Q2 2023 Kaiser Aluminum Corporation Earnings Call
Greetings and welcome to the Kaiser Aluminum Corporation second quarter 2023 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Kim Orlando without to Investor Relations. Thank you Kim you may begin.
Thank you good morning, everyone and welcome to Kaiser aluminum second quarter 2023 earnings Conference call.
If you have not seen a copy of our earnings release. Please visit the Investor Relations page on our website at Kaiser aluminum dotcom.
We have also posted a PDF version of the slide presentation for this call.
Joining me on the call today are president and Chief Executive Officer, Keith Harvey and Executive Vice President and Chief Financial Officer, you know what.
Before we begin I'd like to refer you to the first three slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward looking statements are based on management's current expectations.
For a summary of specific risk factors that could cause results to differ materially from the forward looking statements. Please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31st 2022.
The company undertakes no duty to update any forward looking statements to conform the statements to actual results or changes in the company's expectation.
In addition, we have included non-GAAP financial information in our discussion.
Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation.
Reconciliations of certain forward looking non-GAAP financial measures to comparable GAAP financial measures are not provided because certain items required cause such reconciliations are outside of our control indoor cannot be reasonably predicted or provided without unreasonable effort any reference to EBITA and our discussion today.
Adjusted EBITDA, which excludes non run rate items for which we have provided reconciliations in the appendix at the conclusion of the company's presentation. We will open the call for questions I'd now like to turn the call over to Keith Harvey Keith.
Thanks, Kim and thank you all for joining us for a review of our second quarter 2023 results.
Turning to slide six.
Our relentless focus on operational execution.
Along with the stabilization of our business as demand in key markets continues to rebound fueled stronger than expected second quarter results.
Our second quarter adjusted EBITDA increased 36% over the first quarter of 2023 to approximately $64 million due mainly to our strong focus on reducing costs across our platform through lower spending favorable energy costs in the quarter improved efficiency.
He is across all plants and rising aerospace demand.
As a result, our EBITDA margin improved 410 basis points sequentially over the first quarter 2023 result to 16, 8%.
Now turning to slide seven.
The demand environment for the second quarter was mixed but was overall within our expectations.
Aerospace demand continued its strong steady recovery towards pre pandemic levels with both shipments and conversion revenue exceeding our outlook.
As a reminder, we benefited from a strong mix of products and the accompanying pricing during the first quarter.
Our momentum continued into the second quarter facilitated by our ability to flex our available capacity due to softening general engineering demand to satisfy strengthening aerospace demand.
We remain well positioned to service the aerospace market with strong customer relationships and multiyear pricing in place for the majority of our associated products.
In packaging we.
We experienced ongoing destocking with beverage customers during the second quarter as higher cost continued to impact consumer purchasing behavior ahead of the highly anticipated summer promotional activity.
That said shipments in the quarter exceeded our expectations as our operations continue to stabilize with conversion revenue was slightly down due to a mix shift and products shipped.
Turning to slide eight.
General engineering, the slowdown in semiconductor plate and other general engineering long products persisted into the second quarter with shipments and conversion revenue flat with first quarter as distributor inventories began to normalize and align with current demand.
Importantly, pricing has remained elevated by historical standards, reflecting the recognition of our customers place on the value we provide them for our unique Kaiser select products and superior customer service standards.
And finally automotive demand continues its slow steady upward trajectory as the industry recovers from various supply chain related challenges.
Shipments were relatively flat versus the prior quarter in line with our expectations with conversion revenue down slightly as pricing reflected a slightly lower price mix shifts in the quarter.
Turning to slide nine.
I'd now like to turn to a brief update on our packaging business at the ward facility as our operations continue to stabilize and recover from the various challenges we faced in 2022.
Importantly, we successfully negotiated a new mutually beneficial for year Labor agreement effective may 15, with approximately 850, United Steelworkers represented employees at work.
We believe the contributions from our work employees will be instrumental in the achievement of our longer term growth objectives for the packaging business as we continue to execute on our strategic plan.
Our role Coke capacity expansion project, which is expected to convert roughly 25% of our current output to higher margin coated products remains on track to be fully operational by mid to late 2024.
As we stated previously we expect to enhance our margins significantly as this new investment comes online and we have already secured substantial new commitments and anticipation of its qualification and production commences.
Additionally, increasing our use of recycled materials as a percentage of raw materials at ward remains a longer term focus.
We seek to increase the inherent sustainability of our packaging products.
