Q2 2020 ITT Inc Earnings Call
Today is Friday July 31st 2020.
Today's call is being recorded and will be available for replay beginning at <unk> pm Eastern.
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It's now my pleasure to turn before overtook manual Capri Group Chief Financial Officer, you may begin.
Good morning, and thank you Maria welcome to ICICI second quarter 2020 earnings call. This is a manual could break it on the line. This morning, I Luca Savi, Chief Executive Officer, and President and Tom Carter, Our Chief Financial Officer.
Today's presentation press release, and reconciliation of non-GAAP financial measures to the most comparable GAAP measures can be found on our website, but I teach you dotcom for Sosh investors.
Our adjusted non-GAAP results exclude certain non operating and nonrecurring items, including but not limited to its best this restructuring asset impairment acquisition related items and certain tax items.
Oh adjustments in the quarter a detailed in the reconciliation.
Before we begin I'd like to provide a brief overview of our Q2 GAAP results compared to prior year.
Q2, total revenue decreased 29% to $515 million segment operating income decreased 65% to $37 million and if yes, a 53 cents decreased 29%.
Free cash flow increased 205% $269 million.
Please note that our remaining discussion, we're primarily focused on non-GAAP or adjusted measures unless otherwise indicated.
Lastly, today's call will contain forward looking statements that are subject to risks and uncertainties, including impacts from the Kobin 19 pandemic.
Actual results may vary materially.
All such statements should be evaluated together with the safe Harbor just coders.
And the other risks and uncertainties that affect our business, including goes disclosed FCC filings.
Now, let's turn to slide three where Luke I will take us through the key highlights.
Thank you your medical and thank you all for being with US. This morning, despite the many challenges and unique circumstances that you're dealing with at this time.
I truly hope everyone states safe as we continue to adjust to the wider spreads with the cautions I'll be Colby 19 endemic.
Before we start to be school, I'd like to saying customers and suppliers what worked with us to ensure that we delever I'll, probably the safely and in a timely manner.
I'm also very grateful Asha or just for their support.
And I want to give a heartfelt. Thank you to all I'd to use across the globe will continue to work relentlessly to serve our customers and sure orders in the most dedicated fashion and to take care of each other in challenging conditions.
On our Q1 cool, we highlighted our twentytwenty focus to strengthen <unk> resilience and to drive aggressive cost actions, what playing offense for the future.
And this is exactly what we did in Q2.
We delivered a 25% segment decremental margin.
We accelerated and increase our cost and spend reduction actions to $160 million.
We generated record free cash flow of $169 million.
We bolstered our liquidity to $1.4 billion.
And we signed an ally to acquire and meet European Wave company.
Building on these strong foundation, we will continue to drive operational execution.
Further reduces decremental margins, while fueling future growth opportunities.
We can only truly demonstrate our resilience through actions and result.
This morning, we we share with you the actions we will keep on driving to strengthen the operationally financial performance as we continue to mitigate the kabi 19 impacts and reinforce the resilient <unk> identity.
Today, we will also give our understanding of the market that we serve and our expectations for the balance of Twentytwenty.
Before going into Q2 highlights award on safety.
Safety is my top priority.
And when he talked weekly we don't facilities across the word I'm energized by the accomplishments of our teams, who diligently and effectively execute on health protocols.
These enabled us to contain the global number will be infections to fewer than 70.
Now, let's turn to our Q2 results.
We focus a while we control.
And produce better results than expected.
During the second quarter, I see teeth resilience to resolve our team and our pivot to play often.
On fuel display.
From a financial perspective, we deliver solid EPS of 57 cents.
Exceptional segment decremental margin of 25%.
Record free cash flow, a $169 million, representing a significant growth of 205% or $114 million.
And segment working capital reduction of 210 basis points compared to probably area and 100 basis points compared to the first quarter.
Operational excellence is its fundamental pillar of <unk> long term success.
And during the month of June I was able to experience first hand over and over again, when visiting our Seneca falls plant and seven facilities in Europe.
Actually for operational improvements enabled industrial process with the LIBOR is 13.7% adjusted operating margin <unk>.
These these 120 basis point expansion versus prior year, despite the revenue decline of 17%.
This 13.7% margin also represents an improvement of 240 basis points over Q1.
We moved quickly to take out cost and were progressing nicely towards our long term, 15% lost margin target.
I be continues to impress with strong operational execution and there's an example, <unk> and C line at Seneca falls achieved above 90% on time delivery for the 10th consecutive month.
Was the Europe I was also pleased to see or the kaizen projects, we have underway to improve operations being in assembly line efficiency workshop in Coney Island.
Or boosting output in accident <unk> important.
Last but not at least in barger I friction teams continue to improve manufacturing processes by repurchasing and driving the utilization of existing equipment.
All across I did t., we drove high levels of operating efficiency at our manufacturing plants in Asia, Europe, Middle East and the Americas.
And lastly, these operational excellence combined we don't Pete in execution enabled us to accelerate and boost our cost reduction plan, adding 25 million of you actions that increased our target to $160 million.
All of the operational excellence was possible because all our lead this get out people say through the adoption of rigorous health protocols.
Thanks Wendy's.
Customer centricity.
Our teams passionately served our customers and were created me satisfying increasingly demanding requirements.
Showing inactions once again that our customers our priority.
Let me elaborate.
Meant to me friction OEM sure game continued in the first off of Twentytwenty, we outperformed the global market and each of our main regions.
The based on platforms ramping in the second how we continue to expect to outperform blow by markets by 700 to 1000 basis points. This year.
Oh, I'm wondering unit grew new business awards by 94% into quarter.
The improvement that law and his team executed at would these business back on a growth trajectory.
I'd be grew organic palm project orders by 22%.
Project orders were consistent with the level reach into first quarter.
That's a result.
Backlog at the end of Q2 was up 3%, excluding foreign exchange compared to the beginning of Twentytwenty.
The project or the performance is an emerging sign of customers recognition of IP operational improvements and the innovation in our product.
I'd be customers, what also delighted by cynic, a full 95% gloss baseline pumps delivery performance during Q2.
These outstanding delivery performance pairs nicely, we did rise to a U.S. facilities, and our Korean and Saudi plane.
Well done IP.
This level of execution mirrors, the motion technologies playbook, well I'm friction business maintained 99% on time delivery performance. Despite operating in Ariad hit hard by copy 19.
Lastly on capital deployment.
