Q2 2021 Materion Corp Earnings Call
Greetings and welcome to the material and Corporation second quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation and.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Andrew Banjo manager of corporate development and Investor Relations. Thank you. Sir you may begin good morning, and thank you everyone for joining us on our second quarter 2021 earnings Conference call. This is Andrew Bento manager Investor Relations and corporate development Corp mature.
And on and Corporation.
Before we begin our remarks this morning, I would like to point out that we have posted materials on the company's website and we will reference as a part of today's review of the quarterly results.
Can also access the materials through the download feature on the earnings call webcast link.
With me today is jugal, <unk>, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer.
Our format for todays conference call is as follows.
Jugal will provide opening comments on the quarter and an update on key initiatives.
Following jugal Shelly, who will review the detailed financial results for the quarter and then we will open the call for questions.
Let me remind investors that any forward looking statements made in this presentation, including those and the outlook section and during the question and answer portion are based on current expectations.
The company's actual future performance may materially differ from that contemplated by the forward looking statements as a result of a variety of factors.
Those factors are listed in the earnings press release, we issued this morning.
Additionally comments regarding earnings before interest and taxes net income and earnings per share reflect the adjusted GAAP numbers shown on attachment and number 5 and this morning's press release.
The adjustments are made and the prior year periods for comparative purposes, and remove special items non cash charges and certain income tax adjustments.
And now I'll turn the call over to jugal for his comments.
Thanks, Andrew and when.
Welcome everyone.
I'm pleased to report, we delivered very strong results and the second quarter.
We achieved record quarterly value added sales.
Exceeding our prior record set in the first quarter.
And recorded our fifth quarter of sequential top line growth.
We're seeing strength across key end markets and more importantly, we continue to outpace that growth by delivering on our organic growth initiatives.
Our advanced materials business delivered another quarterly record from value added sales.
Recognizing substantial results from our commercial initiatives and strong market demand.
I'm very proud of our team's continued dedication to serving our customers and the accelerating demand environment.
Our businesses are effectively managing supply chain and staffing needs and mitigating the effects of inflationary pressures with a well designed pricing model and good cost control efforts.
Along with our strong financial and operational performance, we continue to execute well on our key strategic growth initiatives let.
Let me talk to a few highlights.
Our customer funded engineered precision clad strip project is ramping up.
We are nearing completion on the construction of a new leading edge manufacturing facility and commencing start up activities.
Our Opex Baldur's integration is complete.
Our global teams are collaborating on various customer opportunities and we have several synergistic initiatives underway.
Our organic growth pipeline remains strong across all 3 segments.
We continue to make R&D and commercial investments and work collaboratively with customers to deliver new high performing products to our customers.
Which will allow the company to continue at above market organic growth rate.
And finally, we have been steadily increasing our investments and our facilities and capabilities to support our growth objectives.
With accelerating demand and a strong organic pipeline, we are focusing on projects that will deliver new capacity and enhanced capabilities and improve yields across our business.
We remain confident that these important strategic initiatives along with many others are positioning us as a high performing advanced materials company and enables next generation applications.
The space sector has been and the news quite a lot recently and maturity on its proud to serve this exciting industry across all 3 of our businesses.
And we look forward to advancing the future of the space market.
With our innovative solutions.
On slide 7 of our materials, we are highlighting some exciting recent wins and advancements that are helping to enable the growing space sector and a variety of different ways.
First we.
We have announced a partnership and our P. A fee business to develop nuclear thermal propulsion systems for future NASA space missions.
Nuclear propulsion provides greater propellant efficiency as compared with conventional chemical rockets and.
Can enable faster travel and longer mission durations.
Our products are being explored for use and critical components on the nuclear thermal engine that will propel new missions and exciting discoveries.
Material and will be collaborating on this inspiring project with ultra Safe Nuclear Corporation Blue origin General Electric's Hitachi nuclear energy General Electric research from Atoll and others.
In addition to our continued relationship and growth with NASA and we are supporting the emerging commercial space market and a variety of ways.
Let me give you a few examples of our products involved and recent commercial missions.
