Q2 2022 Finning International Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Finning International Inc. Second quarter, 2022, investor call and webcast.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
Analysts who wish to join the question you May Press Star then one on their telephone keypad.
Should you need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to Amanda Hudson Senior Vice President Investor Relations and Treasury. Please go ahead.
Thank you operator, good morning, everyone and welcome.
Second quarter earnings call.
Turning me on today's call.
President and CEO .
Kevin Burke.
Oh, and great culture, EVP and CFO .
Our remarks today, we will open the line questions.
This call is being webcast.
Dot com.
We've also provided slides referenced during our prepared remarks, the slides are posted on the Investor Relations section of our website.
You can also use slides on our webcast page and audio file this call and the accompanying presentation will be archived on our website.
Before I turn it over Scott I want to remind everyone that some of the statements. During this call are forward looking.
Please refer to slides 10, and 11 for important disclosures about forward looking information as well as coffee and specified financial measures, including non-GAAP financial measures.
Okay.
Thank you Amanda and good morning, everyone.
Today's call I will provide some introductory comments Kevin will then detail important improvements we have made to our value proposition and operating model, which have enabled us to exceed our investor day commitments.
After that Greg will provide more detail on our performance in the second quarter, including regional commentary and outlook. Please turn to slide.
We are pleased with our strong performance in the second quarter globally. Our teams continued to deliver outstanding results in a very dynamic environment through consistent execution of our simple plan to dry product support reduce cost and reinvest to compound our earnings we've made sustainable improvements to many important areas of our.
Business and significantly improved our earnings capacity.
Delivering on the commitments, we set out at our Investor day last year, we've accelerated products. The core growth, we have reduced our cost base to become more efficient and agile in serving our customers. We have reinvested in our business to compound our earnings.
Yeah.
From delivering approximately $900 million of free cash flow during a very challenging 2022, delivering $2 66 tenths of EPS over the last four quarters. The full cycle resiliency of our business model and successful execution of our strategy had been on hold sway.
There are a number of key building blocks to the success.
First and foremost safety remains our top priority and a key area, where we continue to make significant progress.
We reduced our total injury frequency a further 11% from Q2 2021.
We are driving strong product support growth rates and improving our customer value proposition in close alignment with caterpillars aftermarket growth strategy.
We've reduced our cost structure through sustainable productivity gains and the effect of inflation management in.
In addition improvements in our inventory management practices and advanced digital capabilities have helped us to capture growth opportunities and service our customers more efficiently.
As a result, we realized a significant improvement in our operating leverage and achieved a fundamental step up in profitability.
These enhancements to our customer value proposition and operational improvements are significantly elevated our return on capital performance across all of our regions.
Redeployment of capital to accretive M&A and share repurchases have also helped drive strong EPS growth.
While we are monitoring financial market volatility, we are encouraged by increasing capital deployment by our mining customers, where our accordion quoting activity continues to grow in both Canada and Chile.
During the second quarter, we were pleased to secure two important long term contracts, including an agreement with arguments goals to deliver mining fleets. So theyre Blackwater coal project, a greenfield development in British Columbia, with a pathway to fleet de carbonization with caterpillar.
And Ah contract with Codelco to deliver the first fleet Caterpillar electric drive trucks to the administer <unk> copper mine.
Our customers continue to be busy we expect this project backlogs healthy customer balance sheets and high machine utilization rates will continue to support strong demand for equipment parts and maintenance.
Following our strong EPS growth of 52% in the first half of 2022 compared to adjusted EPS in the first half of 2021, we expect demand conditions to remain favorable for the remainder of 2022.
Underpinned by our large and diverse backlog continued growth in product support and disciplined operational execution, we are projecting above mid teens EPS growth in the second half of 2022 compared to the second half of 2021.
We also expect to generate positive annual free cash flow in 2022 with the amount of free cash flow dependent on supply and delivery schedules.
While activity levels remain robust we are closely monitoring leading indicators and the impact of ongoing supply chain labor inflation and interest rate challenges on our customer activity levels.
We remain focused on actively managing these risks and are capturing growth opportunities in a disciplined manner.
The sustainable improvements we have made to our business have improved our earnings capacity through all stages of the economic cycle, which gives us confidence in our ability to continue successfully navigating a dynamic global business environment.
I'd like to invite Kevin to provide a bit more color on how these structural improvements to our business model has helped us to exceed the targets, we set out at our Investor day last year.
Thank you Scott and good morning, everyone.
