Q2 2021 Universal Stainless & Alloy Products Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the Universal stainless and second quarter 2021 conference call and webcast at this time all participant lines are in a listen only mode. After.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you would need to press Star then 1 on your telephone.
Please be advised that today's conference is being recorded if you acquire any further assistance. Please press Star then zero I would now like to hand, the conference over to your House a day June Phil and Jerry. Please go ahead.
Sarah Good morning, This is June and Phil and Jerry of Comm partners and I also would like to welcome you to the Universal stainless conference call and webcast. We are here to discuss the company's second quarter 'twenty 'twenty..1 results reported this morning with US from management are Denny Oates, Chairman, President and Chief Executive Office.
Sure, Chris Zimmer Executive Executive Vice President and Chief Commercial Officer, and John Army, and as Vice President and General Counsel and corporate Secretary before I turn the call over to management. Let me quickly review procedures. After management has made formal remarks, we will take your questions.
And as Sarah said, he and she will instruct you on procedures at that time also please note in this morning's call management will make forward looking statements under the private Securities Litigation Reform Act of 1995.
To remind you of the risks related to these statements which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission.
With the formalities complete I would now like to turn the call over to Danny Oates Denny we are ready to begin.
Thank you Jan.
Good morning, everyone. Thanks for joining us today.
Our second quarter results built on the trends, we highlighted and the first quarter and further confirms our 2021 outlook for consecutive quarterly improvement.
Anything demand momentum accelerated and faster clip than we projected specifically.
Specifically during the second quarter, we posted a new company record with gross bookings of $74 million cash.
Solutions were minimal booking.
Bookings increased 68% sequentially and triple the second quarter of 2020 level.
It is noteworthy that 42% of the second quarter bookings are scheduled for delivery and the first half of 2020.2.
We reported a rapidly growing backlog of $98.9 million and increase of 71% during the quarter more than doubling our backlogs since December 31.2020.
We reported all end markets increased bookings and backlog with the growing confidence and aerospace recovery standing out.
We turned a corner on profitability, achieving a positive gross margin of 5.6% and the second quarter and highest level since the pre pandemic first quarter of 2020.
We increased sequential electric arc and vacuum induction melting activity by 15% and 8% respectively on a year over year basis Electric art melting was up 33% and vacuum melting and premium alloy was up 71%.
We also noted that our $10 million payroll protection plan loan was officially forgive and early in July and will be recorded and our third quarter third fiscal quarter.
Let's take a deeper dive into the second quarter itself.
Net sales and the second quarter of 2021 were $38.5 million and increase of 4% from the first quarter.
This reflected strong sequential sales growth and each of our end markets, except for aerospace, which was off 4% from the first quarter.
Shipments were $14.3 million pounds up 3% sequentially and 28% from the cyclical low fourth quarter of 2020.
Indications continue to point to demand recovery and the commercial aerospace market and the second half of 2021 accelerating into 2022 and 2023 as evidenced in our order entry and backlog.
Our sales were more heavily weighted towards semi finished products, including lower premium melted products offset by strong player sales.
Premium alloy sales totaled $5.9 million or 15% of second quarter sales that's.
And that's down 740, <unk> down from $7.6 million or 20% of sales and the first quarter, reflecting inventory drawdown and aerospace.
Customers reported Poland requests from Oems are growing and our premium alloy orders and our incoming bookings and June 30 backlog are up at a more normal rate of 21% to 25% of sales.
Second quarter, <unk> sales totaled $9.3 million or 24% of sales the highest sales level since the record third quarter of 2018.
The sharp recovery in industrial and manufacturing combined with continuing strong automotive market are driving plate demand.
Gross profit of $2.2 million and the second quarter improved by $2.4 million from the first quarter on top of a $4.8 million improvement from the fourth quarter.
As a reminder, gross profit and in the second quarter includes fixed cost absorption charges of $2.1 million associated with historically low activity levels.
