Q1 2024 Kaiser Aluminum Corp Earnings Call
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Operator: Greetings and welcome to the Kaiser Aluminum Corporation first quarter 2024 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.
Greetings and welcome to the Kaiser Aluminum Corporation first quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only.
Operator: A brief question and answer session will follow the formal presentation.
Operator: 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 with Investor Relations.
Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando, with Atto Investor Relations. Thank you. You may begin.
Kimberly Orlando: Thank you you may begin. Thank you good morning, everyone and welcome to Kaiser aluminum first quarter 2024 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.
Kimberly Orlando: Good morning, everyone, and welcome to Kaiser Aluminum's first quarter 2024 earnings conference call. If you have not seen a copy of our earnings release, please visit the investor relations page on our website at kaiseraluminum.com. 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 Neal West.
Kimberly Orlando: We have also posted a PDF version of the slide presentation for this call.
Kimberly Orlando: Joining me on the call today are president and Chief Executive Officer, Keith Harvey and Executive Vice President and Chief Financial Officer, Neil what.
Kimberly Orlando: Before we begin, I'd like to refer you to the first four slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitutes 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 31, 2023. The company undertakes no duty to update any forward-looking statements to conform them to actual results or changes in the company's expectations.
Kimberly Orlando: Before we begin I'd like to refer you to the first four 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 expectation.
Kimberly Orlando: 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 2023.
Kimberly Orlando: 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.
Kimberly Orlando: 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 for such reconciliations are outside of our control and or cannot be reasonably predicted or provided without unreasonable evidence. Therefore, any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix.
Kimberly Orlando: In addition, we have included non-GAAP financial information in our discussion.
Kimberly Orlando: Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation.
Kimberly Orlando: Reconciliations of certain forward looking non-GAAP financial measure to comparable GAAP financial measures are not provided because certain items required for such reconciliation are outside of our control <unk> cannot be reasonably predicted or provided without unreasonable effort.
Kimberly Orlando: Any reference to EBITA and our discussion today it means adjusted EBITDA, which excludes non run rate items for which we've provided reconciliations in the appendix.
Kimberly Orlando: Furthermore, slide five contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvey.
Kimberly Orlando: Other slide five contains definitions of terms and measure that will be commonly used throughout today's presentation.
Keith A. Harvey: At the conclusion of the company's presentation, we will open the call for questions.
Keith A. Harvey: I'd now like to turn the call over to Keith Harvey Heath.
Keith A. Harvey: Thanks, Kim. And thank you all for joining us for our review of our first quarter 2024 results. Turning to slide 7.
Keith A. Harvey: Thanks Kim.
Keith A. Harvey: Thank you all for joining us for a review of our first quarter 2024 results.
Keith A. Harvey: Turning to slide seven.
Keith A. Harvey: The year is off to a good start as our first quarter adjusted EBITDA of $62 million surpassed our internal expectations. Business conditions continue to normalize, and operating efficiencies improved across all platforms. Both the general engineering and automotive end markets are off to a faster start than expected at the beginning of the year. Aerospace and high-strength, while stronger year over year, were softer than our original expectations.
Keith A. Harvey: The year is off to a good start as our first quarter adjusted EBITDA of $62 million surpassed our internal expectations.
Keith A. Harvey: Business conditions continue to normalize.
Keith A. Harvey: And operating efficiencies improved across all platforms.
Keith A. Harvey: Both the general engineering and automotive end markets are off to a faster start than expected at the beginning of the year.
Keith A. Harvey: Aerospace and high strength, while stronger year over year was softer than our original expectations.
Keith A. Harvey: Our efforts to control costs and implement our metal sourcing strategy gained traction in the quarter. As we move through the balance of 2024, we expect to continue to make progress on these initiatives, positioning the business for the next phase of our strategy with the full commissioning of Rollcoat No. 4 investment at our Warwick Packaging Facility in 2025. I'll now turn the call over to Neal to discuss the quarter in more detail, and then I'll be back to discuss our outlook. Neal? Thank you.
Keith A. Harvey: Our efforts to control cost and implement our metal sourcing strategy gaining traction in the quarter.
Neal: As we move through the balance of 'twenty 'twenty four we expect to continue to make progress on these initiatives positioning the business for the next phase of our strategy with the full commissioning of the Roku number for investment at our warrant packaging facility in 2024.
Keith A. Harvey: I'll now turn the call over to Neal to discuss the quarter in more detail and then I'll be back to discuss our outlook Neil.
Neal E. West: Thank you, Keith. Good morning, everyone.
Neal: Thanks, Keith and good morning, everyone.
Neal E. West: I'll begin on slide 9 with an overview of our shipments and conversion revenue. Conversion revenue for the first quarter was $367 million, a decrease of $2 billion or 1% compared to the prior year period. I will then discuss each of our end markets in detail. Aero and high-strength conversion revenue totaled $137 million in the first quarter of 2024, reflecting a 12% improvement on an 8% increase in shipments over the prior year quarter. The improvement in conversion revenue reflects a mix of higher-priced products, along with growth in shipments.
Neal: I'll begin on slide nine with an overview of our shipments and conversion revenue.
Neal E. West: Conversion revenue for the first quarter was $367 million, a decrease of $2 billion or 1% compared to the prior year period.
Neal E. West: Looking at each of our end markets and detail here.
Neal E. West: Oh and high strength conversion revenue totaled $137 million in the first quarter 2024, reflecting a 12% improvement and an 8% increase in shipments over the prior year quarter.
Neal E. West: The improvement in conversion revenue reflects a mix of higher priced products.
Neal E. West: Along with growth in shipments.
Neal E. West: Packaging conversion revenue was $118 million, a decrease of 11% year-over-year, due primarily to a 7% reduction in shipments of higher-priced coated food products driven by the expected first quarter 2024 de-stock. General Engineering Products conversion revenue was $80 million, up slightly year over year at a 2% increase in shipments, partially offset by a lower value mix. And finally, automotive conversion revenue was $31 million, which was relatively flat compared to the first quarter of 2023, driven by a 4% reduction in shipments, offset by improved pricing. Additional details on conversion revenue and shipments, I.N. Market applications can be found in the appendix of this presentation.
Neal E. West: Packaging conversion revenue was $118 million, a decrease of 11% year over year due primarily to a 7% reduction in shipments of higher priced coded food products driven by the expected first quarter 2020 for Destocking.
