Howmet Aerospace Inc. ($HWM)

I'm Doug Harned, Bernstein's Global Aerospace and Defense analyst. And I'm thrilled to have back with us today John Plant, Chairman and CEO of Howmet. And with that, we're going to get started here.

John, I think to start off here, maybe you can just give us a little bit of overview of where Howmet stands right now and what some of the opportunities and challenges you're facing are?

Okay. So first of all, good morning, everybody. Look forward to chatting with Doug today and giving you some insights to Howmet. We seem to be at, I would say, a point where the opportunities do outweigh the challenges at the moment. Having said that, I mean sometimes the opportunities themselves bring challenge in being able to step up to them. We're at this moment in time where in our commercial aerospace side of the business, the backlogs for commercial aircraft are extraordinary hires. And that gives us some feeling of security of improved volumes for the future and with aircraft manufacturers predicting increasing rates. So that's good and helpful to us in terms of the growth vector for the company. Also in aerospace, the defense budget seemed to be solid. And given the use of aircraft, especially recently, then there appears to be the opportunity for digital spares coming up in the next 2 or 3 years. And then at the same time, given also the use of missiles and the potential for investment in the Golden Dome, then that also is producing another, say, growth opportunity for us. So the aerospace part of our business seems to be well set. And it then turns to the gas turbine part of the business where it to be a particularly hot topic these days, given the build-out of data centers and the required improvements in electricity supply to power them. And I think as everybody knows, is that our position in supplying the turbine blades for the gas turbine as part of electricity supply is very significant. And in fact, our market share is well over 50% globally. And therefore, again, another significant opportunity for growth for us. So those are the, I'll say, the longer-run opportunities facing the company. And we probably have the more, I would say, tactical short-run opportunity of some improvements or maybe bouncing off the bottom this year in terms of our commercial wheel business for commercial trucks both in North America and to some degree, Europe. So in terms of challenge, the growth of the company presents its challenge in terms of our ability to deploy all of the capital required to step up to these challenges. And at the same time, making sure that we not only deploy the capital, we do it in a very efficient way, introduce the products on time and achieve the volume increases and at the same time, produce a very healthy cash flow. And there's always a little bit of strain between I'm going to say the commitment we have to deliver the cash flow conversion of the company with a long-term metric of 90% of net income while meeting these growth challenges.

Well, let's -- I'd like to continue a little bit on that hot topic of IGT and power. Your revenues were up 39% in Q1. And if I go back 2 years ago, we weren't even talking about this topic. I mean -- and we've got team Renova down the hall here, and I'm trying to get a picture of how you see this growth rate going forward for Howmet because you've talked about going from $1 billion in revenues, up to, say, $2 billion in 3 to 5 years. But if I start to look at what some of the companies involved in gas turbines are talking about, the growth rate looks higher than that. And if you add on pricing, and you add on, I think, maybe more market share, the $2 billion seems like a low number. How should I think about that?

Well, I think you have to break the current revenue down between that's required for OE build and that's required for spares. And just at the moment, both are I'll say firing on all cylinders in the fact that the existing fleet of turbines is working much harder than expected and, therefore, driving a very significant spares market for us. At the same time, you say everybody wants more in terms of gas turbine production. And so I think it's fair to assume there's a little bit of caution in the way we're thinking about things because this is much more required than just our turbine blades to produce the whole power generation setup. And so beyond the turbine, you have to have the power gen side of the I say, the equipment, the generation side of it. So I want to be cautious that, to some degree, we ultimately move the weakest link in that whole supply chain -- and but at the same time, remaining hopeful that maybe the growth could be higher.

Well, I remember when we were here last year, at that point in time, you were talking about basically negotiations underway with 4 companies. And now you've talked about now you're up to like, I think, 6 and maybe a 7. So it seems like you're -- I'm trying to understand your sort of all of those individual companies are expecting a lot of growth, and you seem to be expanding your presence across them as well.

It's been an extraordinary time in the gas turbine business. So maybe sometimes in life, you get a little bit lucky. And to some degree, this feels a little bit of good fortune because while we had expected an increase in our gas turbine business, if you went back maybe 18 months, 2 years ago, we were thinking more like going from a fairly cyclical business to maybe something growing in the mid-single digits to high single digits area, the best.

For the power side?

