Kaiser Aluminum Corporation (KALU) Earnings Call Transcript & Summary

Welcome to the first day of our JPMorgan Industrial Conference. Really pleased to have Kaiser Aluminum here today. And President and CEO, Keith Harvey is going to walk us through a little presentation, and then we'll move to Q&A. I certainly have some questions, but certainly, raise your hand, we'll let you guys ask some questions, too. Thanks for joining our conference.

Thank you for having me. Good morning, everyone. Okay. President and CEO of Kaiser Aluminum, about 43 years with the company, started as an engineer in one of our plants. Thank you very much for your interest in our company. I'll do a little run-through on what we're about and how we operate. And as Bill said, we'll entertain some questions. I'll go through the usual forward-looking statements. These are on our website, if you care to look at any of these. Company overview. We're a North American producer, highly engineered fabricated products. We've got a diversified portfolio. We focus on 4 specific markets in general that all demonstrate strong secular growth trends in place. Our business philosophy is one of the integral pass-through on the business model. We pass through metal and we work on conversion revenue for our profits in the business. We've got long-standing relationships with our customer base. This is our 76th year in operation. We've been operating with a number of our customers since our inception. We've got a disciplined approach to manage of liquidity and debt leverage, and we'll get into some more details about what that's about, especially in days like today. And then we focus on strong operating leverage and manufacturing efficiency to ensure that we have a low-cost position to operate in the markets that we entertain. We have 14 facilities around the country. We have one facility in Canada, but we're a North American-based company. The products we focus on are sheet, plate and coil products in the various markets we participate as well as extrusions, high strength and what we refer to as soft alloy extrusions, and then we also have a bevy of drawn products which we offer in the marketplace. Our strategy has been consistent over the last 16-plus years. We focus on demanding applications where there are significant barriers to entry. For instance, we've been in the aerospace business since our inception for 76 years. We focus on differentiation of our product, as well as quality, but also product preferences with machinability and so forth for our customers. We focus on differentiating in those manners. And then we create value with operating leverage and with manufacturing efficiencies in our ops. In markets that we service, well, the aerospace, commercial, defense and business jet and space included in that space. Automotive, general engineering and most recently, we reengaged back into the packaging markets with the acquisition of a large rolling mill asset in Evansville, Indiana. Our Warrick operation. In the focus that we also, with the diversified products that we focus and this specific markets, it's a small niche area in which we find those attributes and where we want to get paid for what we do. And if you look to the chart on the left, you'll see that the global market for sheet and plate products is roughly greater a little around 65 billion products. And we operate in less than 15% of those markets. We have operated as a company in all of those over our history, but we're focused on the heat treat nonauto type products for our flat rolled products. And then we're back into the can business. We focus on can in North America only. And then you move to the right side of the chart are long products, which are drawn high-strength and soft alloy extrusion products, we focus on less than 20% of the North American market, which is roughly about a GBP 5 billion market. Looking at our portfolio, there's a mix of, from a conversion revenue and conversion revenue from our perspective is just taking out all the metal, all the allowing cost, conversion revenue is the area we potentially focus on and our opportunity to make profits. Our philosophy is to pass through metal. We don't try to necessarily judge the market or time the market, if you will, ours is to focus on the conversion revenue. The pie chart on the left shows at the end of the year, I'll get into some of the reasons for that. We're a little heavier in packaging through 2022 just because some of our markets are rebounding from the COVID post-pandemic timing. Demand drivers for our products. If you look at our packaging, we focus on beverage and the food can markets. We're finding a strong growth potential there due to the sustainability efforts that are underway from plastic. On the aerospace, it's really a focus on global passenger air travel, then obviously, to have a segment of our business on defense, we see we're not only on the current program, the F-35, but also on all the legacy and the rotary aircraft. BizJet is a large part of what we focus on. There's a big resurgence to take underway since the pandemic on business jet development and then we focus on space development as well. On automotive extrusion, lightweighting of vehicles for the ICE, especially, has been underway for a number of years. As we pivot toward the EV vehicles, we're seeing a larger content opportunity for extrusions in our business. As you look at construction of battery boxes, still structural components and we still focus on the legacy products, which are like antilock braking systems in which we have a significant position. On general engineering, mainly focused on North American industrial products. Part of our drivers are industrial production rates and GDP. We have seen a reshoring trend take place since the pandemic as a lot of our end customers were called short due to the supply chain issues that were as a result of that period of time. And we're seeing that sustain going forward. That's a positive for our position there. We also have a large position in general engineering because we had that broad bevy of products. We sell mainly through a North American distribution base, and that broad product offering is something that we utilize