Q4 2020 Haynes International Inc Earnings Call
Hello, everyone and thank you for joining us today for this Haynes International Inc. Fourth quarter fiscal 2020 financial results Conference call.
And are all phone lines are in a listen only mode, but after todays prepared remarks, you will have the opportunity to ask questions ticket and started today with opening remarks and introductions I'm pleased to yield the floor to controller and Chief Accounting Officer Mr., David Van Bibber Good morning, Sir.
This call contains statements that are forward looking.
And the meaning of the private Securities litigation and the format of 1995 and section 20, Onee and the Securities Exchange Act and making 34. The words believe anticipate plan and similar expressions are intended to identify forward looking statements.
We believe our plans intentions and expectations regarding or suggested by such forward looking statements are reasonable such statements are subject to a number of risks and uncertainties and we can provide no assurance as such plans intentions or expectations will be achieved.
Many of these risks are discussed in detail and the company's filings with the Securities Exchange Commission in particular form 10-K and for the fiscal year ended September Thirtyth 2020.
The company undertakes undertakes no obligation to publicly update or revise any forward looking statements.
Whether as a result of new information future events or otherwise.
Let me turn the call over to Mike.
Thanks, Dave.
Good morning, everyone.
And our team leads our company through the impact of the pandemic.
I thought I would start this call by highlighting some of the positives from this past quarter.
Well this has been a difficult period, we've executed well and I'm proud of our team's accomplishments.
First starting in late March we prioritize cash generation.
After generating $13.1 million and cash and our third quarter, we generated an additional $11.7 million and Q4.
For a total of $24.8 million and the second half of our fiscal year.
We have also developed plans for positive cash generation to continue throughout fiscal 21.
Next we have strong liquidity, no debt and $47.2 million and cash on our balance sheet.
Due to our high level of confidence and operating cash and fiscal 21, we paid off the $30 million precautionary draw on our revolver and September 2020.
Many years and tightly managing our balance sheet have set us up well to manage our way through the pandemic.
In addition, our team is strategically positioning our company to exit this downturn with a competitive advantage by leveraging our mill direct and service center routes to market.
We are building flexible intermediate inventory and the mill to allow for consistently shorter lead times and a future for high volume and alloys. All our service centers are targeting stock for even shorter lead time requirements and small order quantities.
We also plan to continue to invest and value added cutting capacity to provide high value differentiated products and therefore build additional competitive advantage.
Throughout this pandemic, we've stayed in close contact with our customers continuing to provide what they need when they need it and to gain share insight into current business conditions and future demand requirements.
Next week.
We are pursuing market share gains and have moved from talking about it to achieving it and our industrial gas turbine market segment, where we began shipping increased volume two and new customer in Q4.
In addition, we continue to focus on our value based pricing for high value differentiated products, while at the same time seeking to be competitive when the commodity alloys portion of our CPR mix in order to drive volume.
Average selling price both sequentially and year on year has held up well despite the drop in volume.
Our entire team continues to emphasize the value that we provide via our unique proprietary alloys, our quality, our technical and sales service and our just in time inventory.
Next we reacted swiftly and to the pandemic began and the U.S. to take costs out of the organization with salary reductions unpaid furloughs headcount reductions and other actions to reduce our costs as we managed through the pandemic.
While it's difficult to reduce cost and full proportion to our volume reductions because of the many many of our costs are fixed we analyze all discretionary spending and made very difficult but necessary decisions.
All of the work on Sq and eight and volume related cost reductions is very important on.
Also important for the long term health of our business is the ongoing work to improve yields and lower manufacturing costs.
Our cost and yield initiatives and Q4 are expected to further benefit us as our volume comes back.
After the pandemic these actions should keep us on track to improve our gross margin percentage, which reached 18% and the two months prior to the pandemic.
In addition sequentially, our gross margin improved and a fourth quarter compared to the third quarter going from 3.3% to 4.9% percentage in spite of volume and revenue declining.
This shows our ongoing commitment to reducing cost in this low volume environment.
And we'll have additional details on this and his financial update.
A couple of more positives or allo and application work continue to provide high value opportunities for us and unique applications.
We're currently working on opportunities involving both new alloys, and new applications for existing alloys.
I continue to believe that innovation is a core strength for our company and the foundation of Haynes.
Our safety rate has continued to improve throughout the year, our process improvement initiatives keep safety front of mind for everyone in our company.