For the power side. And obviously, that's not the case today. We're thinking much more boldly about the increases that are coming. And then as we began to think through where we were in terms of the customer set that we have, our anticipation was that we'd see a significant increase in requirements of the large gas turbine manufacturers. So think of that as GE Vernova, think of Siemens, think of Mitsubishi Heavy and that's where we see the most fundamental part of the demand. As it turns out, we now see that it's also the small and midsized gas turbine manufacturers as well that are requiring a very significant increases in capacity. Some of it driven because they can't get the large gas turbines as a supply shortage. And that's generating the opportunity for banks of the smaller midsized turbines, but also parts of the build-out of the liquid natural gas is also producing a significant demand there for, let's say, gas compression liquefication and driving of gas towards the LNG terminals. And so we're actually having, again, demand not just from data centers, but across the board. And because of that lack of capacity being brought to the market by the larger gas turbine manufacturers, it's given the opportunity for us to supply to the likes of the -- Caterpillar or was it Baker Hughes? Or is it even Doosan in Korea and so on. So there's a lot more opportunity, which we hadn't originally thought about when we were conceiving of the demand pattern for the next 2 or 3 years. So it's a long way of saying we've -- because again, we are probably the most significant supplier to each of these customers, then it's giving us a level of further opportunity we haven't planned on.

Well, and you're talking about the signal demand signal for the next 2 to 3 years. But when you look at the investments that you need to make to do this, I imagine you have to think about what are we looking at in 5 years? Is this something that will plateau? Or is this something where we can -- you see headlines that almost imply infinite growth here, which I would always be skeptical of. How do you think about structuring deals so that you don't end up over investing in capacity?

That's been the, I'll say, item, which has been most forefront of mind for me in terms of determining to what degree should we capacitize for this opportunity? And first of all, what's the duration of the growth part of the cycle. And so what do we see by way of requirements for utilities, stand-alone data centers, data center clusters and also into the oil and gas sector going forward or even the derivatives for provision of turbines for ships, for example, in the defense industry, and you've seen some of those announcements recently where, again, we supply the parts for turbines for that. So there's a lot going on. And then the question is, to what degree should we invest and we also have to, as you know, be very cognizant of protecting shareholders' returns and therefore, not overinvesting. So we've also tried to think of it in terms of how do we structure the commercial arrangements with our customers such that we are confident in making those investments. Then also what will be the demand pattern as we get to 2030 and beyond and what's the growth rate looking like both for data center clusters? Or is it now in the provision of electricity to industrial complexes and therefore, the required some micro grids, et cetera, et cetera. So there's a lot of thought which has gone into how much we should invest, how should we protect ourselves. And indeed, since the part that we supply is the wearing part of the turbine so this is a replacement requirement. So I always think of turbine blade just like the brake pads of the turbine industry. So assume that in the next 5 years, the fleet of turbines that are out there in the market, let's assume it's going to be a very significant increase in quantity, maybe almost doubling the existing fleet. And therefore, all of those turbines were producing requirements for spare parts at the turn of the decade into the 2030s. And so in the scenario where maybe OE growth slows or maybe we don't have any growth at all, then my thought is that Howmet should be able to continue to see growth because all of the fleet of turbines, the existing fleet and all the build-out over the next few years are all going to require replacement parts, which will give us another vector of growth, which will either compound, what we have or a substitute and therefore, we should see continued growth. and therefore, giving some comfort to the level of investment that we're considering.

I want to jump over to the aero part of engine products. But just in thinking about this, when you look at the growth, can you give us a sense of how large you expect the power portion of Engine Products to be as a percentage of your engine business in 5 years? I know that's hard because the Aero side is growing rapidly as well.

Yes. It's a bit like predicting how big our spares business will be relative to OE. And because in recent times, you've actually seen the percentage increase in spares revenues increased at a higher rate than the OE production. And the question is, how will that continue. And the answer is it really depends upon the OE growth as well as the sort of the build of aircraft required for engines, the natural recycle replacement parts, plus also what I call the bubble, which is the fitment of the fleet of engines which have been seeing early life failure for some of those parts. And then you compare and contrast that to the growth in gas turbines, the large gas turbines, which again is going to be dictated by the weakest link in the chain, but then the requirement for spare parts. So it's really difficult to handicap each of these individual segments to say what's the percentage increase in spares in gas turbines versus OE versus spares in commercial aero, defense aero and also the OE build. And so it may not sound the most sophisticated responses to you. But the answer is, maybe I don't sweat it too much because the only thing I know is it's more and do I really care which -- where the growth comes from? It feels as though it's passing out going to about 20% in there or 25% of that like. I don't need to work it out just now.

