Q4 2020 Arconic Corp (PITTSBURGH) Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Arcana Corporation fourth quarter 2020 earnings Conference call.
At this time all participant lines are in listen only mode. So if you require operator assistance. Please press Star then zero.
After the presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one.
Please be advised that today's conference maybe recorded.
I'd now like to hand, the conference over to your host today, Mr. Haymore Director of Investor Relations. Please go ahead.
Thank you Liz good.
Morning, and welcome to the iconic corporation fourth quarter and full year 'twenty and 'twenty results Conference call I'm joined today by Tim Myers, Chief Executive Officer, and Eric Atmos, and Executive Vice President and Chief Financial Officer. After comments by Tim and Eric We will have a question and answer session I would like to remind you that.
Today's discussion will contain forward looking statements related relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release, our most recent SEC filings. In addition, we've included some non <unk>.
GAAP financial measures in our discussion reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings press release and in the appendix in today's presentation.
With that I'd like to turn the call over to Tim.
Thank you Shane and good morning, everyone and welcome to our fourth quarter and full year 2020 and earnings call for those of you who would like to follow along with the presentation. The slides are posted under the investors tab on our website.
The fourth quarter capped off a challenging year that demonstrated the company's agility and solid performance and the face of pandemic driven lower demand and uncertainty.
And April last year, and we completed the launch of our tonic and the Standalone company and focused on becoming a stronger and more dynamic organization.
As we look forward to 2000, and 'twenty and beyond we see multiple paths to growth on both the top and bottom line through driving asset utilization Debottlenecking operations.
And maintaining permanent cost outs, and capturing productivity driven cost savings.
Let's begin with a review of the financial highlights for the quarter.
Revenue in the fourth quarter was $1 5 billion up 3% from prior quarter and down 14% or 12% organically year over year.
The decline in revenue was primarily a result of continued softness and aerospace and was partially offset by the strength in industrial and packaging sales.
The company and recorded a net loss of $64 million, primarily as a result of and after tax charge of $108 million related to a partial annuity relation of our U S pension plan, which we executed in the fourth quarter.
As can be the case with the county no. Good deed goes unpunished. This annuity <unk> derisked the balance sheet as a company by $240 million with no current cash cost to the company.
Adjusted EBITDA was in the center of guidance provided in November of $151 million and adjusted EBITDA margin was 10, 3%.
Free cash flow for the quarter also fell within guidance with a use of $49 million, primarily due to U S pension payments that were deferred during the year as permitted under the cares Act.
We ended the quarter with cash balance of $787 million net debt of $504 million and total liquidity of approximately $1 5 billion.
Now turning to slide five and full year 2020, I would like to highlight financial results and then walk through a few key takeaways for the year.
Revenue for the year was $5 7 billion down 22% from the prior year or 17% organically, reflecting the impact of the global pandemic and production declines due to delays associated with the Boeing 737 Max.
The company and reported a net loss of 109 million, which included after tax charges of $156 million related to partial annuity stations of our U S and U S U.
UK pension plans, which were executed throughout the year as part of our strategy to reduce legacy liabilities.
Adjusted EBITDA was $619 million and adjusted EBITDA margin for the year was 10, 9%.
Free cash flow generation from Q2, 2020 to Q4 2020 was $161 million.
It's worth noting that included and this number is the funding of approximately 350 million for pension and OPEC and <unk>.
Environmental liabilities over this period.
Our cash generation absent these funding.
Requirements for legacy legacy issues exceeded.
$1 billion over three quarters.
Looking back on 2020, and we accomplished much over our first nine months of the company not only managing the pandemic, but building a foundation for increasing profit and cash generation as we look to the future.
After launching the company and on April one we immediately took actions to conserve cash and managed working capital more efficiently and preserve operational flexibility as the pandemic continued continue to adversely impact the global economy.
And we've implemented $260 million of cash conservation actions or.
And our $60 million more than our original target of $200 million.
Approximately $40 million and the structural cost actions implemented as part of the program will benefit our 2021 run rates and are included in our 2021 guidance.
And the weeks that followed our launch we optimized our capital structure through new debt offerings, and our new credit facility, the new capital structure created greater financial flexibility and improved our liquidity.
We also took steps to make our financial results more transparent and in line with peers as we eliminated the use of LIFO inventory accounting and began adjusting metal lag out of our EBITDA definition.
Lastly.