I'd like to take a moment to congratulate our Arcadia, Louisiana, two facility, which completed a full year without a recordable incident in September.
I'm very proud of our team this.
This has been a difficult eight months, where everybody. We've continued to effectively focus on the health and safety of our team while also dealing with a significant business implications of the virus. Our team has continued to show focus.
Termination and leadership.
Now a few final summary comments from me on revenue cost reduction.
And cash generation before I hand, it over to Dan.
Our very low business levels and the second half and 2020 fiscal 2020 were challenging and resulted in an unprecedented step down in revenue levels. We continue to monitor monitor their respective markets and look for favorable signs of the recovery.
I'll point out that our order entry.
Has begun to improve and move into right direction from the very low levels. We saw in May and June to a slightly higher level in Q4.
Well, we have a long way to go it is certainly a step in the right direction.
On the cost and margin side, our past price and variable cost work led to significant gains in year on year gross margin percentage in Q1, and Q2 and a reduction in our breakeven points and the much talked about 5 million pounds and quarter to less than 4 million pounds a quarter.
Our January and February gross margins of 18% show what we are capable of however, with our Q4 sales volume being just 2.9 million pounds. We are incurring losses, the majority of which can be attributed to the unfavorable fixed cost absorption, resulting in direct charges.
In addition to the significant reductions in pounds sold from lower demand. We also reduced inventory levels by another 1.1 million pounds in the fourth quarter.
This combination of lower sales levels and inventory reductions led to a sizable reduction in pounds produced and our Kokomo mill and the fourth quarter that reduction was 49% year on year, we simply cannot spread the fixed cost we have over 50% less produced and pounds.
As discussed we have successfully increased our cash balance since we pivoted to a cash generation focus as the pandemic began to impact all of us.
I'd like to talk about the fact that our inventory reductions were done responsibly, meaning that we have our customers need as our priority even as we reduce inventory as an example, despite reducing inventory by 2.8 million pounds and Q3 and Q4 combined we actually built and modest amount of strategic work and process inventory.
And our high volume alloys, allowing for lead times to be reduced to more quickly support our customers and business levels do improve and.
And I'll turn it over to Dan will provide more details on our specific markets and on our financial results.
Thank you Mike Let me start with a look back at our quarterly volumes at the end of last year fiscal 2019, our fourth quarter volume was 5.4 million pounds, which was the companys highest quarterly volume and four and a half years moving.
Moving into fiscal year 20, the first half was impacted by the grounding and production halt of the Boeing 737, Max lowering aerospace volumes combined with weak oil prices, which lowered volumes and our chemical processing market.
Volumes and the first and second quarters were 4.2 million and 4.3 million pounds, respectively.
The second half of fiscal 20 was then significantly impacted by the cold and 19 global pandemic, which lowered volumes in Q3, and Q4 to 3.2 million pounds and 2.9 million pounds respectively.
The fourth quarter volume of 2.9 million pounds represents a 46% reduction from the 5.4 million pounds and last years fourth quarter.
Net sales and the fourth quarter of fiscal 20 was $79.9 million.
Looking at each of our major markets for the fourth quarter sales to the aerospace market accounted for 42% of our revenue and 33.6 million.
This is a decrease of roughly 17% sequentially from Q3, and a decrease of 51% from the same period last year.
The pandemic has had significant effects across the aerospace industry with announced reductions and commercial aerospace and build schedules combined with reductions in repair maintenance and overhaul activity.
Complicating the demand situation continues to be the elevated amount of inventory throughout the aerospace supply chain.
Destocking is expected to continue in fiscal year 20.
Backlog dollars and aerospace decreased sequentially from Q3 to Q4 by 16% and down 46% year over year.
Fourth quarter sales to the chemical processing market accounted for 23% of our revenue and $18.5 million.
This is an increase of 52% sequentially from Q3, but a decrease of 33% from the same period last year.
The sequential increase from a very low level relates to a pickup of shipments into Asia.
It is also reflective of our approach to seek higher volumes from commodity CPI transaction on business with more competitive pricing.
This market will continue to be impacted by cobot, 19, and then and and and environment of low oil price is causing chemical companies to delay their capex spending back.
Backlog dollars and the CPR were flat sequentially from Q3 to Q4, but down 13% year over year.
Fourth quarter sales into the industrial gas turbine market accounted for 16% of our revenue at $12.4 million.