That said the $2.4 million sequential improvement in gross profit reflects 3 major factors.
Improved absorptions as activity levels recover about $1.1 million of the improvement.
Positive misalignment between surcharges and metallic cost on products shipped about a half a million dollars.
Lower operating cost due to improved productivity and increased yields for about $800000.
In addition, we remain extremely vigilant in controlling spending and maintained controllable fixed operating spending 35% below pre pandemic levels during the quarter.
Given our increase in bookings and backlog were clearly and ramp up mode operationally.
The ramp is evident on the primary and of our business that would be melting re melting grinding and hot working activity all of which have increased.
Our downstream operations will be increasing output as we move through the second half with a higher mix of finished bar products.
For context, our overall planned activity level and the second quarter as measured by pounds processed was 44% above the recent cyclical low and the third quarter of 2020.
But remains 42% below the last cyclical high and the fourth quarter of 2019.
Our goal is to maximize operating leverage on higher volumes through tight spending controls and a continued drive to improve productivity and first time through metrics.
The ramp will not be without its challenges like every manufacturer and distributor I know today were challenged by a limited labor pool and growing inflationary trends for key operating supplies and parts. However.
However, we remain confident we will meet these challenges.
Let's look at commodity prices for a minute.
For cobalt prices of all commodity is used in manufacturing of our products increased during the second quarter.
Nicole resumed its climb after retreating at the end of the first quarter rising, 9% sequentially and 41% from the second quarter a year ago.
Molly was up 47% from the first quarter and more than double its level last year.
Scrap also nearly doubled from a year ago and was up 11% from the first quarter.
This general rise in commodity prices over the past couple of quarters is increasing surcharges at a faster pace and our average milk cost yielding a short term benefit to gross profit, which we estimated at about a $5 million and the second quarter.
Surcharges will continue to increase and the third quarter, but we expect the benefit to be tempered somewhat as melt cost catch up the surcharges.
As to base pricing of our products, we have now announced 3 price increases. This year. The first was a base price increase of 3% to 10% on oil products effective March 1.
And it will be reflected in late third quarter shipments.
We followed with a base price increase on all bar products of 3% to 10% effective June 21.
The latest increase was on that was announced earlier this week a base price.
A 3% to 10% on all long products, which becomes effective immediately.
The latter 2 increases will benefit our sales as we move into 2022.
Continuing down the income statement, selling general and administrative expenses of $5.2 million and $13.4 percentage of sales were essentially unchanged from the first quarter and we expect little change for the remainder of the year.
With an effective tax rate of 28%, our net loss and the second quarter was reduced to only $5 million over 28 per diluted share.
The net loss was $1 million or <unk> 11 per diluted share excluding the fixed cost absorption charges.
EBITDA for the second quarter turned positive at $1.8 million compared with a loss of $1.7 million and the first quarter.
And ahead of 1.4 million and in the second quarter of last year.
Adjusted EBITDA and the 2021 second quarter increased to $4.1 million versus $2.1 million and the first quarter and $2.9 million and the second quarter of 2020.
Turning to our financial position manage working capital at June 30 totaled $116 million compared with $112.3 million at March 31, and.
And 151 million at the end of the second quarter of 2020.
Which represents a $35 million reduction year over year.
Inventory did increase 8% from the first quarter to $128 million as we gear up for a stronger second half and 2022.
Receivables increased 3% from the first quarter totaled $21.3 million with improving day sales outstanding.
Accounts payable increased 32% to $25.2 million, driven primarily by higher melt activity.
Capital spending and the second quarter totaled $1.8 million while depreciation.
<unk> and amortization totaled $4.8 million.
The majority of the spend is for 2 strategic projects, including the addition of a state of the art vacuum arc re mail furnished to support growth and premium products and an 18 ton crucible for our vacuum induction melting facility to further reduce operating costs as we scale up.
Commissioning and the var is underway and installation of the Crucible as scheduled for the fourth quarter. This year.