with our distributors. Resilience of growth through the various cycles. As you know, in our industry, we have a significant amount of cyclicality to our business, up and down. You'll see at the bottom, some of the events that take place within the markets that have a potential to impact the business, either positively or negatively and selling through that. Our conversion revenue, you'll see, in the 2020 time frame, I'll focus you on the red portion of that graph. Aerospace-type products were at onetime 60% of the company's conversion revenue. The pandemic had a significant impact. We saw a 40% decline in that business. There's a relatively high-margin type products. We're seeing that rebound have been calling that out since really the 1st of 2021. We've seen continued growth and that continues. I'll also point to the light blue in the 2021, 2022 period. We made an acquisition back into the packaging industry, the Warrick rolling mill facility from Alcoa, significant growth opportunity we felt and an opportunity for us to move into very specific higher-margin products within that category. That mill we bought at a period of time, we're really pleased with the acquisition price that we paid for that and with the long-term outlook, and we'll go a little bit more into that in a minute. We've demonstrated the ability to deliver results even in those cycles. We focus on the left part of the growth, but you'll focus on the last 3 years. Those last 3 years with the impact on our market with COVID, with the challenges that we had with some supply chain issues, labor challenges over that period of time. We've continued to be at the lower levels of our output. We're starting to see things hopefully more normalize as we go forward into 2023. And we've had challenges with things such as labor. Labor, we ended up hiring 900 people last year and roughly 100 of those folks stay. That's just a little microcosm of what we've been dealing with in the labor markets and some of the challenges that we've had. I'll really not focus on this. We had a lot of supply chain challenges with the acquisition that we made last year, a lot of unusual costs that impacted the business, and this is typically some of the things that we've done. We've started to recover here. We started to put some of our assets in place in the business. We have long-term contracts, of which we're currently renegotiating going through. We have a major investment that's following on the heels of this acquisition for this business, which will give us a significant margin enhancement on roughly 25% of the business that we currently have. That's halfway through the operation is supposed to be up and running early to mid next year. Our end market outlook, we talked about the demand drivers, but for packaging. And these are really focused off of the 2021 period of time. But we see a 5% to 7% growth in this market. This market is being heavily subsidized right now with over 1 billion pounds of imports, mainly from Asia. And so we see significant opportunity to enhance margin. This business allows us to pass through cost. We have alloy cost, energy, freight, a number of other cost pass-throughs that we do. But we see significant growth continuing there as from a sustainability effort as consumers really focus on moving from plastic type products to highly sustainable products such as aluminum. And so we're seeing that growth not only in beverage but also in the food can industry. On the aerospace high strength, again, significantly impacted in 2020 due to COVID and that change. I noticed there's a lot of aerospace companies attending the JPMorgan today. But what we're seeing is a really strong rebound in the commercial market, which is the largest driver on that side. It's really driven by passenger airline growth models. And so what we're seeing there is the return to the recovery rate, we were seeing 3% to 4% CAGR growth on that up through 2019, actually, the first quarter of 2020. And as we moved into that, we saw our business drop roughly 40%. We're still about 30% below the historic high of what we saw in 2019. But as we've been saying for roughly 8 quarters now, we expect that to rebound back to where it was in 2019 at roughly the rates and return back to the growth rate that we experienced. And with the aircraft backlog that's beginning to go back and the build rates starting to recover, we feel that's pretty much on track. On the automotive, we've got a 5% CAGR. That's a fairly conservative number over the years. We've seen 5-20. Anytime recovery, there's been higher even in the teams on that growth. That's really being driven by growth in North America conversion to EV, but lightweighting continues. We're heavily on trucks and SUVs for our products. And that's a roughly 80% of North American sales. We're in good position there. But as you know, that industry has been impacted over the last number of few years due to the COVID and supply chain challenges as well. And then on general engineering, which is an important business for ours, we've been in some of our customers. One of our largest customers Reliance Steel & Aluminum. There's about a 2% CAGR there. We saw demand really muted over the last few years, but as the reshoring has occurred, we're starting to see that recover. At 2% CAGR is actually pretty exciting for us to see the return for that business. Our business cycle strategy is to be prepared for diversity. What does that mean? Well, we're in highly cyclical markets typically. And actually, that was one of the drivers to move back to packaging, which isn't as cyclical in the past as our products. But in the past, our products are highly cyclical. Therefore, we've known that there can be considerable high, considerable lows and they happen very quickly in our industry. It really focuses us on sustaining our position with long-term customers to be able to weather through those. Our cost, we consider fairly flexible variable cost. We demonstrated that in the beginning of COVID, we took out close to $100 million within a 2 or 3 month period. And cycling back up has been a challenge from a labor perspective. But we're still in a position if we're, for instance, ready to hit in a recession. We