This is a decrease of 9% sequentially from Q3, and a decrease of 21% from the same period last year.
Shipments into this market can be lumpy quarter to quarter.
The decrease is attributable to conservative purchasing methods due to COVID-19, combined with small and medium frame engine builds slowing down due to the weakness and the oil industry.
Our share gain initiative continues.
However, given the current economic conditions, the shipments are not yet consistent quarter to quarter.
Backlog dollars and industrial gas turbines decrease sequentially from Q3 to Q4 by 15% However are up 11% year over year.
Fourth quarter sales and other markets accounted for 12% of our revenue at $9.2 million. This is a decrease of 17% sequentially from Q3, and a decrease of 16% from the same period last year.
Again demand was impacted from the effects of the Coke and 19 pandemic decreases were largest and the flue gas desulfurization automotive and oil and gas markets.
Backlog dollars and other markets increased slightly from Q3 to Q4 by 2% and 1% year over year.
Fourth quarter other revenue accounted for 18% of our revenue and $6.2 million. This is a solid increase and 94% sequentially from Q3, but a decrease of 8% from the same period last year.
Solid toll conversion sales drove the sequential increase both on our four high Rolling mill, but also conversion work and our melt shop.
Overall fourth quarter volume was 2.9 million pounds, while this low volume compress gross margins significantly this quarter the compression alleviated somewhat from the third quarter by 160 basis points.
Gross margin in the fourth quarter was 4.9% compared sequentially to the third quarter's 3.3.
This margin expansion occurred even though volumes declined.
The amount of fixed overhead costs that we charged directly to cost of goods sold as opposed to capitalizing on the inventory as our plant capacity was underutilized.
Decreased this quarter compared sequentially to last quarter low.
Last quarters direct charge was 5.9 million in Q3, but favourably declined in Q4 to $4 million.
We are continually and diligently striving to reduce our costs to better align our cost structure to these new lower volume levels.
This quarter was also challenged with heavy costs in three different categories first increases and inventory reserves of 1.5 million, which is about 500000 higher than Q3, and about 1.1 million higher than last years fourth quarter.
Second.
Costs are roughly 250 to $300000 of coke and related costs, such as for staggered shifts quarantine pay cleaning tasks and cleaning supplies.
And third additional severance related cost of approximately 300000.
On the fourth quarter.
In total we have reduced headcount by roughly 183 as of October 31st 2020, or 15% of our global workforce.
This equates to approximately 14 million and annualized salaries wages and fringes.
In addition, during the fourth quarter, the executive team and the board of directors continue their 10% pay reduction and salaried employees continued their one week unpaid furloughs.
And she and a including research and technical expense was 9.1 million and the fourth quarter.
SGN eight was reduced to this quarter due to the reversal of incentive compensation accruals of $1.2 million, which was accrued and prior quarters, but fully reversed in the fourth quarter.
Excluding this reduction SG and it was $10.3 million as compared to last year's fourth quarter of 12.5 million or a reduction of 18%.
Three additional points to finish out the piano first non operating retirement benefit expense and the PNM was $1.7 million, which nearly doubled compared to last year's numbers as we had talked about previously previously.
So we have some good news for fiscal 21, and a moment I will further discuss our new valuation and next year's expense.
The second item to finish out the piano interest expense in the fourth quarter was slightly lower as we repay the precautionary draw on the revolver, which occurred mid March and third our effective tax rate was adjusted lower this quarter to 21.2 net 21.2% as we finalized our year end tax provision.
All of that resulted in a net loss for the quarter of $5.7 million, which sequentially improved by $2.4 million.
Let me circle back to the topic of our recent valuation at September Thirtyth 2020 of our pension and retiree medical plans.
The actuarial about valuation was favorable although the valuation included a reduction of the discount rate used to measure the plan liabilities, which is unfavorable it was offset by favorable items, including higher than expected return on plan assets for the pension plan and.
And favorable returns retiree health care spending as we have been actively managing our retiree health care costs.
This is expected to significantly reduce non cash expense in fiscal 21 by $2.2 million for the pension plan and $3.4 million for the retiree healthcare plan.
This combined 5.6 million will be reflected primarily as a reduction of non operating retirement benefit expense in the PNM and F y 21.
Moving to backlog.
While we have experienced low order entry levels, primarily due to the pandemic order entry rates slightly increased in the fourth quarter fiscal 2000 compared to the third quarter, but still below shipment rates.
