Q3 2020 Constellium SE Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Constellium.
Third quarter 2020, <unk> results conference call.
At this time all participants are in a listen only mode. After the speakers presentation. There will be a question answer session. After question during the session.
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I would now like to hand, the conference over to your first speaker today signed when things director of Investor Relations. Thank you. Please go ahead Sir.
Thank you operator.
I would like to welcome everyone to our third quarter 2020 earnings call.
The call today are Chief Executive Officer, Joe Mercer, Maine, and our Chief Financial Officer, Peter Matt.
After the presentation, we will have a Q and a session a copy of the slide presentation for today's call is available on our website at <unk> billion Dot Com and today's call is being recorded.
Before we begin I'd like to encourage everyone to visit the Companys website and take a look at our recent filings.
Today's call May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 95, such statements include statements regarding the company's anticipated financial and operating performance future events and expectations and may involve known and unknown risks and uncertainties for a <unk>.
A summary of specific risk factors that could cause results to differ materially from those expressed in the forward looking statements.
Please refer to the factors presented under the heading risk factors in our annual report on form 20-F.
All information in this presentation is as of the date of the presentation. We undertake no obligation to update or revise any forward looking statements.
As a result of new information future events or otherwise, except as required by law.
In addition.
Addition, today's presentation includes information regarding certain non-GAAP financial measures. Please see the reconciliations of non-GAAP financial measures attached in today's slide presentation, which supplement our IRS disclosures.
I will now like to hand, the call over to Joe Mark.
Thanks, Ryan Good morning, Good afternoon, everyone and thank you for your interest in Nick Setyan, Let's turn to slide five please.
Before we discuss highlights from the sales falter I want to reiterate that the health and the safety of our employees is our first priority we.
We continue to follow street protocols to mitigate the risks from the Govies 19 pandemic.
I want to thank our employees Hill, taking these precautions seriously as a virus continues to spread in many communities around the globe, we must remain vigilant and say.
Now, let's discuss highlights from the sales growth there of 2020 over.
Overall this was a very good performance for the company what.
What our business is still recovering from the difficult second quarter.
Clearly on the right track.
Fark benefited from strong can sheet and recovering auto body sheet demand.
It's an AI is experiencing a solid recovery across its automotive industry platforms and is benefiting from the successful revenue and operational improvements.
Aerospace demand remains weak, but there is reason for optimism on the T. I'd side with the recent announcement of preliminary anti dumping duties in the us a.
Peter We show you all three businesses did a great job on costs.
Now for a few details.
Treatments were 354000 metric tons, a decrease of 11% compared to the sales folks are up to 19.
Revenue decreased 20% to 1.2 billion euros of the roughly 300 million Euro decline in revenue confesses sales growth or a flat here approximately two thirds was related to lower shipments and one third was related to lower metal prices.
I remind you that while revenue was are affected by changes in metal prices, we offer a success business model to Minimise middle risk.
Net income of 20 million euros compared to net income of 1 million euros in the sales cluster of two inch nineties.
Adjusted EBITDA of 126 million euros decreased 9% compared to the sales quarter of 15 19.
This is a strong result, and I want to acknowledge the great cost performance sales team delivered again this quarter.
Stadium generated 354 million of adjusted EBITDA in the first nine months the decline of 20% compared to the first nine months of last year.
We are establishing guidance of adjusted EBITDA of 450 to 460 million euros in 22.
This guidance is based on our current outlook and does not consider for example, the CV of deterioration in economic conditions uses you into the club Covitz endemic.
We look forward to a time hopefully in the not too distant future. When we can reinstate long term adjusted EBITDA guidance.
Free cash flow was 75 million euros in the sales growth through 2020.
This is an exceptional results in a challenging environment and brings a free cash flow for the first nine months of 2020 to 129 million euros.
Based on our current view of market conditions, we expect to generate free cash flow of 100 to 150 million euros in 2020.
We continue to deliver on our commitment to be consistent generators of free cash flow.
Our leverage was 4.3.
And of the sales call to de leveraging remains the top priority of ours.
I will now hand over to Peter to discuss our financial performance in detail Peter. Thank you show Mark and thank you everyone for joining the call today turning.