Neal E. West: General Engineering products conversion revenue was $80 million up slightly year over year, and a 2% increase in shipments partially offset by a slower value mix.
Neal E. West: And finally automotive conversion revenue was $31 million, which was relatively flat compared to the first quarter 2023, driven by a 4% reduction in shipments offset by improved pricing.
Neal E. West: Additional details and conversion revenue and shipments by end market applications can be found in the appendix of this presentation.
Neal E. West: Now moving to slide 10.
Neal E. West: Reported operating income for the first quarter 2024 was $33 million after adjusting for an up for operating non run rate items of approximately $1 million. Adjusted operating income was $34 million up 70% year over year on improved operating results offset by a two.
Neal E. West: Now moving to slide 10, reported operating income for the first quarter 2024 was $33 million. After adjusting for an op for operating non-run rate items of approximately $1 million, adjusted operating income was $34 million, up 70% year over year on approved operating results, offset by a two and a half million dollar increase in depreciation. Our effective tax rate continues to be in the low to mid-20% range under current tax regulations.
Neal E. West: And a half million dollar increase in depreciation.
Neal E. West: Our effective tax rate continues to be in a low to mid 20% range under current tax regulations, we anticipate that our 2020 for cash taxes for foreign and state taxes would be in the $3 million to $4 million range with no U S. Federal cash tax until we consume our federal Nols, which as of year end 2023.
Neal E. West: <unk> were $101 million.
Neal E. West: Reported net income for the first quarter 2024 was $25 million or $1 51, net income per diluted share compared to net income of $16 million or <unk> 99 cents net income per diluted share of the prior year quarter.
Neal E. West: We anticipate that our 2024 cash taxes for foreign and state taxes will be in the $3-$4 million range, with no U.S. federal cash tax until we consume our federal NOLs, which as of year-end 2023 were $101 million. Reported net income for the first quarter of 2024 was $25 million, or $1.51 net income per diluted share, compared to net income of $16 million, or $0.99 net income per diluted share After adjusting for approximately $1 million of operating non-run rate items previously mentioned and other non-run rate income of $11 million primarily related to insurance settlements from prior year claims, adjusted net income for the first quarter of 2024 was $17 million, or $1.02 adjusted net income per duly loaded share, compared to adjusted net income of $7 million, or $0.42 adjusted net income per duly loaded share in the prior year quarter.
Neal E. West: After adjusting for approximately $1 million of operating non run rate items previously mentioned and other non run rate income of $11 million, primarily related to insurance settlements from prior year claims adjusted net income for the first quarter 2024 was $17 million or $1 <unk>.
Neal E. West: Adjusted net income per diluted share compared to adjusted net income of $7 million or <unk> 42 cents adjusted net income per diluted share in the prior year quarter.
Speaker Change: Now turning to slide 11.
Neal E. West: Adjusted EBITDA for the first quarter of 2024 was $62 million up approximately $16 million at 34% from the prior year period adjusted.
Neal E. West: Adjusted EBITDA as a percentage of conversion revenue improved approximately 430 basis points from the first quarter, 2023% to 17%.
Neal E. West: Improvement in adjusted EBITDA was primarily the result of improved operating efficiencies and cost cost controls in our business as well as timing of certain annual planned maintenance events and lower freight costs, which was partially offset by higher employee benefit and incentive costs.
Neal E. West: Now turning to slide 11, adjusted EBITDA for the first quarter of 2024 was $62 million, up approximately $16 million, or 34% from the prior year period. Adjusted EBITDA as a percentage of conversion revenue improved approximately 430 basis points from the first quarter of 2023 to 17 percent. The improvement in adjusted EBITDA was primarily the result of improved operating efficiencies and cost controls in the business, as well as the timing of certain annual planned maintenance events and lower freight costs, which was partially offset by higher employee benefit and incentive costs.
Neal E. West: Now turning to a discussion of our balance sheet and cash flow.
Neal E. West: At March 31st 2020 for total cash of approximately $102 million and approximately $517 million of borrowing availability on our revolving credit facility provided total liquidity of approximately $619 million.
Neal E. West: There were no borrowings under our revolving credit facility theory, and as of the quarter end and it remains undrawn.
Neal E. West: On March 31, 2024, our net debt leverage ratio continued to improve to four two times as we continue to make progress towards our target leverage ratio of two to two and a half times.
Neal E. West: Turning to capital allocation cash.
Neal E. West: Capital expenditures for the first quarter totaled $30 million.
Neal E. West: Now turning to a discussion of our balance sheet and cash flow, on March 31st, 2024, total cash of approximately $102 million and approximately $517 million of borrowing availability on our revolving credit facility provided total liquidity of approximately $619 million. There were no borrowings under our revolving credit facility agreement, and as of the quarter end, it remains undrawn. On March 31, 2024, our net debt leverage ratio continued to improve to 4.2 times as we continue to make progress towards our target leverage ratio of 2 to 2.5 times.
Neal E. West: This is lighter than anticipated attributed primarily to the timing of payments of invoices related to our road called for project, which remains on track for commissioning later this year.
Neal E. West: Our full year 2024 capital expenditures are still forecasted to be in the range of $170 million to $190 million.
Neal E. West: On April 15th we announced that our board of directors declared a quarterly dividend of 77 cents per common share underscoring the continued confidence our board and management team have in our long term strategy to improve our profitability and increase stockholder value.
Neal E. West: And now I'll turn the call back over to Keith to discuss our outlook Keith.
Speaker Change: Thanks Neil.
Speaker Change: Now I'll turn to our outlook for the fiscal year of 2024.
Neal E. West: Beginning with aerospace on slide 13.
Neal E. West: We've experienced strong momentum over the last several quarters and Aero and high strength market demand that is carried over into 2024.
Neal E. West: However, given recent developments, we are taking a more cautious outlook on expected build rates for the balance of the year for domestic large commercial jet production.
Neal E. West: Turning to capital allocation, capital expenditures for the first quarter total $30 million. This is lighter than anticipated, attributed primarily to the timing of payments of invoices related to our Roe Colt IV project, which remains on track for commissioning later this year. Our full year 2024 capital expenditures are still forecasted to be in a range of $170 to $190 million. On April 15th, we announced that our Board of Directors declared a quarterly dividend of 77 cents per common share, underscoring the continued confidence our board and management team have in our long-term strategy to improve our profitability and increase stockholder value. And now, I'll turn the call back over to Keith to discuss our outlook.
