Q1 2021 Broadwind Inc Earnings Call
[music].
Greetings and welcome to the Broadway on the first quarter 2021 results conference call. At this time all participants are in a listen only mode. A question and answer session will follow it up on long presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded on well now turn the conference over to your host Jason Bond debt.
You may begin.
Good morning, and welcome to the broadband in first quarter 2021 results conference call.
Leading the call today is our CEO, Eric Blatchford, and I'm, Jason bonds at the company's CFO.
We issued a press release before the market opened today detailing our first quarter 2021 results.
I would like to remind you that management's commentary and responses to questions. On today's conference call May include forward looking statements, which by their nature are uncertain and outside of the company's control.
Although these forward looking statements are based on management's current expectations and beliefs.
Actual results may differ materially.
For a discussion on some of the factors that could cause actual results to differ please refer to the risk factors section of our latest annual and quarterly filings with the SEC. Additionally.
Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call today in our press release issued this morning.
At the conclusion of our prepared remarks, we will open the line for questions with that I'll turn the call over to Eric.
Thank you Jason.
And welcome to those joining us today.
After reporting strong for your results for 'twenty 'twenty.
Which included significant growth in total revenue margin capture free cash flow and adjusted EBITDA.
Our first quarter results were impacted by a number of near term headwinds.
Including pandemic related supply chain challenges are.
For a week long weather related outage at our Texas facility in February.
And the shift in the timing of a tower customer order from the first to the second quarter.
Despite these challenges our business began to stabilize in April and supply chain challenges have begun to subside.
Resulting in improved utilization rates at our production facilities.
Additionally, the presence of unfairly priced imports continues to negatively impact our business.
Nevertheless, we are forecasting a sequential growth on both revenue and adjusted EBITDA.
On the second quarter of 2021.
When compared to the first quarter.
Demand fundamentals in our core wind energy markets continue to strengthen.
During the past decade cost competitiveness of wind improved materially versus other forms of energy with the unsubsidized bubble is cost of wind energy having declined 70% since 2009.
In addition to this major cost reduction.
Policymakers have set forth incentives to drive increased third party investments.
And wind technologies setting the stage for greater investments in renewable energy.
In December 2020 Congress approved an additional year of the PTC at the 60 per cent subsidy level the GAAP.
With a new 30 per cent ITC for offshore wind, creating the potential for increased power demand over the medium term.
Longer term, we view the recent decision by the by the administration to reenter the Paris climate accord.
The increasing potential for a new infrastructure spending bill together with the reintroduction of the Green Act as favorable catalysts for the sector.
Given the success of the anti dumping and countervailing duty investigation from the summer of 2020.
And the continuing efforts to ensure an even playing field in the U S. We believe domestic wind tower manufacturers are uniquely positioned to benefit from these favorable market dynamics.
As we have done throughout the pandemic, we continue to produce and ship products that meet and often exceed our customers exacting fabrication requirements.
Order rates in our non wind markets improved dramatically in Q1.
As our customers return to a more normalized cadence of activity following a prolonged period of disruption.
Our tower orders doubled in the first quarter 2021 versus the prior year period for several customers secure at 2021 production capacity.
The strengthening of quoting activity, we began to see towards the end of 'twenty 'twenty continues.
And we anticipate a gradual recovery in the first half 2021 order flow.
The full impact of the pandemic on our business and end markets remains difficult to quantify but we.
We anticipate that current cash and availability on our credit facility will continue to provide adequate liquidity to support our business. During this transition period.
Within our heavy fabrication segment, we experienced a 46% year over year decline in tower sections sold in the first quarter due to the reasons just mentioned.
As we've discussed on previous calls orders on the towers business tend to vary from quarter to quarter.
However, first quarter orders were well above the prior year first quarter, even as for backlog decrease.
At this time on optimal tower capacity is about 60 per cent book for 2021.
We are in continuing discussions with our OEM customers to satisfy their tower customer demand for.
The remainder of the year.
Within gearing.
Pandemic related delays in customer order activity in the second half of last year resulted in lower segment revenue during the first quarter.
However, we are beginning to see early indications of improved demand activity with backlog nearing pre pandemic levels.
Revenue for our industrial solutions segment increased on a year over year basis as demand improved within the natural gas turbine market.