Turning now to slide seven you will find the change in adjusted EBITDA by segment for the third quarter and the first nine months of 2020 compared to the same periods of last year.
For the third quarter of 2020, Constellium achieved 126 million euros of adjusted EBITDA.
Decrease of 13 million euros or 9% year over year.
PARP adjusted EBITDA of 85 million euros increased by 13 million euros or 20% compared to last year.
Adjusted EBITDA of 10 million euros decreased by 33 million euros, or 77% compared to the third quarter of 2019.
And then I adjusted EBITDA of 33 million euros increased by 7 million euros compared to last year.
Lastly holdings and corporate costs of 2 million euros were comparable to last year.
In the first nine months of 2020, Constellium achieved 354 million euros of adjusted EBITDA, a decrease of 87 million euros or 20% year over year PARP adjusted EBITDA of 209 million euros decreased by 1 million euros compared to last year.
And T. adjusted EBITDA of 93 million euros decreased by 66 million euros or 41% compared to the first nine months of 19.
As an i. adjusted EBITDA of 66 million euros decreased by 19 million euros or 23% compared to last year.
Lastly holdings in corporate costs of 14 million euros were 1 million euros higher than last year, We expect agency costs of approximately 18 million euros in 2020.
Now turn to slide eight and let's focus on the PARP segment.
Adjusted EBITDA of 85 million euros increased 20% compared to the third quarter of last year volume.
Volume was a headwind of 14 million euros in the quarter.
Packaging shipments fell by 9% primarily as a result of the temporary shutdown in March of our Neuf Brisach plant in France, and reduced consumption of cans in Europe, both due to COVID-19.
We believe these effects are temporary and we expect stronger shipment levels in the fourth quarter.
Shipments to the North American can sheet market in the third quarter increased slightly year over year.
Automotive shipments increased 7% compared to last year as demand from our automotive OEM customers recovered rapidly.
Costs were a tailwind of 30 million euros due to improved recovery and strong broad based cost control with labor and maintenance as important contributors FX.
FX translation, which is non cash was a headwind of 2 million euros due to the weakening of the us dollar during the quarter.
While we have not provided bowling green results separately for the past few quarters I want to provide an update on the trajectory of improvement.
Boeing Greens adjusted EBITDA increased from negative 48 million euros in 2018 to negative 15 million euros and negative 19 to what we estimate will be a positive 15 million euros. In 2020, I think we can all agree that this is an impressive improvement in over two short years.
Over two short years, now turn to slide nine and let's focus on the anti segment.
Adjusted EBITDA of 10 million euros decreased by 77% compared to last year volume was a headwind of 52 million euros are lower aerospace and T. I'd shipments.
Aerospace shipments fell 48% compared to last year as aerospace Oems and distributors continued to reduce orders to match lower build rates.
We expect a similar decline in year over year shipments in the fourth quarter.
T. I'd shipments declined by 27% to lower due to lower industrial activity in both Europe and the U.S, we expect some recovery in the fourth quarter on recent evidence of stronger demand in the us.
Price and mix was a 2 million euro tailwind.
Costs were a tailwind of 19 million euros due to strong broad based cost control with labor and maintenance as important contributors.
FX translation was a 1 million euro headwind in the quarter.
Looking forward despite the challenging market market conditions, we expect anti to remain a positive adjusted EBITDA contributor in 2021, but at a lower level than 2020, as we expect the second segment will face difficult year over year comparisons through the first half of 21.
Now turn to slide 10, and let's focus on the US an ice segment.
Adjusted EBITDA of 33 million euros increased by 7 million euros compared to the third quarter of 2019.
Volume was a 3 million euro headwind automotive shipments were comparable to last year on strong demand recovery from automotive Oems industry shipments declined 5% due to lower industrial activity in Europe prior.
Price and mix was a 1 million euro tailwind costs were a 10 million euro tailwind on strong cost control with labor maintenance and sub contractors subcontractors as important contributors.
Onto in particular complement the auto structures team for its efforts to restructure the business and get it back on track.
Lastly, FX translation was a 1 million euro headwind in the quarter.
Now turning to slide 11, I want to highlight our continued strong performance on cost.