Our advanced materials business supplies of gold alloy people and product used to break the thrusters and many commercial space crafts.
This product is an excellent solution for joining highly critical components and applications subject to adverse operating conditions due to its high tensile strength resistance to corrosion and oxidation and superior thermal and electrical conductivity.
R. P. A C business has also taken flight and the commercial space Arena.
Currently our tough met 3 alloy is used and fluid control systems on commercial space launch rockets.
That tough about alloy is used because it's extremely strong and non plainville when exposed to pure oxygen and it's very easy to machine and the complex components.
Finally from me on provides critical optical components, enabling space observation and surveillance.
Our precision optics business has decades of experience and a designer and manufacturer of filter arrays that provide high and spectral performance and extreme environments.
These optical filters and enable leading edge space imaging, making them ideal for a wide range of applications, including space based instrumentation surveillance and targeting systems for missile defense and commercial satellites.
We recently announced a partnership with the various see Ruben Observatory on it first of its kind custom optical filter that can be used on the legacy survey of space and time telescope or L. S. S. T currently under construction and Chile.
And our P. A C business beryllium as a preferred material for space related and reflective of optical systems and sensors.
Liam's high stiffness to weight ratio excellent thermal properties and dimensional stability provide unmatched performance when used as a reflective optics and structures material and space based optical systems maturing on is proud to have beryllium mirrors that are set to launch into orbit on the James Webb space Telescope later this year.
The space sector represents a great opportunity for market growth and maturing on specific outgrowth and based on our broad portfolio of high performing advanced technologies, which continue to drive further space observation exploration and commercial and noncommercial aerospace missions well into the future.
Now, let me share some comments on the second half of 2020.1.
We've had tremendous success and executing our growth initiatives delivering 2 consecutive record setting quarters for value added sales.
And we're confident that we will be able to sustain this momentum into the second half as our strong and markets coupled with accelerating organic initiatives have positioned the company on a path of continued above market growth.
As a result, we are raising our full year guidance to $3.25 to $3.45.
Again, I cannot stress how proud I am of our global team's dedication to meeting our customers' needs.
I would like to thank them for their hard work and dedication as we move through this outstanding year.
Now, let me turn the call over to Shelly to cover the financial details.
Thanks, Jugal and welcome to everyone joining us on the call today.
During my comments I will reference the slides posted on our website. This morning.
Starting on slide 11, and as jugal mentioned material and delivered a very strong second quarter Valley.
Value added sales, which exclude the impact of pass through precious metal cost reached a record $207.9 million up 31% from the prior year.
The increase was driven by robust demand across several end markets, including semiconductor automotive industrial and consumer electronics.
In addition, our strong pipeline of organic initiatives is delivering helping us to achieve above market growth as we continue to develop new advanced material solutions for our customers.
We delivered an adjusted EBIT margin of 10, 6% and adjusted earnings per share of <unk> 86 cents, both significant improvements over Q2 of last year.
Looking at Slide 12, our profitability was impacted by several key factors.
Adjusted EBITDA in the quarter was $22.1 million up from $12.8 million last year.
Our adjusted EBIT margin of 10, 6% represents a 260 basis point increase from a year ago.
The increase was largely driven by strong volumes favorable price mix and improved operating performance offset partially by higher SG&A and R&D expenses.
Our team continues to respond well to the increased demand.
Hosting and favorable operating performance.
The increase in SG&A and R&D this quarter represents higher variable compensation and our continued investments in R&D.
Despite the increased investment SG&A expense as a percent of VA sales improved 150 basis points year on year when adjusted for special items.
Now, let me review second quarter performance by business segment, starting with our performance alloys and composites business on slide 13.
Value added sales from $108.6 million and increase of 21% compared to last year.
The year over year increase was primarily due to sales to the new engineered precision clad stripped customer.
As well as strong performance and the automotive and industrial end markets.
We are seeing notable growth and our connector material for the automotive market with new applications and strong demand.
Within the industrial sector rebounding construction and mining end markets drove increased demand for our beryllium sprinkler components appliance connectors and tough net components from bushings and bearings.
