Q3 2023 Arcosa Inc Earnings Call

You need assistance during your conference today.

He's press Star zero.

Good morning, ladies and gentlemen, and welcome to the third.

Third quarter 20 twenty-three earnings conference call.

My name is Shelby and I will be your conference call coordinator today.

As a reminder, today's call is being recorded no I would like to turn the call over to your host Aaron <unk> director of vector relations for Arkansas Mystery back you may begin.

Good morning, everyone and thank you for joining our closest third quarter 20 twenty-three earnings cough.

With me today are Antonio Korea, President and CEO and Calpac CFO, a question and answer session what will follow their prepared remarks.

Copy of yesterday's press release and the slide presentation for this morning's call are posted on our Investor Relations website I R. Dot are close at Dot Com a replay of today's call will be available for the next two weeks instead.

Instructions for accessing the replay number are included in the press release.

A replay of the webcast will be available for one year on our website under the news and events tab.

Today's comment and presentation slides contain financial measures that have not been prepared in accordance with GAAP reconciliations of non-GAAP financial measures to the closest gap measure are included in the appendix of the slide presentation.

In addition, today's conference call contains forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward looking statements. Please.

Please refer to the company's S. C C filing for more information on these risks and uncertainties, including the press release, we filed yesterday and a Form 10-Q expected to be filed later today.

I would now like to turn the call over to Antonio.

Good morning, Thank you for joining us to discuss our third quarter results.

Look for the remainder of 10 to 33 please.

Please don't reach for it.

Or close to that of course, they generate a double digit growth in revenue and adjusted they beat the normal lighting for the date, that's drove destroyed studies business.

Solid financial results underscored the resilience.

Versify portfolio I'm deeply hassle, bringing leveraged our secret <unk> businesses.

Production volumes improve.

Starting with construction products stroke pricing of recovery natural language gets volumes drove 9% adjusted it beat that girl.

We made progress from her improvement plan for a specialty materials and margins for the business increase equation.

I am pleased to announce that we recently closed on three bolt on acquisitions in construction products.

In September we acquire to stabilize produce certain counting our presence in the fast growing north Houston Martin.

Following order and we acquired two recycled aggregate producers.

Spending our president's in Phoenix, and entering the <unk>, Florida recycled market.

Our newly acquired businesses can slowly that hot six locations predominantly in central Florida from Orlando to dump.

Combined these three equity seashores represent an investment of approximately 41 million and I'd I'd, rather attractive multiple of roughly seven times the beta.

We continue to have an attractive.

Additionally, Bolton opportunity.

Well engineered structures revenue increased segment profitability was below our expectations.

Ah repeat destructions business, what's what's impacted by several headwinds, including a shifting production makes a certain high margin orders what are the lead to 2024 as well as an unfavorable foreign currency impact.

Additionally, we experienced operational challenges.

Moving equipment downtime, which required the outsourcing of some process this up higher cost.

During the quarter, we began implementing correcting actions that enabled initial margin improvement in the month of September.

On the positive side of wind business perform well in the third quarter, even as production volume remained relatively low.

Continued focus on driving upper east inefficiencies, we anticipate our when business will be profitable and then they beat the basis for the year before considering the net benefit of tax credits. This.

<unk> compares favorably with I already have an expectation for breakeven they beat the performance for 2023.

Transportation products generated strong results driven by volume on pricing growth in both Barton steel components.

While the bar towards the ring thing during the quarter was modest inquiries continued to be healthy at our backlog backlog nearly doubled on a year over year basis, providing provokes from disability well into 2024.

In summary, I am pleased with our solid year to date financial performance. We have continued to advise our strategic priorities expanding our <unk> business is both the lemonade and organic puzzled projects.

At the same time with position are cyclical businesses to capitalize on the expected improvement in market fundamentals next year.

Finally, our balance sheet, the liquidity position remains strong providing flexibility for capital of location Gail.

Gail will now provide detail on our financial results for the quarter and I will return to these calls are updated outlook Gail.

Thank you Antonio I'll begin on flight 11 to discuss our third quarter segment results, starting with construction products revenues increased 7% driven by higher pricing across our construction aggregates and specialty materials businesses.