And we identified several opportunities that are expected to drive volume growth and increased market penetration to continue to deliver value creation.
We're continuing to ramp up incremental capacity for automotive and industrial products at our Tennessee facility.
We expect to benefit from tailwind and the industrial market through 2021, due to favorable outcomes and the common alloy aluminum sheet trade case.
And we're also and the process of re entering packaging and several markets. Following the exploration of a noncompete agreement at the end of October.
We're bringing our Tennessee can sheet facility back online and are executing multiple qualification runs with packaging customers to support new volumes and 2022 and beyond.
Our timing is good is surging and aluminum demand is.
Packaging demand is driven multiple recently announced capacity additions by North America, and can makers, resulting and increased demand for our can sheet.
And.
Turning to slide six I'll provide a little more detail on how we performed across the markets we serve.
Ground transportation sales increased 5% from the prior quarter.
Due to ongoing growth and commercial transportation, which continues to benefit from increasing heavy duty truck builds.
Year over year sales declined 5% organically as solid retail demand in the automotive market was offset by the Ford F 150 model changeover that suppress volume.
And total ground transportation made up 38% of our total revenue, which is slightly higher than our historical levels.
Sales and the industrial market increased 14% from prior quarter, and 7% organically year over year, despite broader economic challenges.
Sales benefited from the continued ramp up at our Tennessee facility as well as the early impact U S trade actions.
As we stated last quarter tariffs on imports from the relevant 18 countries became subject to cash deposits and October.
As a result, we saw imports from the 18 countries steadily decline through the year.
Sales and the building and construction market were down 6% year over year, but were flat with prior quarter.
Sales and the packaging market increased 7% organically year over year and were flat with the prior quarter. As a reminder, packaging sales continue to represent only our operations in China and Russia and.
And the Noncompete agreement, which restricted sales growth expired late last year.
We're now exploring opportunities in the U S and elsewhere previously unavailable to US is demand for can sheet continues to increase globally.
Finally, our aerospace sales further decelerated in the quarter to a decline of over 60% year over year on an organic basis large.
Large commercial aircraft build rates remained soft as uncertainty and the airline industry continues to curb demand.
As a result elevated inventory and the supply chain and subsequent Destocking is driving the decline and our sales and we anticipate destocking. We keep our sales is depressed year on year through the first half of 2021.
Now I'll turn it over to Eric to discuss fourth quarter results in more detail.
Thanks, Tim on slide seven Youll see a summary of our fourth quarter performance Red.
Revenue in the quarter was $1 5 billion down 14% from the fourth quarter of 2019 were down 12% organically, primarily due to weakness and aerospace partially offset by year over year growth and industrial and packaging sales.
As a reminder, during the third quarter last year, we changed our inventory cost method to average cost for all U S. Inventories previously carried on LIFO and we also changed our definition of adjusted EBITDA to exclude the impact of metal price lag and included a reconciliation and in appendix of this presentation to provide more clarity on this change.
The reconciliation and the appendix also highlights that our pre separation carbon accounting included non service pension costs and adjusted EBITDA and after separation of benefit plans from the former parent these cluster and other income and expense as indicated and a reconciliation of net income to adjusted net EBITDA.
Turning to the fourth quarter results adjusted EBITDA was $151 million driven by a combination of pandemic related demand reduction partially offset by our cost actions are net savings programs are on track and our cash conservation efforts delivered approximately $40 million of the $55 million of net savings in the quarter.
And we implemented 260 and cash cash conservation actions above and the original target of $200 million.
Turning to slide eight and provide more detail on our segment performance.
Starting with our rolled products segment revenue was $1 1 billion, reflecting continued weakness and aerospace and a modest decline and ground transportation.
Non transportation due to model changeovers, and partially offset by industrial and packaging sales.
Segment revenue was down $174 million or 13% or 11% on an organic basis year over year, and essentially all volume and mix related and.
Adjusted EBITDA was 139 million and adjusted EBITDA margin was 12, 2% as our cost actions, partially offset adverse impacts from lower volume and weaker mix.
Revenues and our building and construction systems segment, and the fourth quarter were $236 million down $27 million or 10% or 13% organically year over year, primarily due to.
Disruptions continuing to delay construction projects adjusted EBITDA was $30 million flat year over year as volume declines were offset by cost actions and the quarter adjusted.
Adjusted EBITDA margins were 12, 7% up 130 basis points year over year as a result of structural changes we've made to improve the mix and the segment and other cost actions.