I'm happy to be joining the call today to provide an update on our operational improvements.
If I can ask you to turn to slide three which shows our execution against the Investor day commitments, we set in June 2021.
Oh net revenue of $7 3 billion.
The last four quarters.
As our product support outperformance was offset by constrained availability equivalents.
Our product support revenue grew by 14% up is.
Considerably exceeding outflow.
In addition to strong demand for parts and service across all sectors, we have significantly improved our value proposition while construction customers.
We are now offering a wide range of customer value agreements and rebuilds for box construction equipment models.
Roger attractive financing and warranty with the support of Caterpillar.
Leveraging our network capabilities, so faster turnaround cost efficiencies.
As a result, our support revenue was up 24% period.
While price increases had a more positive impact.
Product support revenue growth.
A year ago, we are pleased with our aftermarket share gains and improving volumes, which drove the majority.
Falls.
We continue to make progress on improving our cost structure.
Our SG&A as a percentage of net revenue over the last four quarters was 18, 8%.
This was above our <unk>.
<unk> following our product support revenue, which is more SG&A, Texas.
New equipment sales unexpected.
More inflationary pressure than we expected a year ago.
Despite these challenges SG&A in Q2 2020 to 16, 9%.
And by higher new equipment deliveries compared to the previous three quarters.
The productivity lifts, our proactive inflation managements.
Okay.
Important progress here.
We have significant room for further improvement and cost reductions.
A key focus going forward.
Our key focus areas for productivity.
Productivity improvements include deployments of optical triple our model portfolios.
Supply chain and warehouse optimization.
Okay.
<unk> spent money.
I would like to give you an example from each of our regions.
It doesn't affect progress in several important areas.
In Canada, we saw in <unk>.
Improvements in our technician productivity and service quality following the implementation of our Triple on network.
We are thoughtfully building, our technician capacity we had.
Around 250 technicians out the period.
Mostly in Africa.
Our locations as far as the higher cost jurisdictions <unk>.
<unk> struggled and quality has improved.
Born to reduce it by 30%.
While service revenue is not yet at the levels of thoughtful as you ensure service.
Until 2019 levels.
This is a result of increase in scope.
This machine rebuilds, which over four times and faster turnaround.
The quality and composition of our inventory has improved meaningfully across all regions.
With America <unk>, new equipment inventory is only slight set by that date.
At.
At the end of 2019.
We are far more deliberate about standardization that category.
Alright.
Using our.
Our client will not.
Repeated stages, which helps increase velocity.
In the UK and Ireland, we improved our EBIT percentages as a percentage of net revenue by 160 basis points from Q2 2019 to six 4%.
This was driven by product support growth, including the addition of the Heidrick way.
With cubic revenue build at a lower cost.
Jeff.
And in foreign fuels, the API as a percentage of net revenue increased by 600 basis points since we acquired the business in 2019.
While concurrently making investments natural gas renewable fuels distribution capabilities.
Over the last one.
And alright, and EPS $2 $62 66.
With significant outperformance was coal exit a number of well executed initiatives supported market conditions that drove strong margins and operating leverage.
By accretive M&A and share repurchases.
Our improved earnings.
Balance sheet enabled us to reinvest in our business.
Capital to shareholders.
During the last 12 months, we have reinvested $341 million, including share repurchases the acquisition of <unk>.
On the expansion of full refuel capabilities in CMG aggregate and hydrogen.
Importantly, <unk> also announced a 5% dividend increase which March 'twenty one year.
Dividend increases.
Our inflation to be extremely proud of this Greg.
Just to deliver strong returns to our shareholders.
102 to that.
<unk>.
<unk> 17, 44% in Canada, 22, 3% in South America, a 16, 2% for the UK and Ireland.
<unk> significantly improved profitability.
South America achieved the strongest improvement in both profitability and invested.
Relative to I apologize.
In summary, we have built our business to drive improved <unk> supplier to us perhaps that helps us.
Q2 was yet another strong quarter, which demonstrates we have the right strategy. So that concludes on our goals and deliver great service to our customers will not sufficient and innovative way possible.
I will now hand, you over to Gregg.
Thank you Kevin.
I will talk about our strong performance in the second quarter, our growing backlog regional highlights and outlook.
Our consolidated second quarter results are summarized on slide four.
No.
It was up 18% from Q2 2021, driven by strong market conditions backlog deliveries.
Execution of our product support growth strategy.