Our effective capital deployment strategies consolidated unprotected outstanding liquidity position.
These will enable us to continue to invest in future growth opportunities as we people to play more often.
Today, we have $1.4 billion available liquidity and with ample capital to fund all operational needs any investment and position us to take advantage of other strategic opportunities.
And we continue to protect our cash position through daily and weekly cash reviews, and we added a record $169 million a free cash flow year to date.
Well, we play offense for the future we've continued to strictly controlled <unk> capital expenditures.
In Q2, we reduced capex by 25% compared to prior year.
And our top tracking to our $35 million reduction target for the full year.
Our strong liquidity position enables us to weather the present storm why we saw the seat future growth.
We continue to invest in smart and energy efficient applications that we drive revenue growth in the long term.
In Twentytwenty, the <unk> pad is making new inroads in both aftermarket and OE customers and <unk> IP. We're currently testing gotta evolutionary energy efficient power source for our pumps.
Lastly on capital deployment, we signed in their life for the new niche weight acquisition as we continue to build out these long term growth platform.
All of these actions executed with speed.
Helped us deliver the Q2 results provided on slide four.
Segment operating income margin of 12.6% despite the revenue decline.
We delivered these margin through strong operational execution and fast and decides it cost actions that produce segment decremental margin of 25%.
And he be decremental margin of 20%.
We achieved 52% corporate spend reduction bus is probably area.
Yeah. So 57 cents per share was ahead of our expectations and declined 35% excluding unfavorable FX of three cents.
And lastly, we generated $169 million, a free cash flow year to date, what presenting at 205% improvement over the prior year.
In summary, we delivered a solid second quarter, many difficult environment by executing decisive action.
And with speed.
Now, let me turn it over to Tom to discuss Q2 results by segment Tom.
Thank you Luca let's start on slide five motion technologies.
Empty organic revenue declined 35% due to wide ranging auto production shutdowns impacting our friction in the Wolverine businesses.
In the quarter friction declined 42%.
However for the first half of 2020 friction outperformed each of our major OEM auto markets.
In North America, we outperformed by 1000 basis points in Europe, we outperformed by 400 basis points.
And in China, we outperformed by 1600 basis points.
At this out discussed during our Q1 call. We expected Q2 topline results to be impacted by unfavorable customer order phasing.
Nonetheless, we continue to project 700 to 1000 basis points, a global Oh, we outperformance for the full year as new platform awards enter the production phase and the second half.
Wolverine declined 38% in the quarter I was able to deliver 800 basis points outperformance for the first half.
And finally, KONI and Axtone revenue decreased 9%.
Solid Europe, OE rail growth, partially offset lower aftermarket revenue in North America and Asia.
Empties adjusted segment operating income declined 57% to 24 million due to volume declines and unfavorable FX of to mine.
However, empty successfully contained decremental margins to 27% due to increased manufacturing efficiency proactive plant shutdowns restructuring benefits and aggressive discretionary cost actions.
The 27% decremental margin improved sequentially and is also much lower than the decremental margins. During the 2008 2009 recession, reflecting the true resilience of today's empty.
Empty delivered solid Q2 margins were 12.2%.
Mainly reflecting volume decreased.
Excellent continue to expand margins, both compared to the prior year until the first quarter.
In friction China almost returned to create covert 19 margin.
Continuing restructuring actions in the second half will further bolster empty structural competitive advantages, which are the foundation for continued market outperformance.
And these reductions will also help to improve decremental margins in the second half.
There's also worthy to note that empty improved working capital by 120 basis points and produced record operating cash flow.
And lastly from an award perspective, both friction and will continue.
Continued to gain share with key conquer wins and new platform wins, both unconventional and electric vehicles.
These awards continue their share gain momentum power empties significant outperformance and global auto markets, we serve well into the future.
Let's now turn to industrial process on slide six.
I P delivered outstanding results, considering the challenging environment.
Organic revenue was down 17%, however, margins expanded 120 basis points compared to prior year and 240 basis points sequentially.
The IP revenue decline was driven by lower project revenue due to large project shipments in the prior year.
Short cycle revenue was up 4%, mostly driven by lower industrial valve activity more than offset relatively flat aftermarket and baseline activity.
Organic orders for the quarter declined 9%.
As 22% project growth driven by general industrial market share gains was partially offset by reduced capital investments across major markets due to covert 19.
Hi piece backlog at the end of Q2 was up 3% excluding foreign exchange.
Versus the beginning of 2020, providing solid visibility into the second half 2020.
Operating income declined 9% to 26 million as George and the I.P. team can find decremental margins to a mere 6%.
As a major accomplishment driven but driven by proactive measures take taken in late Q3 of last year and rapid restructuring actions implemented in 2020.
And as a result, IP segment operating margin grew 120 basis points to 13.7%.
This operating margin performance was driven by mix restructuring in sourcing benefits continued strong project execution.
Hi, some government incentives more than offsetting the impacts of volume declines and increased customer payment risks.
Working capital improved 760 basis points as the IP and shared services teams are hard at work securing payments from customers and de leveraging the balance sheet. Thanks, a significant inventory reductions have resulted in a 20% improvement in inventory turns versus the prior year.
I see is resilient reflects the motion technologies business approach as global on time performance and product portfolio redesign accentuate differentiation with customers.
IP will continue to reduce costs in the second half as we implement new restructuring out.
And execute on footprint optimization projects.
Now, let's turn to CCT on slide seven.
TCT organic revenue declined 29% on weakness across all major end markets.
The steep reduction in air traffic lowered commercial aero demand and caused a major slowdown or we build rate.
Further compounded by the specific challenges related to 73, seven Max Requalification.
Industrial process business experienced a 7% decline as distribution inventory just at the lower levels of activity and medical connector saw a surge in demand.
To accommodate cobot 19 patient care.
Operating income declined 55% on the volume drop and margin declined to 11.1%.
Primary drivers of the declines for volume impacts from Cobot, 19, and Oh, we production weakness.
These impacts were partially offset by strong productivity restructuring actions.
Women incentives and lower material inflation.
We expect volatile market conditions to persist for the balance of the year affecting Oh, we build rates at airframes.
She Cts decremental margins of 35% improved sequentially from Q1 and reflect the aggressive restructuring actions executed by the business.
TCT executed a footprint move in Q2, and we'll continue to drive product line transfers to lower cost regions and a discrete additional restructuring for the balance of 2020 as a part of the comprehensive operational reset designed to better align the current demand expectations.
