Q1 2021 Haynes International Inc Earnings Call
Only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host David Van Bibber, Sir the floor is yours.
Thank you very much for joining us today with me today are Mike Shor, President and CEO of Haynes International and Dan Maudlin, Vice President and Chief Financial Officer.
Before we get started I would like to read a brief cautionary note regarding forward looking statements. This conference call contains statements that are forward looking within the meaning of the private Securities Litigation and Reform Act of 1095 and section 21 E of the Securities and Exchange Act of $19 34.
The words believe anticipate plan and similar expressions are intended to identify forward looking statements.
Though 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 assurances such plans intentions or expectations will be achieved.
Many of these risks are discussed in detail in the Companys filings with the Securities and Exchange Commission in particular form 10-K for the fiscal year ended September 32020.
The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise with that let me turn the call over to Mike.
Thanks, Dave Good morning, everyone.
It's interesting for me to take a step back and look at where we've been since the pandemic began and where I believe we are headed.
Six months ago. During the Q3 earnings call, we discussed the significant impact that the pandemic driven volume reduction was having on our business.
At that point, we were still on the discovery phase of understanding how far volume would drop.
Three months ago. During the Q4 earnings call. We highlighted the actions we were taking to stabilize our business. During these very difficult times.
Our visibility is still unclear our recent conversations with customers as well as our recent order entry trends leads us to believe that Q1 is that we're near the bottom of this unprecedented downturn.
This quarter as compared to last year's Q1 is volume down 34% and revenue down 33, 4% gross margin percent. This quarter was a volume impacted one 4% versus 17, 3% last year net loss this quarter was $8 million compared to net.
Income of $3 $3 million last year.
These are difficult numbers for us to see they reflect the full weight of the pandemic.
As a team we are focusing our attention on properly positioning our company for the future. We believe that as we begin the process of emerging from the downturn turn we do so with strong business fundamentals.
I am proud of our entire team for accomplishing what we committed to both before and during the pandemic specifically related to gross margin.
Significantly lowering our breakeven volume and cash generation.
I'll now provide a few comments on each of these areas are.
Our previous work on improving gross margins was critical to our long term success.
We achieved 18% gross margin prior to the start of the pandemic expanding our quarter on quarter gross margin percent by 670 basis points in Q1 of fiscal 'twenty.
By 580 basis points in Q2 of fiscal 'twenty.
Was accomplished by our teams focus on pricing for value.
And relentless cost reductions and.
An important point, achieving 18% was not an endpoint for gross margin percent progress, but it was a great step on the right direction.
We believe that our efforts to significantly improve our gross margin will result in substantially.
Lower volume breakeven for Haynes and.
And based on this we believe.
That a return on profitability can occur at much lower volume levels than what we exhibited in fiscal years 2017 and 2018.
On a quarterly data from 17, and 18 show that our company.
Could not be profitable unless we shipped at least 5 million pounds of quarter.
Based on the cost reduction and pricing for value work accomplished by our entire workforce. We believe that our breakeven volume should now be below 4 million pounds, meaning that our breakeven should be reduced by at least 20%.
While our current level of losses due to just $2 8 million pounds being shipped in the quarter are of concern. We are focused on the positive impact that our work should have on the speed in which our company can return to profitability.
As the pandemic came to the U S. We pivoted to cash generation driven by responsible inventory reduction.
We generated $24 $8 million on the last half of fiscal 'twenty and an additional $14 million in cash has now been generated in our fiscal 'twenty one Q1.
Everyone on our team has a role to play on this and we believe that we will continue to reduce inventory and hold a solid cash position in fiscal year 'twenty one.
In addition to our cost cash and pricing initiatives.
Both our performance on alloy and application development and our technical and sales service in my opinion are second to none in this industry.
Since we are both the mill and a global distributor of our products, we're able to provide our customers with unique alloys and products.
Just in time deliveries small quantities and value added cutting capabilities.
Our customer focused actions and capabilities continue to be core competencies and key differentiators for Haynes and position us very well with our customers for the recovery from this pandemic.
We understand that the path back to the commercial aerospace levels. We saw on 2019 will take time, but we believe it is vaccines and confidence and safe Air travel expand we will all want to fly again and the commercial aerospace sector will once again show sustained growth.
My question is the timing and slope of the improvement in the commercial aerospace build schedules.
We also expect to see modest growth in both the CPI in IGT markets as the general economy begins to open back up from the pandemic.
