Terex Corporation (TEX) Earnings Call Transcript & Summary

Moving right along here. Thank you that we have the team from Terex, Simon Meester, newly appointed here in what month? 2 or 3? 2. He's the CEO of Terex; and Julie Beck, CFO, who's -- thanks again for your consistent support of our conference. And good to see both. And I think with that, I think Simon has some prepared remarks to go through, and then we'll open up to Q&A after that. So, over to you, simon.

Cool. Well, hi, everyone. Thanks for your interest in our company. I've been in the role for about 6 weeks now. So actually, this is my first investors conference. So I'm looking forward to meeting a lot of folks today and tomorrow. But yes, what I thought I would do is just quickly share a little bit about Terex. And some of this is also quite frankly, kind of how I'm looking at the company. I might give you a little bit of a flavor of kind of where I'm coming from at the moment. But I very much see kind of my tenure is probably more going to be focused around growing the company, whereas I think my predecessor, I assume some of you may have met, it was much more of a transformational journey because, in essence, Terex has significantly changed over the last 10 years or so and is a completely different company now than it was even 5 years ago. So obviously, our GC wants to make sure I make this my first slide. So obviously, I would encourage you all, which I'm sure nobody does, but to read it. Any kind of forward-looking statement may vary in the future. But yes, so then, incoming CEO, John's tenure, my predecessor was about transformation, mine is about growth. So what does that mean going forward? Well, obviously, I'm still very much in listening and learning mode, kind of traveling around the company, meeting with the teams. I -- we have a lot of great operational momentum as a company. We've been -- really been improving our bottom-line performance in the last couple of years. So the last thing I want to do is step in and try to fix something that really isn't broken. And there's a lot of -- a couple of things. For example, something that was near John's heart was our safety performance, our values. And that's one of the things that I can safely say is not going to change going forward is we're going to continue to be focused very much on the way we run the company, how we run the company. And not just because it's a nice thing to say that we care about safety, but one of the things that I've learned in my career is that show me any kind of high-performing team, and it's a team that performs safely. So we correlate it not just to everyone's right to return home safely, but also we think it's the identity of a highly successful company. So that's going to continue to be part of our DNA going forward. Then 2023, yes, very, very strong year for us on many levels. In terms of top line, in terms of bottom line, we grew our EPS -- adjusted EPS, 63% in 2023, and our return on invested capital is now hitting north of 28%. But within the portfolio, a real strong story. Again, for those for those who know our company, we have MP segment and the AWP segment. The MP segment, 16.1% operating margins, very strong performance. And in AWP grew 480 basis points on their bottom-line performance. So we're now having all of our businesses running in the double-digit operating margins across the portfolio, which is something that we're very pleased by. Now it's not just about the financial performance in 2023, we also made several investments. I assume many of you know about the Monterrey facility that we're building in Mexico, which is the largest plant that we've ever built in Terex. It's the second year of our -- it was the second year of our investment, this year is the last year of that investment. And then obviously, we made a lot of investment in new product development and also new technology, including robotics and battery technology. So overall, a very, very successful year. We're very pleased by. Then I mentioned earlier, it's not just 2023. I look at this, and I'm stepping in as new CEO, and I'm thinking, okay, where is this company coming from? And if you just look at the last 8 years since 2015, our operating margins grew from 5% to 12%, our EPS from $1.30 to $7.06 (sic) [ $7.56 ] is the adjusted number. And then our return on invested capital from 6.6% to 28.5%. So I think overall, just an incredibly strong story. And it's really the function of 2 things. First of all, because we transformed the portfolio, and I'll share with you a little bit on what kind of transformation we did. And the second piece is we really doubled down on our business system, our operating model and how we run the company. And so to give you a little bit of color on how we transformed the company since 2015, and a lot of credit goes to John and his leadership, we basically just divested a lot of businesses that we felt were dilutive to our portfolio that were very cyclical in nature. And so it's really been a story of getting rid of businesses that we felt didn't have a future in our portfolio and that's one piece of the puzzle. The other piece of the puzzle is that since 2015, that's where the growth story of our MP business started. And I'll share with you in a minute a slide on what MP has been able to do since 2015. But basically, it's grown double digits in terms of revenue since 2015. And so now we are 8 years later. I know everyone always talks about AWP when it comes to Terex, but it's really MP that has built a strong foundation that we now have -- we've built the company on. And then obviously, the back end of this time