Backlog was 153.3 million at September Thirtyth, 2020, a decrease of $21.3 million or 12% from the $174.6 million at June Thirtyth.
For the full fiscal year backlog decreased $81.9 million or 35% from the 235.2 million timber.
Timber Thirtyth 2019.
Capital spending was 9.4 million in fiscal 2000, and the forecast for capital spending and fiscal 21 is 10 million.
Which continues to represent a level well below our depreciation levels.
Liquidity.
The company had cash of $47.2 million and zero borrowings against the credit facility as of September Thirtyth 2020, the company repaid the 30 million precautionary draw on the revolver in September due in part to generating 24.8 million in cash and the last six months of the fiscal year primarily from inventory.
The reductions and the company's confidence and its ability to generate future cash and its overall liquidity position.
In addition, subsequent to year end in October of 2020. The company replaced the 120 million credit facility set to expire in July of 21, with a new 100 million credit facility expiring and three years and.
New credit facility contains an accordion feature that permits and increase up to 170 billion at the request of the borrower if certain conditions are met.
You can find the details of our new credit facility and our filings with the SEC.
Outlook for next quarter.
We continue to experience Mark and uncertainty driven by the Coke and 19 global pandemic.
We expect revenue in the first quarter of fiscal 21 to be lower than the fourth quarter of fiscal 20.
Due to the ongoing impact of the pandemic as well as the typical end of year holiday related business slowdown maintenance schedules and customers managing their calendar year and balance sheet.
Earnings for the first quarter cannot be estimated during this time of unprecedented market and economic conditions low volumes and unfavorable fixed cost absorption.
We expect to continue to generate cash from inventory reduction in fiscal 21, and we continue to position the company favorably for the recovery.
In conclusion looking forward, we continue to see significant demand challenges ahead. Despite these challenges we continue to feel that we are well positioned to weather. This period, driven by our ongoing efforts to align our cost structure and inventory levels to current demand levels.
With inventory levels at 246 million at September Thirtyth, 2020, which is 65% of F. Y 20 sales, we believe additional inventory reduction is achievable.
This strategy is expected to yield and increasing cash balance over fiscal year 2021.
Mike with that I will now turn the discussion back over to you.
Thanks, Dan.
This has been a stressful time, obviously for the world our country, our families and our businesses.
And again want to thank our employees. They all continue to push forward initially to protect the health of our employees and obviously that's on going and then to jointly lead Haynes through these turbulent times by pivoting the cash generation focusing on what differentiates us from the competition and implementing the actions required.
Related to our key metrics for success with that Jim That's open the call for questions.
Gentlemen, thank you and to our audience joining today, if you would like to ask a live question at this time simply press star and one on your telephone keypad pressing star and one on place your line into a Q and I will open the lines. One at a time also a friendly reminder, that if you're joining us today on a speakerphone. Please return to your handset prior to pressing star and wanting to be certain that your signal does reach our equipment.
Once again, ladies and gentlemen that is star and one if you would like to ask a question, we'll hear first from Steve O'hara with Sidoti.
Hi, Good morning morning, Steve on it.
Thanks for taking the question.
I guess if.
If you look at.
You mentioned, the inventory levels and where they are right now and channel.
You talked about have they improved at all or are they still kind of high.
And.
No.
Do you need and kind of a real.
Real pick up in demand for for that to improve.
There are things kind of maybe you know progressing where inventories are getting cleaned up a little bit here and there as we progress.
Steve sure, we obviously spend a lot of time talking.
Talking about this both internally and getting insights from our customers.
We believe that inventory reductions.
Throughout the supply chain are going to go on for another few quarters said another way based on a lot of customer feedback there.
Theres still probably six to 12 months of inventory in many areas of the supply chain obviously there's.
There is going to be exceptions to this we're seeing some exceptions. So we could see a modest uptick and 21, but that will just be the first step in our opinion to the recovery.
Our view and I really think a great way to look at this is to look at the leap engine, because I think what happens with the leap engines tells us what's going to happen to the aerospace industry you all know the story 70.
1700, 36 engines and 19 initial forecast and 20 320 down to 800 this year and it's somewhere between 800000 next year and so what we're still dealing with his inventory and supply chain to make over 2300 engines initially projected and in in 2020 and that dropped to 800, so still and.
Tori out there and the good news for us.
Rejections are for the leap or back to over.