[noise] recovery and volumes of natural aggregate as well as organic volume grocery acquisition related contribution entrenched short.

Adjusting adjusted segment EBITDA increased 9% year over year, reflecting strong pricing games and reduced inflationary cost pressures free adjusted segment EBITDA margin was flat is higher margins and natural and recycled aggregates were offset by lower margin specialty material.

Turning to natural aggregates pricing momentum remains strong across our markets with average organic pricing up high single digits unafraid adjusted basis led by our West region.

Third quarter natural aggregates volumes increased by high single digits, driven by strong growth and our Gulf Coast in Texas region, partially offset by modest declines in our West in Ohio River Valley region.

[noise] pricing and lower inflationary costs, particularly for diesel resulted in year over year margin expansion.

And recycled aggregates, we continue to focus on the value of your volume pricing was up significantly in the third quarter driving year over year margin expansion. Despite a decline in [noise].

Within special K materials overall demand remained healthy particular, particularly for our industrial and flooring plaster and lightweight aggregate.

Missing games were solid for these product lines, while multifamily starts have receded from peak and Submarkets, our customers backlogs are strong and plaster supply remains constrained.

Third quarter margins decreased year over year, but improved significantly from the second quarter as we made progress on our operational improvement plan and increased throughput we've.

Remain focused on driving continued margin improvement in this business.

Finally revenues and our trench shoring business grew 25 per cent on higher organic volumes as well as contribution from the Houston acquisition that closed earlier in the year.

<unk> also expanded slightly in our backlog an inquiry levels remain supportive of growth in 2024.

Moving to engineered structures on slide 12, adjusted segment EBITDA declined, 6% and margins for 140 basis points lower year over year Normalising for the storage tanks divestiture.

Wind towers business performed well and benefited as anticipated from $5.6 million of net a M. P tax credits, which more than offset the impact from lower wind tower volumes.

Results for our utilities structures business, we're below our expectations. Although revenues grew at a solid double digit pace led by strong unit volume ground several factors impacted segment profitability during the quarter.

There was a shift in product mix at certain higher margin projects were pushed into 2024 and were substituted with lower margin bid work from an operational standpoint equipment downtime at several locations resulted in additional expense and production inefficiencies.

Lastly, a stronger peso impact of the profitability of manufacturing operations in Mexico. The peso began appreciating relative to the dollar earlier in the air and was that more than 15% in the third quarter compared to a year ago levels and prior quarters, we overcame negative currency effects through operating efficiencies.

Turning to our backlog we ended the quarter with combined backlog for utility wind and related structures of one and a half billion dollars approximately in line with the second quarter as order activity and utility structures kept pace with shipment.

Moving to transportation products on 513.

Revenues were up 30% driven by volume growth and improved pricing and those are barge in steel components businesses adjusted segment EBITDA more than tripled with margins, reaching a three year high this significant improvement was accretive to our consolidated margin, reflecting the significant operating leverage and these businesses.

We received large orders of $21 million predominantly for Harper barges, representing a book to Bill 0.3.

We ended the quarter with total barge backlog of $240 million, approximately 75% of which we expect to deliver during 2024.

Conclude on 514 with some comments on our cash flow and balance sheet position.

Degenerated $44 million of operating cash flow during the quarter, which was down a year over year due to a 29 million dollar increase in working capital primarily driven by higher overall volumes and the time I have a collection of receivables, we anticipate a moderation in working capital needs in the fourth quarter, but our expectation is that work in caps.

It'll be of use of cash for the full year.

As we continue to make progress on the organic projects underway and construction products and engineered structures net capital expenditures were $42 million during the quarter, an increase of $12 million a year over year third quarter free cash flow was $2 million with one quarter remaining we have tightened our full year Capex range two two.

200 million to $210 million.

We ended the quarter with net debt to adjusted EBITDA, one time in available liquidity of $633 million.

During the quarter, we amended our credit facility to increase our revolver from 500 million to $600 million extend the maturity date to 2028 and repay in full hour 135 million dollar terminal.

Missing a financial covenants remained unchanged.