So now I'll turn it to Emmanuel a future I think he CFO for an update of our cost actions liquidity and balance of your expectation starting on slide eight.
Thank you Tom as you can see here in 2020, we're laser focused on what we can control and we implemented aggressive and largest structural cost actions.
All of our businesses as well as our corporate at the onset of the pandemic to protect margins and to produce strong free cash flow performance.
In Q2 as a result of this focus we increased our savings target of $260 million exceeding your original guidance that we communicated during Q1.
We have already executed a large portion of our restructuring plan and the remaining actions will mostly take place in international regions in the second half.
We also detailing incremental actions across <unk> as part of our increased cost target of 860 million.
Specifically, we added annualized savings coming from our global industrial footprint optimization main dealing with IP production facility.
We already you announced one closure and the relocation into a larger production site you schedule for Q4. This year, we continue to prepare plans for additional consolidation.
And our discretionary spending cuts were very impactful in Q2, and we will exceed our original target for the year.
Finally, we reduce capex by 25% in Q2 and continue to track to overall target of 35 million reduction.
We remain flexible on our Capex strategy and continue to focus the reduce capital allocation towards productivity and targeted growth projects.
Overall as a result of the great progress made to date and the decisive incremental actions. We took our 25% decremental margin in Q2, a significantly improved from Q1 and we now expect total segment decremental margin in 2000 twin to range between 20 to 28.
<unk>.
Now on slide nine.
We ended the quarter with liquidity of $1.4 billion, which was significantly strengthened compared to Q1.
Our balance sheet and liquidity position, a key strength of I teach and these provides us the ability to effectively deployed capital when opportunities materialize and value creation targets are achievable.
From a cash flow perspective, we continue our strict routine to monitor collections and other working capital improvements on a daily basis.
We scored some good wins with customers and our collection into to help generate a record $169 million a free cash flow year to date.
This represents an increase of 205% versus the prior year.
We also collected a significant past due receivables early in July we key customers to continue our successful receivable harvesting action.
We optimized segments working capital by 210 basis points year over year, and we have more opportunities to further improve in the second half, especially regarding inventory at Mt. NCC.
However, we also expect demand to increase sequentially at Mt, an IP, which will start to wait on our second half receivables.
Based on this we are nor targeting a free cash flow margin of more than 11% for the four year, which is 160 basis points better than prior.
The next few quarters, we'll continue to be unpredictable, even though the visibility has improved compared to 90 days ago.
As a result, we will continue to suspend formal guidance until the demand certainty improved.
But let me provide some perspective on how we see the you're playing out for the balance of 20 Twond.
We expect gradual sequential improvement in the second house, but still expect hygiene revenue year over year decline, mainly driven by CCT.
Despite improving passenger air traffic in Q3, we do not see commercial aero production rates materially improving sequentially.
However, we expect defense revenue to pickup compared to the first half on the back of improved project order intake.
We expect auto production rates to improve sequentially, reflecting a market decline of approximately 25% for the for you.
Also reaffirm that our friction OE business will outperform these global market declined by 720000 basis points for the for you.
Sequentially in Q3, we expect empty revenue to improve more than 20% versus Q2, we further improvement expected in Q4.
M.T. revenue growth combined with our aggressive cost actions will fuel solid sequential margin expansion in Q3 in Q4.
We expect IP revenue to be consistent with Q2 levels in Q3 and show modest sequential growth in Q4.
Finally, we expect corporate expenses in Q3 entry for to be similar to Q1.
Overall, we have not integrated you know forecast I know the global locked down like we experienced in Q2.
Even though we have seen improvements in June and July from certain end markets. We expect the sequential recovery to be erotic because of coven 90.
We expect Q3 P.S. to show mid teens sequential improvement the gradual improvement will come from cost actions combined with gradual market recovery.
We're now targeting segments decremental margins of 20% to 28% for the for you.
And finally from a free cash flow standpoint, we're targeting more than 11% of free cash flow margin.
Let me turn you back to look out for his closing remarks.
Thanks Emmanuel.
Q2 has been a very demanding quarter.
And I'm very proud of I'd to use achievement when it comes to our customers.
We served them even better than before by assisting them in navigating this crisis and the leaving our product safely and on time.
As of today.
For our IP tiers, we kept our people safe, but recourse is we're expecting have protocols.
For our communities.
The CBD rights movements of being an inspiration to was all at I.D.
We reject race racism.
Racism has no place that ITD food stuff.
We had I did D out apt standards and leave by the principles of they very sticky equity and inclusion and we're taking concrete actions to make it better workplace.
And for our shareholders.
We delivered a record free cash flow and aggressively reduced costs to lead the impact of lower demand.
When already playing offense and using our strong competitive position to our advantage.
We will continue to focus on what we control.
And drive operational excellence.
Customer Centricity and effective capital deployment these out value creation drivers.
Before taking your questions.
I would like to take a moment to acknowledge my colleague.
Tom Scalera.
As you are aware, Tom we'd be stepping down as I TTS Chief financial officer as of October.
At this time, he and demand with the Bray, who would be succeeding heme as <unk> next year for our working closely on the transition.
You should know that it was Tom and I, who recruited Demandware in 2012.
This is when our partnership stocked it.
I want to express my deepest appreciation to Tom for the whole he is down for <unk>.
For our customers.
I'd tears and of course, our investors.
Tom it's been we'd like to de since 2006 and was named CFO in 2011, as we navigate to speed up.
Since that time under Tom's leadership, among many others accomplishment I to tease market value tripled.
I'm sure. The many of you have gotten to know Tom professionally during his time, we'd <unk>.
He has spent a lot of time, we'd many of you in all of these roles here.
By my calculations, Tom has made more than 50 50 quarterly earnings calls.
Also between competencies and other meetings. He has been part of more than 1700, investor and analyst meetings. During his tenure as CFO.
That number is even higher when you consider all the interactions he had with many of you opened TV became CFO.
But.
For those of you lucky enough to have gotten to know Tom personally.
You also know that these not only especially finance leader, but it truly special person, who cares about people and always bring fresh perspective.
Hendi does it we did great sense of humor.
I found his counsel and partnership do out of time working together to be invaluable.
When it was getting ready to start into my new role as CEO I.
I see T. provided some quotes provided me some coaching on the IR site.
See it I can tell you today.
At the best coaching was in working day in and they out with Tom.
And listening to his perspective and absorbed from his experience.