EBITDA and EPS were up 27% and 43% respectively from Q2.
All regions delivered strong operating leverage in Q2, which demonstrates successful inflation management and continued disciplined execution of our productivity initiatives.
We're very pleased to have bill to earnings up to the 80% level this quarter.
Our health benefit attributed <unk> taxes carry headwinds, perhaps similar value.
This brings our EPS growth for the first half of the year to 52% compared to adjusted EPS first half of 2021.
And we look forward to continuing our strong execution and momentum in the second half of 2022.
Slide five shows changes in our net revenue by line of business compared to Q2 2021.
Well as more details on the growth and composition of our equipment backlog.
While ongoing supply challenges, our new equipment sales were up 24% year over year, driven by mining deliveries in Chile, and construction deliveries in the UK.
We're seeing continued momentum in our consolidated backlog, which was over $2 1 billion at the end of June up 4% from March 15% for December and 56% year over year.
Mining order intake more than doubled in Q1 2022 over a third of our backlog is now mining equipment and includes 798 truck orders for Codelco, but does not yet include the recently announced award for Martin This call depend.
Depending on supply and delivery schedules, we expect to deliver roughly 70% of our backlog this year.
We were pleased to have already secured a backlog of over $600 million of new equipment for 2023.
With strong quoting activity, particularly in mining 2023 backlog will continue to grow from this very solid base through the second half of the year.
We saw strong demand for rental equipment and high rental utilization in Q2 supplier challenges persist.
Product support revenue increased across all regions led particularly by strong growth in Canada.
Turning to slide six.
We delivered significant growth in EBITDA and EBIT compared to Q2 2021, an increase in gross profit was in line with growth in net revenue with higher rental utilization and competitive pricing for used equipment offset by a higher portion of their equipment and the sales mix.
SG&A was up 8% or on 18% higher net revenue an increase in SG&A from additional workforce higher variable cost to support revenue growth was partially offset by alsip recoveries and lower expenses.
SG&A as a percentage of net revenue in Q2, 2022 was 16% or 140 basis point improvement from 2021.
We look back to pre pandemic levels three years ago prepare our Q3 2022 results to Q2, 2019, which had similar revenue levels.
EBIT as a percentage of net revenue was up 250 basis points growth was up 520 basis points EPS is up 48% order intake is up 45% on equipment that wasn't more than double last through 2019.
Turning to slide seven which summarizes our Canadian results and outlook.
Market conditions are strong in Western Canada net revenue increased by 50% from Q2, 2021, driven by product support as well as higher rental and new equipment revenue.
Product support revenue was up 23% from Q2, 2021, which increased spending by mining customers and increased volume of construction.
Our machine utilization consistently strong execution to capture growth.
New equipment sales were up 3% from Q2, 'twenty, one largely due to mining deliveries construction sales were below Q2, 2021 impacted by supply constraints and delivery delays.
Rental revenue was up 30%, 32% year over year, reflecting strong customer demand across all sectors and high utilization rates in the constrained supply environment.
EBIT as a percentage of net revenue was 10% up 70 basis points from Q2 to one one mostly due to a higher proportion of product support revenue mix.
As we look ahead, we expect mining customer balance sheet health.
The increase in capital budgets to drive product support opportunities renewables fleet and Greenfield project development.
And construction work and private sector investment in infrastructure and energy.
<unk> robust activity, including demand for heavier angles.
Please turn to slide eight for our South America results.
New equipment sales increased by 66% from Q2, 'twenty, one functional currency driven by deliveries to Chilean mining customers.
Demand for products was strong, especially in the mining sector. However, the growth rate was constrained by challenging supply environment product support revenue, increasing 2% and functional currency from Q2 'twenty one.
Despite the shift in revenue mix to new equipment sales EBIT net revenue was up 30 basis points year over year, driven by operating leverage from our improved cost structure as well as favorable impact of Chilean peso devaluation.
In the near term with legal mining activity in Chile continue to drive demand for maintenance and replacement of maturing it quickly.
Every activity remained strong including protected <unk> mine as they approach first production, both Godot Codelco, where we have won several trucks and sport equipment packages.
We continue to closely monitor the constitutional reform process to Chile, and the recently proposed tax reform Bill, including the proposal for a revised mining royalty framework.
These proposals under discussion.
So this process is completed the timing of investment decisions related to incremental Greenfield new expansion projects will remain uncertain.
Despite these uncertainties, we still see strong levels of quoting and order intake activity for fleet replacement and technology by mining customers and contractors.