line is what I mentioned earlier is once we've done all the divesting and we've done all the cleaning up and all the fixing is that we started to focus on the way we run the company and our operating model. And just to give you one more data point here. AWP, for example, in 2020 started their kind of operational excellence performance. And I can speak to that very comfortably because I was at AWP at the time when this started, but ever since we've taken $230 million of cost out of that business since 2022 to 2023, all with the purpose to improve our through-cycle margin performance. So the last 8 years, really the 3 things we did. We cleaned up the portfolio. We accelerated MP's growth. And then thirdly, we took significant cost out of the AWP business in the last 3 years. And then yes, so where are we today? So today, we're very happy with the portfolio that we have. We have a collection of roughly 7 verticals, if you will, in our business. And all of them are either #1, #2 or #3. They're all market-leading businesses. And they're positioned really well from an end market standpoint. But we like these brands. We like these businesses because they're market-leading businesses, and they're very competitive in nature, and they're very accretive in nature. So this is the story that I talked about MP. Since 2015, 2016, it's been a real strong growth story. It's been a real strong operating margin story, growing from $1.2 billion to $2.2 billion, now almost half in terms of top line, but more than half in terms of bottom-line performance. So in the last 4 years, 60% of our operating profit was MP alone. And this is probably my most important message for today and tomorrow is, quite frankly, we, Terex, we'd like to talk a lot more about MP because we feel that that's really become the foundation of our company and the foundation of our story. And I think what that team has been able to accomplish growing double digits consistently, every year, double-digit growth over the last 8 years is really what has built the foundation. But then so where are we today? What is our strategy? So obviously, I'm 6 weeks in. So this is one of the questions I'm asking myself. Are we -- what are we going to do going forward? And as I think about our existing strategy, I think a lot of these pieces are still very valid and will be valid going forward. In terms of execute, one of the lessons I've learned over my career is you can develop a winning strategy, but at the end of the day, if you can't really execute, it's where things continue to fall apart. So there will always be an execute piece in our strategy going forward, a lesson that we've learned over time. And then secondly, at the end of the day, we're a product company. We develop exciting products for our customers. That's what we do. And so there has to be an innovate piece in our strategy. So that second piece is going to stay in there as well. Maybe just what I think I need to focus on is just double down on that growth piece, make it just bigger, bolder and just see how we can accelerate growth for the company because we have a strong balance sheet. We have market-leading businesses. We have end markets that are really -- that have a lot of tailwinds. Now obviously, we want that growth to be sustainable. We want our growth to be sticky. We want our growth to be profitable. But I expect that that's probably going to be a piece of our next strategy is to be a little bit bolder on the growth side. So then where are we in terms of what we laid out during our Investors Day in December 2022? It's still only 15 months ago, time has flown, but we're nicely ahead of target. And obviously, as incoming CEO, one of my priorities will be to make sure we stay ahead of targets. Now I already get the questions, so it looks like you have an opportunity to raise your targets and I'd say, hey, I'm in 6 weeks. Give me a little bit of time here before I change the expectations here. But the good news is we're ahead of expectations and we're doing really well in terms of what we laid out just 15 months ago. I talked about our addressable markets, and we've shown these slides a couple of times before, but I just want to lay out, if you look at the part on the left here is that about 80% of Terex's addressable markets is aligned with government stimulus one way or the other over the next many years. I know we still have that stigma that Terex is allegedly a mining and construction company. We're not. We actually don't do any mining and construction anymore. We're no longer a mining and construction company. We're an industrial company, if anything, a diversified industrial company. But if you look at the verticals there on the left, we have a little bit of infrastructure. We are in electrification. We're in digital, we're in waste and recycling. We have a real nice mix of portfolios that are aligned with -- where all the investments are being made at the moment. So then just the last slide. I feel that John is leaving me with a toolbox with a lot of tools, a lot to play with. I feel that we're in a very -- we're in a great position. We have a strong balance sheet. We have market-leading businesses. We have strong demand in our end markets. We have strong operational momentum. We have great values. So I really think that we have an opportunity to go from a fix it era, which I think is what we were for the last 10, 20 years, to probably a find it era where I can -- I have the privilege to really take the company forward and see how we can accelerate growth. So I'm pretty excited, as you can imagine, and I'm excited about our journey and about our prospects.