have highly variable costs, which we can flex fairly quickly. Retaining strong liquidity as a safety net. We finished the year roughly $600 million of liquidity on the balance sheet. And it not only is good for a safety net in the downturns, but it also provided us the opportunity to acquire the Warrick facility in the middle of COVID during a period of time when others were more focused on whether or not they were going to be able to go through COVID. And then finally, the focus on business on the management team is to really maintain a conservative debt leverage. We really focus on the 2 and 2.5x. And we knew that as we moved into the, after the acquisition, that's accelerated. It's higher than that, but management has a strong focus on returning that to 2 and 2.5x within a very short period of time. We talked about metal price neutrality. Our focus is to have provisions in place to pass through these highly volatile costs that we associated. Last year was a perfect example of having the ability to pass through costs, costs basically ramp from $1 to $2 a pound and back to $1.20 within almost a 13-month time period. We have to have the ability to pass through and manage through that. Over 95% of our shipments have that type of metal pass-through provision associated with those. The remainder, we're able to pass through in roughly a 2 to 3 month time period depending on the lag of the markets. That's a focus that the business has had for a long term and serves us well in these volatile markets. Our capital allocation priorities on the left. These have been longstanding for us. Our #1 priority is to invest in organic investments. We've had a number of those that have transpired especially the last decade and a half for the company. We've invested back more than 2x appreciation on this, including sustaining CapEx, a significant amount of that on growth over the last number of years. We've put back roughly $3 billion investment in this business since 2006 time period. Second priority is inorganic growth. We focus such as we fill white spaces. We've had a number of small investments we've made. Warrick was by far our largest investment for over 30 years. That's our largest acquisition that has taken place. Third, we've had a very strong commitment to our dividend, a little different in our space, since a period of time, and that's a focus on we basically stated that we won't sit on the cash in the company. If there are no other investments, the top 2 priorities, we basically have matcherized for a period of time, then we will move dividends back on a fairly regular basis to our shareholders. And then beyond that, if there's excess cash, we have a history of returning that cash back to the shareholders in the form of repurchasing of shares. Here's a little documentation of what we've done on organic investment. You could see over $1 billion of more than 2x depreciation that have taken place back into the business. Just after the major acquisition, we had a strong investment that took place last year toward further in that growth. Majority of that was on growth. And we have a strong, we've talked about $170 million to $190 million investment that management is going to assume this year for a continuation of that growth. On the inorganic investments, you can see a number of smaller investments we've done over the years for, to really fill in our white spaces around aerospace or other the major markets that we serve. Certainly, the largest move we've made was to get back into packaging with the Alcoa Warrick facility. We paid a roughly $670 million in cash for that operation. And to satisfy that growth that we talked about earlier. Then these 2 charts show how we've been disciplined on the return to shareholders. You can see the strong and improving dividend back through the '07 time period. And then the chart on the right are the share repurchases we've made. We think as a management team, we have more growth investment opportunities in front of us now than we've had ever in the last 20-30 years. That's a solid outlook for us, but a balanced approach to how we look at capital. Talk about the end market outlook and our growth potential. And we've looked at this. We've talked about the end market demand drivers on the left. We've talked about on the portion on the right of what we feel needs to take place to position ourselves from that. Currently, we're under an investment at the packaging facility to substantiate the growth for packaging. We have a Phase VI expansion planned at our other major rolling mill at Trentwood and Spokane focused on aerospace and GE growth. We pulled 6 of those expansions over the last 10-plus years. And as the aero market continues to rebound, GE is strong. We've already got that on the blueprints to pull that trigger when that's ready. We've got other investment traders to support the automotive growth when we see that happening. And we feel we have a strong balance sheet of which we can affect those changes. Long-term outlook for this business, we believe we can deliver with that on the right. And with the market demands on the left, we believe this business will be able to deliver roughly $2 billion conversion revenue with margins back into the mid- to high 20s and certainly different than where we're at today, but we've got the market positioning and the investment plan to get us back there. And then finally, from a sustainability perspective, we feel we're part of the carbon solution. Aluminum is used a lot by our customers and to affect their Scope 3 challenges. We're lightweighting. We provide an opportunity for them to continue to use our KaiserSelect products. KaiserSelect products basically are products that we believe are industry-leading from a performance perspective on how fast people can machine and utilize our products and reduce the cost in doing so. Our focus is to, we have a strong focus for 2030 to basically reduce the intensity of carbon outlook in our facilities by over 30%, and those plans are in place. And then finally, the use of recyclable material in our products. And then as our customers use in lightweight products, that's a continuation of the use for the low carbon content for the products.