Our long term outlook for copper mining in Chile remains constructive and we expect <unk> to remain an attractive place to invest in the long term.
Electrification trends drive.
Growing demand for global car.
We're mining remains strong order intake in the construction side of the Chilean business has softened.
Backed by higher prices rising interest rates and peso devaluation. However, we expect construction machine utilization remained strong driving continued product support opportunities.
In addition, we are monitoring Argentina closely inactive hedging our currency.
Exposure to the devaluation of the official exchange rate is becoming increasingly likely.
Turning to the UK and Ireland on slide nine.
The UK and Ireland delivered very strong results in Q2.
Equipment sales were up 23% in functional currency driven by the construction youre, including Hs to deliveries.
Activity in construction and the contribution from hydro product support revenue was up 25% in Q2, 2021 and functional currency.
EBIT as a percentage of net revenues of 110 basis points.
2020 from Q2 of 2021% to six 4%, reflecting operating leverage on strong revenue growth and structural profitability improvement, including through the acquisition of hydrocarbons.
We continue to be excited about the hydro Quebec position. The integration is going very well the cultural fit is excellent and the immediate positive financial impact is very helpful to the UK business.
We continue allocating capital towards the business highly attractive bolt on acquisitions starting in the UK.
Our outlook for the UK and Ireland business remains optimistic delivery stage, two customers investments and other infrastructure projects high machine utilization hours are expected to continue to drive strong construction sales right.
We also have a solid backlog of power systems projects for deliveries in the second half of 2022 and into 2023.
We expect demand for our power system solutions, UK and Ireland to remain strong.
Our balance sheet remains healthy with net debt to adjusted EBITDA of one eight times as of June <unk>.
A very solid inventory position to support the delivery of our backlog and strong product support growth rates were.
We're closely monitoring leading indicators, taking a low risk approach on incremental inventory additions and being very disciplined about how we capture growth upward.
Operator, I'll now turn the call back to you for questions.
Thank you we will now begin the question answer session.
Analysts who wish to join the question queue May Press Star then one on your telephone keypad.
You will hear a tone acknowledging your request.
If you are using a speakerphone please pick up your handset before pressing any teeth.
To withdraw your question. Please press Star then two we will pause for a moment as callers join the queue.
The first question comes from Yuri Lynk with Canaccord Genuity.
Please go ahead.
Hey, good morning, and congrats on a nice quarter.
Scott last year.
You talked about.
Coming up on mid cycle economics for fitting over the ensuing 12 months.
Which we did and maybe even surpassed mid cycle in some measures and just wondering how you would characterize or how you view. The next 12 months do you view them as.
Do we say the word peak or how are you looking at just given all the uncertainty in the market.
Yeah, why don't I make a couple of comments and then Kevin you can add on so.
So I actually think we're pretty well positioned right now I mean, you obviously see a lot of uncertainty in the market.
And frankly, even in some of our construction, okay. So U K as an example, we've seen a little bit of a slowing order intake.
Instruction were seeing a little slower order intake however, in our big engines of Western Canada and shelf mining.
A lot of great activity, a lot of quoting and back backlog build and I think it is underpinned by the commodity price.
We are really encouraged about the rest of 2022, and then going into 2023.
Both will probably slow a bit going into 2023, but we will still grow in my mind.
I think an important differentiator for us relative to some of the other.
Folks out there who may have a little bit more construction exposure.
Kevin anything to add.
Sure.
There is uncertainty.
We feel we're really encouraged about the rest of 2022.
That's great.
With that I will continue the Benson.
Great progress in our products are.
Yes.
The backlog is strong.
This call me.
We are somewhat sheltered from the construction headlines.
<unk>.
Widening with where the commodities are still small, but we see that deliberate tightening south.
South America.
We also believe we've got a very strong position with the credit quality is very.
Very good regions.
It's just an ability to sell through.
Talking about right now and we've got great contribution Shanghai rental business.
For refueling and the reach the hydro.
The acquisition that you're.
Adding to our performance and then provide some diversification I guess in that now.
Our business operations and the last thing I would say that from a mid cycle perspective.
It is hard to predict late in the cycle, but what I really want to make the place is slightly the term we've used internally to increase helpful. At all.
I would like investments in how we manage the slide fleets.
It's not necessarily a term that we use to spud in the quarter past the cycle of what it is.
Disciplined in the App installed.
All right.
To manage the trough with each of the troughs in that business.