That's great. Excellent rundown. Maybe going back to the point about being bolder on the growth side. And John, as you mentioned, and Julie have left you with a balance sheet and a liquidity position that's as strong as it's been. Maybe any thoughts around areas of strategic priorities in terms of inorganic growth and where you may kind of be focused on?

Yes. No, absolutely. So we do have an active pipeline of M&A opportunities. We're looking at pretty much anything that will have a positive impact on our portfolio as a whole that will be financially accretive, that will be aligned to the businesses that we have, that will make our portfolio stronger overall. But quite frankly, we'll always weigh this against other opportunities that we have for our capital. We still believe that our share price is way too low. So we'll continue to look at share buybacks as well. So we'll obviously focus for the long term on our active pipeline, and we do have some interesting prospects there. It's too soon to kind of share some more details there. But short term, we'll aggressively compare that to the opportunity to buy back more shares because quite frankly, the share is not where we think it should be.

And staying within the construct of what the 2.5x of kind of leverage, right?

Yes. 2.5x, yes.

But I would say the 2.5x very much so is -- but it's directional, not gospel. And it also depends on many, many different variables, where we are in the cycle and -- but 2.5x is our directional aspirational goal.

We can get into the segments a bit more. But just one of the themes across both that your predecessor had been focused on was focus -- growing the parts business, again, for AWP and MP. And just looking at your background and spending a number of years at Cat and Sandvik, 2 companies that they've done quite well in that. Obviously, the product portfolios are a bit different. But where do you see in terms of the opportunity to kind of drive that growth in that high margin kind of business?

Yes. Yes, obviously. As I said, we're no longer a mining and construction company. So in that sense, we're not -- we don't really compare to Cat, the Way Cat's customers are using their products versus our customers are using our products is slightly different. But universally, still, customers invest in a piece of capital equipment, and they want to make sure it's been taken care of. And it obviously consumes parts. Also in our business, we quite -- or we have quite some opportunity in terms of parts consumption, service consumption. And we have been growing our parts business. We try to outgrow our equipment business and our parts business every single year, and we have been for the last couple of years. And so we have been adding, for example, in utilities, we've been adding our mobile fleet. We've been adding service branches. But we do believe that there's still quite some opportunity to continue to add categories to our parts portfolio. Quite frankly, in several of our businesses, we believe it's currently a competitive advantage because we have a global footprint of parts warehouses. We have a global footprint of service businesses. We have commercial service businesses. We have product support businesses. And we believe there is ample opportunity to kind of expand on that, but mostly -- not so much in brick-and-mortar, mostly in just adding categories.

Got it.

And we also invest in digital capabilities to make it easier for our customers to do business with and the telematics data and things to make it easier on our customers, and that helps with the parts and service growth as well.

Yes. That's a great point.

Maybe just from a kind of high-level standpoint, Simon, you obviously present in a lot of markets and geographies. What's your kind of overarching view of the world in terms of the areas? Maybe you could present some upside risk versus what are the areas or parts of the portfolio that maybe could be a little bit more challenged?