We still expect to spend about $11 million on capital this year.
Regarding cash management total debt was $53 million and the second quarter, including a $10 million term loan under the payroll protection program.
That's up $1.4 million for the first quarter with $19.5 million lower than the second quarter of 2020.
Im pleased to report that at the end of July excuse me at the beginning of July we received full forgiveness of the $10 million PPP note.
We will record this benefit and the third quarter labeled as extinguishment of debt and the amount of $10 million pre tax or an estimate estimate at $1.10 per share.
As a reminder, and the first quarter, we amended and restated our 5 year $120 million asset based credit agreement.
The new agreement includes a revolving credit facility of $105 million and increases the term loan facility to $15 million and.
Additionally, in conjunction with the amendment, we repaid our $15 million seller note obligations associated with the acquisition of our North Jackson facility and are now enjoying about $120000 and quarterly interest savings as a result.
All in all we are and a firm financial footing to pursue our operating and growth strategies with upwards of $42 million and gross availability on our revolver.
It's been a couple of minutes on the end markets, our aerospace sales were $21.3 million or 55% of sales and the second quarter of 2021.
And bear with $22.2 million or 60% of sales and the first quarter of 2021.
And $37.2 million or 71% of sales and the second quarter of 2020.
Year to date aerospace sales were $43.5 million or 58% of sales.
We expect recovery and commercial aerospace demand to gain traction as we move through move into fall. This year inventories have been leaned out of the supply chain airlines are recovering to pre COVID-19 levels and ordering new airplanes.
Airplane makers are increasing build rates and beginning to place orders with suppliers.
And expand on a few items.
The uptake of Covid vaccination says on lease pent up leisure travel and domestic airline passenger traffic is taking off you'll have to excuse the pun.
Over the fourth July 4th of July weekend for example, TSA screen more than 10 million people, including $2.2 million passengers on Friday July 2nd.
Which was high it was the highest level since the start of the pandemic Delta Airlines reported that their domestic leisure travel was fully recovered to 2019 levels and they also see encouraging signs of improvement and business and international travel.
The resurgence and air travel low interest rates and rising fuel costs are prompting airlines to place orders for new airplanes.
The largest and the second quarter was from United Airlines, 270 single aisle, Boeing and Airbus planes, Brian here and Alaska Airlines have also ordered additional 737 Max Jets.
And total Boeing reported 505 gross orders, while Airbus <unk> hundred 8 gross orders.
The recovery and new orders from airlines that prompted the manufacturers to consider increasing aircraft build rates and its updated production plans Airbus confirmed and average production rate of 45 aircraft per month and the fourth quarter of 2021 for the <unk> hundred 20, and told suppliers to prepare for a rate of 64 by the second quarter of 2023.
And as many as 70 by the first quarter of 2024.
Theyre also increase and the build rate for the 820 from 5 aircraft per month to 6 and early 'twenty 'twenty, 2 and a similar increase in the <unk> hundred 50 by the autumn period of 2022.
We will see what Boeing has to say about build rates next week when they report.
Unfortunately, all the news from Boeing has not been positive.
UAE Airlines fly Dubai cut its order for the 737, Max by 65 planes based upon its latest strategic planning and.
And Boeing has reported that the 787 production rate will temporarily be lowered from 5 to 4 going forward.
Lastly software issues on the Triple 7 X continue.
Meanwhile, the aftermarket continues to improve and defense markets remain strong our service center customers continue to expect a strong metal pull and the supply chain for building new planes in the fourth quarter of 2021.
Congress conversations about supply chain destocking have all but disappeared and aerospace as focus shifts to the timing and strength of the recovery.
The heavy equipment market remained our second largest market and the second quarter of 2021 with sales of $9.3 million or 24 percentage of sales representing an increase of 15% over the 2021 first quarter and 67% higher than the second quarter of 2020.
Yeah.