In the third quarter, we flex our cost by 96%.
Cost flex represents the change of costs over the change in revenues for the third quarter of 2020 as compared to the third quarter of 2019.
Effectively for every dollar change in revenue were able to flex our cost by 96 cents. This compares favorably to the 83% cost flex we provided last quarter.
At the bottom of the page you can see that each of our businesses demonstrated strong cost control with PARP at 111% cost flex and T at 78% and asthma NIE at 122%.
Cause flex in excess of 100% reflects cost reductions in excess of revenue declines.
Partially due to the structural cost reductions during the quarter.
Excluding metal and depreciation we reduced cost by approximately 65 million euros compared to the third quarter of last year. These.
These cost savings were driven by strong cost control across the business, including labor maintenance and professional fees.
Labour represented over half of the total 65 million Euro decrease.
These cost savings include approximately a 5 million euro benefit from European state unemployment aid related to COVID-19.
As you know, we are very committed to reducing costs and running a lean operation.
Fixed cost reduction is a major platform of our horizon 22 initiatives. The successor project to project 2019 I.
Im pleased to announce our initial horizon 22 cost reduction goal of 75 million euros of savings from where we stand today, we estimate in excess of one third of these annualized horizon 22 savings have already been secured come.
Combined with our savings from project 2019, which Youll remember was 78 million euros, we will have cumulatively removed over 150 million euros out of our cost base.
I remain excited about the significant cost reduction opportunities that are in front of us.
We are working to emerge from this crisis with improved margins and a stronger financial profile than when we entered it fixed cost reduction is an important tool in this strategy.
Now, let's turn to slide 12, and discuss our balance sheet and liquidity position.
At the end of the third quarter, our leverage was 4.3 times and our net debt was 2.05 billion euros, which is more than 100 million euros lower than our net debt position at the end of 2019.
We remain very committed to capital discipline.
As you know we reduced our 2020 capex target to approximately 175 million euros, a $96 million euro reduction from 2019.
Through the first nine months of 2020, we spent 46 million euros less capex than in the same period of last year.
Our free cash flow was 75 million euros for the third quarter and 129 million euros for the first nine months of 22020, we are extremely proud of these achievements given the business environment. They underscore our commitment to be a consistent and strong free cash flow generator.
As John Mark noted earlier, we expect to generate 100 250 million euros of free cash flow in 2020 based on our current view of market conditions.
Generating free cash flow is a firm priority and we remain committed to deleveraging.
As you can see in our debt summary on the bottom left hand side of the page we have no bond maturities until 2024.
Our liquidity was over 1 billion euros at the end of the third quarter.
We remain very comfortable with this liquidity position.
I'll now hand, the call back to Mark.
Thank you Peter and let's turn to slide 15, and discuss our end markets.
We believe our balanced portfolio of products across end markets geographies and customers is a competitive advantage I'll start with the packaging market.
Packaging represents 39% of LTM revenue.
We continue to street, we continued to see strong market demand in North America stable.
Stable demand in Europe, our packaging shipments are currently running at 95% or more of last year's levels.
We believe the packaging market as long term secular growth tailwinds driven by customer preference for aluminum cans.
Customers continue to invest in you can lines in North America.
These additional lines should drive incremental demand for can sheet in the years to go.
The consumer preference trendy Sunday, one of the Tailwinds for can sheet.
In Europe the demand for can sheet continues to grow based on substitution if aluminum steel steel.
In the U.S., we continue to expect the gross of auto body sheet demand tighten supply to the packaging market over the medium to long term.
Now, let's move to automotive over.
Automotive remains a secular growth market for aluminum customers continued to prefer larger vehicles with regulation aimed at increasing fuel efficiency and reducing emissions the automotive market will need to continue to likely.
In addition, we expect hybrid and electric vehicles to continue to gain share of defeat.
These equals our aluminum intensive.
Due to the importance of lightweighting to achieve their range objectives.
Cool stadium is well positioned to realize the benefits of the secular shift to aluminum in automotive and the electrification of the fee.
Moving to more recent trends automotive Oems resumed production in the second quarter and rapidly increased demand in the third quarter.