Well, on the OE Aero side, I mean if I go back a couple of years and talked about this a number of times, but this -- Howmet used to be viewed primarily as an OE supplier on engines. But obviously, the aftermarket became much more important. But now Boeing is now looking at going up to 47 a month on the MAX this summer. We'll hear from Kelly later. Where do you stand relative to Boeing in terms of, say, a burn down in inventory and ultimately aligning with the rate of growth. Obviously, that funnels through GE as well, but...

So right now, there's not a lot of inventory that lying around either in completed engines nor in parts availability. So pretty much our customers will take everything that we can make in the support of their ramp. And if not, then there's the sufficient backlog through the MRO shops for spares requirements at the moment, again, that the thing which is not forefront of mind at all, is there a demand issue. So with the assumption there's little inventory in the spares chains, little inventory in the OE chain, then there's nothing to worry about on engine parts for that on that side.

And that's true for both Boeing and Airbus for like LEAP 1A and LEAP-1B.

Yes. I mean, where we are at the moment is widebody we expect to show signs of growth coming up hopefully this year, which has been a long time coming and maybe into next year, but again, as you see, narrowbody is also requiring inputs of parts because Boeing want to produce more, and that would be great. Airbus also want to produce more, but have struggled a little bit recently. And as a well-publicized information regarding the supply of 1 of the engine manufacturers into Airbus. Again, part supply. And we all know that we're in this changeover period. So last year, we changed over on the LEAP range of engines to the improved, I'll say, generation improvement on the LEAP 1A, we have yet to make that change and to see that changes coming through on the LEAP-1B. And of course, to date on the GTF advantage, again, we are producing parts now, but none have yet made it to the outside market. And so again, a lot of change and a lot of throughput is required as we bring those changes into being in '26 and '27.

Now on these new play designs. So how do you manage the timing of the ramp. As you said, sort of the next 1 that's right in play now is on the advantage. And so that ramp, I mean they just got certification for the engine on the aircraft. And so like when do you ramp up and how do you manage the changeover from the prior blades to the new ones?

Yes. It's difficult for us to give precise dates about when changeovers will occur. We saw on the 1A8 that we were prepared -- I think you saw me quote at the end of '24, we had put in place 500 engine sets of parts on the 1A changeover. And so if I start with 1B we're in that build phase. We're producing tools for capacity. We're looking at the changeover dates for production, while also knowing that we're going to continue to provide and manufacture the existing technology. And just for your information, we're also still manufacturing the zinc technology on the 1A as well. And as I think you know, when an engine comes in for overhaul, if all the blades are changed, and you can go to a new generation, but if only certain of them are, then you can't mix and match on the same disk and therefore, we supply both new generation and old generation and the older generation is into the service market. We're going to go through that on the 1B this year. And then for the advantage, we're going to be increasing production every quarter during the course of this year. When it actually makes its way to the market and where will the market set first in the OE area or the aftermarket area. That's not for us to determine. There won't be enough I will say, provision of parts to do both at the same time is our view. And so I think we're actually going to see a far higher production in 2027 of the advantage level of parts. And so -- and reaching much higher volumes in the second half of '27, while still providing all of the existing current GTF advantage parts all the way through.

Because this would also involve -- I mean, they have this whole hot section plus program to do upgrades. So you've sort of got normal MRO, that program and OE right, all.

That is going to be a very significant increase in requirements for us. as we go through this next, let's say, 18 months. .

Is it fair to say that on each of these, when you go to the new generation blade that you would have higher pricing, better margins and more share.

I never really comment on.

I know you don't want to comment that.

I just loosely refer to it as a higher content because of increased sophistication. So -- if we're going to produce turbine blades that can exist at fundamentally higher temperatures. So think -- these are not extra 100 or 200 Degrees Fahrenheit. We're talking about hundreds of degrees of improvement in term of capabilities. And so to produce that level of part, it's another generation of sophistication. And the way I'd like to think of it in the advantage areas that some aspects of the technologies that we developed for the engines for the as an example. Some of those technologies are being deployed for the advantage level of turbine. So again, to make sure that there is a significant buffer between we know what the temperature of the engine may see because, again, it's obviously a lot of testing has been done, but then there's the real-world application.

I have heard some frustration from your customer universe that maybe because you guys are too good, but that you're sort of the main source here and that they would love to have more options. And we've seen Pratt, they have this whole effort in Asheville, where they're working on doing some of their own blades. How do you view the potential threat of new entrants in this market or people in-sourcing like Pratt's trying to do? What is that -- what impact, if any, does that have on your thinking?