Neal E. West: Our long term outlook for continued strong demand for these platform remains unchanged.
Neal E. West: The diversity of our customer base and our ability to be agnostic on platforms is by design and positions us well regardless of market conditions.
Neal E. West: We remain a key supplier to all customers in the large commercial jet segment.
Neal E. West: And maintained strong positions in other key segments of the Aero and high strength markets, including defense <unk> space business, Jeff and other industrial high strength applications.
Neal E. West: Based on current expectations, we now expect aerospace and high strength shipments and conversion revenue to be flat year over year for 2024 versus 2023.
Neal E. West: Now turning to packaging on slide 14.
Keith A. Harvey: Now I'll turn to our outlook for the fiscal year 2024, beginning with aerospace on slide 13.
Neal E. West: Destocking from our food packaging customers ended in the latter half of the first quarter.
Keith A. Harvey: Based on conversations with our customers. We now expect our shipments to continue to improve from these levels throughout the balance of 2024.
Keith A. Harvey: We have experienced strong momentum over the last several quarters in the aero and high-strength market demand, and that has carried over into 2024. However, given recent developments, we are taking a more cautious outlook on expected build rates for the balance of the year for domestic large commercial jet production. Our long-term outlook for continued strong demand for these platforms remains unchanged. The diversity of our customer base and our ability to be agnostic on platforms is by design and positions us well regardless of market conditions.
Keith A. Harvey: Additionally, our new role Coke coder installation is progressing according to plan.
Keith A. Harvey: The project remains on budget and is set for completion by the end of this year with production expected to begin in 2025.
Keith A. Harvey: To date, we have a substantial portion of this capacity already committed with discussions well underway for the balance.
Keith A. Harvey: Accordingly, we continue to expect our packaging shipments and conversion revenue to improve by 5% to 7% year over year and 2024.
Keith A. Harvey: We remain a key supplier to all customers in the large commercial jet segment and maintain strong positions in other key segments of the aero and high-strength markets, including defense, space, business jet, and other industrial high-strength applications. Based on current expectations, we now expect aerospace and high-strength shipment and conversion revenue to be flat year-over-year for 2024 versus 2023. Now turning to packaging on slide 14. De-stocking from our food packaging customers ended in the latter half of the first quarter.
Keith A. Harvey: Now turning to general engineering on Slide 15.
Keith A. Harvey: We began to see an increase in order rates for all general engineering products with Destocking ending late in the first quarter.
Keith A. Harvey: As supply levels are now aligned with current demand trends.
Keith A. Harvey: We continue to expect improving demand for our general engineering products as we progress throughout the year with our 2024 shipments anticipated to improve by approximately 5% to 6% year over year.
Keith A. Harvey: However, we continue to forecast modest price compression and our outlook as demand recovers and therefore expect a resulting general engineering conversion revenue to be flat to up 1% compared to 2023.
Keith A. Harvey: Based on conversations with our customers, we now expect our shipments to continue to improve from these levels throughout the balance of 2024. Additionally, our new roll coder installation is progressing according to plan. The project remains on budget and is set for completion by the end of this year, with production expected to begin in 2025. To date, we have a substantial portion of this capacity already committed, with discussions well underway for the balance. Accordingly, we continue to expect our packaging shipments and conversion revenue to improve by 5% to 7% year over year in 2020. Now, turning to general engineering on slide 15.
Keith A. Harvey: Next I'll turn to automotive on slide 16.
Keith A. Harvey: Demand remains flat to slightly up versus last year's levels as higher build rates for trucks and light vehicles in North America drove a steady recovery into 2024.
Keith A. Harvey: Further <unk>.
Keith A. Harvey: The recent price increases initiated late last year are anticipated to hold.
Keith A. Harvey: As a result, we expect our 2020 for auto shipments and conversion revenue to increase in the 3% to 5% range versus 2023.
Keith A. Harvey: Now I'll go into our summary outlook turning to slide 17.
Keith A. Harvey: For the full year 2024.
Keith A. Harvey: We expect demand will continue to improve across most of our end markets.
Keith A. Harvey: As a result, we continue to expect conversion revenue to improve in the 2% to 3% range over 2023.
Keith A. Harvey: We began to see an increase in order rates for all general engineering products, with destocking ending late in the first quarter, as supply levels are now aligned with current demand trends. We continue to expect improving demand for our general engineering products as we progress throughout the year, with our 2024 shipments anticipated to improve by approximately 5 to 6% year over year. However, we continue to forecast modest price compression in our outlook as demand recovers and therefore expect the resulting general engineering conversion revenue to be flat to up one percent compared to 2023. Next, I'll turn to the automotive industry on slide 16.
Keith A. Harvey: Additionally, we continue to expect approximately 70 to 170 basis points of EBITDA margin improvement year over year.
Keith A. Harvey: In summary, we are off to a strong start to the year and continue to make solid progress on our growth initiatives, which position us well as we implement the next stage of our growth strategy in 2025.
Keith A. Harvey: Looking ahead, our focus remains on successfully executing our revised metal sourcing strategy at work.
Keith A. Harvey: Managing costs and improving operating efficiencies across all our businesses to drive profitable growth.
Speaker Change: With that I will now open the call to any questions you may have.
Keith A. Harvey: Operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Keith A. Harvey: Demand remains flat to slightly up versus last year's levels as higher build rates for trucks and light vehicles in North America drive a steady recovery into 2024. Furthermore, recent price increases initiated late last year are anticipated to hold. As a result, we expect our 2024 auto shipments and conversion revenue to increase in the 3 to 5% range versus 2023. Now, I'll go into our summary outlook, turning to slide 17. For the full year 2024,
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please pull for questions.
Keith A. Harvey: Our first question comes from Curt Woodworth with UBS. Please proceed with your question.
Speaker Change: Yeah, Good morning, Keith and I appreciate all the details.
Speaker Change: First question is good morning.
Speaker Change: It seems like Youre, making good progress around kind of improved metal sourcing and the flow path at work, but can you provide a little bit more detail about kind of the timing on when you see that optimize and what level of margin or a cost down impact you could see from those efforts and then I guess with respect to not all we've seen a pretty material increase in the Illumina illumina.