Mostly ends are running at or near last years levels, both in North America and Europe.
The demand for our products will continue to be dependent on the level of production of the Oems, which as of today is very strong.
Let's turn now to aerospace aerospace represented 14% of our LTM revenue.
The near term outlook for aerospace remains uncertain due.
Due to the effects from the COVID-19 crises in the 737 Max issues.
Aerospace Oems have reduced build rates and it is unclear how long build rates will remain at these levels.
Our aerospace business continues to operate at approximately 50% of flat yield levels.
Based on our current visibility, we expect inventory de stocking to persist through the fourth quarter of 2020 and likely through the first half of 2021.
In other specialties, we continue to execute on our strategy of expanding in each product in a diversified range of markets.
In general these markets all dependent on the health of the industrial economy in Europe, and North America.
Faulty I'd the defense markets remain strong most industrial and transportation markets in North America off showing solid signs of improvement was these markets remain weak in Europe.
European extrusion demand is solid across most end markets.
Before concluding I want to let you know that full were often as deciding to these constellium for a different to both Judy.
I want to thank Paul for his many contributions to some steady over the past 10 years and wish him well in his next endeavor I would also like to announce that PD often will take over as asinine business unit presidents and join our Executive Committee.
As the longest sthree was considered and as sales numerous leadership positions in the company, including management roles and operations strategy and innovation. Most recently he was in charge of OTO structures and led the turnaround.
I am excited for him to lead Escena into what I believe is a very promising future.
In conclusion, I am very proud of our sales growth our results and the tremendous efforts made by the entire continuum team during these challenging times.
We remain committed to operational execution harvesting the benefits of our investments.
Disciplined capital deployment debt reduction and shareholder value creation.
With that operator, we will now open the Q and a session.
Thank you.
A question. Please press star followed by the number one on your telephone keypad with Dai. Your question. Please press the pound key.
Our first question comes from Kerry from Deutsche Bank. Please go ahead. Your line is open.
Thank you and our zone lock in data.
Two questions for me just wanted to start with the utilization right. So.
Thank you said some packaging, 95% order is close to 100% of last year and then there is about 50% do you have.
Those numbers the arrow as you think about the next three quarters or so do you have a utilization right you can share or is it too hard to tell on that at this point and good morning, Chris.
On Aero, it's hard to tell I think what we are.
Preparing for is a continuation of the low rates at which we are we are obviously in discussions as our customers see there are also positive signs around build rates stabilizing and possibly the seventhree hundred and 70.
David's three seven Max coming back.
But we've heard that story before so it's difficult really to make a prognostic of the future and I think our best assumption now is full do six nine months to go we will stay around those levels of 50%.
Okay. Thank you and then on the auto market are you, saying so momentum building into the ended the year or more stabilization at this point.
I think we're seeing.
Stable to positive, but there is uncertainty around when automakers will take their shutdowns at the end of the year is it for one week to week sales really I think the fundamentals of demand out of good.
Entry levels.
Switching to remain.
Decently Lou but there is going to be to have uncertainty through the last weeks of the.
Okay. Thank you and then just on the packaging market.
Can you just remind us when the bulk of your contract. So I think that was signed in 2017 at June 2021, 2022 can you give us just some color given the given all the announcements downstream that have happened recently, just thinking about potential renewals.
So we said 21.
To some extent and 22 to a large extent will yield the contract renewal and so we look at them we could.
Quite a bit of optimism and excitement.
We were well.
Well, we are welcomed practice going into 21, and 22 and I'm very happy with where we are.
Where we will be more exact.
Thanks, Thanks, So mark all the best Thank you.
Your next question comes from some.
From Credit Suisse. Please go ahead your line is open.
Hey, good morning, Submarket theater, and congrats on a great operational quarter. Thanks, good morning. Thanks.
So I guess continuing on christine's question around around packaging and then your comments on.
How there is growing obviously demand in the us in some degree thats going to continue to maybe pull.
Hot mill capacity away from certain sectors and there is a finite amount of hot mill capacity in the U.S switch.
Think is already running pretty full out so I'm curious.
What your thoughts are with regards to future growth for you in packaging in the us.
I believe you are running pretty much a full capacity today.