Well, obviously, we need to always think of what the competitor? Or is it customer -- competitor might do. We do keep a fairly close eye on what the capabilities might be in those new areas of potential source. And with that, displaying the full level of knowledge about the situation is these things are not easy to make because if they were. And I guess that we have a lot of people doing them. So I suspect that we could be sitting here a decade from now and still finding that people might be struggling to produce the economics of -- blade essentially go to the question of yield. And the difference between, let's say, getting a 70% yield and a 40% yield is all of the pricing and all the profit that exists in a turbine blade application.

Now you've had very strong margin growth. I mean your EBITDA margins. You've been taking them up close to 300 basis points each year for the past couple of years in engine products -- what's enabling those increases, I think you were at 36% in Q1. Where can you go from here? Because it does seem like you have opportunities you've described that you're very well positioned for.

It's always difficult to talk about where you're going to go because it's -- it would be a forecast for the future. And as you know, I've always been very reluctant to comment on what the future might be hold by the way of margins because to some degree, to a large degree, things are outside of your direct control. We don't know what inflation rates will be in the second half of this year yet and therefore, the degree of recovery and therefore, dampening effect that might have on margins, et cetera, or margin growth. So I never want to assume a level of knowledge or precedence that could predict the future that accurately. And so -- and you can say, well, some of it because I don't feel like I need to do it. . And secondly, I think it's a little bit foolish to do that. But I think the most important part of it is, as we continue to strive for the improvements in our manufacturing space and improve our yields and drive through these improvements in technology, which are very significant in either improving the robustness of engines or if not producing the opportunity for further fuel efficiency then those are very valuable to the industry. And we just want to play our part in that and gain the appropriate value for that.

Well, also still within engine products. So defense has also been quite good for you. And our assumption is F-35 is probably this big a single driver there. If we look at F-35, the aftermarkets, I mean the cycles on the F-35 drive a pretty strong aftermarket. Is it fair to think of growth there, in some sense, proportional to the fleet size in F-35, we're trying to predict that.

I actually think it's more than proportional to the fleet size. I hate to use the word exponential. But to some degree, it does apply. So if you went back and looked at the size of the fleet, let's say, in 2021 and then looked at the spares level, I don't mean space packages provided with the OE sets to say, to foreign governments, which that's a feature of it. But spares, driven by usage. Then our, I'll say, loose prediction had been by 2025 that we would see the production of spares for the turbine to exceed the OE production, which is actually what did occur during 2025. And then when we look forward to, let's say, 2030 so you put another 5 years of production of 150, 160 F-35s into the market. And so, looking at, let's say, another 800-plus aircraft. And then all of those obviously are going to require spares and the existing fleet, which is being built from, let's say, the last 5 years are going to require spares and so my thought at the moment is the -- without going through what -- exactly what our models predict because there's also numbers of flying hours, which is something which we don't control. there's been a lot of flying out recently, given the conflicts that are there. Then the thought is may be dispersed it -- double again by 2030. And assuming this aircraft is in sitting production through the 2030. So I think at the moment through is it 2038 or '39 another 10 years of 150 if it's flat production or who knows exactly what it will be by 2035 because we will be hopefully doing the F-47 and whatever the Navy plane requirements are so all of that will be feeding in as well. So my thought is the spares demand is going to continue to grow and will be very significant as we go through the 2030s. 2040s, 2050s.

I don't -- we don't model the 2060.

Yes, I thought you might, but things that might be beyond you and I talking on this stage together.

You don't plan to be here on the 2060 confidence.

I haven't thought about it recently, let's say, but it's possible that it might not be the case.

Okay. Well, me too. So we'll see Yes. So switching over to fastening systems. So you've had some really strong revenue growth. But we've sort of been waiting for this wide-body ramp to occur. And it seems like you've had this growth even before we've seen the 787 and A350 growth really move up. What's driving your fasteners growth.

Has there been multiple strands to that growth. I mean, first of all, we've probably incremented our share in various areas. It's been a little bit because of the SPS fire, which occurred when our competitors, there's been a little bit because when we renewed our contract with Airbus this year, we took a little bit of share. And we are also trying to develop, I would say, new products that we bring through and look to put those on additional things on the aircraft. So when we put a level of technology, which may surprise you if you took us, let's say, naming the platform exactly where we've put a new range of fasteners are, let's say, the front part, let's call it the nose area of the aircraft. And then we're marching down each part of the fuselage, then that again is content and value increase to us. So we've been trying to do that a lot in our faster business and seeking to do more of it, and we actually got many things in development right now.