Revenues and our extrusion segment, and the fourth quarter were $85 million down $45 million or 35% year over year were down 28% on an organic basis. The decline was primarily driven by aerospace weakness.
Which is typically the largest market for this segment.
Adjusted EBITDA was a loss of $4 million versus a loss of $3 million last year, we continue to implement structural actions in this segment and improving the financial performance of the extrusion segment remains a priority.
Now turning to slide nine and I'll update you on the balance sheet.
As you'll see we have one 5 billion and liquidity with no debt maturities before 2025.
Our leverage remains very low and we have no drawings on our asset based lending facility.
And the fourth quarter, we implemented a new organization, a part of our U S pension obligation the amortization reduced our gross pension obligation by approximately $240 million and did not require any current contribution to the pension plan and resulted in and expected annual savings of approximately $5 million of administrative cost to the pension plant.
Also subsequent to year and we accelerated our 2021 U S pension contributions into January and funded 200 million to be opportunistic and capitalizing on investment arbitrage using our balance sheet cash and the appendix of the presentation, we provided a table with future funding over legacy pension and <unk> obligations.
Further it's worth noting that the company is planning on additional new innovations and we expect to continue to expect to complete another and the first half of 2021.
With that I will turn it back over to Tim to talk about our expectations from markets. We serve for the full year 2021.
Thanks, Eric.
Now, let's discuss our full year 2021 projected market demand and slide 10.
While uncertainty and the global economy remains our 2021 outlook is based on current internal and external projections of build rates and leading indicators and the markets we serve.
We expect ground transportation sales to increase 25% to 35% year over year.
And the range is a little wider and reflecting uncertainty on how quickly the automotive and commercial transportation and supply chain and recover from the shortage and semiconductor chips.
Automotive sales are expected to increase due to a combination of recovery from soft 2020 levels and strong consumer demand, particularly for light trucks and Suvs.
As well as the continued increase and heavy duty truck and trailer sales.
Industrial sales continue to be a bright spot and we expect revenue to increase 15% to 20% year over year.
As we've said before these sales are benefiting from the one two punch of increased capabilities and capacity and Tennessee and stronger domestic pricing and volume demand due to the ongoing U S trade actions.
Our building and construction sales are expected to be flat in 2021, However segment adjusted EBITDA could be down modestly for the year is mix and higher metal prices impact margins.
Global macro uncertainty has continued into 2021 and continues to pressure pressure nonresidential construction, which makes up the vast majority of our sales and this segment.
We expect packaging sales to be roughly flat year over year and 2021 as a reminder, our facility and Russia was operating at near full capacity and 2020 to satisfy strong global packaging demand.
Although our noncompete expired and the fourth quarter the qualification and negotiation process is expected to take several quarters before we recognize meaningful revenue and margin impact from domestic packaging production.
We expect to see domestic packaging production contribute to results and a significant way starting in 2022.
We expect our aerospace space sales declined 25% to 30% from 2020, which is approximately 50% below pre pandemic 2019 levels as.
As continued destocking impacts and the entire aerospace supply chain.
As we've said previously this impact will continue through the first half of 2021 and should return to year over year growth sometime in the second half of this year.
Turning to slide 11, and I would like to walk again through the increased capacity opportunity that we discussed last year.
We are increasing network capacity by approximately 600 million pounds, and North America that requires minimal incremental capital investment.
And that capacity will service, the automotive industrial and packaging markets all of which are benefiting from secular growth trends.
And the automotive sector and the light waiting trend is continuing and the expansion of electric vehicle platforms will continue to drive additional adoption of aluminum products today.
Today light trucks, and Suvs are driving aluminum auto body sheet growth well in excess of production rates.
Third party estimates predict roughly 900 million pounds of additional demand growth over the next five years and North America.
Net demand for industrial aluminum sheet products and the U S is benefiting from the trade action, we've discussed over the last few quarters.
The current U S trade case received an affirmative preliminary determination from the bipartisan International Trade Commission, which is a critical step to leveling the playing field for U S manufacturers of common alloy sheet.
The International Trade Commission will render a final determination of anti dumping and countervailing duties next month.
If this trade case produces a similar result to the actions levied against China and 2018, we expect imports to decline by more than 1 billion pounds.
As we've discussed before aluminum manufacturing is versatile and common alloy manufacturing is typically one of several products produced and our rolling facility.
That said CRE, you estimates roughly 15% of global rolled products capacity installed here in the United States.