Okay that makes sense and maybe just a follow up to that.
On the above mid teens EPS growth for the back half of the year.
Is it fair to say that that's going to be mostly topline driven.
And if so I'm, assuming you're comfortable with your inventory position to be able to.
Get that iron in the hands of your customers.
Yeah. Thanks, Jerry Yeah, we feel solid about the second half of this year. So as we discussed last quarter, we saw step up coming out of Q1 in revenue, which you saw we see I can see step up in Q2 and Q3.
Let's see the backlog $1 1 billion with 70% for this year.
A lot of that is on the ground or audits.
And so we feel confident in that step up in <unk> and so that continued momentum it will have a higher revenue level.
What we're expecting.
I'll just add to that.
That's all about backlog as you said.
In line products and <unk>.
Whilst we still say sung <unk>.
And constraints of lead times and consumption.
Mining backlog.
So.
Build slots are big Caterpillar factories.
So that's on tax advice to those so our platform you say fix cure.
We've already got 600 million in backlog right.
Thanks very much.
Thanks, Gary.
The next question comes from Jacob bout with CIBC.
Please go ahead.
Good morning.
My first question is on supply chain disruption and caterpillar I'm, saying yesterday, but you haven't seen much of an improvement.
What are you seeing and.
How are you thinking about supply chain disruption.
What have you baked into your second half.
Items.
More of the same or.
Yes, so we don't see the supply chain getting ready.
And we don't see it getting.
Any worse.
So we built a solid inventory position.
Effectively using vessel Houston rebuilds.
So I guess, let's say.
Is that we're taking control of the situation.
Using the tools that we have available.
While there is still a challenging supply chain environment.
Hello, Yes indeed.
Indications of improvement like that.
We don't believe it impacts our second ball.
Execution, and we're already thinking about hasn't bought agency securities.
2008.
Like I said.
Those are very tight.
Pulled out in Q1.
It's the key to the supply chain insights or thoughts.
As Brian hit the whitening product.
Like I said big box build swaps they are exciting items, yes.
But.
We feel that the built that supply chain impact.
In fact that.
Deliberately in earnings.
In the second half of the year.
Okay, and then maybe just going back to the backlog.
No.
It does appear that the growth was slowing just this.
Just on the duration. The 70 30 split I guess back half of 2022 versus 23 is this more front end loaded than normal.
So it's interesting for a middle of the year, there is always going to be some mining our power orders that extend into the next year. So I'd say 70, 30 is would be kind of typical for a mid year backlog.
The only thing without.
In the UK, which is apple.
Our largest construction.
We have seen some of that lifecycle.
<unk>.
I would suggest that that.
Hello, Brian .
As customers manage too.
Let's say.
The declines.
The lead times.
I would say that maybe sort of what's the reason.
Okay.
Okay.
But are you expecting in 2023 year on year growth in backlog is that what youre, saying.
Alright, and then again Jacob.
In 2023 is your expectation today that youre going to see growth in backlog year on year.
Our expectations were starting from over 600, and we will continue to build that strongly in the back half of the year.
But we'll have to see where we get this time next year, but order intake is strong mining quoting is strong and so that's encouraging.
At least at that level of backlog already for next year, but we'll have to see ultimately where we built in the back half of that through the first half next year.
Okay I'll leave it there thank you.
Thank you Joe.
The next question comes from Michael <unk> with Scotiabank. Please.
Please go ahead.
Hey, good morning, guys.
Good morning.
Good morning.
I think I think you've got a version of this question each call.
I'll ask it again any ways you've seen.
You've shown us I guess, how this business can take on more revenues as loss cost Kevin.
Specifically spoke to some of the structural improvements that we've all been tracking.
Market conditions have been very favorable.
On gross margins are you.
<unk> pricing discussion is to become a little bit more challenging.
In the near term and maybe are you seeing any signs of that at all today.
So yes.
Yes.
So I think we probably will.
One of the most effective auto systems management price environment certainly.
But I'm really pleased with that.
Progressed.
Okay.
We built capabilities two years ago finalized to help us.
The light product pricing.
Got it.
And we work closely with us on teams to educate them about the data.
We were seeing in the pricing environment.
No.
Those conversations.
So.
There were some challenges around client as it relates to.
The clients.
Moving to a new pricing model.
Hey, rich.
We manage through those.
I will.
Compensation.
Nice inclusiveness.
I feel we're well positioned for the set of cable, but I still remain very thoughtful about the bus environment.