Metal fabrication markets drive <unk> sales and a pickup in industrial and manufacturing as well as automotive demand and new model development. Despite the ship shortage chip shortage drove our second quarter growth last.
And last week, the Federal reserve reported that the second quarter total industrial production rose and an annual rate of 5.5% with mining and materials, especially strong.
We expect <unk> sales to continue to be a major growth driver for us and the second half of the year as order entry from our plate products remained strong.
The oil and gas and market remained our third largest end market and the second quarter with sales of $3.9 million or 10% of sales and increase of 28% from the first quarter sales and up 9% from the 2022nd quarter.
The oil and gas market continued to rebound and the second quarter with U S crude prices rising more than 50% this year and the rotary rig count in North America more than doubling from last year.
Our Houston based analyst put it this way as oil prices continue to surge upwards rig counts are being dragged along with them.
And after a couple of years of producers cutting expenditures as they focused on ensuring up capital and investor returns. So on that started increasing production Halliburton characterized 2021 is a transition year on their call yesterday and called out continuing increases in production and spending and the second half as the start of a multiyear up cycle and the oil and gas.
<unk>.
Looking at our backlog and order book and considering the products. We've introduced for this market. We expect to see continued moderate growth through the balance of 2021.
The general industrial market was our fourth largest market and the second quarter with sales of $2.3 million or 6% of sales representing a sales increase of 9% from the first quarter of 2021 with 27% lower than the second quarter a year ago. Our general industrial category includes sales to the semiconductor as well as to the medical and general matter of fact general manufacturing.
Markets.
The sequential increase and our general industrial sales was mainly due to a resumption of purchasing by our semiconductor customers after an inventory adjustment and the first quarter.
The current demand for chips is urgent and buying has been heavy and its latest report the semiconductor industry Association noted that global demand for semiconductors remained high and May with sales increases both year to date and month to month and all major regional markets.
While this segment can be a bit lumpy for us we are back on track to see more normal sales levels for the balance of the year.
Power generation market sales and the second quarter increased 17% to $1.4 million or 4% of sales compared with $1.2 million or 3% of sales and the first quarter, but were 34% below the second quarter 2000 and twice.
Maintenance demand continued to account for most of our power Gen sales and the second quarter as it has in recent years.
While maintenance activities were interrupted by the pandemic and 2020 demand began to recover and the first quarter and recovery continued in the second quarter.
Springtime is normally a strong season for maintenance and the unusually high conditions. This year have also increased demand.
Universal along with our customers have been waiting for the eventual pickup and the new turbine market and the U S. For some time the business case for gas turbines was recently reiterated by a market analysis from Grand view research, which noted that the size of the global gas turbine market is about $20 billion and.
As expected to grow at a compound annual rate of 7% from 2021 through 2028.
Among the factors factors cited propelling the market, where government policies favorite and use of clean fuels for electricity generation.
Natural gas based power plants, and reducing greenhouse gas emissions the.
The decline in gas prices and the discovery of shale gas reserves.
That said, we expect maintenance demand and continued to be the main source of our power generation revenues with recovery to continue for the balance of the year.
So let me summarize and the second quarter. The second quarter was another quarter of improvement for Universal and 2021 is playing out generally as we expected.
Sales are increasing gradually becoming bookings accelerated to record levels during the quarter.
Market demand is going on the right direction, and we saw a sequential sales growth and each of our end markets except aerospace.
Recovery demand and aerospace is expected and the second half of the year, especially in the fourth quarter.
Our initial expectation for 2021 was for consecutive quarterly improvement with momentum building and the second half.
And with record bookings and the second quarter and our backlog increased to 71% to just shy of $100 million, we are well on track.
We turned the corner on profitability with a positive gross profit of $2.2 million and a gross margin of 5.6% and the second quarter.
We continue to achieve productivity improvements reduce operating cost per pound and control spending we expect further improvement as volumes increase and affirming price environment unfolds.