As I referenced earlier, our first quarter results were impacted by a series of nonrecurring events that we believe are largely behind us.
I'm proud of the way our team responded to these issues because they are focused on keeping our plants running and our people safe.
We successfully met our customer commitments.
With that I'll turn the call back over to Jason for a discussion of our first quarter financial performance.
Thank you, Eric turning to slide six and seven for a high level overview of our first quarter performance.
First quarter consolidated sales were $32 $7 million compared to $48 $6 million from the prior year quarter.
In Q1, we worked through a number of challenges primarily in our heavy fabrication segment, which ultimately led to a 33 per cent year over year reduction in revenue.
The largest impact for the declining revenue was related to demand for towers on by.
With the wind Repowering project in the prior year period.
Additionally, one of our customers for later project, resulting in a $4 $7 million revenue deferral to Q2.
We continued to experience supply chain disruptions during the first quarter.
Tower internal packages.
Which are required for the final step in production were delayed resulting in the inability to recognize $2 $8 million of revenue at quarter end.
We lost more than one week of production out of our Abilene tower plant in February due to the impacts of winter storm Erie.
Veer weather conditions also drove approximately $200000 of additional natural gas expense at one of our other facilities as increased usage during the storm exceeded fixed contract levels for some spot market purchases during peak pricing.
We subsequently reopened the facility without significant delays or damaged.
However, we lost valuable production slots as a result.
These reductions were offset by the mix of tower designs produced and related steel content, which varies by customer design and application.
Do you want on adjusted EBITDA was $1.2 million a decline on a year over year basis, driven by the volume impacts described earlier.
Spite the operational challenges in our tower product line, we are encouraged by improving financial performance.
Other product lines, which are generally tied to an economic recovery.
During the first quarter. The company was eligible for the employee retention tax credit or E. R. C. That's outlined on the provisions of the cares Act and other subsequent revisions in.
In Q1, we earned $3 $4 million in refundable tax credits.
Which are component of EBITDA in the segment financials.
That's the credit will be utilized to offset increased payroll costs, resulting from pandemic related disruptions described earlier.
We expect to be eligible for the E. R. C. Again in Q2, given our interpretation of current guidance.
First quarter operating expense.
It was essentially flat year over year.
Interest for interest expense declined to $200000 from $700000 from the prior quarter due to lower debt levels and a reduction in our borrowing rate.
Turning to slide seven and eight for a discussion of our heavy fabrication segment.
First quarter sales were $22 $8 million.
There are $38 $4 million from the prior year quarter.
Driven by our previously mentioned comments on lower wind tower demand and continued supply chain disruption as well as other nonrecurring events.
First quarter orders were up 34% year over year to $28 million and as of this call. We have approximately 60% of our 2021 optimal tower production capacity sold.
As we continue to market to multiple chirping Oems.
We're also encouraged that on industrial fabrication orders rebounded sequentially in Q1 to approximately $7 million as mining and industrial customer demand recovers following a challenging 2020.
Notwithstanding the Q1 operational challenges, which delayed delivery and revenue recognition on approximately 75 sections to Q2 segment adjusted EBITDA was $1 $8 million.
As we discussed earlier, we continue to sell towers to multiple turbine Oems.
Which has been a key strategic objective over the past several years.
This customer diversification as well as expansion of our industrial fabrications product line.
And success in several trade cases has allowed us to improve our plant utilization overtime and as a result, EBITDA margins have expanded.
Yeah.
Moving to slide nine I'll cover our gearing segment.
We are encouraged by the economic recovery and our position within energy and industrial markets.
M. A C. Our pipeline of opportunities to improve in the second half of last year and in Q1 customers began to place orders to restock inventory levels and resume capital spending as the economy recovers.
Q1 orders approached $10 million the highest level, we've seen since the pandemic started.
And up approximately 75% sequentially.
Book to Bill was approximately two times, resulting in recovery of our backlog to over $19 million.
First quarter segment sales declined to $5 $2 million versus $6 $2 million from the prior year.
For a result of lower commercial activity last year.
We generated $300000 of segment EBITDA in Q1, and we expect a gradual recovery in top and bottom line performance throughout 2021.