We are continuing to evaluate methods to enhance the recyclable content of our products and are very pleased with our progress on this front so far.
As evidenced by our efforts in 2023, our long term view on our packaging business remains optimistic given our ability to effectively compete in a niche market guided by our focus on coated packaging products. The significant investments we are making in the business our.
Tori normalization strategy.
And the continued secular shift to aluminum as a substrate of choice in the North American beverage and food industry.
Yeah.
In summary, the conclusion of the second quarter marked a strong first half in 2023.
We worked diligently to stabilize our operations following the significant challenges we navigated last year.
I'd like to commend our strong team at Kaiser for their unwavering dedication to executing our strategic plan and working safely.
Underlying demand and pricing have been holding up well aside from short term destocking trends continued macro and economic uncertainty in the current inflationary environment.
And looming recessionary concerns.
Nevertheless.
Our niche position in the markets, we serve coupled with strong secular growth prospects helps ensure we are well positioned to grow longer term.
We remain very bullish on the Aero and high strength market in particular with the recovery outpacing our initial expectations.
And remain intently focused on cost reduction efforts efficiency improvements and continued commercial actions to improve our margins for the company as a whole.
I'll now turn the call over to Neal for a more detailed analysis on the quarter Neil.
Keith Good morning, everyone.
I'll begin on slide 11, with an overview of conversion revenue.
Conversion revenue for the second quarter, 2023 was $379 million, an increase of $27 million or 8% compared to the prior year period.
Looking at each of our end markets and detail Aero and high strength conversion revenue totaled $131 million in the second quarter 2023, reflecting a 48% improvement on a 32% increase in shipments over the prior year quarter, and a 7% improvement on a 10% increase shipments over the first quarter of.
2023.
The improvement in conversion revenue over both periods is directly correlated to the strength things a man we've been experiencing most notably in the commercial aerospace on higher pricing levels with our shipments exceeding our expectations.
Packaging conversion revenue was $134 million in the second quarter down 8% year over year due to a 9% reduction in shipments, resulting predominantly from destocking in the beverage can markets.
On a sequential basis second quarter conversion revenue was flat on a 6% increase in shipments over the first quarter of 2023.
While shipments exceeded our expectations for the quarter the mix was more weighted towards lower revenue body stock versus coated products.
General Engineering conversion revenue for the second quarter was $81 million down 9% year over year due to a 30% reduction in shipments, which was partially offset by improved pricing.
While the year over year results were impacted by Destocking at the service center centers for our plate and Rod and bar products in the first half of 2023 pricing continues to remain at a healthy level.
Sequentially, our second quarter 2023 conversion revenue shipments were relatively on par with the first quarter's results.
Automotive conversion revenue was $30 million up 23% over the second quarter 2022, driven by a 16% increase in shipments coupled with higher pricing.
Quarter 2023 conversion revenue declined 3% on a relatively flat shipments over the first quarter of 2023, due primarily to product mix.
Additional details on conversion revenue on shipments by end market applications can be found in the appendix of this presentation.
Now moving to slide 12.
Reported operating income for the second quarter 2023 was $36 million after adjusting for corporate restructuring costs and other non run rate items of $1 million.
Adjusted operating income was $37 million up $33 million year over year and up $17 million sequentially.
Our effective tax rate for the second quarter, 2023 was 14% compared to 23% in the prior year period due to discrete items taken during the quarter.
For the full year 2023 and over the long term, we continue to expect our effective tax rate before discrete items to be in the low to mid 20% range on a current tax regulations.
We anticipate that our 2023 cash taxes or foreign and state taxes will be $2 million to $3 million with no U S. Federal cash tax until we consume our federal Nols, which at year end 2022 were $161 million.
Reported net income for the second quarter, 2023 was $18 million or $1.14 per diluted share compared to a net loss of $14 million or a loss of 87 per diluted share in the prior year quarter.
After adjusting for a total of $3 million of pre tax non run rate items, including the aforementioned operating non run rate items. Adjusted net income for the second quarter 2023 was $20 million or $1 26 per adjusted diluted share compared to an adjusted net loss of $8 million or a <unk>.
Loss of 51 per adjusted diluted share in the prior year quarter.
Yeah.
Now turning to slide 13.
Adjusted EBITDA for the second quarter, 2023 was $64 million up approximately $33 million from the prior year quarter and up $17 million sequentially.