Why don't I kick off with a couple of end market questions. But again, if you guys have want to also ask some questions, please let me know. But let's start off with end markets. You provided the longer-term sort of outlook across these end markets. And then in the fourth quarter earnings, you provided some very near-term sort of shipment guidance. Kind of low mid-single digits for packaging, aero and auto here in the first quarter, offset by general engineering, down sort of mid to high single digits versus this longer-term outlook. I guess if we sort of bracket that, how should we think about the growth through the progression of this year and in the next year, what are the areas you see the most growth potential maybe looking at, again, second half of the year and into next year?

I'll take them by products because they certainly have their own dynamics. We'll focus first on the aerospace market. Aerospace market, as I said, have, if you go back and look at our quarters, we've had continual improvement back to that 2019 high watermark. And that market is continuing to pick up speed. We're getting some great signs for both Airbus, Boeing looking to really accelerate build rates over the month as supply chain basically will allow very strong backlog. We're back to an 8- to 10-year backlog on those products. And we certainly see defense, business jet really helping to also throw some steady demand. Probably our strongest growth potential from this point is on the aerospace and a return not only to the levels we were, but back on that 3% to 4% CAGR rate. You move back down to packaging. Packaging is on a little bit of a, everything is cyclical. We've seen a short slowdown in the fourth quarter and slightly in the first quarter. Mainly this is an inventory rebalance as some of the consumer traits change. As people get back out in the marketplace restaurants and all this, we're seeing a transition from some of the packages that we dealt with and others. Some packages and products like food products are continuing to accelerate. Within the class itself, we're seeing some variation. We don't think that's a long-term scenario. Our customers tell us this is a short-term rebalance of products. You move on to the automotive side of the business. Automotive is prepped. We typically, on SARS, we would see a $16 million to $18 million passenger vehicle build rate in any given year. And we've been stuck at roughly the $13 million build rate, vehicle build rate for the last 3 or 4 years. There's pent-up demand out there. However, there's a few clouds with interest rates and so forth that are out there. I think that business will start to recover. Our business has been flat for 3 years. We're showing less than 5%, actually a little bit of 2% to 3% growth. But on the conversion revenue, we're seeing a little better with prices and new programs that we're launching. We're seeing some better pass-through of cost and a little higher margins on those products. And then finally, on the general engineering product, which is mainly the IP of the country and we focus on North America, we saw that we were such a toward pace for the previous 6 to 7 quarters. We felt that those weren't sustainable. We started to see our distributor inventory rates start to rise and we saw a slight hesitation in the fourth quarter. That continued into the first quarter. And it will really all focuses on. There are canary in the coal mine. If we have a hard landing or a soft landing or any landing at all, they'll generally be the product where we'll see a greater slowdown. Generally, there's some price deceleration that will take place if we're in a recession. We haven't seen any of that to this point. It's a little bit all this uncertainty and then some of the challenges we had last year, which led us to just give the short outlook for just the first quarter.

Maybe just following up on auto. You talked about lightweighting for traditional vehicles. How does the content progression go from current ICE, lightweighting ICE to EVs?

It's really an interesting trend, and it's developing as we speak. Of course, on ICE vehicles, we were working on CAFE requirements. Lightweighting of the vehicles to meet the CAFE standards and help them do that. And of course, there's a number of products we call legacy programs that we're on, such as anti-lock disc brakes and things like that, which will continue on even whether it's EV because they still have to hit the safety mandates. But depending on where we end up on things like the battery tray, and right now, the industry is focused on which type of materials, of course, it's all in parallel with what they're trying to get for extension on battery development. There's a certain mileage they're trying to meet on all of these. Lightweighting will continue regardless of the development of the battery and the extension that the battery life can give on performance. If a number of the programs, and we're working with a number of folks that are looking on an aluminum extruded battery box, which not only serves to hold the batteries. It's also a conduit to remove heat from the vehicle. And we also use it as a substrate for wiring and so forth, hydraulic lines or if they're available to maneuver through. But they are also underway development with steel and stamp product and all this. But if it moves the way of extruded, that's a potential 50% increase over an ICE vehicle use of extrusions. There's a tremendous opportunity on the upside there. It just depends on how the development works. And of course, this will take place over a number of years. And there are a number of programs that will go aluminum extrusions or some that will try steel. It's all based on the platform that it's being used on.