Healthy balance sheet and liquidity continued to provide ample flexibility to pursue disciplined capital allocation I will now turn the call back over to Antonio for an update on our outlook. Thank you Gail [noise] of.

Of course, I'll continue to perform well I need to unplug to generate double digit growth in both revenue and adjusted it beat that for 2023.

Please turn to like <unk>.

Even though it's solid you today performance in our visibility into the fourth quarter, we're confident in our 2023 revenue and adjusted to beat that <unk>.

The mid point of our guidance ranges, we forecast, 11% revenue growth and 30% that just to repeat the girls on a year over year basis Normalising for the storage dug diversed.

Consistent with our prior guidance or 2023, I, just said it'd be the forecast assumes estimated wind related netbacks credits or between 17, and 22 million bending silent clarification from the I R. S.

Please turn to slide 17 to review the outlook for our growth businesses.

Construction products pricing across our portfolio has remained strong public.

Probably construction activity is accelerating at both the federal and local levels and we're seeing Chelsea the Monday multifamily nonresidential those heavy industrial construction.

The volume in single family residential has stabilized in recent months the near term outlook for this specific market is less clear given higher mortgage rates.

An engineer structures market fundamentals remain positive.

Major growth drivers are in fact.

Utilities continue to allocate significant capex doors, Greek hardening initiatives and infrastructure that connects renewable sources to the greed you know the.

<unk> Road infrastructure spending continues to fuel demand for traffic strokes was broke.

<unk>, we have seen order softness due to <unk>, reducing capex.

<unk> following significant levels of five G investment.

Overall order activity embattled disability remains strong reinforcing are positive view cause.

As I mentioned before we are already executing on the Brooklyn van to increase our margins and are seeing early signs of progress we.

We expect <unk> to improving the fourth quarter, even though some equipment will not be operating at 100 per cent capacity.

Let's do an outdoor cyclical businesses starting on slide 18.

Aided by any incentives from the inflation reduction that the wind industry is expected to enter a multiyear upcycled indecent.

In this environment, we're making necessary preparations ago across our footprint to optimise production capacity.

New Brown is vasil at the new Mexico, where stuffing <unk> I'm working on building modifications.

Our expectation remains that we will deliver towers from this facility starting in mid 2024.

In addition to this efforts were making incremental investments across our exist existing plans to further enhance our manufacturing efficiency and flexibility.

During the third quarter, we were pleased to receive us more qualification in order for a new customer for $2 with a livery expected <unk> before.

We continue to have provoked pick up conversations with our customers for additional projects with deliveries beyond 2024.

We remain confident in the growth outlook for the wind power business, which serves only the onshore market while.

While order fulfillment these complex and requires time to negotiate our backlog of about $1.1 billion supports our expectation for increase production volumes and strength and profitability next year.

Turning to slide 19, our transportation broke segment segment performed well in the third quarter with a barge business deal in the early stages of a <unk>.

March backlog at the end of the quarter was up 87% on a year over year basis under squirrel, <unk> growing demand for our barges in strengthening our production disability into 2024.

We remain confident in the meat the amount for this business some customers recently have delayed purchasing decisions.

Unusually low water levels of the Mississippi River system, which should be temporary higher interest rates waited on the the demand for the quarter.

We do not believe these concerns are reflective of the fundamental shifting customer sentiment.

In this environment, we have taken measures to maintain or manufacturing flexibility and we continue to have strong visibility into our production schedule for 2024.

In closing costs as well position for continued growth in the fourth quarter to 2024 would significantly improve visibility cyclical businesses, while our growth businesses benefit from Kelsey pricing on demand environment.

<unk> outlook will remain focused on the execution of our strategy and strengthen your capability to deliver on the many growth opportunities across our portfolio.

Before I open the call to questions I want to recognize will there. It goes a theme for their hard work.

Yesterday was our fifth anniversary as an independent public company.

C C to forget how much his company has changed in just a short period of time.

We have come a long way when convinced that the best is yet to come I also want to thank all their closest stakeholders are employers or employees customers investors of suppliers for their support and confidence during these five years and I would like to open the call for questions.