He goes onto his next venture to focus on the chart to put foundation eco founded with these late wife, Rebecca The Council couch it.
I want to wish Tom the best of luck.
And from my heart.
Thank you Tom.
Now.
We are ready to take your questions Maria.
Thank you. Thank the floor is now open for questions.
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Thank you our first question coming from the line of Mike Halloran of Baird.
Good morning, everyone and best of luck time enjoyed working with you the last decade.
It was a little neither Lukas account all those earnings seasons and conference calls and everything I try my best not to do that myself, but it's been very enjoyable and best of luck.
Thanks, Mike.
Hey, So a couple of questions here first on the motion side certainly helpful with some of the sequential commentary, but maybe you could dig into the regions.
What you're seeing on a regional basis from recovery perspective, what kind of production assumptions you guys are using on at a high level for the back half of the year on a regional basis, obviously, the outperformance will be there and it's always great to see but a little bit more granularity interest for the end markets are doing would be great.
Sure.
So Oh my God I mean, let me tell you about I wear our view of the market.
No when the as you know when you look at the I you Chase HIV is projecting <unk>, a global market decline for the full year Rafi of 22%.
Have you had in the in Europe in North America, and in day, minus 13 or something like that for China. What are we are projecting today. He is that a lead to be worse than you chesa, but better than our previous forecast.
We like to be lead to be more conservative because these help us even adjusting our cost even more aggressive way, but I can tell you didn't the last three months that we have revised upwards our forecast for each of those region for Europe, China and North America. The reason for that to ease of course, what we've seen in China. It you do.
We did a very good recovery and the growth roughly of the up 9%.
Are you have to watch carefully if there was some pent up demand that coming from Q1 and also in talking from our customers studies at ease the why we revised our forecast upwards from our view three months ago.
Let me share a couple of more data points that might give you. Some more color. We are we do know habit be concerned on programs there might be delayed.
But we have not experienced any cancellation and the majority of the programs I really starting maybe a little bit later, and maybe you need to be slower, but no major cancellation that we adapted yet experiencing.
And then the last data point on the markets.
I would say you know we talked in the past that I shared with you that when we haven't looking daily at our order book, because we are tracking that on a daily basis, we'll look at what we call. It the variation factor. The variation factor is the variation that you're getting your order book from the beginning of demand until when you close the month.
And what we've seen is that the variation factor, which was which was huge we show a lot of volatility in the past improved continue to improve in China in Q2.
We saw Europe, and North America behaving in Q2 like China deed at the beginning of Q1 and that means you're too and then when we look at the July variation factor is almost at normal level. So all of diesel is good because these means less volatility more stable market and the super.
Hi change that is more in control. So Q3, we see a substantial sequential growth over Q2.
That's super helpful. And then on the IP side, maybe help put the backlog commentary and the order commentary in context.
The strength the general industrial side of the surprising.
You know the overall orders were pretty reasonable relative to what the environment looks like how does that inform how you're thinking about the next 12 months here.
Do you think this backlog spins off what's the ability to replenish as we sit here any kind of context around that would be helpful.
Sure. Thank you Mike So when you look at when you look at the at the orders right.
Orders were down 9% year over year, roughly 10% sequentially, but you have two different stories, we deem dose orders you've got the project side of the business, which was 22% positive year over there yet and flat sequentially was actually slightly positive and the short cycle, which was minus 17% with the baseline.
And pod surrounding the into in the low end to low twentys. So when you look at decent what you see is also a backlog, which overall is up 3% year to date.
Once again, the same things into backlog you have the project backlog, which has go NAFTA since the beginning of the year end the show cycle backlog that has gone down. So what do you have I'm I'm sharing these because when you look for reasons at the some of these great improvement in margins that you see nice.
Despite the revenue decline comes also from the mix. These what's been a tailwind for our Q2 it would be more of a headwind when we moved to Q3 and Q4 as that you know the short cycle orders that lower in Q2, because what they locked down which was supposed to be delivering.
Q3 of course that data that representing a headwind from a mix perspective, when you look at the funnel.
When you look at the final I would say they interestingly enough.
The North America funnel as grew only you've ever year old area.
As grown since the beginning of Twentytwenty and there's also been growing seems March 2020.
So we see on the North America is a strong a strong funnel and when you're talking about general industrial you know that DC is our bread and butter disease really were in North America, we're stronger both directly and also with our GDP W. W, which is our distribution network, which is the SMB.
Of the industry.
We have seen any to be more challenges on day on the on the final and probably you will expect that is in the middle East, which is our second largest allegra.
When you look at the Middle East the final that has gone down during Q2.
And this is mainly because orders have been assigned but what do you need to eat that really the replenishment of the funnel as not a is known as fast as it was in the past and that's the regional where that has gone. It's gone it will be slow, but when you look at July we see some positive sign though.
In July in terms of some opportunities coming into the final.
Great appreciate the color as always Super Super helpful.
Thank you Mike.
Our next question comes from a lot of Joe Ritchie of Goldman Sachs.
Thanks, Good morning, everyone.
Morning, Joe Joe.
Hi, Tom Echo what everybody else has already said just just really great work with you over the years and thank you for all the help with you nothing but the best and congratulate congratulations go Daniel as well.
Thanks, Joe Thank you Joe.
So maybe just starting out I think I'm just going to focus my my questions on really just the margin <unk> and your comment on mix notwithstanding a luca on the IP business.
The the result, this quarter from a margin perspective, with really really good and so I'm just I'm just thinking about kind of like that longer term entitlement that we've we've talked about you know mid teens type entitlement you feel like you know you're the progress that you guys are making is allowing you to hit that are going to allow you to hit that no.
Number at a quicker way even despite this this yeah the backdrop that we're experiencing.
Well I I've seen that are they the performance as being an outstanding I'd be and I really I applaud the George Dave and entire IP team at four up for what they've done a it declined 17% in revenue and improvement of 120 basis points that you have to think about that.
Improvement.
We had a headwind of volume, which was roughly 500 I want just to give you color to put in context.
A headwind volume of a right roughly 500 basis points at that we had a positive mix, which contributed roughly three out of in 14, the net productivity.
Is that 250 basis points and debt was good because when you see these net productivity up to 50 and becomes both from the productivity in operation productivity in supply chain. It for the TBT in restructuring savings and.
All of these that.
That makes it a you know a nice nice path to tracking towards our 15 glass that managing now when it when it comes to or the timing I would say.
