and make sure. Those those plans are still intact and we think that will be we'll be right back at it in the second half of the year with both of those launches.
We're not able to talk about either one just in detail. If you will do confidentiality issues with a with customers but.
No not given given everything else is going on of the automotive.
Industry not bad.
Thank you. Thank you all my questions.
You're welcome Thanks Justice.
<unk>.
There are no further questions at this time I will tend to call back over to Jennifer. Please go ahead.
Thank you so much for joining us today stay healthy and that concludes the call. Thank you so much.
[noise], ladies and gentlemen. This concludes today's conference call. Thank you for participating you may know disconnect.
Oh.
[music].