Our recent share gains in the IGT market has helped to offset the decline in this industry.
Industrial activity also seems to be picking up.
Overall, we're starting to see the first signs of improvement.
Quoting activity is up and additional pockets of demand now exists.
These data points signal that improvement may be ahead.
Wrapping up my comments I believe that our team has positioned us very well for the future. Our focus is clear we are a customer focused technical and sales solutions provider for high value differentiated nickel and cobalt based alloys, we help our customers solve their manufacturing and process related issues through the.
The supply of high value alloys, along with best in class technical and sales support.
Our formula for success is understood by our entire workforce safety speed agility quality alloy and applications engineering differentiated products and outstanding customer service. This is what will continue to separate us from the competition with that I'll now hand, the call over to Dan.
Thank you Mike volume shipped in the first quarter of fiscal 'twenty, one was $2 8 million pounds, a reduction of $1 4 million pounds were 33, 9% from the same period last year and a five 2% reduction sequentially from the fourth quarter of fiscal 'twenty.
This significantly lower produced and shipped volume continues to be the primary issue impacting our financial results.
Many of our customers are in a cash preservation mode, which resulted in conservative order entry trends.
Combine that with elevated inventory throughout the supply chain, particularly in aerospace also contributed to lower volumes.
Sales to the aerospace market accounted for 34% of our revenue at $24 6 million.
This is a decrease of roughly 27% sequentially from Q4, and a decrease of 58% from the same period last year.
The aerospace market has been the most impacted by the pandemic with reductions in commercial aerospace build schedules and 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 during fiscal 'twenty one.
Notable milestones on the aerospace industry include the start of the vaccine rollout and its impact on people's confidence to fly again.
Bind with the recertification of the Boeing 737, Max to fly.
As Mike mentioned is expected to still take time to get back to pre pandemic aerospace levels.
Backlog dollars in aerospace decreased sequentially from Q4 to Q1 by 11% and down 51% year over year.
First quarter sales to the chemical processing market accounted for 21% of our revenue at $15 3 million.
This is a decrease of 18% sequentially from Q4, and a decrease of 9% from the same period last year.
Demand in this market continues to be impacted by Covid, 19, and generally lower oil prices, causing chemical companies to delay their capex spending.
The commodity side of this market is highly competitive with many producers seeking volume.
Special project revenue most of which is reflected in chemical processing was $4 4 million, which is a $1 5 million lower than the fourth quarter and $4 1 million lower than the same period last year.
Backlog dollars in CPI increased slightly by two 4% in Q4 to Q1, but it's down 7% year over year.
First quarter sales to the industrial gas turbine market accounted for 19% of our revenue at $14 million.
This is an increase of 12% sequentially from Q4, and an increase of one 5% from the same period last year.
Our share gain initiative continues to help volumes, however volumes can still be lumpy quarter to quarter in this market was impacted by the pandemic.
We expect modest growth in industrial gas turbines as conditions slowly improve.
Backlog dollars on industrial gas turbines decreased sequentially from Q4 to Q1 by 10% and down 25% year over year.
First quarter sales to other markets accounted for 18% of our revenue at $12 8 million. This is an increase of 38% sequentially from Q4, and an increase of 8% from the same period last year.
This increase was driven by flu gas this authorization applications this quarter.
Backlog dollars on other markets increased sequentially from Q4 to Q1 by 22% and were also up 22% year over year.
First quarter other revenue accounted for 8% of our revenue at $5 6 million.
This is a decrease of 9% sequentially from Q4, and a decrease of 23% from the same period last year.
The decrease was due to toll conversion, including told customers that have exposure to the aerospace industry.
The overall low volume of $2 8 million pounds resulted in significant compression on gross margins in the first quarter of fiscal 'twenty, one to one 4%.
The company continues to face the industry wide challenge of reducing spending commensurate with reductions in production volume in this current environment.
In addition to low volume shipped during the quarter. The company also reduced inventory by $9 $8 million or 4% during the quarter, which further reduced production volume in our plants and to reduce the utilization of our equipment.
In the first quarter the company charged $5 9 million directly to cost of sales for excess fixed cost.
Overhead per pound incurred due to abnormally low production levels that could not be capitalized into inventory.
This direct charge of $5 9 million compares to zero in the first quarter of fiscal 'twenty and $4 million sequentially in the fourth quarter of fiscal 'twenty.
We are continually and diligently striving to reduce our cost to better align our cost structure to these lower volumes.