As we begin to execute against our elevated backlog.
Turning to slide 10 for a discussion of our industrial solutions segment.
Industrial solutions reported $3 $5 million of new orders in Q1 down from $5 $9 million compared to the prior year period.
Primarily a result of the timing of orders from its primary customer.
Our pipeline of opportunities remains healthy.
Including quoting activities with new customers and end markets.
And as and as a result, we expect the order book to build throughout the year.
First quarter segment sales increased to $4 $6 million from $4 million from the prior year, given the strength from the gas turbine component demand.
And by the timing of customer projects.
Segment, adjusted EBITDA was $500000 due for the volume impacts.
<unk> execution.
The operating leverage associated with increased volume.
Effective cost management has resulted in T T M EBITDA of $1 $5 million of.
A significant increase over the comparable period.
Turning to slide 11 on.
Operating working capital increased $6 $6 million sequentially to $11 $7 million or 9% of sales due to increased inventory levels associated with the previously discussed volume impacts in Q1.
We view these inventory levels to be driven by extra ordinary events anticipated inventory levels to gradually decline over the next several quarters.
For cash and availability under our credit facility remains healthy and above historical levels with nearly $22 million of liquidity at quarter end.
Which includes approximately $3 million of cash on our balance sheet.
As mentioned earlier, we will likely qualify for additional ERC benefits in Q2, which are likely to not the company over six and a half a million dollars of cash in the first half of 2021.
In Q1 under our previously announced ATM equity offering program we issued.
One 1 million shares of our common stock netting approximately $6 $4 million.
After deducting commissions.
As highlighted on previous calls we are.
Received approximately $9 million for proceeds under the Paycheck protection program.
We submitted our forgiveness applications for a lender and the SBA in Q1.
And have subsequently received forgiveness on one loan value.
Approximately $300000.
And at this time, we have not received a determination on the balance of the loans.
As noted in our press release issued this morning, we expect Q2 revenue to be on the $45 million to $50 million range with EBITDA between four and a half to $5 million after including approximately $3 million of additional ERC benefits.
That concludes my remarks, I'll turn the call back over to Eric for an overview of end markets.
In addition to some concluding remarks.
Thanks, Jason.
Turning to slide 12 for further discussion of our outlook for the domestic wind market.
As predicted 'twenty 'twenty was a robust year for onshore capacity additions with more than 17 gigawatts installed.
Projections for 2021 remains strong.
With approximately 15 gigawatts of installations.
While it's challenging for analysts to predict future demand in a rapidly changing environment both in commercial on political terms.
There are certainly from tier ones for the long term outlook of wind energy.
We'd have a renewable friendly administration.
That has already taken steps to drive renewable investment.
Including the recent PTC extension and evaluation of the Green Act, which includes a longer term P. D C incentive through 2026.
An infrastructure Bill would likely include a build out of power transmission.
Necessary to connect new sources of supply to areas of demand.
Broadway and supports such legislation and believes it has a high probability of getting passed through Congress and signed into law.
This legislation represents both an engine for new job creation, and a foundation upon which to modernize our aging energy infrastructure with lower cost renewables.
And as turbine technology continues to evolve new more efficient turbines continue to drive down the cost of wind energy well.
While the Repowering of existing turbines provides an additional lift to demand.
Further as ESG mandates increased commercial and industrial buyers will continue to be a major driver of wind power demand.
In our view.
Offshore remains an attractive growth area for wind capacity additions in the U S primarily off the coast of the Eastern States.
With nearly 34 gigawatts of new installations.
Forecasted to be put in service during the next decade.
This source of clean power is key to meeting individual state mandates designed to move away from fossil fuels in the medium to long term.
As we look outside of wind, we continue to make exciting progress across a number of diverse end markets.
Mindful of our long term strategy to support the world's transition to a cleaner energy future.
Our customer diversification initiative remain central to our overall plan to optimize for factories.
And retain our critical work force is as winter orders vary from quarter to quarter.
Wind renewables and other forms of clean power remain core to our business.
Even as we've increased our non wind revenue by three times in last for years.
With non win revenue sitting at more than $60 million annually.
Today, our fastest growing non win segments include power generation mining and the industrial segment.
Which includes our penetration into the material handling on marine markets.