Thank you at this time, if you would like to ask a question. Please press the star N. One on your Touchtone phone you may remove yourself from the queue at any time by pressing star to once again that is star N. One to ask a question will pause for a moment to allow questions too.

Q.

And we'll take our first question from Garrett choice with Leap capital.

Oh, Hi, Thank you wondering first off just on a construction project Sir.

Volume growth, which is stronger than we had anticipated.

Some favorable geographic Mexico.

Wondering if you could go maybe a little bit more detail by and mortgage and what you're seeing you know withdrawal.

Mmm your ballroom games.

Sure. Good morning, Eric This is Gail I'll I'll take that yeah. We were pleased as well as I mentioned in my comments volumes for natural aggregate throw up high single digit that's Ah.

First of all I am increase we've seen.

Really end up in about a year so to your question looking at the markets volley.

<unk> tore up in Texas, If you recall, we said volumes were flat in the second quarter. So you know seeing some some continuation of positive. They're you know certainly positive weddings and the state nrem doing well and revenues. Okay. We're seeing some new neighborhoods in the north and South D. F. W. Area. So we were we were encouraged by.

That we did have a new Greenfield, Texas that we didn't have last year that is performing well and we had good stabilize volumes and in down in Houston in the Gulf region. We also had volumes up they were up in the second quarter as well LNG in a refinery project work.

It's healthy D. O T work is healthy there's a limited gravel availability in the Gulf Coast. That's also helping.

Where we did see volumes down as I mentioned within the Ohio River Valley in the west, but they were they were down slightly.

So we did see volumes up sequentially, so where where encourage it as early as I said it. It's it's the first quarter in a year, but but we're encouraged what we're seeing from a volume perspective.

One thing I'd like to mention that you know it was my remarks, but.

I think we also have during the quarter across our portfolio in the U S.

Is significant.

Disruptions from the heat that'd be experienced throughout the country.

And when the we have a significant amount of hot base here in Texas, specifically in that slowed construction the loft.

And.

All sorts of impacts across our portfolio, even in our plans no turnover.

Turnover increased absenteeism increased but I think we soldier in the corner and this is just that I don't have a number to give you before but I think that this third order had a quite a vanilla <unk> related to weather.

Maybe just to add onto that a little bit more color on the the weather side, we probably saw that even more pronounced in a recycled aggregates business, we did see volumes down and recycled in the Dallas Fort worth area in the corner.

Okay understood Netflix thanks for all the detail wanted to ask.

Applications that you're in announced recognizing the relatively small but wondering.

Particularly interested in actually the entrance into Florida do you think that this could be a new platform for your really good opportunity just.

A bit of a one off.

<unk>.

<unk> more than anything.

We we had a small operational ready in Florida that that came with it was stolen point acquisition a few years ago.

So I need some market that we really like it.

There's not a lot of a consolidation, especially in the recycled side, but we do see a once we enter into a market.

We start seeing our pipeline increase we just simply get more more calls from local small companies that are interested so it is a platform that we want to develop you send that market. We're really interested in the we we already have additional opportunities in the pipeline.

Got it Uhm last question for me just the project on my knees and utility structure.

Any any visibility as to what was driving bad and potentially.

Sure.

The.

Volume ships.

I think it's probably more of a 2020 for sure.

Yes, I <unk> I wouldn't say, it's only utilities I would say you will see this <unk>.

The industry is to the amount is very very strong.

It feels like we're seeing with winter hours <unk> sometimes.

Projects get announced and there's there's a lot of noise around them.

When brief start hitting the ground you your face reality now and even though people say well now there's more layoffs happening and things like that the reality is that in in the in the Blue collar labor for is there has not been a shortage of jobs. So they're still it's hard to get people a <unk>.

Meeting for for for transmission towers for wind power farms for all these things speaking time, so I I the way I would think about this our our our growth is not going to be a straight then I think we're going to see this up some balance and as we as we get go through this bubble mixed up we have to be break.

As we grow so that's to me that is the biggest deal the biggest issue happening.

Understood. Thank you for that and best of luck.

Thank you.

And we'll take our next question from <unk>, which Stevens.

Hey, good morning Antonio Gill.