This effort is balanced with keeping employees safe related to COVID-19.
Last quarter, we reported COVID-19 related costs at roughly 250 to $300000 that were for staggered shifts quarantine pay cleaning tasks and cleaning supplies.
This quarter. This is up moderately due to some additional precautionary quarantine cases that we had this quarter in an effort to keep everyone safe.
SG&A, including research and technical expense was $10 5 million in the first quarter as compared to last year's first quarter of $12 4 million or a reduction of 15%.
A reminder, that sequentially last quarter SG&A in Q4 of 'twenty was reduced by $1 2 million due to the reversal of incentive compensation accruals.
Excluding this reversal SG&A was $10 3 million in Q4 similar to this year's Q1.
Two additional points to finish off the P&L first the non operating retirement benefit expense on the P&L was $1 $3 million.
<unk> in the first quarter as compared to the same period last year.
As I reported last quarter, our actuarial valuation was favorable due to lower retiree health care spending as we have been actively managing our retiree health care costs and higher than expected return on plant assets from the pension plan.
And secondly, our effective tax rate was 21, 2% in the first quarter of fiscal 'twenty, one as compared to 26% in the same period last year.
This lower effective tax range is unfavorable due to a pre tax loss.
All of this resulted in a net loss from the quarter of $8 million.
Which as Mike put it is difficult for us to see and reflects the full weight of the pandemic.
As far as our outlook for next quarter, we continued to experience market and certainly due to the COVID-19 global pandemic.
While visibility is still unclear conversations with customers as well as recent order entry trends lead us to believe that our first quarter volumes and revenue are at or near the bottom on this unprecedented downturn.
Earnings for the second quarter cannot be accurately estimated during this time of market and economic on predictability.
Low volumes and unfavorable fixed cost absorption.
We expect to continue our solid liquidity throughout fiscal 'twenty, one and to be favorably positioned for the recovery.
Moving to backlog backlog was $145 1 million at December 31, 20, a decrease of $8 1 million or five 3% from the $1 $53 3 million at September 32020.
Backlog dollars I'm, sorry backlog pounds increased sequentially during the first quarter by two 2% as compared to September 30th offset by a decrease in average selling price reflected reflecting a change in the product mix.
Liquidity.
As we increased we increased cash $14 1 million this quarter driving total balance sheet cash to $61 3 million at December 31, 2020, compared to $47 1 million at September 32000.
Our increase in cash was largely attributed.
Attributable to reducing our inventory by $9 8 million to $236 3 million at December 31.
Additionally, there were zero borrowings against our line of credit.
As we mentioned in our last earnings call, we refinanced our credit facility to a three year agreement and now have $100 million of borrowing capacity if needed.
Capital spending during the first three months of fiscal 'twenty, one was $1 1 million and total planned capital expenditures for fiscal 'twenty. One are expected to be approximately $10 million to allow for maintaining reliability within our operations.
In conclusion these are challenging times, but they are temporary and we believe that we are at or near the bottom of this unprecedented time period.
Since pivoting to cash we have generated $38 9 million at $24 8 million in the second half of fiscal 'twenty and an additional $14 $1 million this quarter.
We believe our liquidity is strong with the ability to weather. This period, and we are well positioned for the expected future improvement in demand in our markets.
Mike with that I will now turn the discussion back over to you. Thank you Dan.
I want to thank all of you for your continued interest in Haynes and your patience as we weather these unprecedented times.
And then also want to thank our employees together, we continue to work on protecting the health of our workforce on.
On enhancing what differentiates Haynes from our competition and on implementing the actions required related to our key metrics for success with that Matthew Let's open the call up for some questions.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask that while posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone. Please hold while we poll for questions.
Your first question is coming from Stephen O'hara Your line is live.
Hi, good morning, Thanks for taking the question I hope you're well.
Yeah, you too.
I noticed in a challenging period for you guys and it seems like you guys have done a really great job kind of maintaining the balance sheet generating cash.
And you talked about kind of the previous gross margin work that you've done can you talk about maybe.
Is there a way to frame kind of without that work done in the past and where we'd be today.
I mean, it would seem like that work can be a lot more difficult maybe a lot more painful.
In the face of a downturn on obviously necessary, but it means they are weighted to kind of think about without that where we'd be today.
Let me just put it in perspective for you we were.