EBIT, excluding special items was $17.1 million or 15, 7% of value added sales compared to $11 million or 12, 2% of value added sales and the prior year.
The increase was due mainly to higher sales volumes favorable price and improved operating performance.
P. A C reported double digit adjusted EBIT margins for the fifth consecutive quarter up 350 basis points from the prior year.
Yeah.
Now, let's turn to advanced materials on slide 14.
Value added sales with a quarterly record of $66.9 million up 28% versus the prior year and exceeding the previous record set in Q1.
The increase was driven by higher sales to the semiconductor and energy and markets.
And Sidney we're seeing a great response to our commercial initiatives aimed at data storage and mobile phone applications and we're supporting the strong overall end market demand.
With and energy and uptick in commercial construction activity has led to higher demand for target material used in smart glass and innovative material used and modern buildings.
EBIT, excluding special items was $8.3 million and the quarter compared to $5.3 million and the second quarter last year and.
Adjusted EBIT margins improved year over year by 220 basis points to 12, 4%.
The improvement and adjusted EBIT margins was due to higher volume and strong operating performance, partially offset by increased R&D and commercial investments.
Turning finally to the precision optics segment on slide 15.
Second quarter value added sales were $32.6 million up 83% compared to the prior year period.
The business saw increases across key end markets favorably impacted by our Opex falls, there's acquisition as well as strong performance and both our legacy optics and display businesses.
EBIT, excluding special items was $2.9 million or 8.9% of value added sales.
As we have previously stated precision optics is largely a project based business and therefore the impact of program timing can have a significant impact on mix and margins from quarter to quarter.
As a reminder, precision optics had a strong first quarter, which results and year to date EBIT margins that are up 130 basis points from the prior year.
It is also worth noting that on an adjusted EBITDA basis precision optics margins improved year over year, and the second quarter as noncash amortization charges from the Opex falters acquisition impacted EBIT margins when compared to 2020.
Moving now to cash debt and liquidity on slide 16.
We ended the second quarter of 2021, but the net debt position of $34.9 million and approximately 273 million available on the company's credit facility.
The year over year increase and debt was primarily related to the optics Bulgars acquisition. However, we remain well below our targeted leverage range of 1 and a half to 3 times net debt to EBITDA.
We have significant available liquidity and a strong balance sheet to continue to invest and our business.
Regarding capital allocation, we maintain a disciplined and balanced approach focusing on organic growth opportunities returning capital to shareholders through our dividend and the pursuit of strategic inorganic opportunities.
Consistent with our comments and Q1, we expect capital spending of around 100 million for 2020.1.
The higher amount is attributed to our strong pipeline organic growth opportunities, particularly the new engineered precision clad strip project as.
And as well as promising opportunities in each of our segments.
We also continue to evaluate acquisition candidates that fit with our strategy and long term objectives.
Now, let's turn to the guidance summary on slide 17.
With the ongoing strength of our organic pipeline and good underlying demand across our end markets, we're increasing our outlook for the remainder of the here.
Looking first at the third quarter, we expect adjusted earnings per share and the range of 80 to 84 cents, which is up about 64% from last year at the midpoint.
We are raising full year 2021 adjusted earnings guidance to $3.25 to $3.45 per share.
The midpoint of the revised guidance represents a 65% increase from the prior year.
This guidance includes an estimated 25 cents per share impact from startup cost related to the construction of our new engineered precision clad strip facility.
On this slide we've also noted a few modeling assumptions for you.
Overall based on our first half performance strong and market backdrop, and a robust organic pipeline, we feel very encouraged heading into the second half of 'twenty 'twenty 1.
We are investing and our business and driving key strategic initiatives to create long term value for our shareholders and 2021 and beyond.
This concludes our prepared remarks, we will now open the line for questions.
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Uh huh.
Thank you. Our first question comes from the line of Marco Rodriguez with Stonegate Capital. Please proceed with your question.
Good morning, everybody. Thank you for taking my questions and good morning, Marty and Marika.