And the trade case against China combined with this new U S trade case on 18 countries.
Effectively covers roughly 80%.
Of the remaining global rolled products capacity.
Finally.
Consumer preferences towards infinitely recyclable aluminum packaging is a more environmentally friendly alternatives to plastic is driving a boom among can makers and the U S and abroad.
This is also a green opportunity for our economy, which will allow us to further increase our already high aluminum recycling rates.
Currently there are currently several greenfield can making projects underway and the U S that will only serve to increase demand for can sheet and the coming years.
Third party analysis shows that domestic can sheet capacity is already had a shortage of more than 1 billion pounds versus demand.
And while that same analysis shows that can sheet is expected to grow by more than 1 billion pounds over the next five years.
The three opportunities that dimension and these market amount to more than 3 billion pounds and incremental domestic aluminum sheet demand over the next few years.
We only need to capture 20% of this opportunity to sell and an incremental 600 million pounds to new customers and we're already capturing some of this benefit with the automotive and industrial customers, while we re qualify our capacity and the packaging work.
Moving to slide 12 for closing comments.
As we begin 2021, our first priority is to keep our employees safe and our operations stable and efficient through the ongoing pandemic.
We remain encouraged by positive trends and the majority of the markets. We serve we see opportunities to drive volume growth increased market penetration and continue improving our operating and financial results.
As previously mentioned over the next few years, we expect market tailwind to be favorable to our endeavor to deliver another $300 million of EBITDA above pre COVID-19 levels.
The opportunity is comprised of three levers and.
Kris shipments of 600 million pounds.
Maintaining the $100 million of permanent cost out measures implemented in 2020, and securing additional shop floor productivity driven cost savings.
Our automotive commercial transportation and industrial sales are all showing signs of returning to pre COVID-19 levels or better due to a combination of better economic activity, increasing share and improved pricing.
As the company as the economy stabilizes post pandemic. This organic growth will continue to add to our base and our position is strong and both aerospace and the building and construction segments as those markets begin to recover.
And on the Horizon, we're positioning ourselves for reentry into packaging and North America.
In 2021 and beyond we will continue to actively manage our legacy liabilities through a variety of strategies as Eric mentioned, we accelerated the 2021 U S pension contributions into January and we plan and other pension annuity <unk> and the first half of this year.
We believe the leveraging these liabilities significantly de risked the company and.
And we will improve our cash generation profile moving forward.
I'll close with our 2021 outlook.
We expect full year 2021 revenue to be and the range of six 6% to $6 9 billion.
Adjusted EBITDA for the year is expected to be in the range of $675 million to $725 million and increase of 9% to 17%.
Free cash flow for the full year is expected to be in the range of a use of $50 million.
And positive free cash flow generation of $50 million.
Our cash flow guidance includes funding of approximately $350 million to legacy pension OPEC and environmental liabilities as we continued to derisk the company's balance sheet.
And also our free cash flow guidance excludes any cash costs associated with future pension annuity nations, including the one we plan to execute and the first half of 2021.
The free cash flow forecast also reflects working capital investments necessary to support the growth opportunities we have in front of us.
We're looking forward and leveraging those opportunities to build on our momentum and.
And further strengthen our company as the recovery recovery continues into 2021.
I appreciate you joining us today and at this time I would like to open the call up for questions. So I'll turn it over to Liz to help facilitate those.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone to withdraw your question press the pound key.
Our first question comes from the line of Chris Terry with Deutsche Bank.
Good morning, Tim and.
Good morning, good morning, Thanks for taking my questions.
And at a couple thanks, Thanks, Tim and Eric.
Just just in terms of the gone and so you've obviously given the full year number and a lot of moving parts and that.
And I just wanted if you could comment a little bit on maybe sort of first half versus second half split or some of the quarterly progressions and just trying to think about the timing of the arrows in the second half the nature and impact from orders and the first quarter and.
And then also and that full year number what do you have included pool tenancies and something not so the last part of the year or is that excluded from 'twenty one.
Okay. So.
Thank you for the questions that I would say.
First of all I would expect the first half of 2021% to outperform the second half of 2020.
So you will see momentum as we go through the year.
I think.
Additionally, I would anticipate that the second half from 2021 will be stronger than the first half and.
And Furthermore, I would expect the first half of 2022 to be stronger than second half of 2021, because we're seeing a.
<unk> ramped in several markets.
Certainly I would I would anticipate aerospace.