So has that expansion you're talking about, has that been primarily on narrow-bodies?

I will say more narrow body than widebody. We have some developments for new things in the composite area where we're looking at widebodies today, but in particular, for the next-generation aircraft as well. So we're trying to position ourselves and doing this year and the next couple of years, such that to be the selections aren't anything that might occur in any form of narrow-body, I'll say, changes to come or new aircraft to come.

We should see wide-body production rates because we're seeing that at Boeing right now, those production rates are starting to go up. A350, it's been a little slow recently, but that should go up rapidly if you look at what Airbus is projecting. That seems like given that those are more -- those are higher-value fasteners for you. And the volumes are high. I mean, should we expect to see a kind of break upward as we see the ramps take off?

I've been thinking for like 2 or 3 years that we might see, I'll say, the wide body begin to start and therefore, there might be a mix effect. But here we are in '26, it hasn't happened to date. And I'm not thinking particularly great things for '26 either. And we've seen recent announcement that maybe the A350 might not increase as much as we thought because of some additional production problems. So it's best not to get ahead of yourself, but come the day where Airbus is producing 12 A350s a month or maybe come today where Boeing is making in the teams again for the 787 then that will be positive for us. Now how that growth is going to compare to narrow-body ultimately, who knows. But should they get there. And so whenever you decide what the narrow-body production is 100, 120, 140 aircraft a month or whatever number you choose, the percentage increase theoretically on widebody should be higher, but it's a long time coming.

Yes. But Boeing, I mean, they intend to be 10 a month by the end of this year on the 787. So that one seems -- that growth path seems pretty real right now.

That's not our underlying assumption that we've given for our embedded revenues for this year. So should Boeing produce 10 a month. That will be absolutely great. Look forward to it. But I think -- volume increase that underpinned that, then we were able to essentially do all of that without adding any people whatsoever to the business. And so the level of throughput that we've been able to achieve has been extraordinary. And some of it is down to automation. Some of it's down to introducing newer equipment that can say, collapse these numbers of stages of production into, let's say, going from maybe 8 stages down to 4 stages of produce as an example, and therefore, making the whole production system more efficient. . So between again content production efficiency and some price has been beneficial. Now in terms of how the margin develops in the future course, as you know, we are bringing on an acquisition which we closed on the 6th of April. And so when we blend those 2 together, then obviously, we're taking some an entity, which is more like in that, let's say, 20% margin range to add that together. So that will obviously dampen those margins. But then our plan is, obviously, to bring that up and hopefully continue the improvement. So that's what we're seeking to do over the next, let's say, 18 months, 2 years.

So on the CAM acquisition, can you talk a little bit about what attracted you to that and how you expect to integrate it and improve it.

So we've had the opportunity of looking at 2 or 3 fastener acquisitions in the last year. And 1 we looked at and decided not to proceed. One, we decided it was not of great interest to us. But CAM felt to us as though it was a better property altogether. It gave us the opportunity of not only further increasing and improving our fastener business, but also the adjacencies of fittings and couplings and the things which we wanted to increase our revenues significantly in. So part of it, we also thought on the -- when we looked at inside that manufacturing operations that compared to what else we've seen, it seems to be have a better order and so a base that we could further improve from with some of the manufacturing techniques and investments that Howmet does. And so that was an opportunity. . Secondly, we wanted to also see what I believe to be the holy grail of doing an acquisition, which is to gain some revenue synergy. And so we thought that given the scale of the Howmet's sales force and contact points in the industry, which is way beyond commercial aerospace, that would give us the opportunity of pulling through some of the CAM products to the customers for more than they were able to. And so we're optimistic about doing that. We're also optimistic that some of the CAM product that we'll be able to take through our distribution network that we've built. So if you go back to something that we did in 2021, which used to create a separate distribution arm for Howmet is that we've taken that from like $50 million to $350 million over that period of time. And the thought is that we'll be able to feed some of those can products through that distributing capability, whereby we have both the manufacturing and also the distribution side of it. So that's what we think of that we can gain the opportunity of selling more through our network and also through our distribution capabilities, plus obviously, again, can we make further improvements in productivity in the CAM operations.

Switching over to Engineered Structures. This is one where I remember a couple of years ago, it was one you talked about, that was really your main focus of investment. The returns look better on the other interim products, fastening systems. But the performance there has steadily improved over the last couple of years. Can you take us through the most important growth drivers for that business?