Q1, 2020, one we did see some contingent continued pandemic related impact to.
Those more cyclical markets.
Well, we're seeing encouraging signs of increased demand activity anticipate and anticipate a gradual recovery in those markets throughout 2021.
Looking ahead, our focus remains on growing market share in the areas, where you see opportunities for profitable growth.
Improving our asset utilization and expanding our global supply chain to improve our cost position and reduce risk.
All while leveraging our highly skilled workforce.
In our heavy fabrication segment.
We're working to sell the remainder of our 2021 capacity and adding capabilities to improve our asset utilization and output.
We continue to evaluate the offshore turbine market in the U S for possible points of entry as.
As we continue to expand our mix of complementary industrial fabrication customers.
We were honored recently by a visit from the Governor of Wisconsin to our Manitowoc facility to acknowledge the completion of a massive crane fabricated by broadband.
That will ultimately sort for the U S Navy.
I'm also encouraged by strong early interest we have on our new proprietary pressure reduction systems designed to support the growing virtual pipeline system, which uses cleaner burning natural gas to replace the less carbon friendly fuels, such as coal and fuel oil.
And our gearing segment, we plan to shift our sales mix towards markets, which tend to be less cyclical and offer a more balanced revenue stream.
And we will continue to grow our custom gearbox business through more emphasis into the repair and upgrade categories.
In our industrial solutions segment we.
We will continue to expand our market share both domestically and internationally by increasing content with existing customers and focusing on new opportunities in the E. P C space.
I'm pleased to report that in Q1, we won an important new gas turbine customer in Algeria.
There, thereby furthering our global reach.
In summary, our business remains an attractive participant in the development of technologies integral.
For the ongoing clean energy transition.
We see a long term path forward within the domestic bond market.
Given that more than 80 gigawatts of installations are planned over the next decade, including exciting new offshore opportunities.
This growth is driven by three primary factors first the cost of wind energy has dropped dramatically in the last decade, making it one of the most competitive energy technologies available on the market second.
We are policymakers, providing incentives to encourage investments in wind, including the PTC and ITC announcements and the reintroduction of the Green Act supported by a probe renewables administration.
Which is re entered the Paris climate accord.
And finally growing ESG initiatives both mandated involuntary.
Certainly continue to drive demand for wind.
Furthermore, the improving U S economy, and a substantial infrastructure investments being discussed at the federal level All point to increased third party investment in the sectors we serve.
Resulting in a sustained increase in demand for our products.
Given the continued strength of our balance sheet, we are well capitalized to pursue both organic and inorganic opportunities that further support our growth strategy with that said I'll turn the call over to the moderator for the Q&A session.
At this time, we will be conducting a question and answer session and he would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is from a question. Kim you May Press Star two if he would like turn over for your questions and thank him for free.
Using speaker equipment, it may be necessary for pick up your handset before pressing on exactly one moment. Please open call for questions.
Our first question is from Eric Stine of Craig Hallum.
Please state your question.
Hi, Jason.
Hi, Eric Good morning, Hey, Good morning. So first just wanted to start with wind I know you've got 60 per cent book can you just remind us what is the typical percentage that you would have booked at this point per year.
And then on what is a realistic capture.
What you could get in and would that.
Is that something that theres enough time that it could impact them.
On the back on the back end of 2020, one or anything that you fill in terms of capacity.
It's really going to be more towards early 'twenty two.
Sure well, it's 60%, we we we certainly have been higher than that in previous years, we'd like to be higher at this point in time, but we are working with with our free or three for customers to fill that capacity in Q4, and there is still time to fill that capacity.
I think we've talked about it on on previous calls the lead time for steel.
And to start production as in the typically in the four to five month range.
And then.
I guess on that topic steel given the what tripling the prices here and not that long on the period can you just remind us here.
The set up there you obviously use a lot of steel.
I believe that it may vary by OEM, but you've got some.
Some pretty good mechanisms in there to pass that on.
Sure Yeah as a as a reminder, we most of our virtually all of our contract share or are directed by we don't take we don't take steel risk and so we purchased steel by project.
So we don't we don't have that issue as far as the rest who wished for broad wind risk too broad win but we are cognizant of the fact that rising steel prices could impact our customers' bid.