Having maybe more towards some of the strategic things you're working on, I guess, related to general engineering, maybe further follow on auto, but also aerospace, what are you uniquely provide in these markets that are unique, maybe, again, GE and aerospace, you kind of hit on the automotive side just now?

On the aerospace, we're one of the few companies in the world that have been qualified and delivered products to the aerospace, especially on the commercial side for over 70-plus years. And that market is a very demanding market to get into, really difficult qualifications, obviously, the quality of your products and so forth. We've been on programs for multiple years. During a period of the early growth, a lot of new entrants to try to penetrate the market. But we have a very strong position across the litany of programs that we talked about earlier. And we're maintaining. We're continuing to invest as the growth of that market occurs. I mentioned on our flat-rolled side, we've had 6 major expansions over the last 15, 16 years and Phase 7, which we believe we'll need to pull within the next 1 to 2 years. That's on the shelf ready to go. That's going to add additional 20% to 25% additional capacity for those markets. That investment will also support the general engineering side, which we think general engineering side is on a recovery basis here as reshoring takes place. And certain markets as semiconductor, as that business gravitates back. We participate heavily with that. Currently, a lot of that end market uses in Asia, but we see a lot of that gravitating back to the U.S. We have a strong position there. And then on our other bevy products, as I mentioned, our distributors, we sell a lot of our product through that period. They like to buy a bevy of product. Every product that we make, they sell. We have the largest offering domestically of any other player. We've had a strong position. We've supplied Reliance Steel & Aluminum for instance, for greater than 70 years. As they continue to grow and they grow in the market, we participate in that growth and our investments not only help us on things like aerospace, but it also for the GE type investments.

The long-term price tag, which is fair. 2022 [indiscernible]. How much of that would you attribute to the overall [indiscernible] 2022, how much is being engraved with Alcoa [indiscernible] Kaiser accountability just didn't, [indiscernible] it's something you wish you had done differently?

Well, first of all, I'm still very excited about packaging and the opportunity it provides us. I did not anticipate a 2022. We had a number of challenges -- we've called out we had roughly $70 million plus in unusual costs that occurred. A lot of those occurred at the Warrick facility. We have a short-term supply arrangement with Alcoa. Alcoa ran into some difficulties supplying that material for the first half of the year. They've gotten their act back together there. But we also have been challenged with the supply position we had on magnesium. The use of these products, especially on coated products, of which we have a significant amount, we use a lot of magnesium. One of our major suppliers declared force majeure in September of 2021. And we kept being assured that, that was continuing to improve. Well, it didn't improve, it got worse to the point where Kaiser had to declare force majeure midyear and really impacted our shipments in the third quarter of the year. And as a result of a lot of bad things happen, you do a number of things with which to really minimize the impact of those to your customers. And so what we did as a result, we had to bring in higher-priced metal. That was part of the cost that associated. And then we had to go out and pay magnesium prices that were considerably higher of what we had previously contracted to. Now we have passed through on areas of that nature, but there's a time of where that pass-through can take. It can take anywhere up to 6 months to a year to pass those costs through it. And then on our other large rolling mill, we had a major outage in the third quarter of last year. That had been long planned. We executed it very well. But there are a number of costs associated with that, that also impacted us last year. I would say 2022 was hopefully one of those anomaly years, one of those bad years you just go through. We're starting to normalize operations there. We've diversified all of our raw material alloys and usage since then. We're well covered through the balance of this year and partly into next. And then we are getting alternatives to just running hot metal from the Alcoa smelter. And those will be in play. Long term, we're focused on moving highly recyclable type content. UBC's additional scrap loop, that's really the play to really help suffice the sustainability. We're coming away from the coal-powered plant that exists there. We're getting on to the grid in Indiana with a lot more green type energy opportunity ahead of us. And then you have to remember, they've been a 50-year Alcoa company, and we're working in the middle of integration into a Kaiser Aluminum operating business. There was that distraction that took place. A lot of things happened in '92. I mentioned earlier at the podium, we hired over 900 employees last year, and we kept around 100 of those. Another major distraction as you get into when you look at efficiencies of running your operation. It was one of those challenging years, it's really why we have the liquidity that we have. We've seen that in spades back in the 2008 time period and so forth. We're prepared as a company. The good news is starting out through the year. We're seeing demand hold up pretty well. Pricing is holding up very well. Still a lot of uncertainty out there about whether or not we'll be in a recession or not. But the long-term secular growth expected in our markets gives us good comfort that we're at the markets that count, and we're in a good position to take advantage of those longer term.