Good morning.

I guess I wanted to touch on kind of sticking with construction products here pricing has been strong you know it sounds like.

Generally the outlook in the market is you know 24 could be another good year for pricing. It is there any color that you could give us on you know how you were thinking about your pricing outlook on the construction products out of business.

You know the the I think you know what you hear from from our peers and their competitors is similar to what we were trying to do I think we have pricing out the increases right now we have another price increase for January.

You know, where we're going to try to continue pushing pricing and prioritizing pricing over volume.

We will see some areas, where we can get both a and that's going to be great, but we're going to be trying to focus on maximizing our margins and and.

Even though I again people say wait inflation is down years, but still you're not in that.

<unk> speaking back up a little bit and the inflation is not completely under control. So we have to continue to push our pricing.

Yeah Yeah.

Alright that that makes sense and.

I guess on.

Speaking of costs. You know you you mentioned elevated kosten specialty materials is.

It sounds like that's getting a little bit better, but it is that gonna be still kind of be a factor going forward and and.

I guess I'll just stop stop there.

Yeah. So so specialty materials, we mentioned in the second order a we had a really really bad second quarter for specialty materials.

Lots of <unk>, a and but I would say more of that there is a cost factor there, but I I would say, it's more a throughput factor when you look at them.

The plans for specialty materials are much more complex their industrial industrial plants.

We have some maintenance issues or another things that.

A lot of laps and <unk> third overdoing, the second quarter. That's improving we are we are we were able to keep our people are much more our plans are improving quite a bit in terms of scale made sure that we had a significant improvement in specialty materials pretty significant improvement in the in the <unk> in the third quarter. So I was very pleased.

<unk> continues to look well he's was literally that it was better than the third in the cycle.

Trent throughout the third order sequentially August and September September was better than novelist et cetera. So.

Mm mm.

I'm pretty happy with what deemed there is doing a pretty important piece here is that the demand for the product is very very strong.

So it's really in our hands to continue to drive this improvement plan that we have we have a great team.

The month is there in the margins are there and the everything is ready for us to continue to improve margins there I'm thinking back to become a business that's.

Can be according to our margins.

Right Yep Okay.

Thanks for that color and then.

I'm sorry, if you touched on there and I know you touched on it but so sorry to have to come back to it again, but for just a little bit more.

Detail on the transportation side, you know you you called out low river levels, I think orders it kind of impacted orders a little bit, but how're you kind of thinking about just given you know where we are in the cycle. How are you thinking about that businesses, we kind of look in 24 Directionally yes.

Well, let me talk first about the river levels. When you look at it statistically that in the last couple of months have been very very low.

He.

Historically.

But if you look see suddenly it's the normal season for this to happen.

So since a couple of weeks, we've received rain and elevens are coming up quite a bit. So I think we we don't expect it to be an issue going forward in the year or early <unk> 24. So.

But when that happens you know this more cyclical businesses I would characterize the mood in our customers as well.

More more volatile than in other businesses. So when things go buying a order you will get those all pessimistic when things go great you'll get all optimistic.

So so it's a it's a.

<unk>, we we expect it to be become better <unk>. The important aspect I'll go back to the fundamentals of the business day.

Replacement market is there the demand is there the customer sentiment this positive that <unk> need to be replaced we have a good battle of into 2024, we have a significant portion of our sales already let's say a.

It is secured and that allows us to to to work with our customers from timing on but I don't want to give away my capacity. So we want to focus on our margins.

<unk>, we have time to work with our customers on getting new orders et cetera. So we have time I'm confident that the demand is there and we're going to get the orders to fill 2024 and and that is going to be a better year.

Got it.

Antonio for all the color much appreciated and best of luck for the as we go through the rest of the year.

Thank you very much.

And we'll take our next question from Britain.

B a davidson.

Alright, great. Thanks, Good morning, Antonio could you speak a little more to the issues in the engineered structures segment of me. It sounded like there was the next issue, but maybe some inefficiencies in the system, maybe now how long does it take for you to work through that.

The facilities, where you want them to be in and then I guess.

You know how do we how do we think about the margin profile the business if any different.

2024.