We are moving forward with our growth initiatives, including the addition, and the new state of the art var as well as the 18th on Crucible to support our growth and premium alloys and reduce cost.
We ended the quarter on a firm financial footing, enabling us to pursue our operating and strategic goals.
Like all manufacturers, we are facing 2 challenges at our markets and operations recovered from the pandemic.
Labor shortages throughout the supply chain, and increasing inflationary trends on parts and supplies and consumables.
As we move through this year amid signs of recovery I want to continue to recognize the central roles of our dedicated team our.
And our support of customers and shareholders and our board without them, our continued progress would not be possible.
That concludes my formal remarks Sarah.
Ready to take some questions.
Thank you.
A reminder to ask a question and you would need to press Star then 1 on your telephone to list.
And you all your question. Please press the pound key please standby, while we compile the Q&A roster.
Yes.
Our first question comes on the line of Michael a shock with Keybanc capital markets. Your line is now open.
Hey, good morning Denny.
Mike.
Good.
First wanted to touch on the inflationary pressures and labor constraints that you mentioned.
Maybe if you could provide an update there and the current hiring environment and where you see your current head count versus where you wanna be it on the recovery.
Well, it's been a struggle and it's a struggle I want to emphasize not just for universal and I think it's a struggle throughout the supply chain.
So we are spending as much time expediting as we are placing purchase orders these days.
And normally the lack of delivery of parts and supplies and the slow delivery of raw materials is normally attributed to a lack of labor.
Our suppliers.
Or a lack of containers for shortage of containers or high priced containers on and the international product that we're moving.
This is a problem that the entire industry entire supply chain is confronted with Sars Universal goes as we start to ramp up the facilities we are hiring.
And is very challenging right now.
And my personal opinion, the supplemental unemployment compensation that we have and.
And the country today, which will end on September 4th.
Is the main cause of the problems, we're seeing and along with other manufacturers. So we are doing things to try.
And address that we have accelerated some wage increases and our contracts.
Which were originally slated for the end of September we accelerated into June to try and attract more employees, but fundamentally I don't view this as a as a wage rate issue, it's simply the fact that.
And it's nice part time and the year at summer and people are electing to stay on unemployment through the summer and come back to work in September.
And as far as the numbers go.
If we could get additional 50 employees, where activity now and we will be growing net number of employees probably north of 100.
By the first quarter of next year, that's a rough idea of the number of folks that we would be looking for and our plants.
And our 4 operating plants.
As far as the inflation that is on.
I mentioned that the labor and the impact on getting the products here getting supplies and parts on time.
And then and I should emphasize is it's an issue, it's not crippling us or anything like that but it is something that I feel and interest and being transparent and we need to call out because it is a problem.
We are seeing you know mid single to high single digit.
Cost inflation.
Well on many consumables things like refractory brick.
Saw blades lubricants things like that.
Got it and then on the longer dated data and orders and your aerospace backlog is that more structural or engine products and do you see any discernible difference between engine and structural supply chain currently.
Yeah.
Let me ask Chris Zimmer to answer that 1.
Yes, Mike a lot of the orders that are coming onto the books for shipment in 2022 tend to be structural.
That supply chain.
Flows primarily through service centers.
The engine side of the business is typically forger business. They buy at lead time, and generally don't go out as far as they rely upon a slowdown from the engine manufacturers and those engine guys are very quickly imposing upon their supply chains getting ready for the ramp. So we have seen an uptick and activity for.
Or engine demands, but I would characterize the majority of our order entry and the second quarter supporting structural applications landing gear and things of that sort.
And.
Okay. That's helpful.
And then just last for me.
Have you specified your wide body versus narrow body exposure in the past and how do you see the recent and 787 issues impacting universal and the supply chain. Thanks.
We've never specified a percentage of our sales going to wide body versus single aisle planes simply because we really don't have good data on that.
As Chris just described we sell mostly through service centers about 65% to 70% of our sales goes and service centers Forgers would be the next biggest group.
