Martinrea International, Inc. (OTCPK:MRETF) Q4 2022 Earnings Conference Call March 2, 2023 5:30 PM ET
Robert Wildeboer - Executive Chairman
Pat D'Eramo - President & Chief Executive Officer
Fred Di Tosto - Chief Financial Officer
Conference Call Participants
Good evening, everyone. Thank you for joining america today. We ever look guardant to talking with our shareholders, and we anticipation to pass you good and reply questions. We besides enactment that we person galore different stakeholders, including galore employees connected the call, and our remarks are addressed to them arsenic good arsenic we disseminate our results and commentary done our network.
With maine are Pat D'Eramo, Martinrea's CEO and President; and our CFO, Fred Di Tosto. Today, we volition beryllium discussing Martinrea's results for the twelvemonth and 4th ended December 31, 2022. I notation you to our accustomed disclaimer successful our property merchandise and filed documents. I volition speak, Pat volition talk then, Fred, and past we volition bash immoderate Q&A.
Welcome to 2023, a twelvemonth of committedness and anticipation, gathering connected a precise coagulated 2022, it turns out. I privation to commencement with a connection astir our radical and our culture. We judge our radical are the astir invaluable assets of our company. It's been 3 years oregon truthful since the World Health Organization declared a pandemic. And we, arsenic a institution and arsenic an industry, faced a bid of monumental challenges that, successful galore respects, were new, unprecedented for us. Our radical faced the situation with courageousness and tenacity, and we person ne'er been much arrogant to enactment with specified a large radical from the receptionist to the shippers successful our plants to our enforcement squad and our enactment functions. What galore felt for the worst of times, whitethorn person turned retired for america to beryllium the champion of times though it surely was not ever a amusive time.
We speech astir our civilization a batch astatine Martin Brand, arsenic each our stakeholders person travel to know. Our imaginativeness is making lives amended by being the champion supplier we tin beryllium successful the products we marque and the services we provide. Our ngo is fundamentally to instrumentality attraction of our people, our customers, our communities and our stakeholders, lenders and shareholders. Our 10 guiding principles correspond the mode we attack our business. Our sustainability and success, we believe, comes down to culture. As leaders, we are the Chief Culture officers of the company. Living our imaginativeness is astatine the halfway of the future. Our culture, particularly arsenic we person cultivated it much and much implicit the past fewer years is simply a sustainable competitory advantage.
To us, the aureate regularisation means treating radical the mode you privation to beryllium treated. It covers truthful much. It covers dignity and respect. It covers teamwork and sum integrity and information covers diverseness and inclusion. It covers ESG, it covers bully leadership. It makes america a large company. We don't privation to accidental we're a large institution due to the fact that we person diversity. We privation to accidental we're a divers institution due to the fact that we are great. Think astir it. There's a meaningful distinction. Their radical person to spot you to pb them this way, to spot that you attraction for them. Leadership is stewardship and deliberation astir this advancement travels astatine the velocity of trust. Some radical whitethorn beryllium skeptical. They whitethorn ask, but what are your radical say? Let's speech astir that.
Every year, we bash elaborate worker surveys administered by third-party experts who performed akin functions for galore companies, including immoderate of our competitors and customers. We are told we person not conscionable industry-leading stats, but we are 1 of the best-performing companies anywhere. Our worker surveys are voluntary but we had astir 15,000 surveys submitted. That's a beauteous bully sample. We person 58 locations present successful 9 countries connected 5 continents and antithetic merchandise groups. That's besides a bully sample. We scored precise good successful the wide categories, the mode we work, covering wellness and safety, enactment environment, teamwork and collaboration, supporting our people, addressing communication, just treatment, diverseness and inclusion, worth and recognition, covering compensation and incentives, vocation advancements, appreciation and shaping the future, addressing idiosyncratic goals, show feedback, maturation and development.
While the scores are not cleanable and we tin ever amended and we'll strive to bash so, present are immoderate answers to immoderate captious questions. I afloat recognize my occupation relation and responsibilities; 95% agree. Our determination works to amended wellness and safety; 89% agree. I consciousness a consciousness of idiosyncratic accomplishment astatine the extremity of the workday; 82% agreed. How galore plants tin bushed this? This is simply a immense number. I respect my General Manager; 95% agree. Martinrea prioritizes encourages diversity; 89% agree. My nonstop supervisor treats maine with Digit successful respect; 88% agree. Not perfect, but outstanding results overall. In bid to get this feedback from your people, you person to locomotion the talk. You person to attraction for your radical Analysts and investors look astatine numbers. I judge these numbers and our information numbers are adjacent much important than a quarterly borderline oregon EBITDA number. It would beryllium large to spot these referenced successful immoderate expert reports. I judge our shareholders attraction astir them, too. We judge that a happy, motivated and powered, purpose-oriented workforce is the instauration of institution occurrence successful the short, mean and agelong term. A beardown convey you to our radical -- let's crook to the different highlights of 2022.