I was wondering if maybe you could expand on and on a comment I believe I heard in your prepared remarks when dealing with.
Raw material pressures I'm, assuming this is outside of obviously, the metals pricing, but and you talked about some key pricing initiatives that you did to a beach and kind of offset that if I heard that correctly can you maybe expand on them on a little bit.
Yes, Michael.
Pricing has been on very important part of our of our roadmap over the last 3 to 4 years right. We've talked about that quite a bit and we've really tried to develop and very strong value based pricing model and in that we want to make sure that we're having the right price for the value that we're providing for our customers.
And as a result of that anytime that we see situations that warrant a price adjustment, whether it would be raw material price increases or any other adjustments we want to make sure that we have a model that works for us.
And and we discuss appropriately with our with our customers. So this year and theres been a lot of challenges and our companies are based on others have faced on as well on raw material side as well as on the labor side.
We've got a very very strong model to be able to deal with that.
On a large part of our company as you know is dealing with precious metals or just pass through metals, along with beryllium, which is something that we kind of.
Let's say pass through with our customers directly anyway, but then for the remaining a remaining part we make sure that we are.
Working with our customers on pricing so pricing has been a very important part of I think how we've trained our sales force and as we've done both our commercial excellence initiatives over the last few years.
Understood and so just to make sure also and unclear here. These pricing initiatives are obviously more geared towards your overall strategic initiatives that you are and you're pushing forward and more so than and <unk>.
Shall we say just kind of an increase and pricing to try and take care of and you know general raw material price inflation I think it's no I think it's both I think it was actually 1 on the same you know when you think about it right.
We want to make sure as I said, the we continue to provide the right value and so if we see a situation that warrants a and adjustment based on raw material increases we've got a model set up where our teams clearly understand that our procurement team our supply chain team. Our sales teams are joined at the hip when it comes to that and they discussed the situation on the need.
Act appropriately and that's been very very strong part of our commercial excellence training that we've done over the last few years. So I think it's actually 1 and the same for us.
But to be more specific yes, we have taken appropriate steps for raw material adjustments and labor and supply chain.
Because frankly, there has been there's been increases really across the board and we've made sure that we work appropriately with our customers to address those increases.
Got it understood.
In terms of the strength that you guys are seeing from the end markets, that's helping drive.
Our revenue performance.
You also talked about having a robust kind of organic pipeline.
Can you maybe talk about or are you guys taking share in general or or is this may be kind of a net.
On the economies and the world and they're starting to open back up and that's helping kind of accelerate this this revenue performance for you guys.
And I think it's actually both I mean, we have a number of projects, where I think we have new projects being kicked off debt.
Ah we're introducing so take for example, and the EV sector. We have a we have a lot of activity going on right now with the with our products to increase.
And position on the EV side, that's the emerging market and so therefore, it's helping us quite a bit you look at our aluminum scandium.
On a product that is really helping on the <unk> and and the growth associated with 5 G. And then theres other areas, where we're introducing new products such as our new tough met 2 product that we've just introduced.
Is a much much better product and then the typical bronze product and it's taking share away from from that so I think it's a combination of things. We've got I think we've got great activity going on on the organic side on both.
Introducing new products that can take perhaps replace existing products will take share away as you say as well as feed into the emerging growth sectors.
Understood and then.
I'm just kind of taken a look at some of the segment performance at the operating margins from.
And the advanced materials and precision optics, and just kind of looking at the operating margin performance on a sequential basis had kind of a bit of a step down can you maybe talk a little bit about the drivers there.
Yeah, Yeah sure Yeah look on the on the advanced material side first of all I want to say that it's the fifth consecutive quarter that we've had double digit margins that business has just done really really well over the last a year on year and a half as we've driven.
Top line growth is being driven really bottomline performance on the operational side. So I'm really proud of the team and what they've what they've accomplished I think here and the and the second quarter. I mean, we had a couple of 1 time expenses that we've had to deal with minor that we've had to deal with but more importantly, I think we've continued to strengthen the RMB pipeline of that and and.
On the R&D side of things so.