Keith A. Harvey: We expect demand will continue to improve across most of our end markets. As a result, we continue to expect conversion revenue to improve in the 2-3% range over 2023. Additionally, we continue to expect approximately 70 to 170 basis points of EBITDA margin improvement year over year. In summary, we are off to a strong start to the year and continue to make solid progress on our growth initiatives, which positions us well as we implement the next stage of our growth strategy in 2025.
Keith A. Harvey: Price this past month, and then there's been more discussions around potential trade tariff impacts. So I was wondering if you could provide.
Speaker Change: Provide any more color on how you could see that impacting your business going forward.
Speaker Change: Okay, well, thank you Curt and.
Keith A. Harvey: Let's take the award question first yes, we are continuing to make solid progress there.
Keith A. Harvey: Looking ahead, our focus remains on successfully executing our revised metal sourcing strategy at Warwick, managing costs, and improving operating efficiencies across all our businesses to drive profitable growth. With that, I will now open the call to any questions you may have.
Speaker Change: The first couple of years were a little troublesome with supply chain issues and whatnot, but but as I mentioned in my in my comments, we're finally getting to some more normalized output here.
Keith A. Harvey: Operation So.
Keith A. Harvey: Strategy change has really been picking up we planned on looking at different metal sourcing that had been planned from day, one and we just again initiating that in Q1.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is busy. You may press star 2 if you would like to remove your question from the list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Our first question comes from Kurt Woodworth with UBS. Please proceed with your question.
Curtis Rogers Woodworth: Expect that will continue to.
Curtis Rogers Woodworth: Pick up through the balance of the year are the big strategy changes. We discussed earlier has been when we're moving toward a more.
Curtis Rogers Woodworth: The higher margin coated products, which has really facilitated by this investment we're making it work and why.
Curtis Rogers Woodworth: While we're making great progress there.
Curtis Rogers Woodworth: That strategy isn't really initiated until the beginning of 2025.
Curtis Rogers Woodworth: And we said in some earlier comments beginning of the year that we expect a 300 to 400 basis points impact.
Curtis Rogers Woodworth: Yeah, good morning Keith, and I appreciate all the details. The first question is, "Good morning."
Curtis Rogers Woodworth: Once we fully implement that strategy up at work So we've got a.
Curtis Rogers Woodworth: It seems like you're making good progress around kind of improved metal sourcing and the flow path at work, but can you provide a little bit more detail about the timing of when you see that optimized and what level of margin or cost-down impact you could see from those efforts? And then I guess with respect to metals, we've seen a pretty material increase in the LME aluminum price this past month. And then there have been more discussions around, you know, potential trade tariff impacts. So I was wondering if you could provide any more color on how you could see that impact in your business going forward.
Curtis Rogers Woodworth: Good runway ahead of us, but I'm pleased that.
Curtis Rogers Woodworth: To be on the normalized side, where we're getting a hold of the operation and folks are beginning to operate very well quite frankly, the quarter could have been even better for us, but we were we had taken down some major pieces of equipment for some planned maintenance and and work and so we werent unable to take even more of the demand.
Curtis Rogers Woodworth: That was coming.
Curtis Rogers Woodworth: So all in all very pleased with the progress, we're making there and I believe that that's going to continue to improve as we go out through the year and especially as we see demand improving in that area now.
Keith A. Harvey: Okay. Well, thank you, Kurt. And let me take the Warwick question first.
Speaker Change: Now moving to your second part of your question Kurt on the trade tariff.
Keith A. Harvey: Yeah, you know, we are continuing to make solid progress there. The first couple of years were a little troublesome with supply chain issues and whatnot. But, as I mentioned in my comments, we're finally getting to some more normalized output here and operations.
Speaker Change: We've prided ourselves in this company of being.
Keith A. Harvey: On a pass through basis with regards to metal.
Keith A. Harvey: We've got long term AR.
Keith A. Harvey: Very diverse.
Keith A. Harvey: Ply arrangements in place with metal providers.
Keith A. Harvey: At the beginning we havent utilized any Russian material since the beginning of the Ukrainian war, even at that time. It was a small amount I know the impact on the <unk> is larger because there was a good deal of that material available there but.
Keith A. Harvey: So strategy change has really been picking up. You know, we planned on looking at different metal sourcing that had been planned from day one, and we just began initiating that in Q1. I expect that we'll continue to pick up through the balance of the year. The big strategy change, as we've discussed earlier, has been when we're moving toward a higher margin coded product, which is really facilitated by this investment we're making at Warrick.
Keith A. Harvey: Quite frankly with the internal work that we're focusing on with the higher use of recycled material using more secondary metal as opposed to the prime.
Keith A. Harvey: And with our business pass through strategy, I really don't see a big impact to us.
Keith A. Harvey: With regards to tariffs on the metal itself now.
Keith A. Harvey: And while we're making great progress there, that strategy isn't really initiated until the beginning of 2025, and we said in some earlier comments at the beginning of the year that we expect 300 to 400 basis points of impact once we fully implement that strategy if it works. So we've got a good runway ahead of us, but I'm pleased that, you know, to be on the normalized side, we're getting a hold of the operation, and folks are beginning to operate very well.
Keith A. Harvey: Now we are susceptible to some of the prop.
Keith A. Harvey: Products that come through imports that will flow through and so we're very focused on work and stuff that the administration is discussing with regards to <unk>.
Keith A. Harvey: Some controls on inputs of of unfair advantage material and the products that we survive. So we support those and we'll be we'll be watching those but.
Keith A. Harvey: That's why we continue to work on our cost and being very competitive.
Keith A. Harvey: We are and.
Keith A. Harvey: We will continue to monitor the landscape and adjust accordingly, but I like how our our business philosophy allows us to adapt to all these changes.
Keith A. Harvey: Quite frankly, the quarter could have been even better for us, but we had taken down some major pieces of equipment for some planned maintenance and work, and so we were unable to take even more of the demand that was coming in.
Keith A. Harvey: Okay.
Keith A. Harvey: And then as a follow up.
Keith A. Harvey: The Aero high strength market it seems like you're tempering your expectations.
Keith A. Harvey: Mostly on a volume basis.
Keith A. Harvey: In the past when we've seen some slowdown in the euro.
Keith A. Harvey: So all in all, very pleased with the progress we're making there, and I believe that that's going to continue to improve as we go out through the year, and especially as we see demand improving in that area. Now moving to your second part of your question, Kurt, on the trade tariff. You know, we've prided ourselves in this company on being, you know, on a pass-through basis with regard to metal.