But that's not a risk for broadband.
Okay. Thanks for NAV reminder, and then last one for me just interested on the release you put out yesterday the pressure reducing systems.
Can you just help us understand that a little more.
Who is your customer.
Or is it more of a trailer company is.
Is it.
As themselves M. G advantages of the world or is it P M.
Yeah, and then on what type of what kind of what kind of I know, it's early but what type of market opportunity you see there.
Sure. The customers are very we did a lot of homework on this on this product as we as we were contemplating the customers would be virtual pipeline providers utilities, there's potential that that perhaps a trailer company that would be but it will be supporting a virtual pipeline provider would be would be one of our direct customers.
We think the we think the market for that is is could approach $100 million. So it's it's it's not a huge market, but it would be pretty substantial for us to take a nice share of that market.
And we also it it fits our strategy because you know we were supporting the.
Again, the world's transition to cleaner energy future and we know that natural gas and so in addition to our wind and renewables focus is a transitional fuel towards that future. So we're happy to be part of that.
And do you get into the same yeah.
I mean, clearly, it's Anita you're right virtual pipelines from that's an area of quite a bit of growth.
Is this something where you saw from a competitive standpoint, there was a.
There was an area that you had a real opportunity to do that.
Customer margin.
This direction or how did this come about other than it fits well with our strategy. Yeah. A couple of years ago. We were asked by a couple of customers to do some compression technology skills. We we we build we build to integrate our processing skids.
And as we were doing the compression for these customers who realize that their their pressure reduction which is the other end wasn't real weakness and it was a it was a it was something that the customers for having to do themselves. It was kind of an awkward design and so we thought like we took a look at that figured out how to do a better a better job at that in terms of packaging weight efficient.
And that's where we came up with the idea.
Yeah.
Got it thank you for that thanks a lot.
Sure I appreciate the questions.
Our next question is from the near Joshi H C. Wainwright. Please state your question.
Oh, Thanks day Thanksgiving for taking my questions.
I just wanted your.
Good so as far as either a fortunate the for offshore wind goes.
Is there any visibility in the near term in the next two quarters and in terms of longer term a mid to longer term outlook. There are is there any competitive advantage our.
In terms of flow, though the partners that you're working with and winning these offshore wind projects.
Yeah.
Yeah.
The competitive advantages with specific customers is that was that your question.
Is it for the mid to longer for them, because I think some near term opportunities with loss right.
Sure well, what's that what's happened is the near term opportunities have pushed to the right a bit it's the the whole the whole market is moving to the right a bit and I think it is termed it has to do with maybe timing. Some COVID-19. Some some has to do with the leasing of certain of certain you know waters.
So we still feel very optimistic about about offshore it is more than asked as I've as I've mentioned before it's more of an aspirational, we believe its real and its a real opportunity for us and we continue to investigate how we might take advantage of that.
Given specific points of entry whether it'd be.
For factory for wind turbine towers themselves or some other point of entry.
As far as competitive advantages since we work with.
Really all for a major a major Oems, we're certainly producing for three of the for now we.
We feel that we can service any one of those turbine Oems and they all have aspirations for that market.
Understood, but just in terms of technological capability. There's nothing that you liked that are others me, especially as good as for.
No not as as far as our capabilities as we we have the capability to produce some some sizes of offshore wind turbine towers in our Manitowoc facility with some moderate investment at this time, but as far as the technology, our knowhow and knowledge, we're very well equipped to take advantage of that market because we built.
Many different towers for so many different Oems in our history.
On the strict good to hear that moving on to the gearing segment. It seems that there could be a portion of these debt, especially our most recent quarter, you'll see on the nice order book there.
Going forward do you see the gearing segment are becoming a larger proportion.
Some of your total business in the next 234 for you.
Well I, certainly think thing that net over the all over the longer term and.
It's a little bit difficult to predict but over the midterm, we certainly see some tier ones for that for that particular segment in terms of opportunities with really really all of the markets that we serve that's that's the segment that tourism was disparate.
And have customers and we have we have a.
Lot of interest and in our markets such as is.
Material handling marine oil and gas infrastructure.
So a lot of interest in that in growth in that particular segment.
And certainly we're in the early innings of certainly we're in the early innings of a recovery.