So we don't have the visibility through to the ultimate platform that those those parts volume on.
As far as the 787 goes I mean, certainly we love to see them, making 5.780 sevens a month instead of 4 but it's really a marginal impact on us I can't really give you a number.
But you can see by our bookings.
I think obviously.
And you already have or of our volume is going to single aisle airplanes.
Yes.
Got it thank you.
Thank you.
Our next question comes from the line of Alan Weber with my body Advisors. Your line is now open.
Good morning.
And then you're doing great.
Can you talk about the backlog and what percent of debt.
Oh space.
Roughly about 2 thirds about 65% right now at June 30 would be aerospace.
So what you've seen more recently and the last couple of quarters in terms of sales as a decline and the percentage of aerospace as a percentage of our mix.
Which reflects obviously the downturn and aerospace coupled with some faster growth and our non aerospace business.
As we look at the backlog.
We would expect that to come back and align with some more normal numbers and.
By normal I mean things, we've seen recently, which would be.
Aerospace is roughly 2 thirds of our sales year in and year out and.
And as we continue to grow the premium melted products, they will pick up and increasing percentage of our sales.
Which we would expect to be roughly 20% today and a growing percentage as we get into the next 2.3 years.
Okay and then my other question was can you talk about.
And you're talking about the backlog growing and like that and how you think about gross margins and operating margins kind of on income.
Mentally.
Well, you've seen sequential increase and gross profit margin. So operationally as we look at higher volumes and our backlog, obviously that did takes higher production volumes and our plants.
So we want to maximize operating leverage we want to do everything we can to hold our fixed cost relatively flat. So at the margin and as sales pick up more and more of that will come to the bottom line. In addition, with higher volumes just 1 on the variable cost performance.
Putting more material to our facilities, we will pick up additional variable cost per pound improvements so both of those items.
And will drive higher gross profit margins.
And as we look near term I think we still have another quarter or 2 of challenges certainly the third quarter I expect sales to be up.
Gross margins to be improved.
So maybe and a high single digit range.
But as we as we noted we did have a nice bump in bookings.
But 40, almost 50% of that is scheduled for production and the second half with sales and the first day of the year. So it gives us an opportunity to level load our facilities and on even more efficiently.
I guess the other impact I should mention on gross profit, obviously as the selling price increases that I mentioned.
But just be aware, we're also seeing increased commodity costs and we're also seeing some inflationary trends on our consumables as well so 100% on the price increases won't come to the bottom line.
So.
As you look down the road, we would expect higher gross profit margins, because it's a more favorable pricing environment on.
Our mix will be improving more finished bar more premium melted products as we get into 2020.2.
And as we ramp up the facilities are our absorption position will improve and our variable cost productivity and yield specifically, we will continue to improve.
Okay, and then when you.
And your adjusted EBITDA.
What is fixed cost absorption direct charge.
And we basically hold our fixed cost at 45% of our operating cost and.
Third party operating costs, where we might ship something outside the company.
So anything over 45%, we expense directly so and I'm talking about unabsorbed cost or special fixed cost charges. It's a simple fact that we are not operating at very high levels of activity. It is improving but as I mentioned and my comments, we're still running about 42% below where we were as recently as a year and a half ago.
So as you know.
And just from an accounting perspective, according to GAAP.
We expense that rather than putting all that cost and inventory and expense and the future.
Okay.
Okay, great. Thank you very much.
Youre welcome.
Thank you.
As a reminder to ask a question do we need to press Star then 1 on your telephone.
Our next question comes on the line are Bob sales with L. M. K capital. Your line is now open.
Hi, Denny.
On the day.
Okay.
You've answered most a lot of my questions I just had a couple on the premium alloy.
Business it looks like it was 15% of revenue in Q2.
And then you described that checking too.
20% over time, and maybe higher than that.
And I had and premium alloy is.
When you.