Good strong margins from year to date over 13% for that business. As you know our long term objective is to be able to get that business to more of a mid teens type low margin.
So I was very very very very strong margin performance on the advanced material side on.
On the precision optics.
Shelley indicated in her remarks.
And it is a lumpy business and it is something that.
And we deal with and we've dealt with for a number of years.
On a year to date basis, it's up it's a strong double digit margin business that we would continue and to see that business to be a good double digit business as well.
But really it's just the lumpiness of the quarters, which are which drives it and then.
And she also indicated the EBITDA margins were actually up on a year to day basis, the easy and the EBIT margins are up on a year to day basis.
So it's a it's more of a quarterly sequencing type of a thing and all with the Lumpiness. So I.
But very strong performance from both of those businesses.
Very helpful. Thank you and last quick question from me.
I've noted some automotive strength and your business I was wondering if you can maybe talk a little bit about what you're hearing from your customers on sort of relates to semiconductor shortages.
Well clearly it's been impacted by the semiconductor shortage right the automotive side, but I think the great thing that we have is we.
No we haven't really had a hiccup on the automotive side, even though theres been the end market hiccups because of chip shortages.
We've got we've got great products that we're introducing into the E. B space that debt I think is contributing to that we last quarter talked about our large win with visteon on the optical filter side.
That that I think is a good growth activity for us.
So even though there is a chip shortages I think on the and.
On a market side, our business on a on a year to day basis was up 53% on the auto side and I think it's a combination of a number of rate wins that our teams have been able to do.
Got it understood. Thank you guys or a lot I really appreciate your time.
Thanks, Michael.
As a reminder, if you would like to ask a question press star 1 on your telephone keypad.
Our next question comes from the line of Michael a shock with Keybanc. Please proceed with your question.
Hey, good morning.
Good morning, Good morning, Michael.
So first I just wanted to get and update our updated timeline on the new glad strip facility. I know you said construction is nearly complete but when should we expect that to be finished and how should we think about the cadence of the ramp through the balance of the year and into 2022 right. Yes. So again, our teams are making great progress on that despite the.
And the overall pandemic issues that the world has faced us last year and a half of.
The construction has really been on track we are nearing completion and then we'll go into what we basically low validation phase and a qualification phase with a customer that will go on.
Through the through the end of the year and then it just depends on that timing and.
And and approval from our customer and then it's our expectation that and the first half of the year, we'll ramp up the facility and.
And as with any ramp and you can imagine it'll be a bit of a trial and error to see how things are how things proceed on Michael but in the meantime, we continue to ship from our existing facility good.
Good solid sales as we've talked about before from our existing facility and we'll continue to do that until we ramp the new facility. So overall things are proceeding very well.
Yeah.
And you talked a bit about pricing, but given the inflationary environment that were and do you see further opportunities for pricing through the balance of the year and and what segments do you see more of that those pricing opportunities and.
Well I think pricing is something that we push across the company and all regions and and all businesses and it's something that is an important part of our.
Important part of our equation as I indicated on that.
Earlier response that I gave to Marco and and it is something that we have in front of US every single day. So we expect we expect pricing to be an important factor in Q3 and Q4 I mean like you said, it's an inflationary environment.
And and we make sure that we understand all of our input costs, whether it be supply chain labor and raw material and and are factored that in as we price our products with our with our customers and and our customers understand it I mean, they are facing the same.
Issues that we're facing so this is I think this is a.
No.
Understood situation and and it's something that we'll deal with here in Q3, and Q4 and any other quarters that we have to deal with and and Michael as you know typically when you put price increases and place you know there's a bit of a ramp. So you can expect that impact to build through the back half of the year.
Got it and then lastly from me on the inventory side are you comfortable around your current levels. There should we expect to further build and <unk>.
Yeah. So I would say you know we've seen a bit of an uptick and inventory. This year part of that is just driven by price. So not all quantity driven but then you've got some to support the increased levels of business. You know, we'll have a little bit of inventory build to support the new engineered precision cloud strip business, but otherwise you know we look for.
He has to be at pretty good levels, and and we will try to manage that tightly too to increase cash flow.