I I will is still stick into our two years that two years' time.
To get to our 50, net 15 Plaza and I would and these we'd comment.
In two ways, we keep on having headwinds because of the coffee nentin, they're writing demand in the next couple of quarters, we will have headwinds in terms of the mixer, but because of the exit of actions that we're taking ended footprint actually that we're taking and it continues to produce TVT I believe that in the next couple of years, we will hit our 15 plus type.
Correct.
Okay, that's super helpful context.
Okay, and then just just staying on the margins for a second maybe maybe Conversely, just talking about TCT in the headwinds that that business is being from an end market perspective, how do you. How do you think about the path for that business from a margin standpoint, as well and maybe talk specifically around some of the actions that you're taking to drive better profitability longer.
In terms.
Okay. When it when you look at the date CCT.
I like to think about CCT in a in the business you to do you have the aerospace and we know you know you guys know better than anybody else in terms of what's happening out there and it's practically lower for longer.
And then another part of the Beast as they connect will be the short cycle business and these business, we react fast if the recovery happens. So when we look at a day aerospace DZ ease that we have to be very aggressive when our cost structure and we are aggressive and working I want to work on were working capital. So.
Disease, where our restructuring action has been more impactful if we're thinking from a business, but from a margin perspective, I would say probably more than 300 basis points improvement came from restructuring actions at CCT, but did the same time, we need to be ready to play offense opening CCT because of the short cycle. So because when we wanted when the economy.
Starts again, we want to jump on that surface and ride the wave and we'd the connectors and we'd be short cycle business, we can do that.
But really easy cosplay <unk> addressing I, what I, what cost structure ever using museum, we do you see reducing our structural acosta even further.
Yes, Joe if I could just building on what Lucas.
Hi, lighting, there I think where we're on a good trajectory with with the connector business.
When markets to start to recover across the different end markets that we serve I think we'll see a more immediate.
Or short or medium term benefit and the margin profile of our of our connector business, which as you know has been gaining a lot of momentum.
Prior to covert 19, and I think the actions, we're taking are going to give the connector portion of seasoned team even more upside.
When we are dropping incremental margin performance certainly the question on the duration of the of the segment target as around the aerospace and components out of the business, which right now is little bit more enough manage cost and wait and see until the topline.
Becomes more more certain in the future, but I think where we have the leverage and the torque and the momentum is probably more of the connector side of the portfolio, particularly at the market demand comes back.
That's helpful guys. Thank you so much.
Thank you.
Our next question comes from one of Damian crowds of yes.
Hi, Good morning, everyone and Tom Thank you for all here help over the years.
Good luck in Daniel Thank you.
Follow up on some of your comments on IP and specifically on the margins.
Given the various moving pieces there with a they cost productivity actions and then sort of the order dynamics with the a short cycle, but that's a higher project orders and obviously, some some timing around a project delivery.
The margin cadence that we should be thinking about the second half an IP.
Yeah, I think Damian you know one of the things.
So we mentioned that Theres next pressure.
You know that we're going to the offsetting as we roll from Q2 into Q3, and Unfortunately, one of the offsets as the restructuring actions that we've been taking and the incremental restructuring benefits were expecting in Q3 is going to give us some some nice offset to two with less favorable mix as we progressed through the quarters. So.
Yeah, there's opportunity for us to two to outperform the prior year from a margin perspective in Q3.
But I think sequentially you know we're kind of.
Little bit too much mix to overcome but I think we're going to be the things that code for the balance of the year.
From a margin perspective, plus or minus 2030, 40 basis points from from kind of where we jumped off Q2 based on.
Next and restructuring savings, but I think Fortunately, we do have a lot of momentum built up on our cost actions and the restructuring actions and those will gain momentum as the year progresses.
And if I, if I may either to what they would Tom said and because obviously when you look at the mix the show cycle, obviously, even more profitable then the project, but one thing I can share would use these a beautiful shots of the profitability of our project backlog.
And you could see DC line, which for the last three years that as constantly going now you know year. After year end. It did the backlog that we have at the end of Q2 the profitability of the backlog is the highest than it's ever been for our project backlog, a which is a which is a good position to be.
That's really helpful.
And then switching over to and TV.
Yeah. It seems China is going to be a leading you add the recovery for for the friction business.
I was wondering if you could maybe just discuss how that business is progressing for you and how you're feeling about share market share objectives in the region.
And also just wondering if you've seen any changes structurally in the market or an evolving competitive dynamics, just kind of coming through the the pandemic.
Okay. So when we look at when we look at China, We outperformed the China market. The in the first six months, maybe roughly 1600 basis points.
And when we look at a I Wireless awards you have today to I'm very happy about the performance of the team in general, but specifically when we look at China, a one third of the awards that we had year to date in Twentytwenty I actually in China and.
One third of the talked at awards that are actually new conquest and that platforms, where we have not even so I'm feeling positive about that they trajectory of the market share gain momentum and because of these new awards because of the comp or awards the.
And when we look at the China performance in General also of the business that I would say, even though they at utilization of the machines. The about what equipment is not even close to where he was supposed to be overall in the word.
They efficiency that we have of these machines he's already into it around 85% in the labor productivity is already above 80, they when you're not running a fully loaded factory is already a pretty good achievements. So feel good about their market share gain and I feel good about how China is.
Performing from a peanut standpoint.
Okay, great. Thank you I'll pass it along best of luck guys.
Thank you Daniel.
Our next question comes from line of Matt Summerville of D.A. Davidson.
Thanks, and Echo the same settlements and best of luck. Thanks with respect sure with respect to CCT I want to make sure I understand can you talk through kind of the organic cadence for that business in the back half severe with incoming order rates I think down 37, I'm curious as to whether.
[noise] organically that business gets worse before it gets better.
Yeah, Matt.
Your Goodman.
Sorry, So we don't expect a significant improvement in terms of topline from CCT on a sequential basis.
Because it's linked.
As a reminder, 35% overall revenue there our aerospace and we know that's a passenger air traffic has not really going to improve sequentially and probably OEM build rates are not going to improve as well. So we don't expect a meaningful recovery, we expect year over year declines to be similar to what we've.
In in Q2.
And and so you know as Lucas said CCT for US is a for the moment is a focus on taking out cost and reducing as much as possible decremental margins. So that we can benefit for from a really nice incremental margins when.
The business picks up we think that's for aerospace you know, we're going to see a recovery that is probably similar to what we experienced after 911, probably going to take two to three years and Zucker said, we have discrete opportunities.