Adjusted EBITDA as a percentage of conversion revenue was 16, 8% in the second quarter 2023, and an improvement of approximately 790 basis points from the second quarter of 2002, and 410 basis points over the first quarter 2023 and.
On a year over year basis, the improvements in adjusted EBITDA was primarily the results of our stabilizing operations. Following the significant supply chain issues, we experienced at our work Rolling Mill last year. In addition to improved pricing to capture the higher cost of alloys and other inflationary costs with a higher mix of aerospace product shipments.
As a reminder, our second quarter 2022 results included incremental costs of approximately $17 million, resulting from two main issues. The declaration of force majeure by our primary magnesium supplier at the time U S magnesium and the resulting failure to provide us with contracted volumes and to the performance.
Of the coal work smelter.
Each required us to replace shortfalls in contracted volumes with higher costs magnesium and metal units. In addition to reducing a large portion of these lingering supply chain issues. Our second quarter 2023, adjusted EBITDA benefited both year over year and quarter over quarter from a higher mix of aerospace shipments.
Improved operating efficiencies and lower energy freight and major maintenance costs, which were partially offset by higher employee related costs now turning to a discussion on our balance sheet and cash flow.
As of June 30 of 2023 total cash of approximately $20 million and approximately $538 million of borrowing availability on our revolver revolving credit facility provided total liquidity of approximately $558 million.
There were $15 million of outstanding borrowings under our revolving credit facility as of June 30, as we continue to invest in our growth capital projects, most notably the ROE coal capacity improvement project in packaging as well as to meet our working capital requirements.
We believe our total liquidity position remains strong and we continue to work towards our previously discussed inventory overhang, primarily resulting from the 'twenty to 'twenty two supply chain issues that our work operation.
We expect our efforts will serve as a source of cash in the second half of 2023.
As a reminder, our senior notes interest costs are fixed at $48 million annually and we have no debt maturing until 2028.
As of June 32023, our net debt leverage ratio improved to six two times from seven eight times at the end of the prior quarter. We continue to target a leverage ratio of two to two and a half times in regard to our capital allocation strategy. We remain focused on supporting kaiser's growth in 2023.
While continuing to return cash to our stockholders through quarterly cash dividends on.
On July 13th we announced that our board of directors declared a quarterly dividend of <unk> 77 per common share reinforcing the confidence our board and management have in our long term strategy for profitable growth and increasing stockholder value.
For the full year of 2023, we continue to expect our capital expenditures to be in a range of 170 million to $190 million with the majority dedicated to growth activities.
Now before I turn the call back over to Keith I'd like to formally welcome introduced Kaiser's, New Vice President and Chief Accounting Officer, Vijay Narayan, who assumed the role effective June seven P.
P. J as previously served as our VP of finance since joining the company in November 2022, and it's been an integral part of our corporate accounting team and headquarters transition.
We thank our former CEO Jennifer Huey for her nine years of dedicated service to the company and for assisting Vijay through this orderly transition and now I'll turn the call back over to Keith to discuss our outlook Keith Thanks Neal.
I'll turn to our outlook for the third quarter of 2023.
Beginning with aerospace on slide 15.
The strong momentum we've been experiencing in Aero and high strength shipments is expected to continue into the third quarter.
As a result, we now believe the recovery in commercial aerospace should approach pre pandemic levels by the end of this year.
An improvement over our previous timeline given ongoing demand strength in our space.
Build rate increases for single aisle and wide body jets are being planned for this year as supply chains continue to improve airline passenger miles continue to increase and declarations by the air Framers support a stronger 2023.
As such we expect that both our third quarter shipments and conversion revenue will sequentially improve by approximately 2% to 4% versus a very strong second quarter 2023.
In addition, underlying demand for business jet defense and space related sales.
Dissipated to remains strong.
As I highlighted earlier, our unique ability to flex available capacity out of our trek would rolling mill to accommodate increasing market demand enables us to operate from a position of strength well into the future with further potential upside should market forces.
Take the need for incremental investments in our capacity.
Turning to packaging now on slide 16.
Looking ahead into the third quarter of 2023, we expect third quarter shipments to improve 1% to 2% compared to the second quarter 2023, as we now anticipate Destocking will continue in the third quarter.
Conversion revenue is expected to be flat since we expect a weaker than normal coded mix as customers adjust volume in light of continued destocking.
But look to achieve contractual volume minimums.
We do not anticipate these lower levels of demand carrying into 2024, but we will continue to assess the situation.