And that business has been pressured for the last 12 months, but they are quoting activities have been pretty strong. The last several quarters you saw the orders really jumped this quarter. So it appears that.
Customers are beginning to make purchasing decisions again increase their inventories.
We are well positioned to grow that throughout the year and as you know that can that can lead to some lead to some gross margin growth within our expansion within within overall broad with as a result.
Yeah, Yeah, yeah, what's what what's the what's the notice is Amit is that those those purchases from those customers tend to be capital purchases.
Either new capital Inc.
Finishes within their businesses or repairs and with the with a growing economy.
Customers are starting to be more willing to do capital investment.
Yeah Yeah.
Just a couple of book keeping questions. This E C O that.
You have approximately 3 million in the next quarter or rather into Q do you expect anymore.
Later half of 'twenty or 'twenty one.
He gets the benefit.
Yes, I think Oh ERC are I think it's too early to make that call. At this point, we're just planning on six and a half million dollars approximately of cash proceeds to be received in the first half and then we'll.
We evaluate the business in the second half.
To see if we qualify.
Yeah, and then sort of related one last one oh for $9 2 million you got for goodness for 300000 is there any visibility on the other remainder on Mt.
You said something on the commentary, but can you just do a simple more insight into when you expect that to happen.
We've we've we've answered several follow up questions from.
From the SBA and our lender in late in Q1 early Q2. So we're we're optimistic that these will be for given here in the in Q2, but it may slip into Q3, it's just a little unprecedented and there are quite a few companies that are.
That are submitting their forgiveness applications at this point, so we'd expect that debt lumped to have to just roll through the snake here over the next several quarters.
Got it.
Thanks for taking my questions on good luck.
Thank you.
Our next question is from Justin Clare of Roth Capital Partners. Please state your question.
Hi, guys. Thanks for taking my questions Hi, Justin.
Hi, So I guess first off you know given the challenges that you've seen for securing tower internals, we've seen raw material price increases and then logistics has been kind of a widespread issue.
Across the economy, you know what is the risk that we could see you know so.
Some delays in your ability to deliver on your customer orders.
And then also is there any risk that customers could actually push out orders.
You know they may not want delivery right away.
Well I would say that the supply chain challenges that we've been we've been we've been facing have started to him I'm cautiously hopped cautiously optimistic theyre starting to subside.
I mentioned on one of our earlier calls that even even though I'm container shipping containers were where it were a challenge before that has has apparently been begun to lighten a bit so.
In Q2, we're starting to see.
Pretty good improvement in the deliveries I'm, not saying that debt the debt. That's a sure thing Justin going forward, but we certainly believe that the worst is past us.
I know, India is being hit India is being hit now so if that spreads for the rest of the world that could be a potential risk but.
But at this point things are are looking are looking to our peering to improve as far as our customers and pushing things out for the right now that's really hard that's really hard to predict M. I.
I'm aware of some of that that could be happening, but I haven't heard of anything really substantial that I can share at this time.
Okay, and then I guess just wanted to get your thoughts on on the potential to that customers might push things to the right I would think that they want to make sure that they get projects slated for this year completed so they can qualify for the PTC, but then there could be some projects maybe early 2022 pushed to the right.
There may be some possibility there, but how is your order book shaping up for 2022 compared to past years.
Well I will say at this time this time of the year. It's really it's quite early to talk about about 'twenty 'twenty, two but well I said, what I will say is customers have begun to inquire as they normally do I bought inquiry about available capacity at both of our plants.
So while it's early Justin we are getting interest so that's what I can share at this time.
Okay, Okay great.
And then you mentioned that imports are continuing to impact the business here I know you've on a preliminary basis, we've seen some favorable results for the most recent tower trade case.
Just wanted to get a little bit more color on on whats happening. There do you anticipate a change and a reduction in imports head here or do you think we need to see final results on the trade case before.
A meaningful shift in the in the landscape.
Well, what I can what I can report to you adjusted as of as of April there were preliminary findings.
For for countervailing duties against against.
Malaysia and against <unk> and against India. There was a recent anti dumping.
Preliminary finding against against Spain, So with those I would expect somewhat of a dampening somewhat of a dampening effect.
Yeah.