Keith A. Harvey: Supply chain, you know things can get whipsawed pretty heavily on the inventory side can you just give us kind of your view on how.
Keith A. Harvey: How do you think the Aero supply chain is looking for sheet and plate and then in terms of the more conservative outlook is that.
Kurt: You know I know Boeing is it pretty big customer and they've they've tempered their expectations a little bit on the 737, Max but can you just kind of talk through how you see that supply chain evolving maybe into the second quarter in the back half of the year. Thank you.
Keith A. Harvey: We've got long-term, very diverse supply arrangements in place with metal providers. At the beginning, we hadn't utilized any Russian materials since the beginning of the Ukrainian War. Even at that time, it was a small amount.
Keith A. Harvey: I know the impact on the LME is larger because there was a good deal of that material available there. But quite frankly, with the internal work that we're focusing on with a higher use of recycled material, using more secondary metal as opposed to the prime, and with our business pass-through strategy, I really don't see a big impact on us with regard to tariffs on the metal itself. Now, we are susceptible to some of the products that come through, you know, imports that will float through.
Keith A. Harvey: Sure.
Keith A. Harvey: I think your comment is something that we watch very closely with regard to inventory.
Keith A. Harvey: I didn't hear it mentioned very often but we follow those quite intently and I believe for mainly a lot of the challenges that the big Oems are discussed with supply chain issues.
Keith A. Harvey: And whether it was related to current.
Keith A. Harvey: Issues that Boeing may be facing or even Airbus from a supply chain perspective.
Keith A. Harvey: We've had a little muted demand as expected compared to what we expected on the build rates and so that was reason for our slight pause on our side and as you pointed out occurred is it's about a 1% to 2% changed in what we said.
Keith A. Harvey: And so we're very focused on work and stuff that the administration is discussing with regard to some controls on inputs of unfair advantage material in the products that we survive. So we support those, and we'll be watching those. But, you know, that's why we continue to work on our costs and be very competitive as we are. And we'll continue to monitor the landscape and adjust accordingly. But I like how our business philosophy allows us to adapt to all these changes.
Keith A. Harvey: Two or three months ago, I think theres, a little caution in there.
Keith A. Harvey: The good part here that I always refer back to is that over the last 15 or 20 years.
Keith A. Harvey: None of this has been a linear we've always seeing some pauses in operations either by certain platforms are bi conditions that take place.
Keith A. Harvey: Okay, and then as a follow-up. In the aero high strength market, it seems like you're tempering your expectations modestly on a volume basis. You know, in the past when we've seen, you know, some slowdown in the aero... [inaudible] You know, I know Boeing is a pretty big customer and they've tempered their expectations a little bit on the 737 MAX, but, you know, can you just kind of talk through how you see that supply chain evolving maybe into the second quarter of the back half of the year? Thank you. Sure. I think your
Keith A. Harvey: <unk> political or whatever but but.
Speaker Change: I think I think the issues are going to be short lived.
Keith A. Harvey: I was recently at a supplier.
Speaker Change: Meeting with with Boeing and they're really putting emphasis on getting there their supply chain and their operations in sync and I believe they're going to achieve that fairly.
Speaker Change: Fairly judiciously.
Keith A. Harvey: <unk>.
Keith A. Harvey: Made strong commitments to not only their customers, but also to their suppliers.
Keith A. Harvey:
Speaker Change: I have a lot of confidence in that as well and we know what the inventory levels are we know what the a.
Keith A. Harvey: Sure. I think your comment is something that we will watch very closely with regard to inventories. I don't hear it mentioned very often, but we follow them quite intently. And I believe that, mainly, a lot of the challenges that the big OEMs have discussed with supply chain issues and whether it was related to current issues that Boeing may be facing or even Airbus from a supply chain perspective, we've had a little muted demand as expected compared to what we expected on the build rate.
Keith A. Harvey: A little bit of a pause has been the uncertainty of when the ramp rate goes back on the Max for instance.
Keith A. Harvey: And Thats, a little bit the reason for our caution, but I believe all that's going to be handled.
Keith A. Harvey: Post haste.
Keith A. Harvey: And that we're still in a very strong position and it's just really going to depend on how fast they ramp back up on the sales as to whether or not we'll see any further impact on the outlook.
Keith A. Harvey: But for now again, it's the reason we've always emphasized our diversity in this field.
Keith A. Harvey: Focusing on defense and Biz jet and the other outlets for our products, including space, which is growing.
Keith A. Harvey: And so that was a reason for a slight pause on our side. And as you pointed out, Curt, it's about a one to 2% change from what we said two or three months ago. I think there's a little caution in there.
Keith A. Harvey: I think that helps minimize anything thats been going on lately a lot more than perhaps it did with us for five years ago.
Speaker Change: Great. Thank you for that.
Speaker Change: Thank you.
Keith A. Harvey: Our next question comes from Josh Sullivan with the Benchmark Company. Please proceed with your question.
Keith A. Harvey: The good part here that I always refer back to is that, over the last 15 or 20 years, none of this has been linear. We've always seen some pauses in operations either by certain platforms or by conditions that take place, geopolitical or whatever. I think the issues are going to be short-lived. I was recently at a supplier meeting with Boeing, and they're really putting the emphasis on getting their supply chain and their operations in sync.
Speaker Change: Hey, good morning.
Speaker Change: Good morning.
Keith A. Harvey: If we think of those buckets within aerospace you just mentioned large commercial biz jet defense and space.
Keith A. Harvey: How are those different buckets been folded into the guide for the year.
Keith A. Harvey: Yes so.
Keith A. Harvey: We've looked at those various components and you can imagine they they move a little bit.
Keith A. Harvey: But we said that the commercial large commercial jets have been between 50 and 60% of the total.
Keith A. Harvey: I believe they're going to achieve that fairly judiciously. They have made strong commitments to not only their customers but also to their suppliers, and I have a lot of confidence in that as well. We know what the inventory levels are.
Keith A. Harvey: Demand outlook for aerospace for US and then the other buckets move around in that remaining 40% to 50%.
Keith A. Harvey: For instance.
Keith A. Harvey: Vince has been growing a little bit this Jeff has been strong, but now we're starting to see space.
Keith A. Harvey: We know what the – a little bit of the pause has been the uncertainty of when the ramp rate goes back on the max, for instance, and that's a little bit the reason for our caution. But I believe all that's going to be handled post-haste and that we're still in a very strong position. And it's just really going to depend on how fast they ramp back up on these sales as to whether or not we'll see any further impact on the outlook.