That's helpful. Thank you.
Thanks, Michael.
Our next question comes from the line of Marisa Fernandez with Sidoti. Please proceed with your question Hi.
Hi, Good morning, Thank you for taking my question and marathon and MRSA.
And so to follow up on on the class a project.
From your prior answer.
You know, we said spell-check chest that you expected them on a schedule I suppose to coming in earlier than you anticipated.
Most I would tell you that at this time, we are on schedule and we are progressing I would say very well to that.
If we.
And realize that our qualification period, where the customer improves or if theres other adjustments and we certainly will of course communicate that to you and everyone else, but right now we are focused and.
To make sure that we can launch that and the first half of.
And next year, and and all signs are indicating to that.
Got it and then the contribution of you know the class product that you are shipping right now in the second quarter was that about the same as it wasn't in the first quarter or was there a step increase in that and I'm asking because you call it out specifically and went up and flights.
Yeah, well you know that.
That's a business as you know is coming from our existing facility and the amount of capacity that we can handle and that existing facility and so we are making sure that we're getting as much product out as we can from the existing facility.
It's relatively in line with what we have done over the last 3 quarters, we really started that up as you know and Q4 built it up and Q1 and now into Q2. So it's relatively relatively in line and it's really capacity dependent.
Got it and that on the plus side a are there any efforts underway for new product development or new customers at this time.
Yeah, I mean, we've.
Precision bought and engineered precision and cladding is a is a very important part of our business across multiple markets.
All regions.
And so we are focused on our team knows that very well and very clearly that that's a that's an important growth space for us. So we were out knocking on doors.
And in many places.
Got it that's helpful. Thank you.
And if I can ask you about obi and trend so far the synergy and.
Now that you've had on some time Hum you know to integrate them and the acquisition what would you say about the timing for the commercial seen her teeth you weren't expecting.
Yeah, I think the commercial synergies I would say a relatively in line with what we have communicated as part of our as part of our acquisition and the teams have done really well and working together.
As we've indicated and we've got a global organization that we've established putting the 2 teams together.
And they have been working on looking at from a technology perspective product perspective customer perspective, where can we take some where can we take some opportunities and and work together. So I. It is it is a I would say it's relatively in line with what we have shared with you.
And as we of course have some some items and we can talk about announce we certainly will do that.
Got it and then in terms of I know you spoke about the EM margins Oh, you betcha.
And just to confirm you know the value added sales and that dipped sequentially. That's also related to the lumpiness of the business.
Oh, especially and I.
Mhm, Okay. It is okay.
Hi.
So so you highlighted a bunch of opportunities in the space sector and I was wondering I understand those are across your different segments, but wondering if you can handicap for us you.
You know in any way what the contribution from space can mean for material going forward.
Yeah, it's a really important market for us I would say that we're probably I mean, we don't report space as a as a and market as you know, but in general I would say probably brought on $2000.25 million.
Business for Us and.
Mainly from RPC, and our optics business with a little bit contribution from our advanced materials business.
We've got a number of different things that we're that we are working on whether it would be tough net products that can go cross border.
<unk> commercial activities without naming some names I mean I'm sure you can understand that.
And the various commercial space activities that are going on.
2 optical potrero range that go across both commercial as well as defense applications and.
Spacer exploration type.
Areas to the gold pre form that we spoke off that can and that's also being used in the space side. In fact, it was part of the Blue origin.
Launch that happened here recently, and we would look to have that continue to grow to beryllium based on reflective optical systems that can be used across our various satellites and the geospatial and Leo space.
So I think just really across our entire company.
And would expect space to contribute that while we've got a great great set of products.
Offering I think and now it's a matter of how.
How much does the market really growth and Theres a lot of talk as you know right now both on the commercial side as well as on the defense side.
So we will have to wait and see how the market evolves, but I think we've got a great set of products that can benefit from that.
And that's helpful. Thank you I also wanted to ask about the end markets. So what are you know you just reported a lot of strength and I'm wondering on.
And what is left in terms of cyclical uplift I suppose aerospace and so he has ways to go but.