Which tends which tends to happen. Once these preliminary findings are released but again as I think we've shared before these things won't be fully resolved until Q3. They typically they have been resolved a little bit earlier than that.
But they they won't be fully resolve till Q3, so yes, I think that we should be able to see a dampening impact on <unk>.
On imports but.
But I can't be certain until until the final. The final determinations are done which would be in Q3.
Okay, Great. That's it for me I'll pass it on.
Yeah.
Thank you Jeff.
Our next question is from that.
In Malloy with Johnson Rice. Please state your question.
Hi, good morning.
On the fall back good morning, I, just wanted to follow back up on the offshore wind topic and.
We've seen some announcements regarding facilities.
Moving forward.
In New York, and New Jersey.
M here and it looks like 2020 for us is going to be the year, where we have.
Installation is really ramping up can you maybe.
Help us think about the timing the day.
You would need to build a new greenfield plant on the east coast when would you need to be awarded contract or contracts to support a greenfield facility announced it would it be in the next six to nine months in order to meet the timeline on that.
Developers.
Well, there's a tent there there was as you know there's there's a there's a 10 year at least a 10 year project should have increasing installation. So we certainly have plenty of time to take advantage of that but take advantage on the earlier year, you probably need to make a decision in the next year. We're thinking between 18 months 18 months to two years, Max we could get it from the first.
All the dirt to two M two of meaning to a meaningful output in terms of sections sections per week, Marty. So I think we've got time.
And we are looking at multiple multiple with multiple states in multiple sites to see how we might we might address that market.
Okay.
Okay, and then I just wanted to ask you on the on the gearing market and obviously commodity prices are up a lot and seeing a lot of.
Talk about expansion projects for Greenfield projects going forward.
Looking back the past commodity cycles can you help us maybe think about the timing of when you really start to see the impact for demand for your your components.
Yeah.
I can give some history here on on the oil and gas side that that has been as high as $20 million of of annual sales.
We are we're well below that at this point because orders have been lagging the last several quarters, but we did see a rebound in Q1 and our mining is another component that's going to be tied to what you're what you're discussing.
And that has been a more significant portion of our business as well not to the extent of it of what I've talked about in oil and gas, but there is some room to run them and again I think we're just we're starting to hear more from our customers on growth expectations.
Yeah. The one on the one the one market Marty that the adjacent mentioned was steel and.
And there's you know there's a lot of demand for steel and as the mills start to ramp up they start to look at their at their maintenance schedules.
Is there a plan to start start to run at a higher higher capacity utilization. So there's a lot of there's a lot of interest.
New and replacement gearing for the steel.
Market as well.
So we've historically, we've we've been above $40 million in sales.
Annual sales the last in the last several years M. We have that as a target a near term target last year. We're at 25, So we're expecting to build off of that throughout this year and build up to that range.
Okay.
And then my final question just on the the pressure.
On a reduction system.
I think it's it's really interesting and I was just wondering are there other new products that we should look out for in this area related to to natural gas compression transportation re gas or perhaps even would LNG be within your your capabilities of doing something there on the re gas side.
Well the answer is the LNG does the growth in LNG certainly helps our industrial solutions segment, because that that that particular market allows the export of LNG from for me from the United States.
Two other southern parts of the other parts of the world. So that helps the industrial solutions at the facility we have in in North Carolina, but what we are aware of and we are taking a look at its very early Marty but this pressure reducing system that we have that is designed for natural gas can also be used for hydrogen.
We definitely see debt is a it's the fuel of the future it's kind of out there, but we are we are mindful that our technology can be used for that and we're starting to talk with some customers about about how we can get some.
Some early tests out there.
For that possibility.
Okay, and this would be related to hydrogen that's compressed and then add an end customer for fueling station it would need to be.
Yes.
Yeah, where where that where that where the backend of this this.
This.
Product is for the backend yeah, the decompression at site.
Yeah.
Great. Okay, well. Thank you for your time this morning.
Thank you for your questions.
We have reached the end on the question and answer session I will now turn the call back over to Aaron Palash free for closing remarks.
Well thanks, everyone for your interest in our company. We're certainly excited about some great things that are going on within our company and we look forward to speaking with you again to discuss for a second quarter results.
Okay.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.