Last twelvemonth astatine this time, we indicated that we judge 2022 would beryllium a bully year, and our results would amended passim the twelvemonth arsenic proviso concatenation conditions became much normal. As manufacture volumes would retrieve somewhat and accumulation schedules became much unchangeable and arsenic we woody with outgo ostentation done negotiations with customers and suppliers. We knew we would person galore challenges with the warfare successful Ukraine, vigor shortages connected and on. But we did accidental that the archetypal fractional of the twelvemonth would amusement profitability and that the 2nd fractional of the twelvemonth would beryllium amended than the archetypal successful general, that's however the twelvemonth 2022 played retired for us. Here are immoderate of the cardinal highlights of 2022. The afloat scope are recovered successful our yearly accusation signifier and our year-end releases. Our industry-leading information metrics proceed to amended again, we instrumentality information seriously. Our full recordable wounded frequency, oregon TRIF, was 1.21, an betterment of 12% implicit past year, but much impressively, an 86% betterment implicit 2014 erstwhile we made information our priority.
Note that a TRIF of 1.21 is little than fractional the manufacture modular of 3.1 connected -- arsenic galore of you know, implicit the past 2 decades, we person bought a fig of troubled plants wherever information civilization often had to beryllium emphasized arsenic portion of the works culture. We are precise arrogant of this improvement. A harmless works is mostly a bully and profitable works also. We recorded grounds revenues of $4.75 billion, an summation of implicit 25% from 2021. We saw accrued revenues from immoderate of our cardinal programs, but we besides person launched galore caller products successful 2021 and 2022 that are driving immoderate of the gross growth, each during the pandemic.
We generated a grounds level of EBITDA during the year. Each of the 3rd and 4th fourth showed grounds quarterly EBITDA. This operating currency travel besides translated into escaped currency travel successful the 2nd fractional of the twelvemonth of astir $80 million. Our 2022 afloat diluted nett net per stock of $1.76 adjusted oregon $1.65 unadjusted was importantly higher than the $0.41 adjusted and $0.45 unadjusted successful 2021. Our equilibrium expanse improved passim the year, ending the twelvemonth with a nett debt-to-EBITDA ratio, excluding IFRS 16, of nether 2:1, the champion it has been since earlier the pandemic. We maintained our dividends to our shareholders successful 2022. During the pandemic, we person not reduced dividend payments. Quality is important to america and our customers. Many of our products are information parts, and we won a fig of prime awards successful galore of our plants.
We proceed to put heavy successful the business, fixed the important magnitude of caller concern we person won. We enactment that successful the past 3 years, we person spent adjacent to $1 cardinal connected CapEx, the highest for a 3-year play successful our history. But the bulk of the walk was the motorboat enactment we had won. We did not dilatory down our concern enactment during the pandemic, and that is the superior crushed we are coming retired of it with importantly higher revenues. Not galore automotive parts suppliers person a akin experience. Do not judge successful cleanable launches, we judge successful amended ones each time. We had galore bully ones. Not lone person we grown our business, we person important contented connected the vehicles our customers are making, electric, hybrid oregon ICE. Our portfolio is matching what the manufacture is making.
Our lightweighting technologies are precisely wherever our manufacture needs. We proceed to some utilize and put successful leading-edge technologies successful our regular operations and done Martinrea Innovation Development oregon Mine. We person investments successful graphene and graphing enhanced batteries done our NanoXplore relationship, a loaner artillery exertion done AlumiPower and respective different caller technologies specified arsenic Afenco utilizing supercapacitor technology. Our innovation efforts were recognized successful 2022 with Martinrea being awarded a PACE Award for our GrapineGuard enhanced Brakelines. This is mostly regarded arsenic the astir prestigious exertion grant successful the automotive industry, a large congratulations to our team. We proceed to thrust sustainability initiatives astatine Martin [ph] and we promote you to work our 2022 sustainability report.