And if you could perhaps comment on you know this on what their trends relative to the first quarter and how do you see you know.
On T need potential continued market improvement from here yeah. So if you look at our year to date market performance, our top 5 markets grew 25% or better yes, So really really good performance from the semiconductor and industrial Aero defense on auto and consumer side, where I would say that we've got on.
<unk> like you said is clearly on the energy side, we've got great performance going on on a part of our energy business, which is something that we do and the larger you're on target side, but the oil and gas side is as challenged.
The challenge in terms of prepay and comparison to pre pandemic levels and improvement of course from last year, but but we've got ways to go to the pre pandemic levels and on the Aero and defense side, we started to see some very very.
Small inklings of a recovery and the second quarter, which is a very encouraging sign on the aerospace side and hopefully that can continue and the into Q3 and Q4 and start to build more of a momentum for the rest of the year. So those are a couple of areas that debt I think would be really nice to see.
Continued growth and the second half and then of course into into 'twenty 2.
The other markets.
And we are we are performing really well.
Compared to the compared to the end market growth.
Got it so so in terms of aerospace and do you think Oh, you know big improvement is on.
Basketball ceiling 'twenty 'twenty 1.
Well I think second quarter was a was a.
Little bit of a I'll say on a bright spot because we started to see some uptick and the second quarter.
I don't want to get too ahead of myself and say that the same will be the case and the third and fourth quarter I would like to be able to see that continue but I think.
Until we until we see some nice orders come in.
Both on the MRO as well as the.
<unk> side, then I think I'll feel but better and perhaps be able to communicate a little bit more constantly what the second half will bring but second quarter was an encouraging sign.
Got it.
And what's the news about the you're making from a investment or partnership in Pennsylvania can you comment on that.
Yeah look anytime that we're.
Looking at this type of growth across our across our company and we're always looking to see what we can do to add capacity and.
We have a we have.
Really good organic growth underway and good market growth underway and so we want to be able to make sure that we have.
We have capacity that we're putting in and we made capacity.
Adjustments all the time whenever we think its necessary. So for example, we're doing.
And refurbishment and our capacity upgrade and a pebble plant, which is an L. Moore.
Roughly a $15 million project that we talked about actually I think it was last year, we may have talked about it but we've been working that we're probably about halfway complete.
And then and then we have the news and Pennsylvania that you talked about which is our which is our capacity increase for US and then we're looking at our capacity increases wherever we can I mean, our our capital spending is something that we're focused on to make sure we drive appropriate growth and so and we'll keep doing that.
Okay, but then that's it still remains the case and some capex in 2020.2 should be down.
Year over year.
I'm, sorry, I didn't hear you Didnt understand yes, sorry.
Sorry.
And just trying to make sure I understand the capex trend for 2020.2.
Still expect it to be down from 2021 levels well I mean, 2021 is clearly sort of an exceptional year with roughly half of our capex.
Associated with our new project and then the other half being a bit of and on tailings pond improvement as well as on the remaining bnb I'll call. It the typical organic growth slash maintenance capex. So yeah, I would expect I would expect 'twenty to 2 to start to come down too.
On a lower level, although I would expect it to be higher than our historical organic growth and maintenance capex because as we have talked a lot. We're driving substantial organic growth. So I want I want us to be able to take full advantage of.
Adding capacity around the world.
And and deliver for our customers.
And just is that there's no significant change I was wondering if the investment and Pennsylvania meant incremental capex in 'twenty, 2 or not material no.
Does not.
Okay, great well. Thank you so much for taking my questions and congratulations and it varies from quarter. Thanks.
Thanks, Marisa Thanks Marissa.
Thank you Mr. Ventura, we have no further questions at this time I would now like to turn the floor back over to you for closing comments.
Thank you.
This is Andrew Vento and this concludes our second quarter 2021 earnings call.
A recorded playback of this call will be available on the company's website material on dot com.
We would like to thank all of you from participating on the call. This morning, and your interest and material and I will be available to answer any follow up questions. My direct number is 216.
And 3834098.
Thank you very much.
Sure.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.