Yes, So let me start with with one that has been cooking for the euro scaled mentioning her script.

We have two of our biggest plans are in Mexico.

And uhm, a when you have manufacturing expenses.

Salary said everything depreciation.

<unk> specials, when you translate into dollars on the dollar up here a year ago was 21 and now it's at 18, but during the quarter.

Below 17 specials.

$30, so you'd appreciate it pretty significantly.

If you look historically and I'm from Mexico, you look historically, that's once in a lifetime thing that happened, but it happened and that that's okay.

So we throughout the year, you would have been hitting those but through efficiency. Some really good margin orders, we have been able to to not even talk about it. If you remember her cause we haven't even talked about it because we have been able to overcome it.

This this quarter I mean, it was no different except that the case will appreciate it more and we had this operational issues that I've mentioned, we have several equipped been down in a few facilities.

Forced us to go outside and <unk>.

And also the the larger larger Martin margin orders I've moved into 2024.

I mentioned in my remarks, I expect <unk> to improve in the fourth quarter as we <unk>. The peso has improved a little bit that should help but also as we the rumpled power facilities that have been shut down and some equipment I mentioned and we will not have all of our equipment ready for the fourth quarter. So the margin improvement should be <unk>.

It should be let's say over time, you should see improvement and then into 24 as we get into the bigger margin order some and we use a smaller margin orders, we should return to the more normalized margin. So so this is you know some of the problem was self-inflicted we have things to do than we we have to learn the lesson.

Some others outside but I think the <unk> the moslem potential Martin profile for the for the business should not change.

Okay, and then can you talk about the the demand climate you see for wind.

Outside of the large order that.

Tied to the new Mexico investment.

What do.

What does it look like outside of that from customer demand perspective.

Sure I'm going to start by saying, what I think so obvious but I want to read the <unk> because.

When I sit down with people, sometimes they asked me about offshore wind and we're not involved in offshore wind alpha when they say.

Very complex environment.

We we we are we're not participating this that's that's a good thing.

A so we are <unk> only know onshore wind and you're not sure when.

Things are different.

Going back a year or a year and a half ago, we have no tax credits the industry was slowing down.

And if you remember at that time.

<unk> when the inflation reduction that got approved I I my expectation, whether it will take longer for it to really kick in we didn't expect this larger order the reset the beginning of the of the year and we thought it was going to be some time 12 to 18 months for the industry to start working through permitting and all those things.

We got this be ordered at the beginning we're starting a new facility, we expect to start delivering powers in 2020 2024, and we have we have good backlog for 2024 <unk> all our other three plans.

Having said so there's still things to work out in terms of the tax rates have not been completely refined.

By the I R S.

Industry, starting to go through this permitting and bottlenecks in the in the system. So.

It's going to be choppy I don't expect this to be every quarter, we get a big order I think we're going to go through a few quarters, where there's no orders I'm totally we get a big order the phone <unk>, what what'd I say my remarks, we all set up for a better 24, then twenty-three, even our production and and I'm a margin profile.

And we have time with our plans in good shape to be able to wait for those big or the orders to to materialize them and.

<unk> 2024, so 24 should be better than 23, and then we should be ready to continue to ramp up as we move along.

Okay.

I guess this last one on construction products to the natural aggregates business in particular, I mean, giving us back then.

You've seen what seems to be sort of a volume inflection we'll call. It here.

Quarter of you.

Are you more confident that you can continue to increase volumes in 2024 for that bedroom.

Well you know.

As Gail mentioned in her.

Comment before.

We so flattening volumes in the second quarter, we saw an increase.

<unk> in this quarter, we are as much smaller company. So that's a little more beer. So we have more probably more volatility in a regional business has done some of them probably wider net and more geographic diversification.

We are in great <unk> geographies and by being great Geography's means probably we have very good demand fundamentals.

But there's still a lot of uncertainty what we also.

Think is that the the the infrastructure bills should start kicking in and it should help us compensate.

Reduction in volumes in housing another area, we are seeing heavy manufacturing built throughout the country in a regents so.

So I think everything set up for for for some of the demand factors to be strong so strong.

I I think.