Being at the trough.
Fourth quarter first quarter of this year looking very similar.
Hopefully, we will start to see that lift off still down year on year and.
The second quarter, but sometime in the second half I would expect aerospace to start showing some year on year growth.
Additionally, we did pick up.
Relatively significant amount of share and the automotive space.
And that's being impacted right now by the semiconductor issue.
Most of what we've heard and read.
Talking to other companies is that thats going to.
Sort itself out over several quarters and obviously there is pent up demand out there so.
As that recovers I think thats, probably one of the biggest uncertainties, we have and our outlook is.
How much how quickly does that recover and does it have any impact on the calendar year.
But I would expect that that will get better moving forward and.
And then we continue to ramp up the industrial <unk>.
Volume in Tennessee.
So as we continue to qualify more customers, we still have the.
Tolling arrangement.
And with patch and associated with our.
Divestiture of the facility that we had in Texarkana.
And our run through and the first half and then we'll start to see more third party products going into the industrial segment and Tennessee, and then I think your final final question was on packaging.
I don't think that theres going to be a significant amount of revenue or margin in 2021 associated with packaging.
And we're currently going through multiple re qualifications with packaging customers.
We've got more than a dozen trials lined up and the second quarter.
That is typically a three phase kind of AR.
Qualification Chris so.
Typically we will deliver a couple of coils.
The second phase and they want to see a couple of hundred thousand pounds and.
The third trial, they wanted to see about a $5 million. So is that going to be meaningful volume you know as we kind of queue up and get ready for the contracting season for 2022, and then we would expect to see that increment incremental margin in Tennessee next year.
Okay. Okay. Thanks, and then just on the free cash flow and guard, you're able to say, what you've allowed and Oh.
As a range for working capital and and maybe just win through the year, that's likely to impact cash flow the most.
So Chris.
As you are ramping revenue, which is we'll say the first quarter first half will be the largest part of working capital hit.
As you can see the revenue growth year on year is clearly going to put pressure and we rightsize the working capital in 2020, So I think from the working capital pressure will be a use that is.
And the guidance and the pressure is going to be and the first two quarters as you really ramp up that you see the ramp up that Tim just described yet and then than it is important and it will have a backend for packaging depending on the timing of packaging ramp.
Chris This is Eric pointed out we are we right sized working capital it was a generator or source of cash this year.
We took $300 million of working capital out of the out of the business over three quarters.
And I think we've got our inventory stores and in the right place, but we are going to see a ramp up.
And that's going to consume cash.
Okay, and then last one from me just on the on the pension so far and it's grown historically you've already paid.
$200 million, which is what you have guided for the <unk>.
Contribution for 2021, so for the rest of the rest of the year. It really comes down to whether you do the and utilization or another U and <unk>.
Utilization and the first half that you might be mentioned is that is that correct.
Yes, but for non U S and open.
And we put a schedule on page 23 of the earnings presentation, which gives you that full picture of the global view, but essentially you are correct. We will see the details on OPEC spread throughout the year of $37 million and other non U S pension about 17 million and a spread through the year.
Okay.
That's it from me Thanks Vince.
Thank you.
Our next question comes from Curt Woodworth with credit Suisse.
Yes, Kurt.
Hey, how are you good.
Yeah look I think your performance and the fourth quarter was.
Pretty pretty remarkable given.
And then your aerospace business is down 60% year on year and you have the Ford F 150, changeover so to keep.
EBITDA relatively flat year on year, I think is a pretty good accomplishment and obviously a lot of it.
Opex reduction contributed to that so.
My first question is in terms of the $260 million and cash conversation conservation and some of the ongoing cost reduction targets can you comment on what the kind of incremental costs down to the business on a net basis looks like this year because I assume.
Some of the variable components will come back as the business experiences recovery.
Yes, So let me hit and I think.
In 2020, we captured $210 million from the from the program.
$50 million and that was capital expenditure.
And which.
And that won't recur, we will go back to.
Between 2% and 3% of revenue in 2021.
And in fact, probably be closer to the high side closer to 3% and 2% on Capex. So that one it was a one timer is behind us.
And then that and.
And left $160 million and cost savings.
About $60 million of that was structural.
So the balance of that was temporary as we wind into 2021.
We'll capture the additional 40 million.
Most of that.
If you think about it and we started the program in May of last year.
So we'll get.
By the time, we get to the middle of the second quarter, we should see that $40 million.