Can you talk about the supply-demand dynamics for aluminum in general, your views on that?

I actually think that we're in a period of resurgency to where there's going to be significant pull on our products. One of the factors, and I was around in the '90s as we actually exited packaging, and we had looked at that for a couple of years prior to reengaging and reemerging back into it. But a lot of those demands that were taking place, the sustainability of moving away from plastics, moving into highly sustainable areas, looking at markets and customers in that space that we're willing to look strategically with us. One of the reasons we got out in the first place is we weren't able to extract enough margin with the cost of a lot of cost demand and all this. Those customers are looking strategically long term. They're addressing us differently. They're like in aerospace. They consider us extremely important to the growth of their growth. The consumer is the one that's driving this. And I apologize, I don't like looking through that. Packaging is really a good story for us. And reason enough to reemerge. When you look at aerospace, at one time, we were worried about the composites coming back into the planes. But as that has developed over time, all the new platforms continue to have a high rate of aluminum in there, certainly business jet, certainly space, everything. There's a big strong pull there. We actually bought a company to look at whether or not 3D manufacturing was going to offset it. We were comfortable it's not going to happen. We see good, strong sustainability there. And then I think as the reshoring has taken place for GE products, it's continuing to give us upside potential here. And then auto, eventually, when the supply chain issues work out, they're moving to lightweight. It really solves the equation for CAFE, but it also solves the equation for distance that they can travel under battery type propulsion. When you look at the markets we're in, the drivers are pretty sustainable that we're in, and we think we're going to continue to drive the growth.

Unlike supply like smelter aren't that profitable. Some terms about, [indiscernible] where China what are they going to do? Are they going to cancel the production? I'm just curious also about that.

Well, from a metals perspective, P1020 and so forth of that. Of course, we divested our upstream back in the early 2000 side, and we were at a cost structure and the ability to buy on the open market. We still have those long-standing relationships. That's really important, too. We have a well diverse. We're more than 4 or 5 up to 10 different suppliers of product there. Someone asked about Russia, and that had no impact on us at all. There was some that we were buying high purity that goes into aerospace, which we were able to replicate with relationships we had. Really no concern there. We buy well diversified magnesium, we got caught short here. China had stopped supplying that for a while, but that's 85% of the supply of the world's supply is magnesium. But we're well diversified beyond just that local player that we had here. As long as that diversity is in place, right now, we're pretty comfortable with the position that we have.

[indiscernible]

No, you saw the document we immediately passed through almost 95% of the products we sell, that's a pass-through for us. And we demonstrated that in the last cycle.

Maybe last question. You're consistently generating mid-20s EBITDA in the past kind of prior to COVID, and there's been some market dynamics, some challenges you've had, you spoke to some of those. But what steps are the companies taking to improve margins from here? What kind of tangible steps? And how do we get back to that sort of level?

As packaging became a larger position, especially in '22 and the past, that's a slightly lower margin than our other products. In the general area that we cover, and that's the can itself, the lid and the tab. Our focus longer term, this is what we go back to do in all the markets that we're at. We look for those niche areas where we can extract a larger premium in a maybe a select area. We're focused on our investment. We're focused on growing in the higher margin, higher value-added coated products. The investment we have is another roll-coat line that's going to allow us to put 25% of our existing capacity into a higher-margin category, and we've already established contracts to position that in place. We're going to move our margin up from that perspective. From a cost perspective, last year was a really difficult year to measure anything on costs. But long term, we have efficiency gains and positions that we know we're going to get to. We're going to continue to take cost out of the operations. We mentioned we were 40% down on aero. We expect that to be back by middle of next year. That's another $150 million of conversion revenue just to get back to where we were and the potential margins there are very high. The companies we've talked about in the first quarter, we've got a plan to take $8 million to $10 million of additional cost, variable cost out of our process. And we are very confident we can continue to do that because cost is a big piece of the gain here. That's a very big focus for management, and we expect to get there as our markets get back. We make the investments that we've talked about, and then we execute in more normalized fashion.

Great overview, Keith. Thanks for coming and supporting the conference.

Thank you for your attention and interest in the company.