2000 years people start flying again, starting in 2023, meaning that we believe the supply chains will be cleaned out and metal will start to flow and large quantities to support. This late 21 early 20 to make.
Makes sense.
Yes, no that's very helpful. Thank you and then.
Maybe just on the cost cuts.
I think you mentioned kind of a 14 million annualized cost savings.
Is that something that.
It's kind of that.
True pickup and starting in 2021, and and maybe how much of that and that is incremental and 21, maybe and then is the 5.6 million that you mentioned.
On the pension.
Pension is that included in that $40 million.
Okay, all that and I'll, let Dan address the bench and after I talked about the costs I think when.
When we look at cost you got to look at it from from three points of view first is the SG and eight.
And and salary cost reduction that we went through those obviously are were very difficult implement.
And that's something that any of us look forward to but but theres certainly there and we'll we'll move throughout.
Our upcoming fiscal year at some point, obviously when business returns you would have to bring some of that back but given the pain. We went through to get to these levels and it will take some time on the variable cost side, there's really a couple of ways to look at this first when.
What we have done to get to our Highpoint free pandemic of 18% was not only price increase but significant variable cost reduction and that work continues both on yield improvement and overall variable cost reduction and very proud of those efforts and.
One of the things and happens, though if you reduce cost on a per pound basis, you don't get as much cost reduction with 2.9 billion pounds and you did with 5.4 million pounds. Obviously, so that are so as we move forward and some of our past cost reduction is muted until our volume comes back but also on the variable side, we continue to focus.
And all of our facilities and driving costs down.
Daniel and it went to cover the a 5.6 million Steve asked about sure yet the pension reduction and the retiree health care production really has is not part of that that 14 million and that I referenced that was only related to the permanent reductions and.
Net had occurred over the course that occurred somewhat and mostly and 2020, a little bit spilled into 2021, because I mentioned to you. The October number but that was a you know.
A majority of that number has already been realized and some of the numbers, we're seeing for the fourth quarter and even a little bit and the third quarter of EPS, why 20, but unrelated to the pension and I will say this too. It's also a unrelated to other cost reduction measures that we've taken like the unpaid furloughs is not part of that 14 million.
And number the 10% reduction in the executive staff salaries is not part of that as well and that's just one piece of that.
You know bigger cost reduction strategy.
Does that help.
Yes, very very helpful. Thank you and then maybe last one.
You noted that CPI remains Inc.
And at low.
Given the economy et cetera.
I mean, you know.
What are the biggest markets there I mean, it seems like you know homebuilding debt. The one of the bigger drivers of chemical and then you know auto seems to be the other big ones are there other markets that we should think about in terms of.
Getting that market back to maybe improvement other than just general GDP, yes.
Yeah the.
Oil prices have a significant impact so when when oil prices are down theres less spending and the cpis market. So that's that's a significant large pipeline projects are not out there and in general we are seeing many chemical processing projects on hold.
Specifically related to coated and everyone being a bit conservative with their spending so that's.
Thats one side the other side is there a special project side, we actually finished.
Our fiscal year, 20, and a pretty good spot related to year on year, staying plus or minus about even on our revenues on cpis.
We're actually going to see on special projects within CP I will see that drop somewhat because theres very few projects being let but I would say in addition on what you said, it's oil price, it's large pipeline projects and general and it's our special projects.
Okay. Thank you very much I'll jump back and give Steve.
Our next question will come from Chris Olin and tier four research.
Hey, good morning.
Chris and Chris.
Hey, Mike you referred to order rate improvements, although they were from low low level I was curious if.
There was a specific end markets, what's driving that it was in a broad based improvement.
Yeah.
And it gets and facts here, Chris and.
The best way that I like to look at this is our book to Bill and.
And it's kind of interesting when you look at pounds on what we book versus what we've built.
In Q1, obviously pre pandemic. It was at 1.0 I'll get to the markets and second Q2 was 0.7 Q3 was 0.6 Q4 bounce back little which obviously gives us and hope it was <unk> 0.9 and to specifically answer your question on the book to Bill on Aero was still down it was at <unk> 0.7 book to Bill.
For the quarter, but CPI was slightly over one eye GT was slightly under one and other was over one so its arrow is lagging as we would expect as we talked about with inventory, but the others are coming back again, we've got a long long way to go we and we're.
Were we say, we're we're on the road to recovery, but it's from very low levels Chris.
Interesting, Okay and then.
