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Operator: [Operator’s Instructions] The first comes from Julian Mitchell of Barclays.
Julian Mitchell: Maybe I just wanted to start with the second trimester advisor. I think earlier you were talking about the fact that the second quarter is very similar to the first quarter and now we have this decent sequential decline in EPS. So, is there much to do with the conversion of the infrastructure margin assumption?And I just wanted to understand, when we think about this consultant for the full year, do we think that infrastructure margins are in the low to mid single digits?in the second quarter, and then ending the year in sort of low double digits, did it help you get past the tailwind in the curtain load that you just mentioned?
Pat Watson: So yes, several things. Just in terms of thinking about the second quarter, Patrick will then talk here about the infrastructure for the year. Absolutely, if we think about margin progression over the course of the year, the second quarter will be our backside and it really depends on whatever it is. going down from the perspective of curtain charges. I think when we were thinking about the second quarter, I would say 90 days ago, we thought those significant hurdles were about $10 million, our current estimate of that. So, it’s about $13 million as we communicated in the ready comments, and it’s going to go mostly to infrastructure. The margin that accumulates in the second part of the year will be felt in any of the segments and we will see it not only from a volume perspective, but also in the medium term. around the year, but also as long as those vital prices remain at the current point of tungsten prices, we’ll see that turn in our favor during the fourth quarter.
Julian Mitchell: And then my current question is, I guess, about the general engineering segment and also earthworks. So, general engineering, maybe it will help us understand what’s improving in the current half?I know it’s tricky because it’s called general. It can be tricky to be precise, but what is your impression on a regional level, what do you expect in the second half?And then, for Earthworks, he talked about the kind of stagnant sales in 2024. I think a lot of other corporations are excited about stimulus and so on in the U. S. The U. S. government will be released next year. I was wondering what your opinion is on this in relation to the earthmoving market.
Christopher Rossi: I think that, because of the attitude of the English generation, I have analysed a series of upward steps that would allow us to get there. So we’ve talked extensively about the European IPI, which is expected at this time to be part of Our Year, and the National Association of Manufacturers’ sentiment about expanding the U. S. trade base. The U. S. economy also deserves to increase. And that was 90 days ago, the signs were exactly the same. That’s why we think Gen Eng is going to get better. China is also a scenario where, as Pat mentioned, it was weaker than we thought in the first quarter because we expected that movement to start in the first quarter, but now it looks like it’s spilling over into the second quarter. At the end of September we were encouraged by the fact that our order intake started to increase, we started to see that.
And Array, I tell you, in October met our expectations in terms of outlook for the second quarter. So, there’s a positive dynamic on that front. And then Gen Eng is also affected through transportation and smooth vehicle production in the first part of the year compared to the current moment, so these would be the main drivers. I’m thinking from the point of view of earthworks. If you recall, last year, in the fourth quarter, our road milling business was smaller than we would normally expect. And talking to our customers, the main explanation for this was that they only had a restricted budget and had to decrease the number of kilometers of road milling due to inflation and prices related to road milling. They increased so particularly that they had to restrict the number of kilometers of road milling.
That’s why this year we expect higher-than-seasonal growth, that is, in the fourth quarter for earthworks, because our feeling is that, going back to point, through the infrastructure bill, many of the municipal budgets have been replenished or even supported through some investment from the infrastructure bill.
Operator: Next up is from Tami Zakaria of JPMorgan.
Tami Zakaria: In Aerospace & Defense, a very impressive growth quarter. Can you remind us where you are in terms of volume in this segment compared to pre-COVID levels?
Christopher Rossi: Production rates are still below pre-Covid levels. I don’t know, Mike, if we have that express statistic, but we do. I think the other thing, Tami, is that Airbus, Boeing and the other brands are still making plans to increase production speed in the second part of the year. Today, they still revel in delays in the chain of origin that restrict this phenomenon. So I don’t know if they’re going to go back to the previous levels. pandemic degrees this year, and I think they’re still below what, Mike, what is. . .
Michael Pici: It’s around 10% and there’s a 17% expansion in structure rates in the second half of the year in OEMs.
Tami Zakaria: And then as far as energy, I know you’ve spent some time talking about it. And you said that in the second quarter you expected a slight decline as the stock reduction continues. In hindsight, what do you think caused this weakness? In some categories you express within energy, do you see sweetness?And do you see some kind of light at the end of the tunnel, where you think after the second trimester, it’s largely over or not?Do you think it can persist a little longer?
Christopher Rossi: I think, Tami, the main driving force of our specific business is the number of onshore platforms in the U. S. And that’s specifically declined year-over-year and it’s also declined sequentially in the first quarter, so from the fourth quarter to the first quarter. The other thing that happened at the same time was that as the chains of origin began to relax, the oil facility corporations began to reduce their protective stocks. So we’ve been talking about this for several quarters. So we’re talking to consumers every quarter, and they’re now thinking that this kind of stock relief is ours in the second quarter and they’re confident that it will start to recover in the second part of our year. . The other thing I would say, Tami, about some of the oil facility consumers is that when they adopt this stock-cutting effort, it’s not unusual for them to overdo it, and there’s a collection downstream where they have to do some recovery, because they might be in substocking.
This can be a typical situation that occurs.
Operator: Next is from Mike Feniger of Bank of America.
Mike Feniger: With the plus-3 value predictions, I think this quarter has probably done something similar to that number. Just to get to that full-year figure, we: Do you want to increase value in the second quarter or at this part of the year to get to that full year?Is this already explained in terms of your contracts and anything that is overdue?I’m just curious if you’re telling us to perceive the cadence of this and achieve that number throughout the year. .
Pat Watson: Mike, I think the way you think about pricing, there are two things. First, our value is based on costs and we do this all the time. And in particular, when we think about traditional solutions portfolios, in either sector, things that we can quote live, we can adjust the values, I would say, relatively dynamically. The other thing to think about here when we think about pricing for FY24 is that we put values in select markets here in the first quarter. These movements are therefore underway and will clearly obtain advantages during the year.
Mike Feniger: And just my second question, the rest is just, I’m curious, you talked about oilfield services, the depletion of stocks there, and it looks like it’s all over. I’m just curious to know what you’re seeing with your general. engineering, some of those customers, are there authorizations that you’re seeing expanding and other stock?Do they feel good? And then, maybe, if they could communicate to us about their own inventories, they’ve been running it. I’m just curious to know how we think about this for the rest of the year?
Christopher RossiEarnings Call TranscriptMichael PiciNYSE:KMTPat WatsonQ1 2024Yahoo FinanceShow more. . . Show less
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