Yes. For us, definitely, North America is strong. India is strong. Middle East is strong. We are concerned about Europe a little bit. Europe is definitely the one that we're concerned about the most. And then China, South America, probably somewhere in the middle. But kind of that's the spectrum. Australia is actually still a pretty decent market for us, which is important for our Franna business. But I would say on the polar ends is probably North America in terms of the most upside and Europe, probably the most downside. That's how we're looking at it. And then in terms of verticals, we believe that there is a lot of pull-through in AWP. In several categories within AWP is still a function of supply and of demand. And then within MP, crushing and screening is looking strong. Concrete is looking strong because of its dependence on North America and all the infrastructure spend that's happening. Environmental, very strong. And our recycling businesses just continue to grow very healthily. But then probably lifting or cranes and material handling and partially because they're a little bit more dependent on Europe than some of our other businesses. So I would say [Audio Gap] and lifting and handling is the part that we have our eyes on. And then crushing, screening, AWP North America is where the upside is.

Got it. Got it. [ Definitely ] certainly consistent with what feedback from a lot of companies generally.

Yes.

Maybe zeroing in on MP a bit. One of the target that was -- I think you touched on from the Investor Day was a 7.5% CAGR for that business. As you mentioned, that has a little bit more of a European feel to it. Your ability to reach that, to the extent you have this dynamic whereby North America is -- continues to be solid, but you've got maybe some challenges in other parts of the world. Is that still a realistic target?

Overall, the MP portfolio is actually bigger in North America than it is in Europe. And so even though it's being kind of stigmatized a little bit as a European business, it's bigger in North America than it is in Europe. And so also MP has a lot of tailwinds from North America. But first of all, what they have been demonstrating as a team for the last 8 years, and there have been some hiccups in terms of economic cycles in the last 8 years, but still double-digit growth every single year for the last 8 years. So a lot of momentum. And the MP business is a real perfect example of how to continue to apply existing products into new markets or new products into existing markets. There's just so much that we can do with that portfolio that we've been able to just expand. But on top of all that, is also -- the market is still moving more from stationary to mobile products, and that's really our sweet spot. That's where we are the market leader, and we just continue to see more and more applications that are coming our way going forward. So there's a lot to play with just from a portfolio standpoint and from an application standpoint. And then on top of all this, we're actually quite bullish about India. So we're taking several new product categories to India. We have a very strong facility in the south of India. India is spending a lot of money on infrastructure as well that I'm sure you're familiar with. And so we also believe that India is going to be a growth opportunity for us. Yes, we're pretty optimistic.

MP grew more than double that in 2023 as well. As you know, we had a fantastic year.

Yes. One of the areas of growth, you mentioned crushing and screening. If you look at that market, you had some of the larger aggregates producers here yesterday. And the volume growth has been anemic for them. And yet -- but now, I guess, there's certainly more optimism around IIJA funds now starting to come in. So just what the tone from your dealers in terms of quoting activity and kind of their expectation for '24 in North America?

So everyone knows that there's like 40,000 projects in this mega project pipeline, where we see -- what we hear from our customers that only about 15% or 20% of those have really hit where they've broken ground, and there's a lot of projects that sit just waiting for material and people and -- but a lot of them preapproved. So our dealers are definitely seeing upside from a demand standpoint. Of course, there's also an interest rate element here in this whole thing because when you think about the channel itself, obviously, they'd like to see interest rates to come down because then that will make them more comfortable to take on more fleet. But in terms of utilization rates, the utilization rates are healthy. We did report the last couple of quarters that inventories were a little light. They're kind of healthy at the moment. There's not too much. There's not too little. They're exactly where they need to be. I'm not going to lie what would really help us if interest rates would come down in 2024 because that would make our dealers a little bit more comfortable to continue to grow their rental fleets. But at the moment, we're pretty pleased with what we're seeing in terms of utilization rates. We're very pleased with what we're seeing in terms of projects that are still -- that still need to come online and how our products are positioned to tap into that. So overall, I would say there's a cautious optimism in general in our dealer channel is what I would say.