We have a lot of confidence in her pricey. So what I can tell you is that we are confident that our pricing will be able to to.

To help us with some volume improvements.

Get a.

A positive mix pricing volume 420, 24, and continue increasing our margins.

I'm going to go back also to your voice from the winter was the only thing I forgot to mention.

We mention the small order that we receive four two towers, it's a very important step for our calls so because.

Cause you know where the the industry doesn't have many many customers so having a new customer that's a large customer with a heavy presence in the U S.

Important for us to qualify and be able to to to get another a source of large orders in the future. So I'm excited about that.

Understood. Thank you Antonio.

And once again to ask a question. Please press star N. One on your telephone keypad.

We'll take our next question Julia Ramirez.

Company.

Morning, Antonio <unk>. This is Alexander may not familiar.

Morning.

My first question is expanding on something ask a little earlier and so on macro.

Speak to the broader impact of higher interest rates and the general economic uncertainty across the portfolio.

For example, I'm thinking about you know just switch business units are most affected versus Brazilian at the moment.

Yeah. This is <unk>.

You know I would say that the the biggest impact sports housing.

Or mortgage rates continue to be you know a b a.

A.

<unk> mother either of the month.

<unk>.

And then any one of our customers that the highest leverage I think has if you have to borrow to buy things <unk> I would say largest probably is one of them.

But but if you look at the you know for example transmission towers.

Those things are.

I mean of course that you teach have leverage and everything but they are they are they.

They are pretty installation is related to demand is very strong I would say the same thing.

So most of our projects have the role fundamental is that right.

Most of our products have their own from the Menthols out let's split the construction folks is one thing the other ones are they have their own fundamentalists that are really drive drive herself visit ma'am.

Interest rates of course affect the whole economy, so so I'm not.

I'm not saying it doesn't affect them just saying it's not the the is.

Is not the the deciding factor too to buy a bar to buy a transmission tower when the.

The construction side.

Of course housing, but also it affects you know multifamily and all this other projects. So we're not immune to interest rates are of course, we're not.

But I think we've given our backlog in giving given our our.

<unk>.

Diversification wearing really good shape to to be able to to overcome this and I'll also talk about our balance sheet, we have a strong balance sheet Gail nation, we just.

<unk> some of the that we had and we have a a very very good balance sheet to be able to.

Two I located capital correctly and also when you look at the <unk> in this environment, having a strong balance sheet with high interest rates.

It also per cent support you it is for us to be able to take advantage is that the other companies might not be able to able to do in some of the private equity firms might not be able to compete in some of the processes et cetera. So there's risks than those opportunities.

Yeah very helpful color. Thank you Antonio.

You know we've spoken a lot about the margin impact today. So I wanted to just touch on a barge fitness could you give us a sense of how orders my trying to the fourth quarter.

Yeah, I mentioned in my remarks that that.

<unk> is that.

The river West West of an issue during the third quarter, we don't expect it to be doing the the second part of the fourth quarter.

And.

It you know I I think our customers if you talk to them.

They need the barges they want the barges.

I'm still prices, which I have not mentioned in my remarks, but it's important to have come down quite a bit them. During the third quarter, we got to a very.

Appealing price for steel, it's picked up a little bit right now so the conditions are there for for for us to be able to replace.

Is to replace new bodies portrayal call is coming up a little bit, but it but it.

We're very close to the levels up.

We had a year ago, when we closed all those large order so.

You know, it's not going to be again, just like when this is not going to be something that every quarter, you'll get a one to one book to build.

But I'm confident that the demand is there and we have time as I said, we have a pretty significant portion of our production already.

Schedule, we're going to be a cautious in the way, we we accelerate a ramp up but we were confident in the midterm demand factors for the business.

Thank you for the color very helpful. That's it from us today.

Thank you.

And it appears that we have no further questions at this time I will now turn them.

Program.

Remarks.

Thank you for joining us today at our third quarter earnings Conference call. We look forward to providing an additional update next client.

And that concludes today's teleconference. Thank you for your participation you may now disconnect.

[music].

Mmm.

Uh-huh.

Mmm.

Mhm.

Mhm.

[music].