Longer term, we believe our refined strategy, coupled with our strong customer relationships with multi year contracts and targeted growth investment in the new role coat line will support margin improvement and continued long term growth.
Now turning to general engineering on Slide 17.
We expect shipments and conversion revenue for general engineering products in the third quarter to decline from the second quarter on continued destocking activity as well as the associated seasonal decline typical of the third quarter.
Shipments are expected to decline approximately 7% to 10% with conversion revenue down approximately 10% to 15%.
Given the reduced demand for semiconductor and the current environment that has perpetuated the softening in our plate and rod and bar products as distributors continued to align their inventories with current sales levels and import played availability continues to increase.
Importantly, the available capacity at our truckload operation, where our general engineering products are manufactured is opened up additional capacity to service the resurgence in aerospace activity.
Short term hurdles aside our longer term outlook for the general engineering business remains solid given the re shoring of certain manufacturing industry in fact in North America.
We believe our prominent position in the market due to our broad product offering, including our highly differentiated Kaiser select products and strong long term customer relationships ensures we are well positioned to service. This market once a recovery is underway.
Next I'll turn to automotive on slide 18.
Higher build rates for trucks and light vehicles in North America has fueled a modest recovery in the automotive market. So far this year.
That being said, we expect shipments and conversion revenue to decline by approximately 3% to 5%.
Due to typical seasonal trends.
Currently we expect automotive to continue to recover into 2024.
Now turning to slide 19.
In summary, we're pleased with our performance in the strides we have made in 2023 to execute in the current demand environment.
As a reminder, in an effort to minimize the impact of 2022 supply disruptions on our packaging customers, we purchased higher cost metal units in the second half of last year.
These purchases along with reduced sales in the second half of 2022 led to a higher than anticipated metal inventory in balance at the end of 'twenty two that.
That we are continuing to work through.
Accordingly, we expect this inventory imbalance and the resulting higher cost associated with those purchases. So normalized by the end of this year.
Additionally, we remain highly focused on managing elements within our control, including pursuing cost reductions improving manufacturing efficiencies as our operations stabilize and continuing commercial actions to improve our margins.
That said, we anticipate higher major maintenance and other costs to continue in the third quarter, along with continued destocking trends in general engineering and packaging.
As a result, we are anticipating downward pressure on our adjusted EBITDA in the second half of 2023 and expect our third quarter 2023, EBITDA and margins to be in line with our first quarter 2023 results.
Importantly, our strong market position as a key supplier and diverse end markets multiyear contracts with key strategic partners strong liquidity position and the variable nature of our cost structure.
<unk> us well to execute our model our model throughout periods of market cyclicality and or recessionary periods.
From a capital allocation standpoint, we are committed to managing our leverage ratios and continuing to deliver solid returns for the benefit of all stakeholders.
Now turning to slide 21, and a summary of today's remarks.
We look forward to continuing to yield positive results from focused execution against our strategic plan to reinvigorate profitable growth in 2023.
Beyond this year, our long term strategy for sustainable and increasingly profitable growth remains intact.
We continue to believe that our business is capable of achieving conversion revenue of approximately $2 billion.
And an EBITDA margin on conversion revenue in the mid to high 20% range. Following the key investments, we're making now and those we have planned in the near future based on solid macroeconomic conditions.
With that I will now open the call to any questions you may have operator.
Thank you we will now be conducting a question and answer session.
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Please while we poll for questions.
Yeah.
Thank you. Our first question is from Timna Tanners with Wolfe Research. Please proceed with your question.
Hey, good morning.
To explore a little bit more some of the end market commentary if we could on the.
G segment.
How much more can you shift to aerospace just how fluid is that and can you talk a little bit more about the imports and what's going on with that.
Sure.
Well good morning Timna.
The outlook, we have for the end markets is that.
As you stated in the comments that we still see some destocking, especially in plate to continue into the third quarter and seasonal slowness in the fourth quarter most likely.
And all of that is basically we have a large amount of that that we're able to shift over into aerospace plate. So we have considerable capacity, we don't put out numbers, but it has had considerable.
The opportunity to increase additional aerospace and we fully expect that to occur in the second half.
With regard to the imports the rise on the imports we are definitely seeing more and.
More imports, especially on the plate side of the business.
We are expecting further price compression from those imports as they have come in with very aggressive pricing.