So in the past you've talked about de bottlenecking of roughly 75000 tons, but then.
Potential.
Upgrades or reinvestment.
To even increase capacity further because when you look at the announcements on the kingmaker side, that's for pretty substantial growth. The next five years.
And I think it's a 2 million ton market growing at 6% a year, so that almost implies roughly.
Roughly 100000 tons of can't see.
Growth annually and.
In an industry that appears constraints I'm just curious like how you think about that.
Going forward and then it and frankly any that you would want to grow more in auto would that limit your participation and can going forward.
No. So these are good problems to have and we're very excited at the opportunities Youre outlining here. So we have.
The constantly evolving plans to improve the throughput from our meals and if you think of that 100000 tons of additional demand every year.
We.
Can capture our fair share of its old capture will supply our fair share of it.
As long as we've got a little bit of prior annuities and we can decide to allocate capital to build the lake field that.
The fact that that capacity is.
Competing with auto.
Vested in order the demand is a good thing for us, obviously, because strategically and tactically gives us option.
I remind you that at the same time to sort of talk about to one of our competitors going back into the market domestically, which would also provide some the needy the domestic capacity. So all that I think.
Is a positive for the market, it's a growing market.
Consumers preference that goes towards.
Dan can.
Can makers are investing and we as an industry and certainly we have some studio are ready to meet that challenge as long as.
This makes sense for us and do we get paid.
A full with we supply.
Bolton whenever we talk about possible capital expenditures towards the expansion that we get a fair return on the capital we would be deeply.
Okay that makes sense.
And then within automotive structures great.
Great operational turnaround and I know for a period of time.
Roughly 18 months or longer you purposely held back.
On your nomination wins do you feel like next year would be a year of which you could fix.
Accelerate your bidding activity and increase your backlog in the structures business yet capacity.
To do that.
So we thought was full two years essentially is to make sure. We digest that a very significant growth and as you can see from the results in his tonight this quarter and over this year right. We've had we've been successful in turning the corner.
So it would stand to reason that we would.
Progressive restart to rent that again, our activities leading nominations in growing the business, we want to be very careful, especially in light of the current environment, where it is important that we maintain a balance portfolio of activity in that we make sure that the investments we've made we make help de risk.
And as we get to attractive returns.
So clearly.
In this day and age cats.
Absolutely.
Free conscious of the fact that capital is very extensive priorities de leveraging and want to be sure that whatever capital. We deploy gets a very attractive rates of return.
Okay makes sense.
And then one last one on aerospace it seems like you're assuming.
Build rates stay relatively muted.
Theres been some news about Airbus potentially taking athree 20 up to I think a 47 versus 40 rate.
So kind of two questions.
Your guidance seems like you're assuming status quo.
But again, partly what's going on today is a very significant destock.
And it's obvious that comps will be negative maybe in the first quarter first half but.
Any sense of.
How long this deep destock to continue for.
And then in the event Airbus works to increase between 20 to what I think that publicly been saying.
Is there any way to quantify what that could mean to you.
Yes so.
You're absolutely right two arena Destocking mode, and Destocking very acute given I wish sharply the.
The rates have come down.
And by some token when rates go back up.
And it's basically a destocking has lasted for a long enough period of time than the rent that will be extremely strong.
It is difficult to make a prognostic, but I think the first half of 2021 is going to be as you mentioned very challenging.
We will still be a de stocking to long supply chain.
But when things to go back up maybe in the second half.
Thats would be.
Pretty strong pretty quickly.
It's impossible to tell I mean, we've seen.
Very.
We've seen very or shelf variations quarter to quarter and.
I can tell you is given the work we've done the cost side.
Two.
To reduce LCOS.
It goes back up will bring back even more full season.
And when we came down.
When it happens is anybodys guess at this stage.
Yes under an understandable thanks very much for your time.
Sure.
Your next question comes from Josh Sullivan from the Benchmark Company. Please go ahead. Your line is open.
Hey, good morning, Mark.
Earnings.
It's just looking at the free cash flow and congratulations.
On the Horizon 22 program can you give us any idea of how much of the disruption with COVID-19.
Those plans forward, maybe where you thought you would be by now, but where how much that has actually been accelerated because of the 19.