To really re purpose some of our resources to projects mainly in defense.
Some of their short term opportunities to try to boost the topline in the meantime.
I would say that I would say too to finish that Oh connector business is very short cycle. So we've we've dipped pretty quickly into too and so as the economy recovery happens even slowly that business of connector is going to bring us a little bit of.
Little bit of growth from it from a sequential standpoint.
Thanks, and just a follow up what sort of PML benefits should we expect to carry over into 21, when we think about incremental.
Pluses from all the cost takeout, you're doing this here like here.
And Matt you mean for all the businesses correct.
Correct.
Okay.
So.
Our 125 million dollar plan.
These are.
An accumulation of several different actions, where we expect use that for 2020.
The benefits of around 90 million.
Of those actions.
And then when you look at 2021, we expect to around 100 million and the reason for this increase is that you're going to see some of the discretionary cost actions that are going to come back in 2021 compared to 2020, but you also going to see some restructuring benefits and we're going to enjoy the for the four year benefit from.
Those actions.
So 90 million roughly benefit in 2000, 2900, more and more that's 100 million in 2021.
We expect a as I said some of those are the majority of those cost actions will be structural we expect some of them to come back I think when you think about incrementals.
They're going to be larger than our decrementals, and we expect that they're going to be north of 35%.
Great. Thank you guys.
Our next question comes from line of Jeff Hammond of Keybanc capital markets.
Hey, Good morning, guys best of luck, Tom look forward to staying in touch.
Thanks, Jeff.
Just on I guess back to empty I'm, just trying to better understand kind of what region like regionally, how you're thinking about production and where you're maybe more different than the NIH US and then just maybe speak to what you're seeing in terms of aftermarket trends.
Sure.
Good morning, Jeff I would say them on the idea chess that we are definitely more conservative compared to I HSN across all the three regions.
Both in Europe in China, and North America is a is spread across all three.
Compared compared to them. So when they are talking about a 21% decline.
So they're thinking about the roughly 60, a 69 70 million vehicles produced in the we are more in the region of the 65 million vacant producing the in India and the NDC spread as I said across all the three different than the three different regions.
And what was the second part of your question just aftermarket aftermarket summer Uh huh.
When we when we look at the aftermarket that we see a Q2.
It's actually a wars deterioration compared to compare to Dave can put you on that we spoke you to roughly around minus 20%.
And and when we look at it. So these for the fully up we're around probably around between minus 15 minus 16% and we expect these probably two to continue for the fully yet in terms of these these range disease that they feed but they actually got from.
One of our major aftermarket customers just that they over the phone a disease walk to doubt I doubt expecting.
As a market.
Okay, and then just I mean, I know I'm annual you give some good color on CCT isn't like sequentially, but I'm just trying to you know the orders tend to be lumpy and they are pretty ugly in commercial and defense or the comp but like.
Where do you think you know the commercial business is falling out in terms of kind of run rate declines and.
And then what's you know X X kind of a lumpiness, what's kind of the outlook on a defense side.
So on the defense side that we have a year or defense is likely to be more lumpy. So what you have a if you look a defensive probably overall for the year, we will be at and what the market. These roughly flat to what would be around the minus 7%.
Now the different first off and second out so we have a good second alpha comparing versus prior year, just because of the way that day, the program and whereas in the first off we what on the negative side. When he comes to defense aftermarket we have positive year over year mid single digit.
And same on the commercial.
On that right. So on the commercial we think that's for the full year, we're going to we're going to be.
Impacted by the lower build rates, so probably we were going to be around 50% in terms of revenue declines.
For a far commercial aerospace business one thing that's a two note here yeah. That's a portion of our business is linked to interiors and so as airlines cut their discretionary spending on refurbishing. The interiors. We are impacted disproportionately on this business and that's why you see little higher.
Aerospace decline.
And what's the difference between you and the market for defense.
So we expect the market to be around flat for defense.
And so as Lucas said, we're going to be down mid single digit.
Is that just.
<unk>.
Program timing or.
Yes.
Yeah, you're right, Jeff Defense is very programmatic for us and so this is why we're seeing a second half that is stronger than what we've seen in the first half, but he's just a question of Froch program Jeff.
Right.
Okay Luca good the same tapped out on the road again.
How do you absolutely have always traveling.
And Jeff just finished off on the industrial side at CCT. So I would say all of the industrial facing parts of CCT are probably outperforming the market that they serve obviously, there's a lot of different sub categories, but if you really look at it aerospace market for CCT generally in line.
With you know different pressures across the commercial aerospace sector, but generally in line the sense a good second half that probably facing a little bit more programmatic on a full year basis, but a solid second half in defense and then I would say the overall industrial portion CTP, probably slightly ahead of the markets that we serve just to give the pope.
Perspective for the year.
Okay, great. Thanks, guys.
Thanks, Jeff.
Our next question comes from the line of John inch of Gordon Haskett.
Thank you good morning, everybody and Ah, Hey, Hey, Tom I Hope you get some nice parting gifts, maybe a a maybe a new briefcase side.
Sounds great [laughter] hold Joe anyway, So absolutely welcome [laughter] T. welcome Okay, the old ones in investments.
Hey are you guys are you just heard Luka Luka demand are you increasing your cost reduction targets, because you're finding more opportunity or because the outlook has become more challenge than you thought.
Versus last quarter.
So let me let me address days and then in Monroe you can you can be loan. That's why I think that that you know, it's just part of it the way of our operating in terms of that beam crowd, but never satisfied and issue, though you continue to be able to your worst chest of opportunities as a matter of.
Factor I, we say.
Looking at how the market. These evolving I seen that that's our biggest market, which is our biggest sector, which is that much at motion technologies and now to Motiva, we had to Troughing Q2, and we expect you know sequential improvement in Q3 any Q4 as a debit coverage has the recovery happens so.
That would be there that would be the answer it's questionable way of operating and reaching our war chest.
And the Nbcs, Adriatic and and specifically on the on the increased to $160 million.
Yes, it is driven by some footprint actions and here the footprint is many at IP and where we all read we always had those some of those plans, but we were wary not to disrupt the customer. So we were kind of really slow rolling those and as demand as a as declined significantly we have seen this as an upper.
Do you need to really accelerate our footprint operation and we've announced a footprint a consolidation at IP in Q2, and we'll continue to do so into in the rest of the year for several other sites and then.