However, we are in some pretty strong markets, where the Kaiser select products are preferred by our customers. So while we were not ignoring the compression. We believe we're going to be able to sustained a much better than what they are offering. So so we anticipate that that's coming on due to some slowness in Europe .
Markets, and perhaps others and they are seeing from Chinese imports.
Pick up so, but I think we're pretty well positioned with our distributor supply base.
Two to really manage all of that throughput and improve looking into 2024 when semiconductor is expected to return.
And Ernest.
Okay. Thanks for that and then regarding the packaging and the automotive end markets and packaging in the last quarter, you had mentioned some seasonal strength easily into the summer but it.
We haven't really seen much of it and you're not guiding too much of it so that's.
Still destocking I know another competitor had talked about maybe an end of destocking not sure. If that's the same market.
So that is a packaging question and then any impact from the potential strike in automotives that would affect you or any thoughts on that would be great. Thanks again.
On the automotive side.
We've as we've led here slow recovery, usually dependent upon which.
Which platform you're on but of course, if there is a general strike it looks like it could be broad base. So I'm sure we would be impacted as with others.
But we're hearing nothing from our end customers at this point Timna.
But we're watching.
And then with regard to packaging, yes, as we expected from the last quarter Q3 is generally the strongest period of time, but as we've stated in our in our comments.
We didn't see that manifest itself. So that destocking is absolutely continuing we think it's going to continue through the balance of the year quite frankly.
There will be reasoning to why we have a little bit of improvement in shipments.
As we've stated in the past there are minimums and supply commitments that we have with customers that we would expect.
To hold up through the fourth quarter. So while we continue to expect Destocking will continue we actually think that our shipments should hold firm.
As we as we've alluded to in our comments.
Okay. Thanks for all the color.
Thank you.
Thank you. Our next question is from Josh Sullivan with the Benchmark Company. Please proceed with your question.
Hey, good morning.
Mark.
On aerospace at what point does the growth of the large commercial aerospace side overtake the strength you've seen in the defense space and business jet.
And then in those non large commercial aerospace verticals is there any reason to think that those would cycle off.
No not at this time I mean everything is heading up.
We're continuing to have a good conversation with our end customers and on all products that we provide.
And we're looking for continued growth in this area. The one thing for us at Kaiser will be when does the general engineering demand comeback coupled that with the strong aerospace demand, which will lead us to make a determination if and when we launch.
Into our phase seven investment.
And we have that on the shelf, we are talking with customers about timing.
But meanwhile, in the interim we expect that continued strong growth to be recognized here due to that softness in general engineering, but for right. Now if you look at everything including space business jet commercial large jet I mean it is.
All up and the backlogs are continuing to expand.
We're seeing bill rate increases from all customers come across.
The transom here. So we're just preparing for full speed growth and how fast we can manage that growth part of that might not be in our control. They have other supply chain issues. They continue to really challenge our challenge with so it's not all on us, but but right now were gearing all of our assets.
To look at formidable growth coming up in the next several years.
And then I guess on the General Engineering side, you made some comments about the semiconductor market.
Are the domestic investments you know New York State and elsewhere. They are pretty sizable is that going to be a driver for your general engineering market.
Oh absolutely.
We've had.
Ongoing discussions with a number of our end customers and our service center base on the long term outlook for this business.
Quite frankly, and these are all to be determined but.
Theyre talking a magnitude of double.
The requirements that they have had in the previous.
Couple of years. So we're seeing this as a very strong.
Outlook and opportunity for us going forward.
And again are we are a preferred product in that category. So so we're going to have to make a determination here, how we service both a strong and a stronger emerging general industrial, especially the semiconductor side as well as the growing aerospace market good problems.
They have.
And we think forward recovery in semiconductor it could be.
Second half of next year or into 2025, but but our customers.
Stuff that that that's going to be a very strong market for us and we need to prepare for <unk>.
Continued growth beyond what we experienced over the last several quarters.
And then just as far as some of the incremental costs during the second half.
What structural what's transitory how should we think of those.
Yeah, well we're.
There's a few things theres really three major things that are impacting the third quarter for us.
We do expect higher higher costs in the quarter.
Those are going to be around major maintenance in metal and other costs that we have planned.
In the quarter that we know they are coming at us.
We've also called out the continued destocking, so that's going to be down for us.
As we go forward and and then it's the typical seasonality. So so how much is transit how much is embedded there look I think we're over the hump on all of these challenges.
With some exceptions, we talked about the metal overhang, that's continuing on to the end of the year and that's being pushed out due to the destock.