OLED.
Got it thank you.
And then maybe just switching gears here at the Investor Day, Greg I think you called out $250 million of capital deployment through Q2, you've exceeded that just by a bit.
Yes.
Should we expect maybe a little bit of a pullback in terms of capital deployment or is this something that you think is it repeatable annual kind of reinvestment number.
Something that.
Our pace of reinvestment and capital deployment that we can expect.
To recycle.
Yeah. Thanks, Michael So, yes, we had some.
A couple of acquisitions, we're very pleased with as well as we are buying about 1% of our.
Each quarter in terms of share buybacks, so as we highlighted at Investor day.
Yes.
Approximately $250 million.
As a starting point, we will look at the size of opportunities available to us, but ultimately it's going to be competition between share buybacks and acquisitions. We've got a really long checklists for things that from an acquisition that I think we got all of hydrocodone I really pleased they're hard to find.
And so we'll look at thing, we'll look at one off versus the other certainly at the moment, it's really hard client acquisition.
Compete with the accretion of our share.
Share price so.
As of right now, we'd probably balance towards share buybacks will continue to evaluate attractive M&A.
That's helpful. Thanks.
Once again.
To ask a question you May press Star then one on your telephone keypad.
The next question comes from Brian <unk> with Raymond James.
Please go ahead.
Yes, good morning.
Just to maybe piggyback on that last question.
Understanding it's still early days, but could you discuss some of the learnings from hydro maybe how that business has performed relative to expectations.
Yes, sure I'll take that one so yeah, we're really pleased with that.
Had a joint meeting right off the bat with the team a great cultural fit.
Desire to work together on a lot of back office functions and really three that business up to go.
Get more growth.
It's a business that can do smaller bolt ons really bought a really attractive basis and they've actually already executed a couple of those.
So really excited about it I think there's good synergies with customers that's already been a number of integral.
<unk>.
So actually may with all time record financial performance of the business. We continue to work collaboratively to drive that forward. So.
Pleased with that we expect that this points.
<unk> EBIT.
EBIT margins for the UK business and we're at the higher end of that this quarter.
So we're really pleased with it.
Yes.
Brian I've been really.
Average lot of my interactions with the UK team.
It's a great management team and we've got a really.
Paul.
Growth.
The focus right in adults.
To deliver that UK growth lots of upsides and opportunities in Adjacencies.
To support the Davidson business model.
And the items.
Our services to customers and of course this is Jay.
Right.
Expansion.
Opportunity that will continue to explore.
That was deliberate.
The business case of making sure that they are accretive to the UK.
We look.
<unk> Hill acquisition.
Although the actual hydrogen Jamie reported you would say Bob Exane.
On.
What it's like to join US today in the organization and where we have this philosophy is.
Making sure the acquisitions and deliver that that business plan and remain true to their volume competition.
And there are.
Success.
In both cases, we're very happy with those acquisitions.
Lastly.
How they've integrated while we supported.
We'll support them to join us today.
Chip.
Okay.
Slide 10.
Opportunities in the future.
Okay. Thanks, that's helpful. And then maybe just switching gears could you provide some color on customer sentiment I guess around the proposed mining royalty framework in Chile, I mean are you starting to see a higher interest in quoting as we get closer to a resolution or is it just kind of status quo.
Yes, Thanks, Brian I think it's been interesting I mean, we're monitoring closely it's been going on for quite a long time, many waves of news.
But ultimately that many customers are busy.
Copper prices remain attractive at $3 50, with a lower peso their cash margins continued to be strong and their fleets or age.
So we've been encouraged that we've had a lot of order intake.
What I call partial fleet replacement, so those that relate to take long at quite a good pace.
Interesting reaction hasnt been quiet the reaction has been more quoting and frankly.
And it's about technology packages and how.
How do we lower our costs in any scenario.
Royalties are medium mid to reduce costs. They are high the need to reduce costs there as well.
New technology and.
Fleet that can help people reduce their cost per ton and so we've been pleased the number of conversations might continue in some cases stepped up.
Okay. Thanks, that's it for me.
Thanks, Brian .
This concludes the question answer session.
I would like to turn the conference back over to Amanda Hoffman for any closing remarks.
Thank you operator. This concludes our call. Thank you for joining us.
Thanks, Dan.
This concludes today's conference call.
May disconnect your lines.
Thank you for participating and have a pleasant day.
[music].
Uh huh.
[music].