Just want to make sure I understood. What you said there on on the special projects and pipeline or revenues.
What was the actual number I wasn't sure I caught that and then I was just curious.
Did you talk about the pipeline like any prospects in terms of what it could look like for debt for the next fiscal year.
Yeah, we the special projects.
Were approximately 25 million in fiscal 19 were probably plus or minus $1 million over that and fiscal year 20, because the lead times on these very complex products are very long. So a lot of what we had it and there were things that had been.
And what are before the pandemic hit us I'd expect a drop in our apparent now current fiscal year.
I don't know the level that we have some numbers, but were always pushing for more so I would say year on year, that's going to be down.
What we what we like is where the margin is and what's coming and it's been a fairly rich mix over the past year, plus or minus Dan and engine.
No I think you nailed it just give you a specific number and fight 20 special projects 26.3 million, where and F.Y. 19, 25.5 million. So you are right on and your and your numbers Mike.
See that Chris I'm, generalizing and and the incomes and cleans it up give the actual numbers. Thank you Dan.
Perfect you guys have done a great job on the cost reduction side.
Just trying to think about the normalization of volume and and we start looking out to like 22 and such when.
When you think about.
The 183 positions debt.
Or removed would a lot of those jobs need to come back to increase production or is there a way to think about how much of the cost reductions would stick going forward.
I think it was obviously very painful to remove people both.
On the production side and through the salaried side of our business.
[music].
I think it was also fairly expensive for our company to do that so certainly as volume comes back there will be a lag, but there will be a need to bring back.
Some of our production workforce in our facilities, but we will do that very slowly and.
And on the salaried side.
We're going to have to be very careful after spending money to have to remove them to bring them back certainly there'll be some that have to come back, but it will be a very slow process to bring them back.
Okay. Thanks, a lot thank you Chris.
Once again, ladies and gentlemen, if you would like to ask a question or need clarification on anything covered on today's call. Please press star and one on your telephone keypad next we'll hear from Michael the shock at Keybanc. Please go ahead.
Hey, Mike and and good morning, Good morning, My morning.
So first just on your internal inventory de stocking on I know you said, you're looking to destock more inventory into 2022.
But looking at the fiscal one queue, how should we expect the magnitude of the destock to be vs bed sequential change that we saw this quarter.
We've seen.
Well in the second half and last year, we aggressively removed about 2.8 million pounds of inventory.
This is a real balancing act for us because we have to keep some metal flowing through our plant obviously our shipment.
Shipment level is not as high as it's been in the past so and Q1 by the way is typically a tough quarter for us to reduce inventory. So I don't know to be honest weighted to spread across the year, but we do expect to continue incrementally quarter after quarter to find ways to reduce inventory Dan.
Yeah, I think that's a good way to look at him I mean, obviously when we reduced inventory originally UNEV why 20, you know just the volume itself going down is going to reduce you know whats in work and process, what additional raw materials, you're buying so thats a bit of a you know somewhat natural reduction with volumes overall going down and can we as we get into fights.
21, it shifts a little bit and that you know the pace may not be quite as strong and it'll shift a bit more today, maybe the finished goods side of it where were reducing more out of the finished goods side, rather than a wet and and and raw materials, but we're looking and really every pocket of inventory looking for you know any kind of stranded inventory you might say.
And and work and process and and trying to clean it up as best we can we have and inventory steering committee that studies this quite heavily and we reported to senior staff you know inventory levels.
At least weekly if not more often than that so it's a big push correct. Why 21, we're confident we can continue to reduce inventories I mentioned in my prepared remarks, you know our inventory level as compared to sales and still quite high and you know our turns.
And could certainly go up so I think we still have a lot of room to improve and that will generate cash.
Got it and makes sense and and then on the seven and 37 Max given the recent news that we've heard there and I know, that's about 8% and normalize volumes for you Uh huh.
How is the supply chain gearing up for the the return to service and I know you mentioned the leap engines, but any any other color you could add there on on the Max.
I think when you look at the best estimates out there for mass production and Twentytwenty on actual planes built.
And it's only probably 120 planes to be built so I still believe there's significant inventory out there. Obviously, we went from the high levels and the fifties down to zero and now probably plus or minus at the current time for a month.
So there is still significant inventory out there.
So I think a return and a bounce back and demand will be very gradual and we're looking at hopefully at 31, a month, starting in 2022 and and as they begin to need material for that is when I think we'll begin to see a pool.