Yes. In terms of -- as consistent with what I've heard from some of the Powerscreen dealers on -- obviously, the value of the machines have gone up quite a bit in addition to higher rates. So that's creating a bit of a tension for them. So that's probably an area where in terms of if we get 3%, 4%, 5% Fed rate cuts, that's probably an area of the portfolio that would see a more immediate impact. Is that fair?

Well, but we also, as a manufacturer, have the ability to help them out to make sure that there's some easing on the interest rates there as well. So -- but yes, obviously, rate cuts would make that a lot easier, that discussion. But yes, I mean, there is demand. It just -- if it just costs a lot of money to bring new equipment into your rental fleet, if you can finance it at a lower cost of capital, that will obviously help.

Before I go on, if anyone has any questions, feel free.

Right there.

Thank you. Does it work?

No. But we can hear you.

Yes, you can hear me. That's good. We've seen some peers talking about an improvement in demand, first quarter versus the fourth. But we always have the seasonality, either spring season when dealers are typically building inventory versus the fourth. Have you seen any underlying improvement in demand? Or is this mainly seasonality that you -- I think you talked during the call about some improvement? Just to clarity -- aggregates side...

You're talking MP now?

MP and aggregates within MP, please.

Do you want to take that?

Yes. I mean, we would say that, as Simon just mentioned that we're optimistic about North America, in particular, with that aggregates business. And so we're expecting another strong year this year. And I don't know that I can comment on any specific demand in the last 30 or 60 days, but continued strong strength in aggregates.

Okay. So no sort of short-term demand trends that you've seen sort of improving?

But it's been strong. It just remains at a nice strong level.

Can you talk a little bit about the evolving relationship that you have with your end user customers in terms of either better or worse? Obviously, there were some -- in AWP, there were some -- a lot of difficulties previously. Talking to some of your customers, you'll say, we're working better with our suppliers today than we were 5 years ago and understand some of their issues. So I guess I'm wondering is whether the U.S. -- whether it's United Rental or whether it's [indiscernible] in AWP's and or maybe on the aggregate side as well in different companies. Is just there a smoothing event that's occurring here that we don't see? Or we're not just always talking about the end market demand? But their brief leading activities and things like that are going to be able to give you greater visibility and better sustainability going forward is the way you think about the business?

And you're talking mostly about rental companies and AWP?

Those are pretty big businesses.

Yes. Yes. I mean the short answer is most definitely. Because I think, as an industry, we had some hard lessons to learn, quite frankly, over the last 10 years. Even coming out of 2008, the industry was still relatively small, but we had a little bit of a hiccup in 2018. We had obvious -- sorry, coming out of 2018, we had a hiccup in 2020. And so obviously, rental companies are incredibly well-run companies. They are incredibly disciplined. And so they're looking at how to manage supply. They're looking at their demand. We're looking at our supply and our demand. And I think one of the things that we've learned coming out of COVID is that we probably overreacted in terms of switching off our supply chain, and it took us years to build that back up. So rental companies are looking at that as well and say, hey, maybe we need to start talking about multiyear forecast here, multiyear outlook. And so if anything, this has definitely, I think, us as an industry has made us come a lot closer in terms of how we plan and how we forecast. And I definitely see an opportunity to just by collaborating more intensely and maybe with a slightly longer horizon, we can just take some of that opportunism out of the market.

So what do you think, if you think forward over the next 5 years and you do your planning, or even 10, how much reduction are we going to see in that business in terms of volatility? So swings from year-to-year versus what it has been for the previous decade.

Yes, it's a little bit of a loaded question.

I recognize that.

Yes. But no, I mean, this industry has demonstrated at some point -- and now again, we're only talking AWP, which is only a portion of Terex. But at some point in our past, we've seen a peak to trough from plus 50 to negative 50. I mean this has been a 100% swing. It's been insane. And I do see -- I forgot the point that I was going to make. Oh, you are asking whether we see that kind of taper off and where do we see that improve...