A fewer highlights. On c reductions, c strength arsenic c emissions comparative to income has reduced by 19% since our 2019 baseline. -- vigor reductions, vigor intensity, which is vigor depletion comparative to income has reduced by 16% since our 2019 baseline. Renewable energy, astir 42% of our energy consumed comes from renewable sources today. Our CDP score, we accrued our people to beryllium for absorption of clime issues up from a C successful 2021. Long-term targets. In 2022, we acceptable a people to trim our c emissions by 35% by 2035 without the usage of c credits. In diversity, our CEO-led diverseness committee formed further subcommittees to absorption connected intelligence health, mines matter, women astatine Martinrea, young professionals are YoPRO and women successful manufacturing.
As we look to 2023 and beyond, we bash truthful with renewed confidence. We person been done a pugnacious 3-year period. We judge we volition spot amended manufacture income and accumulation growth, particularly successful North America, wherever astir of our operations are located. There is pent-up demand, conveyance inventories stay low. While involvement rates person risen and whitethorn stay elevated this twelvemonth and possibly beyond, automotive financing is disposable often astatine competitory rates. And consumers, particularly successful the United States, person mostly beardown household equilibrium sheets and bully jobs. Our 2023 outlook shows maturation successful revenues, adjusted operating income borderline and escaped currency flow, a precise coagulated outlook.
And arsenic noted, we judge sustainable companies with a large civilization volition beryllium astir for a agelong time. Our aboriginal is great. We look guardant to sharing it with you.
And now, here's Pat.
Thanks, Rob. Good evening, everyone.
As noted successful our property release, we generated an adjusted nett net per stock of $0.58 and an adjusted operating income of $71 cardinal successful Q4, up importantly from a nonaccomplishment of $3 cardinal successful Q4 of past year. Production income came successful astatine conscionable nether $1.2 billion, up 38% year-over-year, and Q4 adjusted EBITDA was $149 million, which is simply a caller quarterly grounds for the company. Adjusted operating income borderline came successful astatine 5.5%, which is somewhat little than the 5.8% we generated successful Q3 owed to a quarter-over-quarter summation successful tooling sales, which typically gain little margins for the institution and immoderate antecedently recognized favorable commercialized settlements that were reclassified into income successful Q4, a outgo offset accounting attraction with nary corresponding measurement oregon bottommost enactment interaction to the quarter. Adjusting for these impacts, 4th fourth accumulation income and wide operating income borderline were akin to Q3. Another beardown quarter, particularly erstwhile you see the ongoing volatility successful the environment.
During the quarter, we continued offsetting inflationary costs commercially and proceed to amended our operations contempt continued proviso concatenation disruptions impacting a level of stableness of lawsuit accumulation schedules, albeit astatine a little level. I'm blessed with the enactment the squad is doing connected each these fronts. It's been a challenging clip to beryllium successful the automotive parts concern successful galore respects and inactive is. Our squad has faced these challenges caput on, negotiating just agreements with our customers and suppliers. The concern continued to thrust operational improvements crossed the organization. I can't convey our radical capable for their hard enactment and Tanate during this time.
As I mentioned connected our past call, commercialized negotiations volition continue, but we bash spot them normalizing arsenic the twelvemonth progresses, assuming a continued easing and inflationary pressures. On that front, a warmer-than-expected wintertime and improved proviso conditions successful Europe person resulted successful a driblet successful earthy state prices successful the region. And the worst lawsuit scenarios that were contemplated arsenic a effect of the vigor shortage, including accumulation shutdowns person not travel to pass. This is bully news. Notwithstanding inflationary headwinds persist successful different areas and labour conditions proceed to beryllium tight, peculiarly successful the United States. And portion accumulation situation is gradually improving, we proceed to beryllium impacted by supply-related accumulation disruptions with respective of our customers, arsenic I already noted.
Looking forward, we proceed to expect 2023 to beryllium a bully twelvemonth with amended accumulation volumes, margins and escaped currency travel compared to 2022. And what we expect volition beryllium the opening of a beardown rhythm with astir of our plants moving astatine capacity. We updated our 2023 outlook connected our Q3 telephone backmost successful November. As a reminder, this outlook calls for a full income betwixt $4.8 cardinal and $5 billion, adjusted operating income borderline to beryllium betwixt 6% and 7% and escaped currency travel to beryllium betwixt $150 cardinal to $200 million. We're maintaining this guidance and proceed to spot it arsenic tenable and achievable. Of course, volumes are hard to foretell and premix is ever a factor.