Again, we could all through 2017 and through 2018, we couldn't make money unless we hit 5 million pounds shipped a quarter and when you look at our history 5 million pounds is not that common which is why we are losing money.
Through 17, and 18, we obviously focused on price and we focused on.
Our relentless cost reduction and I think the most telling signal for US is once the 737 issue hit before the pandemic hit our volume dropped from four 5 million to about $4 2 million pounds of quarter and even with that we were wrapping up pre pandemic times at about 18.
Percent gross margins so cigna.
A significant difference from where we were when we started this thing and obviously when we look back at where we could be if we had not made those improvements there would be a concern.
Okay No that's helpful.
And then just.
I don't think this is the case, but I mean, you guys have been received.
You know again I think the cash flow is pretty significant.
Obviously.
I think that you guys have done a great job there.
I mean theres no.
There's no government stimulus in there or anything like that or cares act benefits or anything of that kind of is that the fact.
That's correct. That's correct, we did not take any kind of.
PPP loan or anything like that I mean, there is a little bit of deferral of payroll taxes.
Those but thats not significant on the team's done Steve I think a real good job of not only reducing inventory, but but very closely monitoring our payables and receivables and obviously that's led to real nice cash generation. Since this thing began.
We literally.
GAAP cash flow every day.
Okay. No. That's helpful. And then maybe last one on I'll jump back in queue, but.
Just I mean, if you listen to the airlines if it sounds like they expect capacity to be kind of well above where.
Where demand is you know their liquidity is.
I think United was about three times, what it was in March as of <unk>.
And I'm, just kind of curious I mean.
Does that help at all I mean are you starting to see maybe some more positive positivity. There just based on the capacity coming back and then maybe that's kind of the precursor to getting.
Some of these Max is back in fleets and getting that production started again.
Or is that kind of just maybe wishful thinking at this point.
Based on what you're hearing from customers.
I think it's going to take a little while for inventory in the supply chain to come down I mean, when you I love the positive comments, we've all read about pent up demand and all the rest of that but I also check as we all do almost every door every day the number of Flyers going through TSA checkpoints and that is continuing.
To be very low and the facts are the airlines were little below 50% fewer flights in 'twenty versus <unk> 19 passenger traffic is down 67% in 2020.
The number of flights operated in 2020 was the lowest level. Since 1999. So you put those things into account and then you look at what was supposed to happen with the leap engine for the <unk> hundred 20 on and the Max and the amount of material on the supply chain bottom line as people need to start flying again.
My view is we're certainly in the early stages of the vaccine, but as the vaccine comes in as people start flying again, then obviously theres going to be great interest in starting to build aircraft and the only advantage of having big on this end of the supply chain. One of the advantages is when they believe that demand will come on we'll feel it very quickly.
The lead time, so it's going to take some time, we're expecting probably plus or minus six months to start seeing aerospace orders come in based on what we see on the inventory supply chain.
But it is going to take some time to get there.
One thing I might add to that as we talk about how we're positioning ourselves.
For the upturn and just our basic business model as Mike mentioned in his prepared remarks, being a mill and the service center, having inventory on the ground in a service center will allow customers to order smaller lots if they want to start slow on this demand recovery, but that'll help us immediately through the service center. So.
We're prepared for the upturn and can't wait for it to be here, obviously, the vaccine and the Max Flying again, I think are very positive things, but it will still take some time.
Okay, alright, thanks, I'll jump back in queue. Thanks, Dave.
Thank you. Your next question is coming from Michael a shock your line is live.
Hey, Mike and Dan Good morning, Good morning, how are you good morning.
Doing well.
So you said you're at or near the bottom.
Think that said I just wanted to get your take on how you're thinking about potentially bringing back some of the head count and in terms of your youre hiring cadence over the next several quarters, if we get a recovery here.
And if you could provide any color as well on the cost cuts you've taken during the pandemic in terms of how much will be coming back versus being structural that'd be helpful.
Sure.
<unk> got to look at where we are capacity wise or volume wise, we're down.
On a wire facility a third were down in Kokomo are produced pounds down about 50% and in our tube facility, they're down either more so.
When you look at that in the January to November time period, we took out 211 people, which is 17% of our overall workforce.
So.
Two points on that number one we will be slow to bring people back because you want to make sure. What we begin to see is real so we're going to make sure both on the production side.
And on the salary side that we take full advantage of the employees, we have and be very careful when we bring people back again the key here from me, especially in aerospace is the slope, we're not sure how fast this will happen.