Whether it's like the worst -- best case is plus 15 and worst case is down 15, which is way better than plus 50 and down 50 from a managing perspective.

I remembered the point that I was going to make. And so that's kind of what this industry had to deal with many years ago, that kind of volatility. And I think we definitely -- I think we've come to realize that that's just the kind of -- it doesn't work for our customers, it doesn't work for us. If you know that kind of cyclicality. And so I definitely see that the way we're communicating now is going to -- and that's where the long-term horizon is coming from is how can we kind of smoothen that out going forward. Because again, it's in everyone's interest. It's in the interest of our rental partners, and it's in our own interest. But I would say there's another thing that's come to play now. And that is we know exactly what we have shipped in 2018, 5 years ago. We know exactly what we have shipped 10 years ago. And so we know exactly what needs to come off in 2023, in 2024, in 2025 in terms of rental rollout. And our rental companies know that we know and we know that they know. And so we can be a lot more transparent in just managing fleet age and what needs to come on and come off. So we, with a much higher probability, can say what the industry is going to need in 2024 than we were 5 years ago or even -- or 10 years ago. So that we have way more forward visibility now than we had 5 years ago. So that is another piece besides the communication and the collaboration. It's also just the accuracy of the data that allows us to be much more accurate on where this thing is going to go. So I think both of those will smoothen the cycles out pretty significantly.

So you're not going to hazard a guess it's peak and trough?

I'm sorry, no, I don't think we're going to have -- unless something like 2008 happens again, then all bets are off. But I don't expect the same type of volatility going forward. No, I don't. I really don't. And if I listen to -- I mean, I speak to all the -- all our large rental companies and their CEOs, and they're all telling me the same story. They're incredibly optimistic about not just 2024, but 2025. And they see what we're seeing is that there's a lot of demand. And we just -- as an industry, we just need to make sure we take some of that maniacal volatility out, and I think we are.

So we've seen sticking to that theme in the AWP space. We've seen a lot of players building capacity in North America and then also some newer entrants into the North American market building capacity as well. How do you think that, that plays into the industry's ability to manage supply and demand as some of that capacity?

It would be a great question to ask [ John Feifer ] as well if you go see him. But I can only comment on behalf of Terex. And first of all, we're not increasing capacity. We're taking high-cost capacity off-line, and we're replacing it with low-cost capacity. And I should have done a better job explaining that on the earnings call, by the way. So I appreciate the question, and I appreciate the opportunity to clarify it. But we retired high-cost capacity in Oklahoma City and Rock Hill and Redmond to the tune of 780,000 square feet, and we're replacing it with just a little over 500,000 square feet at the moment in Monterrey, Mexico. But secondly, we do have an option to take that up to about 900,000 square feet of -- so pretty much a wash in terms of capacity. But we're not even yet at the levels where we were volume-wise in 2018 or 2015 in terms of our supply. So we're not building incremental capacity. Now I'm aware of all the headlines. Quite frankly, some of it, I don't know exactly how to place because I think some of our Western competitors might be looking at other product lines as well, other verticals, other segments. So I can't really comment on what they're doing. I've seen the headlines of the non-Western competitors. I would just caution everyone a little bit because some of that is -- and I hate to use the term fake news because it's such politically charged, but some of it is a little bit fake news because some of these headlines are used to build a narrative to get additional investments from whatever sponsors that some of these competitors have. We go by what we see. We obviously have our intelligence. We know exactly what's being built, where, by who. And we just feel very comfortable with where we are. We feel very comfortable with our value prop. We feel very comfortable with our capacity. We feel very comfortable with our through-cycle margin kind of layout so that we don't go into this with our eyes closed. So I know I'm not directly answering your question, but I can only comment for us. And in our case, we're not doing any crazy things in terms of capacity. So...

So I was wondering if we could talk a bit more about Monterrey. I know you guys got a couple of your competitors that are also moving in there. And so I was wondering if you could talk a bit about the labor availability and also what type of turnover you're seeing over there?