Keith A. Harvey: Drive a stronger.
Keith A. Harvey: Modifier to those numbers.
Keith A. Harvey: So when we're talking commercial aerospace the large commercial aerospace.
Keith A. Harvey: That's a sizable portion of our business.
Keith A. Harvey: And so obviously, we monitor all of these components very well, including the stocking and Destocking that take place and so I would say that right now on the non commercial aerospace.
Keith A. Harvey: But for now, again, it's the reason we've always emphasized our diversity in this field, focusing on defense and BizJet and the other outlets for our products, including space, which is growing. I think that helps minimize anything that's been going on lately a lot more than perhaps it did with us four or five years ago.
Keith A. Harvey: We're in very good position from a stocking and inventory perspective, and demand still holding up very strong. So so we've got.
Keith A. Harvey: Good confidence and that the balance of the year and I think what you saw Josh on the on our our comment there I think short term like for Boeing on this 90 day quality analysis assessment with the FAA. They are about halfway through that.
Operator: Our next question comes from Josh Sullivan with The Benchmark Company. Please proceed with your question.
Joshua Ward Sullivan: I don't foresee them really.
Joshua Ward Sullivan: If we think of those buckets within aerospace, you just mentioned, you know, large commercial biz jets, defense, and space. You know, how have those different buckets been folded into the guide for the year?
Joshua Ward Sullivan: Going back to launching to the build rates of where they're focused on right now 38 until until after that period is over so I think back to probably have a continued impact on perhaps more of the second quarter, but then I believe that Boeing is absolutely committed to.
Keith A. Harvey: Yeah, so how we've looked at those various components, and you can imagine they move a little bit, but we said that the commercial, large commercial jets have been, you know, between 50 and 60% of the total demand outlook for aerospace for us. And then the other buckets move around, and that remaining 40 to 50%.
Joshua Ward Sullivan: To making the changes required and adjustments and I think theyre going to be more focused and back toward those expected build rates towards the second half of the year.
Speaker Change: Got it.
Keith A. Harvey: And then just as far as kind of heading into this week's announcement with Boeing.
Keith A. Harvey: Where the service centers and distributors I mean were they already.
Keith A. Harvey: Preparing in their body language in their ordering cadence.
Keith A. Harvey: For instance, defense has been growing a little bit. Bizjet has been strong, but now we're starting to see space be a stronger modifier to those numbers. So when we're talking commercial aerospace, the large commercial aerospace, that's a sizable portion of our business. And so, obviously, we monitor all these components very well, including the stocking and destocking that take place. And so I would say that right now in the non-commercial aerospace market, we're in a very good position from a stocking, you know, an inventory perspective, and demand is still holding up very strong.
Keith A. Harvey: When did that kind of turn or did it turn ahead of the announcement.
Keith A. Harvey: No I would say it really.
Keith A. Harvey: It hasnt termed so much in that.
Keith A. Harvey: And I give great credit to this Boeing has reached out to their top suppliers and really had a good conversation as to what they intend to do.
Keith A. Harvey: They can't tell exactly because they were working with other principles to try to put things in place, but they've been very focused on ensuring that the supply base.
Keith A. Harvey: Everything has been transparent good communication good open discussion about where inventory levels are due to build rates and then and then expectations go.
Keith A. Harvey: So we've got good confidence in that for the balance of the year. And I think what you saw, Josh, on our comment there, I think short term, like for Boeing on this 90-day quality analysis assessment with the FAA, they're about halfway through that. And I don't foresee them really going back to launching at the build rates of where they're focused on right now, 38, until after that period is over. So I think that could probably have a continued impact on perhaps more the second quarter.
Keith A. Harvey: Going forward and what I really appreciate is.
Keith A. Harvey: The openness of having a dialogue instead of just actions and resulting in us just reacting to their actions.
Keith A. Harvey: So I believe there is theres strong management of this process and I believe any impact that will fill at all should be minimal.
Speaker Change: Great. Thank you for the time.
Speaker Change: Thank you.
Keith A. Harvey: Our next question comes from Bill Peterson with Jpmorgan. Please proceed with your question.
Keith A. Harvey: But then I believe that Boeing is absolutely committed to making the changes required and adjustments, and I think they're going to be more focused and back toward those expected build rates in the second half of the year.
Speaker Change: Hi, good morning, everyone. Thanks for taking the questions.
Speaker Change: Good morning, nice job on the first.
Speaker Change: Yes, thanks, nice job on the first quarter margins.
Keith A. Harvey: And the reiteration for the full year.
Keith A. Harvey: But I guess, if we were just a flatlining you would actually come in even above the.
Joshua Ward Sullivan: And then just as far as kind of heading into this week's announcement with Boeing, I mean, were the service centers and distributors already there? Or were they just getting started? Transcripts provided by Transcription Outsourcing, LLC.
Keith A. Harvey: Vacation, so I'd like to try to understand the trajectory from here, maybe what was sort of onetime in nature in the first quarter that maybe doesn't repeat in the second quarter of any sort of color on how to think about the margin progression for the balance of the year would be helpful.
Keith A. Harvey: No, I would say it really... It hasn't turned so much in that, and I give great credit to this. Boeing has reached out to its top suppliers and really had a good conversation as to what they intend to do. They can't tell exactly because they're working, you know, with other principals to try to put things in place. But they've been very focused on ensuring that the supply base, everything's been transparent, good communication, good open discussion about where inventory levels are due to build rates, and then expectations going forward.
Keith A. Harvey: Certainly well.
Keith A. Harvey: Few things happened in the first quarter build that were a pleasant surprise to us.
Keith A. Harvey: One we had talked about concern about compression in pricing.
Keith A. Harvey: As we as we had gone into the year.
Keith A. Harvey: We really did not experience that in the first quarter.
Keith A. Harvey: Now I'm not taking that away I still believe with.
Keith A. Harvey: The North America being one of the strongest markets out there we tend to attract a lot of other players in other countries that aren't doing so well. So so theres always that outlook there a little concerned about some price compression and so we've worked that into the to the outlook going forward.
Keith A. Harvey: And what I really appreciate is the openness of having a dialogue instead of just actions resulting in us just reacting to their actions. So I believe there's strong management of this process, and I believe any impact that this will have at all should be minimal.