Read everything that everyone else right. So we're going to take us a little time on the salary side will certainly continue to bring people in that are going to help us on <unk>.
Turning to promote our high value differentiated products, but it will be slow to bring many salaried people back.
Okay and I want.
I wanted to get your take on the recent push outs by Boeing and Airbus specifically on the slower than expected ramps on the Max and <unk> hundred 20, and you talked about the leap engine.
Also on the Triple seven ask I know you have proprietary alloys, there on the <unk>. So.
To what extent did you anticipate some sort of slowing here based on what you've heard from the supply chain and are you seeing any hesitancy within customers from because of these announcements we've done.
As we've talked about before the leap engine for single aisle is really the key metric for us and watching the leap and what happens with the leap and what happens with the builds there is significant and.
I think many in the industry are saying somewhere in the range of about 850 leap engines being built in the year, we're now and it's interesting when we've done the math multiple times.
If you assume.
There is no change whatsoever in current build schedule said another way 40, Airbus at 48, <unk> hundred Twenty's and 10 Boeing planes that 797 planes plus spares. If you think if you go with the what I'd now would say is an aggressive look which is Airbus getting a 47 within six months, which none of us think is going to happen.
And Boeing getting to 17 within six months, which anyone could take a bet on that that's 929, so plus per so the 850 is a most likely level force and that's what we're planning on and that's why we think there's still six to nine months on the supply chain.
As far as 777 on the Gen X that's disappointing.
We are whole fundamental business model is all about proprietary alloys and as we've talked about and I'm sure everyone's tired hearing we have two proprietary alloys and the Gen X gene <unk> engine and that's.
And that's significant for us and that being pushed out to 2023 as is.
Is a concern but we continue to go after the other business and continue to look for ways to develop new alloys for next generation engines elsewhere.
Yeah.
Got it that's really helpful. And then just lastly from me on Capex. It was pretty low in the quarter I think of your base maintenance around.
$8 million to $10 million annually is that a fair range and how do you see that trending thanks, yeah, it well as far as long term trends. We've spent the money we need to spend in particular in the aerospace business with a 120 million we invested between.
2012, and 2018, plus or minus so we believe and we've said next three to five years in that range will be well below depreciation and net $10 million plus or minus range and what we said publicly is about $10 million. This year. So we're going to stick to that for now.
Got off to a slow start, but there's plenty of people banging on my door and Dan store as far as the money that they need to spend so I think 10 is a good maintenance number for us I think below that is a concern.
But I don't think we'll get above that.
Got it. Thank you. Thank you.
Thank you. Your next question is coming from Crystal Lynn You're line is live.
No growth.
Chris.
Sorry about that.
Arnie.
Good morning.
So again I was wondering if you maybe I missed it provided any information regarding special projects, where we're at outlook I guess just to tie on to that should we assume that.
Those numbers are going to stay low for a couple of quarters until until Capex, let's just come back up and start.
Yes, I mentioned special projects this quarter, they were about $4 4 million.
A little down from Q4 by about $1 million five and if you look at last year, we had a really good quarter of last year in Q1 had about $8 5 million last year. So the Delta Q on Q1 is a little over $4 million in special projects, a Chris Let me, let me add some additional color.
To that you know in these times.
Looking for for some positives and when we dove in the special projects in the numbers that Dan is talking about what we really found is there is really two components in there. There is the lower end more commoditized alloys that are in there that we are.
Helping our customers get into applications and our upgrades for them, but they are relatively high volume and to be honest, they're relatively low margins. So we decided between Dan and Vicki Ishwar and myself that we would take a second slice of special projects. So by the way just to backup special projects for us as we talk about our non aerospace.
Typically they are CPI and other so what we did and this is a different slice for you as we looked at just the proprietary and specialty alloys not the commodities that we're in there that we did drive an applications and what's interesting in fiscal 'twenty versus 19, they were up 24% and an FIS.
'twenty one versus 'twenty. They are about flat. So what is not in there. There's a lot of the more of the products that we drove in applications, but the more commoditized products. So I feel good about our team continuing to drive the high value differentiated products. Even in these tough times, sorry for the long answer, but it's a different way to look at it and went on.
I mean, when we look at special projects without some of those commoditized.
Alloys.
The margin that we track on it definitely goes up so what we're looking at here are the higher profitable.
Special project.
Interesting Okay. Mike you were talking about market share wins on the IGT side and kind of your success. There we've seen some movement within your competitive space in terms of people targeting different products different mixes I'm just wondering how you feel about.