Turnover has been extremely reasonable. We're now approaching 600, 700 people in Monterrey. We actually picked Monterrey because it's known for its fabrications. It's a place in Mexico where just a lot of know-how exists in terms of fabrications and metal shops and -- so we've had no issue in attracting very talented team members. We're very pleased with the people that we've been able to attract. Again, it's the largest facility we've ever built. Now I know that's going to go right against the question I got here right before, but just in context, it's replacing other capacity. We don't see -- we actually see lower attrition in Mexico than we see in some of our mature plants, which is very encouraging. We -- the average tenure of the people of the leadership team is 20-plus years, so very tenured leadership team. We're doing extremely well on our safety performance, which is another indicator that it's really a smooth running facility for us at the moment. And then I'm aware of some of the -- what competitive activity in the region. I don't think it's anywhere near of what we're doing. I'm not bothered by it, to be very honest with you. I believe in our own ability to provide value to our customers. They know what to expect from us. They know exactly what kind of residual values they're going to get. They know what kind of parts support they're going to get, what kind of service support they're going to get. They know exactly what kind of total cost of ownership they're going to get. Quite frankly, we could have taken more orders than what we currently have in our backlog. So we feel that we're in a very good shape with our value proposition and the demand for our products. I'm not bothered by what others are doing, and I'm not bothered by the labor situation in Monterrey either.

Maybe just sticking with AWP on the 14% operating margin target that was outlined, one of the big sources of margin improvement was from just what we're talking about for the shifting of the manufacturing base. How much of that is still to come in terms of -- from a margin dollar perspective? That -- presumably, a lot of that is still in front of us, but...

Yes. Yes. So we still stick by our commitment to improve 200 basis points by 2025 because of the Monterrey facility, and that will be and totally accretive to AWP.

Got it, but...

If it will be a net bolt-on of 200 basis points on top of what we're doing today, I can't say because there's -- but net-net, the benefit of Monterrey is 200 basis points. Do you have any additional...

Yes, it's correct. And then, of course, we've talked about some of the inefficiencies because when you start up a new plant, it's not fully -- it's -- you build up capacity over time. And so we've been running some of those inefficiencies, and we'll see improvement in that as we go through the year. We'll still experience that in the first half of the year and in the second half of the year, it starts to gradually improve on that as well, and that's more of that too.

Maybe talk through the utilities with the remaining time we have here, a lot of nice tailwinds from an end demand perspective. You've battled some supply chain issues there. Just where are we in terms of activity levels and what's baked into the outlook here in '24 in utilities specifically?

Yes. Still very much a function of supply than demand. So obviously, my focus is to make sure that, that facility continues to ramp up and continues to improve throughput overall. In terms of -- and that's just for 2024, we also want them to improve their bottom-line performance. In terms of overall, where that business is, we feel that [indiscernible] business obviously is benefiting from the megatrends in North America, electrification and so on, the upgrades to the grid that needs to take place in the years to come. But also, because we believe there are multiple applications that are moving from non-insulated to insulator, think about all the broadband investments, the 5G investments. They're slowly moving from non-insulated to insulated, and that's our sweet spot. So it's a little bit like the mobile crushers, and the stationary crushers, we think that in this business, some of the applications are coming our way. Now it's very North America-centric. However, we do see some pockets of demand that start to take off in China. We actually built some utility trucks in China. We see some demand coming in, in Saudi, in Latin America and Southeast Asia and Thailand. So there are some pockets outside of North America. Europe is a completely different type of technology, different type of play. We're not in Europe. But we do see Mexico, we do see some other markets where we can replicate our business model. But it's kind of niche-y still. North America is the mainstream. But yes, a lot of upside for us for 2024. It's mostly just helping the team with their throughput. That's the #1 topic.

Excellent. And great discussion. Thank you.

Yes, thank you. Thanks for having us. Thanks, everyone.