Keith A. Harvey: Sure.
Keith A. Harvey: The teams did a great job from a cost control perspective so.
Keith A. Harvey: So big Big outlook for us on that normalizing of operations, so really starting to get back into the.
Keith A. Harvey: The tone of how we like to operate our businesses, which is managing cost strong efficiencies good efficiencies improving across the board.
Keith A. Harvey: Great. Thank you for the time. Mm-hmm.
Keith A. Harvey: Thank you.
Operator: Our next question comes from Bill Peterson with J.P. Morgan. Please proceed with your question.
Keith A. Harvey: And I think that's something that we'll continue on itself.
William Chapman Peterson: And the other thing was the final thing that we took into account.
William Chapman Peterson: Yeah, hi, good morning, everyone. Thanks for taking the questions. Good morning.
William Chapman Peterson: We had very strong aerospace for the quarter, especially as you compare it to the first quarter of last year and as we've stated we've now got four or five quarters of good strong improvement on the aerospace and high strength and I think for the balance of the year just what we just got finished talking about with the large commercial.
William Chapman Peterson: Nice job on the first quarter. Yeah, thanks. Nice job on the first quarter margins and the reiteration for the full year. But I guess if we were just to flatline, you would actually come in even above that expectation. So I'd like to try to understand the trajectory from here. Maybe what was sort of one-time in nature in the first quarter that maybe doesn't repeat in the second quarter. Any sort of color on how to think about the margin progressions for the balance of the year would be helpful. Certainly.
William Chapman Peterson: <unk> shown and perhaps some some pauses or I would call it a general pause or something.
William Chapman Peterson: It gives us a little bit of caution as we go through the balance of the year.
Speaker Change: But but what I'm.
William Chapman Peterson: Really focused on is that we're acting towards the plan and where we expected to be.
Keith A. Harvey: Certainly. Well, a few things happened in the first quarter, Bill, that were a pleasant surprise to us. One, we had talked about our concern about compression in pricing as we had gone into the year. We really did not experience that in the first quarter. Now, I'm not taking that away.
William Chapman Peterson: Perhaps got out ahead of it a little bit on the first quarter, which is good news and we will see how the balance of the year goes but it.
Keith A. Harvey: It's always better to be off to a great start and.
Keith A. Harvey: Having some.
Keith A. Harvey: Deploying some some tactics and strategies in place that you know are moving you to your ultimate goal.
Bill: Okay, yes, thanks for those insights.
Keith A. Harvey: On General Engineering, it's nice to see.
Bill: The improvement in the business that you're expecting I guess I'm trying to better understand what youre seeing in the segment that gives you confidence is there anything to call out general industrial improvement semiconductors.
Keith A. Harvey: I still believe that with, you know, North America being one of the strongest markets out there, we tend to attract a lot of other players in other countries that aren't doing so well. So there's always that outlook there, a little concern about some price compression. And so we've worked that into the outlook going forward. The teams did a great job from a cost control perspective, you know, so a big, big outlook for us on that normalizing of operations.
Speaker Change: Perhaps you could speak.
Speaker Change: <unk> ability you have considering especially 90 days ago. You were you were more confident about Aero I know youre leftovers. So just any visibility would be helpful. On this on this segment.
Speaker Change: Yeah and I'll.
Speaker Change: I'll preface the comment on Arrow Bill I mean.
Keith A. Harvey: We just moved down from the up 1% to 2% to just flat year over year and I'll remind everyone last year was the best year, we've had probably since 2019 and actually even exceeded 2019, so it's at a pretty good level.
Keith A. Harvey: So really starting to get back into the tone of how we like to operate our businesses, which is managing costs, strong efficiencies, good efficiencies, improving across the board. And I think that's something that will continue to improve. And the other thing was the final thing that we took into account. We had very strong aerospace for the quarter, especially as you compare it to the first quarter of last year. And as we've stated, we've now got four or five quarters of good, strong improvement in aerospace and high strength.
Keith A. Harvey: But then back to your point about general engineering.
Keith A. Harvey: <unk>.
Keith A. Harvey: We've talked about it for years, we track inventory levels at our service centers in certain products and we've got canaries in the coal mine that help us understand where we are in certain phases of the markets.
Keith A. Harvey: And I can tell you we've been tracking we've gone through like 14 months of Destocking.
Keith A. Harvey: And I think for the balance of the year, just what we just got finished talking about with the large commercial production and perhaps some pauses, or I would call it a gentle pause or something, just gives us a little bit of caution as we go through the balance of the year. But what I'm really focused on is that we're acting according to the plan and where we expected to be. Perhaps they got out ahead of it a little bit in the first quarter, which is good news, and we'll see how the balance of the year goes. But it's always better to be off to a great start and deploying some tactics and strategies in place that you know are moving you to your ultimate goal.
Keith A. Harvey: One of our key product lines, which has been our rod and bar products in the extrusion side of the business well for the first time in March we actually saw inventories begin to rise again.
Keith A. Harvey: And that really gets into my comment in the notes we made that that look we believe destocking has ended and albeit while we're at a lower pace than perhaps we were a year and a half ago.
Keith A. Harvey: I believe that the supply and demand are in sink at this point and we saw some fairly solid numbers for the first quarter. So.
Keith A. Harvey: I believe that bodes well going forward for the balance of the year. It typically has always done that and.
William Chapman Peterson: Okay, yeah, thanks for those insights. On general engineering, it's nice to see the improvement in the business that you're expecting. I guess I'm trying to better understand what you're seeing in the segment that gives you confidence. Is there anything to call out, general industrial improvements, or semiconductors? I mean, perhaps you can speak to the visibility you have, considering that, especially 90 days ago, you were more confident about aero, and now you're less so. So just any visibility would be helpful in this segment.
Keith A. Harvey: And then the same comments I made on packaging.
William Chapman Peterson: We had been talking about destocking on the food side of our business and it was pretty important we had gone through about 12 months on the beverage side and we anticipated that we would be ending in the destocking in the first quarter.
William Chapman Peterson: On that on those products and indeed, we did see Destocking ended and we could have sold more had we not had the outages that I discussed so those two big markets. The Destocking has ended and and so we're seeing a rebound that gives us really good confidence for the balance of the year.
Keith A. Harvey: Yeah, and I'll preface the comment on Arrow, Bill. I mean, we just moved down from the up 1% to 2% to just flat year over year. And I'll remind everyone, last year was probably the best year we've had probably since 2019. And it actually exceeded 2019.