Destocking, that's taking place in packaging. So, it's just taking us longer to pass through that metal.
But I fully believe that we're starting unless theres. Some large macroeconomic issue and we're still mindful of potential recession out there, we're always prepared to manage through that.
But as the markets continued with the strength in the rebuild destocking continues to to get overwhelmed.
We think it's really strong outlook for 2024, so we will get more into that when we talk in February for the year end results, but but I think we're starting to get into some typical seasonality type things, we feel our businesses have begun to stabilize we still have more work to do.
But we're starting to see some of this.
More calmness and normal operating start to impact us and if our markets continue to <unk>.
Present themselves as we've laid out here, we think it's some pretty clear selling ahead. So again barring any any recessionary issues that may come our way. So I think third quarter is pretty much in my opinion, it's more of a normal type expectation and as we get.
In the second half it's generally.
Slightly slower than the first half typically and then 2020 for right now, we'll get more into that but it feels like things are improving.
And maybe just one last one.
Can you make any comments on the secondary recycling market in packaging, how does that behave during this destocking period.
As you look to add more recycled material as it opened up any opportunities.
Well.
A lot of that.
Josh on that front, a lot of that we've seen a lot of in the marketplace a lot in the aluminum space. There's been a lot of announcements on recycling facilities being being launched in all of those and then and then you look at geography, you look at those things for some of these.
Secondary players are we think those may present, some opportunities for us certainly theyre going to be playing in our playbook.
The industry in Kaiser's not indifferent from the industry, we're trying to move away from prime.
And products in pure metal high metal surety type products, we're trying to move to secondary Recyclability is the key.
That's the way, we're heading we're driving all of our business, but especially the packaging business that our end customers are expecting us to do that it's in alignment with what we went tend to do on sustainability and from a financial perspective, it's in alignment with where we want to go so youre going to see.
See more and more play on the Recyclability recycle centers and I think secondary will also have a major play in all of this that we're all trying to achieve.
Great. Thank you for that.
Thank you <unk>.
Thank you. Our next question is from Bill Peterson with Jpmorgan. Please proceed with your question.
Yes, good morning, and thanks for taking the questions I wanted to talk about the new role code expansion I wanted to see just confirmed its still on time for mid to late 2024 have you spoken in the past about the potential for inflationary.
Risk for the cost outlook of $150 million can you I guess can you give us any additional color on potential overages.
So that's kind of where the project stance.
Sure well first of all your first question and good morning Bill.
<unk>.
Project still on an on time.
We're still looking for the second half for <unk>.
Qualification to began and we expect to have those in place by the end of 2024 as shown there.
When we alluded to the rising cost of that above I don't have a number to present to you, but certainly a higher inflationary costs as well as some design changes that we implemented as we learned more about some of our customer demands. So we've made some changes to what the original charter.
That business was.
We'll we'll give a little more detail to that as those become more certain to us as to what they are but.
And most likely we will do that in the February timeframe I might also add that we intend to have an investor conference sometime early next year, which we intend to go into the packaging the new role coat and all of those opportunities and things. There. So we'll have more more detail for you at that.
Hi.
Yes, thanks for that.
And I guess on packaging you cannot you noted that obviously this destocking is especially pronounced in the beverage side.
It reflects less coated and while foodstuffs rates stable I guess can you describe what's driving that demand dynamic and.
How should we think about that over the next few quarters the mix within the packaging segment.
Well the mix right now what we've got from a Kaiser situation Bill is that we have we have continued to see destocking as we stated.
But we also have.
With.
A number of not the majority of our customers we have commitments.
Volume commitments that we're trying to.
Navigate.
With them and as we try to navigate through some of that we've had to vary some of our typical product mix in order to.
<unk> achieved some of the volume commitments that we have been at we don't expect those to be any mix shift to be permanently in place. We fully expect coated products to continue to grow inside our company long term, especially as <unk> comes along so roll coat will be.
Predominant mix of what we produce out of the warrant facility and what Youre seeing in the third quarter and perhaps in our last quarter Youre, just seeing us maneuvering through some of the volume commitments by the by the customers.
Okay. Thanks for sharing their insights and we'll look forward to following the progress.
Thank you Bill.
Thank you there are no further questions at this time I'd like to hand, the floor back over to Keith Harvey for closing comments.
Okay, well, thank you for being with US today and I look forward to updating you on our third quarter 2023 results in October have a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.