Additionally, we were really aggressive in reducing discretionary cost and a and then so we're benefiting from that you know increased targets of 160 million.
So as I kinda, but that's kind of dovetails and with that question I mean, where would you guys say versus where we were at the beginning of last quarter, where would you say things are playing out better or worse versus your expectations.
Mark.
Okay. So when we look at a and then let me give you also some color in terms of in terms of July we think that we've seen a China recovered nicely on day out to multi on the automotive market and that we are seeing you know also when we look at the month of July you know I.
What we saw a variation factor, which is almost back to normal. So I, we say in general motion technologies. The is the end that that market is performing better than what we were expecting. These also why we changed our focus is not like what I chassis, saying, but definitely better than what the was three months ago.
And then when we look at all so on day IP side I'm encouraged by some of the scene that they've seen in July when they look at that you know you know we're always looking now what about you know some leading indicators. So on the shorts that we got the good feature on the project, but then when we look at the short cycle, we looked at the daily.
Erase well pads or weekly await for baseline no service evolves and I'm encouraged by the numbers that we've seen in July which are a little bit better they know what forecast.
What about oil and gas Luca I mean, you had talked about potential share gains is that industry. It's obviously pretty tough spot right now is that industry playing out the way you had thought and you still on track to kind of.
To put forward those share gains that you were talking about in the past.
I think we are so when you look at oil in Gaza, you're really looking to two parts of the business. So you know oil and gas for identity. So first of all oil and gas NTT represent roughly 10% to avoid identity business and we have to connect to side of the business where did that play on the on the in the upstream and we will outperform it.
These markets.
The upstream would probably be for the full year roughly minus 40 minus 50, we'd be in the region of minus 20, indeed, it's because of market share gain particularly in the middle East.
Now when we look at that oil and gas that for IP, we play in the downstream upstream as well as midstream and we will be outperforming in that market the as well.
And what we so there are we haven't seen really any project cancellation, John we're seeing some project to get delayed but our strategy on those delay project is really to wind engineering or theirs and and even if you don't get the food or there was a project with engineering you build.
For the customer intimacy and you've got the foot in the door.
In July actually we had a positive news on the oil and gas was that in order that was put on hold the during Q2 in July and came back active and that we are starting talking <unk>, a token again to the customer so I would say confirming the market share gain.
And that all that was for exactly in Kazakhstan.
Yeah got it cool great. Thanks, and good luck on.
Thanks, John.
Our next question comes from a lot of Brian Blair Oppenheimer.
Good morning guess some thank you for all your help over the years.
Absolutely. Thank you.
Right.
I was hoping you could break out the monthly sales rate for friction aftermarket in the quarter I assume April was was quite painful and then there was some degree of recovery to gets the down low twentys on if you could also speak to the July sales rate just trying to gauge the pace of sequential recovery.
Okay. So definitely there was that there was an improvement into I mean, when you look at the quarter of Q2, obviously at April was that was the because Oh. So you think about it our aftermarket the is the European business. So what that what you see that that April was at that.
Lead the worst may was not much much better by amazed when actually some of the locked down became easier and then you have a better situation during the month during the month of June.
July was that was that was steel <unk> catching is still catching up so that is that the normal I would say they normally try and that you will expect a with the easy of at locked down in Europe.
Okay understood.
I know you called out the the real M&A pipeline sounds like that build out could accelerate a bit over the near term.
Can you remind us of the run rate size of of your Tony Axtone platform and I know, we tend to discuss entitlement ranges in terms of margin, but do you have a target and lines for the scale of the rail platform as you continue organic and M&A investment.
Sure. So when you look at when you look at it Connie Axtone business that you are talking roughly about a 200 million dollar $200 million to $210 million platform and when we look at the building a rate platform. We're talking about a in the long term it to be a business of roughly 500 $600 million. When you look at these acquisition.
And these inorganic.
Opportunity. It is more is a niche acquisitions. So he is more one and but he is a is a good is there is a well run the company that might enable us also to play a bigger role on the service side of a have a of rail. So that's a nice the end.
Good addition, what we've been doing Brian is really cultivating these are heavily.
We have pose the because of coffee to of course, we have the reactivated the as recently because of the easing of the locked down but I would say is in each application. These are both town.
Okay. Appreciate all the killer App and again, if we think longer longer term for the rail platform can that business structurally.
Gets a friction type markets.
Ah yes, it can.
Excellent. Thank you.
Thank you.
Our next question comes on line as Brett Lynskey vertical research.
Hey, good good morning, everyone. Many thanks, Tom and congrats to manual.
<unk>.
Yes, just a just a first of <unk> point of clarification on the cost savings I know you indicated 90 million. This year 100 next year just want to make sure that 100 million is in fact incremental.
To the 90.
No no it's not it's not what's incremental is roughly the 10 million to go from 90 to 100 and the reason why did you basically have a restructuring actions that are carrying over and that give you an incremental benefit and then you have some of the discretionary spending that he is rolled back.
Got it Okay, and then just on the balance sheet, obviously in great shape. The pension I know is frozen at 108% is there an opportunity to move that off balance sheet and then just second on the especially just could you just provide a little more color on the is a qualified settlement fund noted the slides and then strategically is there an opportunity to fully.
Eliminating or move that this year next.
Yes, yes, thanks, Brett it's certainly a lot of momentum and positive element to the balance sheet story that you're highlighting.
So so for sure to start with pension that 108% funded or our plan is to is to add to terminate or you know the pension plans to move it off balance sheet to what to an insurance company. This is the U.S. pension plan, specifically that we're referring to here. So so that effort is in motion and that is something that where we are trying.
To accomplish.
By the end of the year, but for the U.S. plan. So that that's in good shape, and we're progressing but that with a good team working on it the QSS.
Is basically.
That is where we store all of our proceeds from settlements with our insurance providers and the QSR continues to grow now and basically that that's cash that we could use for many assessed this and the majority of our environmental spend that we have so the good news about the QSR.
Yes, no operating cash.
Is going towards a satisfying those legacy obligations that money is already in and our internal QSS fun and when we have to make assesses claims or environmental claims we can use that cash to satisfy those claims and that's going to give us.
Really good coverage for for the next.
Roughly two years potentially plus around both discussions and environmental cash outflows.
And then lastly, continuing the momentum on a status.
We've driven that liability down we've done a lot of things to structure it.
You know in a certain way so that if there is an opportunity brett to to find a counterparty or transaction obviously.