Looking astatine our planetary operations successful North America, our adjusted operating income borderline contracted somewhat quarter-over-quarter successful Q4 compared to Q3. The quarter-over-quarter summation successful tooling income and reclassification of commercialized settlements mentioned earlier, took spot chiefly successful North America. This had the interaction of expanding income without immoderate flow-through to earnings. In addition, our premix successful North America was little favorable, and we had a little level of commercialized settlements during the quarter. On a afloat twelvemonth basis, our North American operating income borderline for 2022 came successful astatine 5.7%, up nicely year-over-year from 2.4% successful 2021. We expect further year-over-year borderline gains successful 2023, absent quarterly fluctuations we spot from clip to clip arsenic our outlook calls for.
Further, borderline gains are expected to travel from planned measurement and premix normalization of input costs, continued little motorboat costs and continued operational improvements. What I present telephone our pandemic motorboat enactment was among the busiest motorboat cycles we've ever had. I'm blessed to study the products person stabilized, and we are successful a large presumption to heighten our margins arsenic our customers ramp up.
Turning to Europe; we saw a notable sequential betterment successful adjusted operating income during the 4th quarter, chiefly driven from our favorable commercialized settlements. As I mentioned earlier, we devoted a batch of clip to retrieve our just information of the elevated vigor costs that person been weighing connected our European business. We concluded respective agreements connected favorable terms, which person had a affirmative interaction connected our margins successful this conception successful Q4. Our operating income borderline successful Europe for the afloat twelvemonth 2022 came successful astatine 1.7%, up from a nonaccomplishment successful 2021. We made immoderate bully advancement successful this portion arsenic well. In our Rest of World operations representing 3% to 4% of our business.
Adjusted operating income declined somewhat quarter-over-quarter fixed a weaker income mix. These eventual conception thin to alteration much than others due to the fact that it's comparatively tiny successful size. But overall, we're blessed with the show successful Q4. I'm pleased to denote that we've been awarded astir $90 cardinal of caller concern implicit the past fig of months. This consists of $60 cardinal successful our lightweight structures commercialized group, including further EV contented connected GM's caller EV pickup truck, Lucidar and the Jeep Gladiator hybrid electrical arsenic good arsenic further concern with Audi, JLR and Toyota. $15 cardinal successful our Propulsion Systems radical with Salentus, Scania and Nissan and $15 cardinal successful further contented connected Malucider and our flexible manufacturing group.
As you tin see, we proceed to triumph meaningful enactment connected our EV platforms with cardinal customers. It's besides worthy pointing retired that implicit the past 4 quarters, we've besides secured astir $250 cardinal successful replacement business, including the next-generation GM Equinox crossover. Of note, we are present constructing a caller metallics installation successful Mexico that volition accommodate enactment connected GM's caller Fed 3 electrical conveyance program. This connected the heels of expanding our FMG works and a caller fluids works successful that country. We person a batch of large enactment happening successful North America, peculiarly successful Mexico.
Let's crook the leafage and sermon a large caller investment. Monday, we announced the acquisition of the assets of Montreal-based Defend co development, which was really completed past year. Finco designs, manufactures and markets innovative technologies for the electrification and connectivity of heavy-duty vocational trucks. The Apenco hybrid electrical solution augments the vehicles powertrain and electrifies onboard instrumentality utilizing a unsocial ultracapacitor-based technology, which reduces greenhouse state emissions by 30% to 40%, portion besides reducing motor usage hours, substance consumption, sound contamination and related attraction costs.
The Finco is simply a planetary CleanTech 100 institution and a planetary exertion person successful the innovative usage of ultracapacitors. We're precise pleased with this acquisition and look guardant to gathering connected Avengo's leading-edge exertion with the company's existing customers arsenic good arsenic caller customers. We invited the Avengo squad to our Martinrea family. Again, galore acknowledgment to the Martinrea squad for their large enactment starring to different coagulated quarter.
With that, I'll walk it to Fred.
Fred Di Tosto
Thanks, Pat, and bully evening, everyone. As Pat indicated, our 4th fourth fiscal results were fundamentally accordant with the 3rd quarter.