And then just lastly for me you mentioned, the new GT customer.
Any anything you can tell us in terms of the magnitude how we should think about that customer and then your expectations for more share gains and in the near term. Thanks.
Sure.
I don't think I want to get into the actual volume for us and.
On a company that that only shipped 2.9 million pounds last quarter. It is certainly significant volume.
It's a key piece and our puzzle and something we targeted and went after and and we feel real good about that.
By the way on I T T. The other thing that.
We really like about this market as we finally seeing the supply chain and steady state. So instead of talking about all the inventory and the ice tea supply change been talking on forever.
There is no more inventory reduction when there is demand were seeing a pull forward and so we feel good about that in general and what's happening with that specific customer and for US. It is significant as far as other share gain.
I believe the value that we provide with our service centers with our just in time inventory with our technical service for their alloy applicator or alloy development.
I think we there's opportunities everywhere and which we can find ways to out service others out there and that's what we're focused on doing this is the one which is that that has happened. So it's it's good to talk about but we're certainly focused on others, whether it's here aerospace other areas.
Got it thank you thanks, Mike.
And gentlemen, we do have a follow up coming in from Chris Olin once again and tier four.
Hey, sorry, and a couple of Mark on a.
And just actors out here.
Wanted to ask about Arcadia for two reasons one.
I know, there's been a little bit of disruption and the to the titanium supply situation I was wondering.
Chris We made last year, we lost you Chris.
We can't hear Chris Mr. On are you reconnected Sir.
Hello, gentlemen, I had on my and I do apologize.
Okay to be clear I'm on my right. Yes, you are right here, Okay, Yeah, I'm not sure where I got knocked out there I wanted to ask about Arcadia, there had been some changes in the titanium supply situation here over the past few months I was wondering if that was an issue for that business on the core.
Peter as well as.
The issue with Cove, and kind of Louisiana getting hit I'm, just kind of maybe give me an update there sure as far as the starting stock.
For Acadia for titanium tubes supply not an issue at all it's a.
Very controlled process and which its process. These change in coming on we are deeply involved in our and use customer is deeply involved with that so we don't see anything there will be a very controlled changeover our people and our supplier are all over that one so no issue at all.
Kogan significant issue, Chris not only and Arcadia, but putting all our facilities you know, we're we're doing everything we can.
Social distancing staggered shifts and the shifts early whatever we need to do to try to protect our people, but its very difficult. So yes, we have significant issues and Arcadia. Our team is doing a great job of keeping things going on and I could say that about every facility we have our offices.
Plant and Kokomo going through similar items, you know, it's not just what happens and the plan obviously, it's what happens when people go out in the public or with families were all worried about what happens over Thanksgiving, but so far team's done one heck of a job and keeping things going while working to protect all our employees.
Okay, and D. and you mentioned the Cove and related cost does that continue into the the net should and you mentioned that.
Yeah, I think that was what I said 250 to $300000 that's related to staggered shifts and you know.
Teens cleaning different areas as Mike was just kind of referencing there I think that cost would continue and I am.
As we continue to try to keep everyone safe and keep everyone separated and anything we can do to.
To help and protect their health, we're trying to do so they don't have a cost to it but pretty manageable.
And then the last question I had was I thought I recalled GE talking about increasing production of the turbines or maybe the outlook getting less negative.
Hello.
Has that helped your business and are you thinking about that marketing different at all.
On a on power generation I say on the mid and small sized turbines as Dan said in his prepared remarks, and a lot of that's going into oil.
Oil and gas so that certainly down we finally see nice projections for the large frame engines and and our alloy content. In those is is good and continues to grow especially on the proprietary side. So thats. Good. So we will see that coming and as I noted I think and one of my responses along here, we no longer see supply.
And full of inventory there so when they start to build we will feel it as it come yet not necessarily but we do believe it will come not certainly and and huge quantities not to where it was when we peaked in this market many years ago, but it certainly will begin to improve.
Thanks again thank.
Thank you Chris.
And ladies and gentlemen that does conclude our Q and a session for today's conference I'm happy to turn the floor back to Mr., Mike shore free additional or closing remarks.
Okay. Thanks, everybody. We appreciate everyone's time thank.
Thank you for your interest and support.
Please be safe for thoughts are with you and your family and this incredibly unusual time, you live and look forward to talking to you again next quarter. Thanks, everyone.
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