Come through.
And then there'll be about another $10 million because our aerospace facilities in particular, we've still got <unk>.
Six facilities that are impacted by aerospace and they are in various degrees of.
And still having some temporary cost savings until we see demand come back.
Okay, that's great.
And then for Aero in terms of the guide.
Is it fair to say that the first half of the year looking down more.
And more like 50% to 60%.
And then back half of the year, you're thinking it is going to comp up moderately to hit the full year, the down 25% to 30%.
So.
If you're comparing year on year.
This will end up being the trough the first quarter and the reason for that is.
The first quarter of last year was still very strong for us for aerospace it was.
We had a backlog.
And coming into the year so even.
At that time, we were just looking at the.
737 Max.
Max impact and.
Starting to see the impact of the pandemic at the end of the quarter.
So our sales will be down year on year more in the first quarter than they were and the fourth quarter and I would think about it.
And maybe being relatively flat sequentially and then we should start to see some improvement sequentially in Q2.
Okay.
And then last one from me is the.
And the latent capacity of the 600 million pounds and it seems like at least from the industrial side Youre going to see some good leverage here and then packaging them more in 'twenty, two and and potentially auto late 'twenty two or 'twenty three could you just maybe dissect how you see the cadence of that and then.
In terms of your initial discussions around.
Packaging contracts for 22 can you give any color on kind of the margin profile you're seeing.
Sure. So let me let me start with.
The 600 million pounds.
We have automotive.
It's been impacted by the semi conductor issue and the reason I bring that up as I could probably take more industrial and but we have requirements contracts for automotive they come back and so we'll be taking some spot opportunity, but the automotive and industrial.
Volumes that.
Sit inside of that 600 million pounds were going to be at the run rate to capture our target of that before we exit this year.
And I think as soon as the semiconductor issue sorts itself out we should see that kind of full benefit of that.
Sometime in the second half of the year regarding packaging.
Yes, we are seeing.
A lot of interest as I said, we've got more than a dozen trials lined up.
The weighted that works as they qualify can line by can line.
And as you've probably read.
The packaging market is just.
White Hot.
The can makers and for them to make the commitment to interrupt those lines three times. Each shows you the level of interest that they have and warming us back into the market.
We are seeing.
Pricing consistent with.
What we thought it would be.
So the pricing environment and packaging looks to be what we hoped it was going to be.
We're looking forward to being back in the segment.
Okay, great. Thanks very much.
Our next question comes from Josh Sullivan with the benchmark company.
Hey, good morning.
Good morning, Josh Josh how are you.
Paul.
On the aerospace outlook.
Is there any defence contribution and that expectation is that a strong leg and the outlook you mentioned your expectation for kind of a second half recovery on the commercial side doesn't move that much just just curious if the aero OEM announcements.
A month ago changed that outlook at all or if we were already just at a point and Destocking margin just doesn't change to your outlook.
So from.
From a defense perspective, we have we have some presence and the joint strike fighter and a lot of the land based vehicles.
Good content and.
And create differentiation.
And as you know those land based vehicles, you've got you've got to build an awful lot of them before you get the same content that we get out of a single single aisle aircrafts. So.
It doesn't really offset.
And what's happening with the single aisle aircraft segment.
We've also been picked picking up.
Content and <unk>.
Business Jets.
Nice business, but again most of those aircrafts are much smaller and they don't build as many of them. So we're still very much wed to both Boeing and Airbus and supply chain.
And as they start to deliver aircraft.
And starts to produce.
We're looking forward to them starting to pull again, but I think it's going to be.
A few years before we see pre pandemic levels and our aerospace segment again.
And then just on the the environmental expense this year and the free cash flow outlook.
Should that step down two and 2022 at this point.
You should see a meaningful step down so.
And yes somewhere somewhere in that.
We are you can see the derisking on the balance sheet, the Caribbean Tonight, but essentially you should see the 60 or $70 million step down year over year, depending on the timing as you can imagine it's all related to that one project, which finishes up early to mid next year. So it will essentially be a big step down.
From year over year, as we look to the 2020 and 2021 were 80% of that funding.
Got it okay.
Thank you for the time.
Thank you.
I'm showing no further questions in queue at this time I would like to turn the call back to Tim Myers for closing remarks.
Okay. Thank you Liz and thanks again to all for joining us on the call today.
We will look forward to giving you and up another update next quarter.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
And then.
And.
Thanks, Paul.
And then.
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