Notably, Q4 adjusted EBITDA acceptable a caller quarterly grounds for the company. As we said, the backmost fractional of 2022 volition beryllium amended than the beforehand half, and that is fundamentally however the twelvemonth unfolded for us. Notwithstanding our institution successful the car parts manufacture successful general, proceed to woody with headwinds connected aggregate fronts, arsenic galore of you are good alert of. These see ongoing supply-related accumulation disruptions, inflationary outgo headwinds and choky labour marketplace conditions. Despite these challenges, we person made large advancement successful caller quarters towards getting our margins backmost to levels that we are accustomed to. The beardown show continued successful the 4th quarter. We expect our results to amended further arsenic proviso concatenation disruptions abate, accumulation volumes proceed to recover, and our motorboat enactment continues to normalize.
As Pat noted, we person maintained our outlook, which calls for higher accumulation volumes, sales, margins and astir importantly, escaped currency travel successful 2023. Taking a person look astatine our show quarter-over-quarter. Production income were 4% higher, mostly owed to the reclassification of antecedently recognized commercialized settlements into sales, arsenic Pat mentioned, and wide timing of commercialized settlements. Excluding these items, accumulation income were fundamentally level quarter-over-quarter. Generally, the accumulation situation was akin to past 4th but is expected to gradually amended arsenic the twelvemonth unfolds.
Adjusted operating income borderline came successful astatine 5.5%, a spot beneath the 5.8% we generated past 4th owed arsenic patent bid to a quarter-over-quarter summation successful tooling income and the reclassification and timing of commercialized settlements antecedently discussed. Overall, excluding these items, adjusted operating income borderline was fundamentally level quarter-over-quarter. Free currency travel came successful astatine $15 million, different affirmative quarter, but beneath Q3 levels, reflecting the timing of superior expenditures. On a afloat twelvemonth basis, escaped currency travel was $50 million, positive, a beardown effect considering the ongoing challenging environment. Free currency travel is expected to amended importantly this twelvemonth arsenic our 2023 outlook complies, reflecting a higher level of EBITDA and little CapEx.
We -- looking astatine our show connected a year-over-year basis. Fourth 4th adjusted operating income of $71 cardinal was up sharply from a nonaccomplishment of $3 cardinal successful Q4 of past twelvemonth and adjusted EBITDA of $149 cardinal much than doubled connected accumulation income that were 38% higher. Recall that the backmost fractional of 2021 was erstwhile supply-related accumulation disruptions were astatine their worst. Mark and each constituent successful our fiscal show earlier results began to amended materially successful consequent quarters. While a stronger year-over-year show is bully to see, results are inactive beneath what we cognize we tin achieve. We expect to spell a agelong mode towards bridging this spread successful 2023 arsenic our outlook implies.
Moving connected to our equilibrium sheet. Net indebtedness was astir $20 cardinal little quarter-over-quarter, closing retired the twelvemonth astatine $909 million. Our nett debt-to-EBITDA ratio was 1.95x, successful enactment with our expectations to beryllium beneath 2x astatine year-end. This represents a comfy level for america and is good beneath our covenant maximum of 3x. The leverage ratio should people amended successful the coming quarters arsenic we make an accrued magnitude of EBITDA and escaped currency flow, a information of which we volition usage to wage down debt. We person beardown relationships with our lenders, and we convey them for their continued support.
I'm present going to walk a spot of clip connected superior allocation and superior spending. I should enactment that we person had for immoderate clip an capitalist newsletter connected our attack to superior allocation posted connected our website. Neil Forrester, our Director of Investor Relations and Corporate Development, who has been some an car expert and an capitalist with Franklin Teplton, has acceptable retired our reasoning precise nicely for you. In immoderate business, however the institution allocates its superior is among the astir important determination absorption has to make. Capital allocation is arsenic as important arsenic operational decision-making and execution. We person to beryllium effectual astatine some to guarantee our enactment prospers adjacent past implicit the agelong run. Profitable businesses with beardown operating way records tin beryllium derailed by a mediocre superior allocation strategy. Therefore, it is captious that we get this portion of the firm strategy right.
In Maria, we spent a batch of clip reasoning astir superior allocation. Our overarching precedence is rather elemental to make semipermanent affirmative returns for our shareholders. Generating returns arsenic portion of our mission. In that sense, we are nary antithetic than an concern manager moving a communal money pension program oregon endowment money oregon an idiosyncratic capitalist managing his our ain portfolio. We are committed to the semipermanent sustainability of our company, successful enactment with our vision, ngo and principles. We're each owners, expanding our holdings of shares and equity-based investments implicit each of the past 7 years with minimum shareholding requirements and a robust equity stock ownership program. In the past 3 years, we person met the situation of the pandemic, spot shortages and ostentation and truthful on, caput on. And today, we are a beardown institution arsenic we've ever been due to the fact that are owners and behave similar owners.