That could make sense.
You know there are options are examples out there of different ways to address this liability and I would just.
You know highlight that we're constantly evaluating all of those and I would look for an opportunity that that might make sense, but in the meantime will drive that net liability down 45, 50% as we have will use our QSS cash to satisfy the obligations, which will maintain minimal draw on operating cash and if we see a good strategy to do.
Something in the future, we're certainly actively reviewing those on a constant basis.
Okay, great Congrats on a good quarter and best of luck.
Thank you thanks Brett.
Our next question comes from line as Andrew Obin of Bank of America.
Hi, Good morning. This is only shoe on for Andrew Sheldon.
Wanted to extend my thanks, and best of luck to common.
That's true manual.
Thank you are going away.
Just a question on supply chain did you adjust your sourcing at all in the quarter or you know some production and region and also how did the Mexican facility function given that there were extensive government mandated shut downs. Thanks.
Okay. Thanks, Thanks, Emily so when it comes to supply chain or we had a good savings in supply chain across all the different a different businesses, the India, India region of a roughly a triple digit more than 100 basis points improvement from emerging point of view, we had no major disruption on.
Supply chain.
Because of they have the shutdowns, we had I want to backup line, particularly when you think about Moshe technology in terms of our supply us a week and be able to kind of resiliency and some redundancy in the supply chain, but no major disruption on the on the supply chain and when we had some he kept because the about maybe some supply.
<unk> commie, some casting coming from it from Asia, we've been able to work together with a customer to adjusted to adjust the schedule.
Now going back going to the second part of your question, which is that which is Mexico, our Mexican operations in Nogales kept an operating across the quarter, a we had to several audience with the government and the in some cases were at 30 at CP or 70% based on the situation. There was the in the in the state of said I know what.
No got as Isa when it comes to the Mexican facilities the in Seattle.
For a motion technologies, we shut down that facility during the month of the of as of April and talk to me and Dave was mainly because of customer demand.
And custom demand on the day, we started the and we're operating at right now.
Okay very helpful.
And then a follow up question on motion Tech any outlook on autos into 2021, you know in terms of maybe build rates being revised up then with motion tech outperform that could.
'cause motion tech be up in 2021. Thanks.
I will say when the when it when we look at what we see the obviously twentytwenty one is gonna be defocus, he's going to be higher than twentytwenty. So the growth we continue but.
There is known going to go in Twentytwenty want to the level of 2019 and Ah I see the exactly where these growth is going to land is probably to be two or be too early to tell so the recent growth that the trajectory is there, but these probably to be too early to too early to tell a about once seen that Uh huh.
Can we can we can't commit to that I motion technology, we continue to outperform.
The dimmock it.
Okay, great. Thank you very much.
Thank you.
Our next question comes from one as Joe Giordano of Cowen.
Hey, good morning, and no good to see you guys are finally upgrading the CFO John.
In long do [laughter] not assuming.
Hey, Workmens, but [laughter].
Yes.
So are you looking you mentioned that the project profitability in IP.
In the backlog is the highest has been in years just given some.
You know virus flare up to now there's kind of some confusion about what the pacing of opening up and things is going to look like like what's the risk over the longer so stays in back on what that does to the profitability.
Okay. So when it when you look at when you look at what how these if the how the final ending backlog I have evolved in the last six months, Joe and the last six months I would say have been their worst.
I I expect the last six months to be the worst <unk> in a decent kabi 19 crisis, because we didn't know Wendy's is happening Asia Pac and there was a major complete locked down in Europe before more than a month and the same in North America.
In all these environment.
What we had to ease the iwear a backlog of four hour project actually when topped by 3% since the beginning of the.
And that if we look at the funnel in a into two main regions that we operate North America and middle East to the Middle East the wind down during the last quarter, even during July stopped replenishing up and in North America is actually going up so I would say.
I end attitude that having seen any major cancellations.
Only some postponements on shifting to the writer.
I would say a I don't see any major issues that we that we that we the project that side of the of the business.
Now if there are some changes on a on the contracts that you know.
Usually the reasons some protection there in terms of the terms and condition that you have with the council, but we're not experiencing any of that of those at this moment and this has been probably being the most demanding quarter.
For the business Q2.
Okay. That's helpful. There and then I'm just wondering one more on rail.
Can you kind of just described the the landscape there like how regionalized or the company that you're looking at as targets like or if you're buying a business. That's in one region can you globalize out or would you have to biosimilar companies that make no. That's your similar capabilities in different regions of the world how how are there.
There are big companies out there are they going to be a lot of kind of rolling rolling up of smaller players and then just go go off on a little bit.
Yeah, it's a little bit of immix, Joe in the science that a rail is very regional and therefore, you tend to have more small or medium companies that have a good food hold in the region, sometimes we may be in specific specific country. So.
Does that disease. The first that the first thing in General then of course it depends on day on the project on the problem.
If you think about our business Connie we have our shock absorbers that goal you know on the on the cause of they have the of the train in locomotives high speed trains a coach and that they are both on the GE locomotive sealing the U.S. as well as the in India as well as they locomotives in China.
Now they are on the heights pre I speak trading from CMS that Bombardier outcomes C.R.R.C.. So don't talk of leases are more global so it depends but generally is a very fragmented market with small and medium companies.
Yes.
Thanks.
And ladies and gentlemen that was our final question I'd now like to turn the call bulk of back over to Tom for any additional closing remarks.
Yes. Thanks, Thanks, and thanks, everyone I just wanted to take a quick second I know, we ran long to thank all of the analysts and investors.
It's been my pleasure in my honor to to get to know you went to work with you into represent ITC and help you understand.
You know what appreciate this company and all that potential that that that we have and and I've I've enjoyed the experience and the opportunity to get to know many of you very well over over quite a long period.
I'll Miss you all in and I just wanted to the thank you.
Want to thank my World class team and in particular, Michelle My my support that many of you know that they've all helped to make me much much much better than I am.
Certainly want to thank Luca for for all of his support and is incredibly kind words and no I did not script those for him those were from his heart and from his pens I really appreciate.
His kind words in and and lastly to a manual best of luck and congratulations I know.
I T T isn't as in great hands, and we had a great balance sheet and a tremendous future and Emmanuel Luka will certainly.
Help us realize even even greater value creation going forward. So thank you all and.
Hopefully we can all connected some other point in the future.
Maria I think we're are pretty well concluded.
Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.
Thank you.
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