When you.
When you win that business is it more application specific debt.
And it takes takes.
A longer periods of gel or is that sold into the same type of service Center business. Once you went approval from the from.
On the manufacturer just like the rest of your alloy products.
Let me ask Chris Zimmer and a way on our network.
Well, it's it's it's it's a mixture of the 2.
The premium products do go to.
More critical applications.
So the approval process is more lengthy a lot of times, that's on a direct basis.
So the qualification process is typically tied to a long term agreement.
And the shift of our supply chain to us from an incumbent so it tends to be a little bit of a longer cycle, but once we're into it there's much more steadiness to the business and reliability.
There is a healthy portion of it however that does flow through.
Distribution and this would be what I'd call some workforce structural alloys that go to critical aerospace.
And defense largely defense applications.
And so it's a combination of the 2 but when we look at the applications for these products like gearboxes bearings share.
Shafts within engines.
Tend to be a little bit more intensive from a qualification standpoint.
And therefore, those price like the control of the supply chain a little bit better.
And that yields more direct sales rather than through distribution for what I would call. Some of the products that only calls out and industry Ams specification. So hopefully that helps you.
Yes, that's good that's good.
And.
What would you say that Delta is and gross margin between your premium alloy products and your standard alloy products.
And our premium alloy as you said is.
We would expect to be and the high teens low twenties on premium alloy products.
We do have some produce products that are higher margin and that quite frankly.
But the typical price product would be somewhere between 5% to 7% percent lower.
And today's environment got it okay.
Got it and.
And then the plate business.
And.
Im just pleasantly surprised how strong that business.
Continues to be do you think it's do you think it's a function of.
Strictly new models.
Entering the industry or do you think it's a continuation of limited sources for the plate products and you are garnering a bigger share of the demand.
Well like many of our other products.
No tool steel has sold 100% into service centers.
So we don't have precise visibility into where every pound that we sell is ultimately going to go once it hits the service center.
So we're going to sell a finished plate service centers, it's going to take it they're going to cut it up.
And theyre going to sell that to machine shops.
So.
We know that the largest uses for tool steel would be things like new jigs and fixtures, if you're redoing a line for a new model that kind of thing or anywhere you are doing that kind of heavy metal fabrication work.
Typically automotive is the biggest driver and within automotive the biggest driver would be the new model, where they're rejiggering facilities and stuff like that putting in new.
New facilities to make cars as opposed to the absolute number of cars being made.
But there's also a sizable amount that goes into general manufacturing paper plants cutlery and things along those lines.
That's the best I can give you when we talk to our customers. That's typically the way they answer the question.
And you know theres always that healthy skepticism between our good customers and.
Service centers and minerals about where the ultimate product goes.
Got it and Danny what about and update.
So youre thinking with the board on the <unk>.
CFO position and and your plans to.
You know accommodate what you need from a finance perspective.
I think you should understand that we have a very talented group of financial folks inside the company, we're not going to rush to fill that position.
We have brought in folks and the past and pop them into the CFO role.
And and we end up frankly, and this is my opinion and ended up training folks and they end up and the private equity world taken and smaller companies public.
So we want it and we believe and promoting from within and we've got a good cast of characters inside the company, we want to give them an opportunity to develop and perhaps have a shot at that share.
So that's kind of where we're at right now.
Working to develop some of our people our penthouse talent and I've been with us for a while and deserve a shot at that job.
Got it. Thank you and again that was a super way to spring into the second half of the year.
Yep. Thank.
Thank you.
Thank you and there are no further questions I will now turn the call back to Mr. Owens for closing remarks.
Yes.
Once again, thank you for joining us this morning with recovering markets and the relentless efforts of our team I feel we were able to achieve important progress and the second quarter I look forward to updating you on our efforts and to take full advantage of our market opportunities as we move forward.
Be well stay safe and have a good day and we'll talk in October.
And ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
And.
And then.
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Okay.
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