Yes, I would say thanks, Thanks, Josh Good question I would say that.
You know the adage never let our good crisis go to waste, we've definitely kind of taken advantage of that in the sense that sharpened everyone's focus on cost reduction.
We.
You know throughout each of the business units I think you can see it in the numbers and in the cost select some of third quarter. I think you can see really the outperformance of.
Costs are coming down sharper or the costs are coming down quicker than the revenue so.
In terms of the.
How much is really been brought forward I would say when we look at the Horizon 22 initiative, we say, we're we've announced the two a 75 million program. We feel we're probably kind of as I said earlier over a third of the way through that.
And we're probably further along its hard to say exactly how much further along we are but were I would say, we're definitely further along than we would be otherwise so.
Got it.
Got it and then just switching over to the canned heat market do you anticipate imports for for can sheet in North America, just given the tightness in the market.
And then with the economics work for you to for you to import anything from Europe at this point.
Yes so.
We have seen an increase in the impulsive can sheet to that at best a year.
That is due to a large extend to the distortion induced by a trade policies.
Well you know that there is a two three to terry's coming into the.
The us.
10%.
However, there are numerous exemptions are being size and guarantees, which essentially means that fueling both from a foreign country youre.
You're insulting the at any content of the of the can sheet that 10% less than what the domestic mills have access to so.
So it's one of those.
Interesting situations, where.
Why did the administration the strength to help domestic mills are actually penalizing us bye.
Giving us.
Hi, a price of metal than what.
Foreigners get to get an exemption. So yes, we've seen a little increase of the impulse and I think in both will continue to play a role as long as we have these disability to trade policy.
But remember that these are a long supply chains.
And.
You got problems with what you do with the process scrap you can return it to the mill.
You can see from the.
Fuel sourcing for the domestic supplier and then a lot of those meals are.
At the time of the.
Stronger and stronger focus on sustainability a lot of these in both come from the fill season in the world where a power generation is much this year than it is here in the us So Canada.
And I think all the time, they see something that will become less than this that is to build as the Calvin counts into the aluminum sales from overseas is penalized by the sales of the electricity that is used for them.
Hi, transportation cost and energy requirements to get it here and the lack of recyclability of that process scrap.
So we'll see I think it's also continue to play a role, but not a major role in the balance and quite frankly, we've been dealing with that for the first couple of years and we've been doing just fine as we can see from on them.
Got it.
And then just a follow up the Kurts question.
The battery box opportunity have you have any have you seen any specific nominations on the TV front for the battery box at this point so.
So we were we were we all thought spacing three projects that we communicate to FFO.
About.
By nearly two years ago, we havent adds more nominations that thats both of the conscious choice. We've made to make sure that we can digest all the.
Projects, we had secured and that we can also led technology matures. This many different designs full battery boxes.
We want to make sure that.
The technology and the tools before we get into.
What would be the.
The weeding fuel is seasonal that weaning off full battery books we.
We have the substantial R&D projects as we are doing we tool yen in Europe.
On ways to.
Nate battery box is much more efficient than wind than what the traditional designs off today, we'll see when they see the Jules this is.
Quite exciting and Weve gotten a substantial grants from the UK government to do that.
So.
I think multiple I mean.
While on year, one and a half yields time.
Wind project business, it would as evil sufficiency and we've we've been working with those Oems.
Great. Thank you Vincent show.
Sure.
As a reminder, if you would like to ask a question press star followed by the number one on your telephone keypad.
Our next question comes from Sean Wondrack from Deutsche Bank. Please go ahead. Your line is open.
Hi, Peter Genmark.
John how are you.
Hope you're doing well, yes so.
Great to hear what's going on in the packaging and the auto market that demand is resuming.
Pretty high capacity utilization now so I'm just going to ask one more question turned around the aerospace.
Jack there, which obviously is very difficult right now.
But in the past you've certainly discuss the five to seven year long contracts in aerospace obvious.
Obviously, there is only a few suppliers out there how do these contracts work.
At a minimum take or pay.
Or.
How does that sort of assumption in this kind of an environment you have to work with your customers I would assume.
They are.