Yes. I think, first of all, I'd like to comment on the margin before I go to growth. So let's call it, from 2019 where there's been an oversupply situation for some of the structural parts into the Lockheed F-35 program plus post COVID, some of the declining wide-body in international travel, then it was a tough scenario for that business. And I felt that we were doing reasonably well in that scenario demand structure to hold on to 14% margins. I was quite bold in that I normally don't talk about, as you know, future margin, but I said I think this is conceptually a high-teens business. And as you saw, we broke through and achieved 2 at the front of the margin profile of that business in 2025. And I said our mission was to try to hold that -- hold on to it. And you've seen we've been able to do that in '26 in fact slightly so we're just holding on to it. And feel in a good situation. So thematically, I've been more interested in driving the margin and at the expense of revenue. And so there's been thrifting of product withdrawal from certain segments, sale of a couple of entities. You've seen sale of company we did in the U.K. called Wallin, one in the U.S. in March, which was Savannah, and also, we've chosen selectively to move out of uncertainty. So in the growing industry, my thought was, we can still grow, and you have seen growth, but not at a pace that you would have thought, but it's been a margin focus. And so now I feel as though we've done a lot of the heavy lifting towards that. And so we have a business which has a better underlying situation in that I think the growth rate has the opportunity to increase the margin rate hold or further improve. And so we've taken this, let's say, 2 or 3 years to reprofile where that business sits in the grand scheme of things. And so having the business now in the 20% margin profile and a better future growth pattern to it is one that I increasingly begin to like but it's been heavy lifting and taking some tough choices along the way.

We don't have a lot of time left here, but I wanted to touch on something you mentioned earlier and also on the earnings call. and that is opportunities in the missiles area, which is clearly an area of high growth. And where do those fit into your thinking?

Previously, missiles had not been the highest focus area for us. We were probably more interested in, I'll say, the structural faster part of drones. But more recently, we've seen, I'll say, the long run opportunity where some of the larger missile systems are requiring small turbines now. And certainly, for the I'll say, collaborative combat aircraft, the unmanned aircraft that would fly alongside an F-35 or an F-47. I think clearly those are turbine based and so we've spent time developing the parts for many of these small turbines that you've heard some engine manufacturers referred to and trying to make sure that we have the ability to support the ones we choose to support. And so far, the 3 basin -- engines that we understand which have been selected by the Department of Defense or Department of War, then I think those are all future Howmet parts on them. And so it's not revenue for 2026 per se, I mean, some development prototypes, but positioning the company for to support that segment. And I think it will show significant growth in the next, let's say, 3, 5, 10 years. And so I think it's an important thing that we do. More immediately, in the missile area, of course, a lot of missiles have been used recently and so whether it's be -- where it's now that we see an increased demand to replenish some of those or whether it's for Golden Dome applications. So if you think about missiles like the PAC-3 or the Patriot missile or whether it's the THAAD system, then each of those are -- we are looking at significantly increased volume requirements and working that through at the moment. And so that's going to also produce a level of revenue improvement in -- not necessarily that much this year, but '27, '28, '29 to produce safe replenish stocks and also say, for Golden Dome.

Well, kind of to wrap up here. when you put all this together and you think of your guiding as to cash -- free cash flow of $1.75 billion this year. How should we think about what could take that higher, what might be a risk on that? And how you plan to deploy it?

I think the first order and first priority for us has been to make sure that we can invest for the future growth opportunities. And you've seen us take CapEx up from the $300 million level through $400 million, $500 million we're talking about for this year. And I think '27 is going to be a higher number, still -- and so that really is -- has been the most important thing we've been thinking about in terms of supporting that future organic growth of the company. And then beyond that, we've looked at how much we should use by share buyback, how much for acquisition? And how do those interplay with each other? What's the relative returns for shareholders of them and at the moment, we feel as though we're able to take the opportunity because when an acquisition comes up, you don't get to choose when they come up. It's see what the sellers are willing to sell and we've made to, as you know, the CAM acquisition, the Bruner acquisition said we'll do those. At the same time, at this point of the year, we're still buying shares back at a higher rate than we did in the previous year. So we're able to do that as well. So far, we've not had to face any buying choice as one or the other, we're able to do both and both to an increasing extent. So we're kicking up CapEx. We've been able to complete acquisitions. We are kicking up the share buyback opportunities and still supporting a dividend. And so all of those things are being done. So at the moment, we're not trading one off against the other, it could have -- get the margin, but it's all good.

Okay. Well, John, thank you very much. We'll end it here, but I think really great to see you.

Nice to see you, too. Thank you.