Taking a person look, our superior allocation model is arsenic shown connected this slide. While maintaining a beardown equilibrium sheet, we question to put successful maturation and attraction opportunities that person the imaginable to make beardown returns for our shareholders. This tin instrumentality the signifier of integrated superior investments and probe and improvement initiatives arsenic good arsenic acquisitions and marque strategical and fiscal sense. These priorities are driven by a disciplined interior complaint of instrumentality and instrumentality connected concern superior framework. That is, we take the options that person the highest expected returns implicit the agelong term.
In precocious 2014, Pat joined america arsenic President and CEO, and we embarked connected our thin translation journey, a play to beryllium referred to arsenic Martinrea 2.0. For the adjacent 5 years, adjusted operating income borderline astir doubled to 7.5% successful 2019, implicit 8%, excluding the interaction of the 2019 GM strike, you whitethorn recall, putting america among the apical successful our adjacent group. We achieved this done a operation of plant-level operating improvements successful our thin manufacturing practices and a much disciplined go-to-market attack determination into a strict hurdle complaint successful quoting caller business, which has generated ROIC astatine are among the champion successful our adjacent group. We person had borderline situation implicit the past 3 years, but arsenic noted, margins are improving and are expected to proceed to bash truthful successful 2023.
So let's speech astir escaped currency travel playing the agelong game. Free currency travel is an important metric successful assessing the merits of immoderate concern is simply a cardinal constituent for galore investors, from immoderate of you, and ultimately, a cardinal operator of valuation. The worth of an concern is adjacent to the President Vale's aboriginal currency flows discounted astatine the due outgo of capital. Importantly, the currency generated imaginable of concern indispensable beryllium looked astatine done a semipermanent lens. The institution whitethorn person options to put superior successful high-return integrated maturation opportunities that volition supply a dependable watercourse of escaped currency travel successful aboriginal years. However, those investments reduced escaped currency travel initially. Working superior falls tin besides beryllium unpredictable implicit short-term periods, skewing the existent currency travel picture. And allocating superior is incumbent connected america to play a agelong crippled and not beryllium distracted by near-term ebbs and flows.
Minor 2.0 journey, particularly successful the past 3 years, has besides included important superior investment, mostly connected programme launches reflecting each the enactment we person won. This year, we are expecting CapEx to alteration from 2022 levels, helping to pb to an expected beardown escaped currency travel illustration successful 2023. What astir acquisitions? Our acquisition strategy has been and is disciplined and has served america good implicit time. Historically, our acquisition and strategical concern strategies revolved astir acquiring businesses that broaden our merchandise offering, technology, acceptable people oregon our lawsuit base. They helped america turn rapidly from a start-up to a institution with implicit $4.5 cardinal successful revenues, a existent maturation story. Primarily, these were distressed assets required concern and assets turnaround.
We were capable to get these companies cheaply successful the operation of the operations, thereby putting them connected a much sustainable path. We person proven our effectiveness of turning astir struggling businesses. We are prudent and disciplined buyers, and this is simply a large portion of however we built our organization. Our acquisition strategy has evolved implicit the years, the valuation remains a cardinal component. Great companies tin extremity up being atrocious acquisitions if you wage excessively much. So we are selective and prudent successful our approach. Basically, we look for companies that tin assistance america execute immoderate operation of advancing our lightweight strategy, enhancing our merchandise and method capabilities and diversifying our lawsuit base, and we look to get these companies that are tenable to pull the valuations.
While I won't spell into further here, our investments successful Metalsa assets and the Nano Explore proving to beryllium large investments to support and turn our business. Strong equilibrium expanse is besides paramount arsenic it gives america the assurance and quality to withstand downturns if and erstwhile they arise, similar during some the -- large Recession of 2008, 2009 and the caller COV-19 shutdowns. Our customers besides similar to woody with suppliers who are financially dependable that they cognize volition beryllium astir to service them successful the agelong run. So a beardown equilibrium expanse is cardinal to maintaining and increasing our business. We judge our targeted nett indebtedness to adjusted EBITDA ratio of astir 1.5x is due for [Technical Difficulty].
End of Q&A