Protecting net market share going forward.
I feel really good about it Chris and you really have to take it by by market. Okay.
We've talked about.
Power generation, Okay, and we have we obviously cannot name our customer book with gain for us significant share in that market and I love It because Dan and I talked about it and then it actually happens. So that was that was a real good thing also we've gotten alloy fluctuate to one of our proprietary alloys with an IGT, which is being specced into may.
Engines more efficient both the new engines in certain categories and will be eventually with some spare parts. So feel really good about our share growing in IGT and aerospace we follow at every customer every every contract we have and obviously on the transactional side theres going to be pluses and minus there always is every.
Day, but contract side, we renegotiated and January 10% to 15% of our contracts, which is all of the high value differentiated product. We did not lose anything there. So feel really good about where we are on aerospace chemical processing.
It's really the world of two different groups of products there.
On the on the special project side again in this market to grow from 'twenty to 'twenty, one and stay stable 'twenty one versus 'twenty. So far we feel great about that on the on the commodity side. This see alloys side of this for us in CPI.
We see people go on after some larger or some intermediate sized projects that hadn't gone over before so it wouldn't be surprised on the CPI side. If temporarily we've lost a few orders, but that is not unusual as companies get aggressive and they I can tell you based on history, they will be back to us.
Okay.
Last question, just kind of tying into that the inventory comments you made regarding aerospace I was just wondering if you.
You could separate it between the two being the titanium tubing business and nickel alloys is there a difference between how you see the inventory playing out or are the same.
Yeah.
Good question.
We've seen as far as cancellations.
And I'll use that as an example, Bruce cancellations typically go with what's going on with inventory and the backlog we have seen that most nickel and cobalt cancellations are behind us, but we're still seeing on the airframe side cans.
Cancellations, which we expect to go on for probably another six months plus or minus so.
On my.
I also believe there was a <unk>.
Real demand crunch pre pandemic on titanium tubing. So I think there was a on the airframe side. There was a lot of inventory builds beyond even everywhere else. So I see titanium tubing, taking longer to come back than IC engine business coming back.
Okay, that's what I thought thanks, a lot I appreciate it.
Thank you.
Thank you. Your next question is coming from Stephen O'hara. Your line is live.
Yeah, Hi, thanks for taking the follow up.
Just on the moving back to.
What kind of trends in aerospace and things like that.
If we think about the trend towards ESG and Green technology things like that I mean, it seems like.
Most industries, including airlines have made.
I'm pretty.
You might say grandiose.
Projections about how.
Little carbon the limit within certain periods of time is that.
Does that trend the trend, obviously I think it's real but I mean does that trend benefit Haynes.
As the technology needed to make engines more efficient.
Whether it's either to save money or too.
Cut emission.
Emissions.
Does that benefit you guys long term.
Long term secular trend that benefits you guys.
The answer is yes.
And it's not only aerospace, but its power generation they.
The use of our 282 alloy being specced into her amount of power generation engines.
Is allowing for more efficiencies. So when we talk about ESG and environmental side of ESG, we're not only talking about what we're trying to do within our company, but we're talking about the impact it has in.
In aerospace engines being more fuel efficient being.
Being able to burn hotter because of being able to use some of these unique alloys. So it definitely helps and it's also no different than what we've got going into the GE <unk> engine and what's happening there. So yeah I think it helps and then when you take a longer term view of this thing and look at okay, what what's going to happen in 10 years, okay as hydrogen going to play.
A bigger role on this we've got our technical people all over trying to understand the role of hydrogen.
In power generation technology in engine technology going forward and how we feel the need there. So yeah, we feel really good about that.
If you think about the hydrocarbon industry now oil and gas we have some slight exposure to that but not a huge exposure for us oil and gas is not one of our major markets. So kind of the shift away from that is not going to be that big of a takeaway for us, but certainly see some gains on the other side.
Okay, Alright, thank you very much on the plant.
Thank you I appreciate the question.
Thank you there are no further questions in the queue at this time once again, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone at this time.
Okay.
I don't see any questions in the queue. So with that first of all Matthew. Thank you and thank you all for your time today and thank you for your interest and support of Haynes, Please be safe and we look forward to talking to you again next quarter. Thanks, everybody.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone line at this time and have a wonderful day. Thank you for your participation.
Okay.
Okay.
Yes.
Yeah.