William Chapman Peterson: You mentioned, one other market that we traditionally.
Keith A. Harvey: Comment on and Thats the semiconductor.
Speaker Change: And we have been in it a.
Keith A. Harvey: A destock mode on semiconductor as well.
Speaker Change: I wouldn't say that we've seen that demand tremendously improve but we are seeing.
Keith A. Harvey: Green shoots of that improving.
Keith A. Harvey: So it's at a pretty good level. But then back to your point about general engineering. We've talked about it for years, Bill. We track inventory levels at our service centers and certain products, and we've got canaries in the coal mine that help us understand where we are in certain phases of the market. And I can tell you, we've been tracking, we've gone through like 14 months of G-Stock. One of our key product lines, which has been our rod and bar products in the extrusion side of business.
Keith A. Harvey: And that's helpful for us, especially as we have to.
Keith A. Harvey: Marry up.
Keith A. Harvey: Our general engineering, and our aerospace and our sheet and plate business.
Keith A. Harvey: <unk>.
Keith A. Harvey: That's going to improve as we go forward.
Keith A. Harvey: But certainly we saw it on the Rod and bar segment. So.
Keith A. Harvey: Some of the data behind our outlook for General Engineering.
Speaker Change: Okay. That's helpful. If I can sneak in one more.
Keith A. Harvey: Capex is a little bit light in the first quarter I guess, how should we think about the trajectory here.
Keith A. Harvey: Well, for the first time in March, we actually saw inventories begin to rise. And that really gets into my comment in the notes we made that, look, we believe destocking has ended. And albeit while we're at a lower pace than perhaps we were a year and a half ago, I believe that supply and demand are in sync at this point, and we saw some fairly solid numbers for the first quarter. So I believe that bodes well going forward for the balance of the year. It typically has always done that. And then the same comments I made on packaging. You know, we had been talking about destocking on the food side of our business. And It was pretty important.
Keith A. Harvey: Second quarter and the back half of the year.
Neal: Hi, Bill it's Neal.
Keith A. Harvey: Yes, definitely the first quarter was lighter than we anticipated we thought the quarters will be a little bit more equally spread but we now see that the second quarter will really be the highest spend of the year for Capex and then the last two quarters of the year kind of back normalizing to probably equal to the weight of the first quarter was so really look at.
Keith A. Harvey: The second quarters, where we're going to have the big spend is.
Keith A. Harvey: We get that road coat line.
Keith A. Harvey: The contractors and all of that paid as they start delivering on a lot of other completions.
Speaker Change: Okay, yes, thanks for thanks for that additional color.
Keith A. Harvey: Yeah.
Keith A. Harvey: Yeah.
Keith A. Harvey: There are no further questions at this time I would now like to turn the floor back over to Keith Harvey for closing comments.
Keith A. Harvey: We had gone through about 12 months on the beverage side, and we anticipated that we would be ending in the destocking in the first quarter on that, for those products. And indeed, we did see destocking end, and we could have sold more had we not had the outages that I discussed. So those two big markets, the destocking has ended, and so we're seeing a rebound. That gives us really good confidence for the balance of the year.
Speaker Change: Alright, Thanks Maria.
Speaker Change: And thanks, everyone for being with US today I look forward to updating you on our second quarter 2024 results. When we meet again in July and have a good day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Keith A. Harvey: And you mentioned one other market that we traditionally comment on, and that's the semiconductor. And we have been in a destock mode on semiconductors as well. I wouldn't say that we've seen that demand tremendously improve, but we are seeing green shoots of that improving. And that's helpful for us, especially as we have to marry up the, you know, our general engineering and our aerospace and our sheet and plate business. So, I think that's going to improve as we go forward, but certainly, we saw it on the rod and bar segment. So that's some of the data behind our outlook for general engineering.
Keith A. Harvey: Okay.
Keith A. Harvey: Yes.
Keith A. Harvey: Yes.
Keith A. Harvey: Yes.
Keith A. Harvey: Hum.
Keith A. Harvey: [music].
Keith A. Harvey: Hmm.
Keith A. Harvey: Mhm.
Keith A. Harvey: [music].
Keith A. Harvey: Uh-huh.
Keith A. Harvey: Hum.
Keith A. Harvey: Hum.
Keith A. Harvey: Hum.
William Chapman Peterson: Okay, yeah, that's helpful. If I can sneak in one more, CapEx is a little bit light in the first quarter. I guess, how should we think about the trajectory here in the second quarter and in the back half of the year?
Keith A. Harvey: [music].
William Chapman Peterson: Okay.
William Chapman Peterson: [music].
William Chapman Peterson: Hum.
William Chapman Peterson: Hmm.
William Chapman Peterson: Uh-huh.
Neal E. West: Hi Bill, it's Neal. Yeah, definitely the first quarter was lighter than we anticipated. We thought the quarters would be a little bit more equally spread, but we now see that the second quarter will really be the highest spend of the year for CapEx, and then the last two quarters of the year kind of normalizing to probably equal to the way the first quarter was. So really look at the second quarters where we're going to have the big spend as we get that roll coat line, the contractors, and all that paid as they start delivering on a lot of their completions.
William Chapman Peterson: Okay.
Neal E. West: [music].
Neal E. West: Okay.
Neal E. West: [music].
Neal E. West: Mhm.
Neal E. West: Okay.
Neal E. West: Hum.
Neal E. West: [music].
William Chapman Peterson: Okay, yeah, thanks for that additional call.
Neal E. West: Uh-huh.
Operator: There are no further questions at this time. I would now like to turn the floor back over to Keith Harvey for closing.
William Chapman Peterson: [music].
Operator:
Keith A. Harvey: All right, thanks Maria, and thanks everyone for being with us today. I look forward to updating you on our second quarter 2024 results when we meet again in July.
Keith A. Harvey: Mhm.
Keith A. Harvey: Hum.
Keith A. Harvey: [music].
Keith A. Harvey: Okay.
Keith A. Harvey: [music].
Operator: Have a good day. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Keith A. Harvey: Mhm.
Operator: [music].
Operator: Hum.
Operator: Hum.
Operator: Uh-huh.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: [music].
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Operator: Okay.
Operator: Yes.
Operator: [music].
Operator: Hum.
Operator: Yeah.
Operator: Yeah.