Requirement base weeks a share of.
Markets rightful share of the men by the OEM.
Oems and within the frozen we do.
Can be sales to a year, it's a take or pay.
And obviously in the case of the.
In the days, we were living through.
We have decided to work with our customers. So that we don't impose on them that take or pay provisions for 2020, right because otherwise we could be forcing them to take volumes. They don't need at the end of the day that very conducive to it.
Good business and a good strategic partnership with the customer and Thats prolong the de stocking into 2021.
Wait too long. So we've said I think I commented on this in the prior earnings call, we've decided to take more pain. This year. So.
So thats just more quickly to the realities of the market I mean ultimately these are very strategic relationships that weve had for.
At times longer than our lifetimes as individuals and we want to make sure that continue into the future is very collaborative and we want to make sure that we.
Come from the crises very.
Very.
Absolutely.
We.
Customers.
Right and I think that makes a lot of sense have you seen any sort of peers or competitors have been trying to maybe grow market share at lower prices or is that sort of based on the contract that you. Just described is that sort of limited well.
Well I.
I don't think so I mean that with the deal with the Oems.
We have good.
We made the comment.
The Airbus contract, we signed earlier this year. This is a 10 year contract. These all you know the market shales off six full 10 years essentially so there's not really a newbuild community so somebody to come in and get to do more.
Business at the expense of facility was already go to contract now.
That doesn't do all their business with us to other competitive at different.
Frames or.
Contractual provision, but in our case.
We all know the exposed to losing market share except when contracts renewed.
It's also really hard for competitors to do that in a period of Destocking.
So right right that would make a lot of sales.
And then just quickly on the cost front, obviously, you guys have done a great job of taking out cost starting that project 2019 and basically it.
For the the Corona outbreak.
You talked about 65 million.
Going forward, our excuse me I think that was this year versus last year the governor.
Or is it getting more and more difficult to take out additional costs and where are you looking at this point.
Well done such a good job yeah. Thanks, Sean So I think so a couple of things number one.
You remember our project 2019 achievement was $78 million and our fixed cost reduction initiative as part of Horizon 22 is 75 million. So we continue to see opportunities in the company and just the relative magnitude shows you that we're not.
We're not finding them so hard to find.
We think we still think theres a lot of opportunity and will never be done with that so that's kind of part of the.
The DNA of the of the team here.
In terms of where the big opportunities are you know weve talked in the past a lot about metal and kind.
Kind of efficiencies around metal Theres also a lot of opportunities around manufacturing and kind of running our plants more efficiently running our equipment more efficiently.
We've done a lot of of cost reduction around reducing external resources. You know there are times in a company like this where you have got a lot of external consultants are good example above is.
What we have going on and I when.
When we were trying to turn it around we brought a lot of people in to help us kind of get it fixed quickly.
And they did that but it added a lot of extra costs. As you saw in the you know kind of last two quarters of last year. So we've now are kind of gotten rid of all of that cost and we're kind of running on our own.
At a much lower and a more sustainable base so sorry.
So I'd say, it's coming from a lot of different places, but I would say, we still see quite a bit of opportunity.
Sounds good.
And then just quick last one for me I'm, obviously between.
Between the two presidential candidates.
Can the fighting has basically had somewhat of a greener agenda.
Which could sort of present opportunities for your company I was curious if you thought about any of the opportunities there and how you might have.
Well, we will see a next tuesday or late so whenever the election cycle.
I think we've got a very balanced portfolio.
Activities and some activities could benefit from the change in policy, but.
But.
Other activities may benefit from a continuation of the policies I think we'd have to see how it goes.
And I think as it against a balanced portfolio of activities, we have give us the ability to sales through.
Whatever changing policies for you. Thanks.
Hi, Thank you very much appreciate all the guidance here.
Thanks, Sean.
We have no further questions in queue I would now like to turn the call back to John that how many million CEO for closing remarks, well. Thank you very much everybody again for your interest income stadium and we are very proud of the school. So we're very determined to finish the year on a strong note with strong free cash flow generation.
And we look forward to being able to tell you more about the long term.
When we.
Come back to you in February with our Q4 earnings thank.
Thank you so much for your interest goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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