Good morning, ladies and gentlemen, and welcome to the Howmet Aerospace Second Quarter 2020 Results Conference Call. My name is Beverlyn, and I’ll be your operator for today. As a reminder, today’s conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Paul Luther, Vice President of Investor Relations. Please proceed.

Thank you, Beverlyn. Good morning, and welcome to the Howmet Aerospace second quarter 2020 results conference call. I’m joined by John Plant, Executive Chairman and Co-Chief Executive Officer; and Ken Giacobbe, Executive Vice President and Chief Financial Officer. After comments by John, we will have a question-and-answer session. I would like to remind you that today’s discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the Company’s actual results to differ materially from these projections listed in today’s presentation and earnings press release and in our most recent SEC filings. In addition, we’ve included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today’s press release and in the appendix in today’s presentation. With that, I’d like to turn the call over to John.

Good morning and thank you for joining the call. Today, with Ken, I also have Tolga Oal who is on the call. Tolga is our Co-CEO. Tolga has been immersed in the business since his announcement of CO-CEO back at the time of Investor Day in February. Now, let’s move to slide 4 to cover second quarter results. First, let me paint a picture of the quarter. As you’ll recall, we saw the first significant disruptions related to COVID-19 in the last three weeks of March. The initial effects were quarantine-related disruptions within Howmet plants and certain customers that ceased production, for example, Boeing, Airbus, Safran, etc. The full impact was felt in Q2 with customers’ shutdowns, schedule cancellations, and Howmet plant disruptions. The results reflecting this impact show sales reduced year-over-year by approximately 31% and operating income, excluding special items, by 42%. Nevertheless, we were pleased with the absolute numbers of 14.4% operating income margin and a 19.7% EBITDA margin. This reflects the swift cost containment actions undertaken, starting at the end of the first week of April. And you may recall that we took our initial restructuring charge in the first quarter results. These cost reductions continued to take effect each month in the second quarter and will continue into Q3 and Q4. Later in my remarks, I’ll focus more on our exit rate trajectory for 2020 as we move into 2021. Relative to second quarter EBITDA margin at 19.7%, Howmet also generated earnings per share of $0.12. Now, let’s move to the balance sheet and cash flow. Adjusted free cash flow in Q2 was $76 million, excluding $11 million of separation costs. I’d also point out that the $76 million of cash generation included the effect of three items. Firstly, we reduced our AR securitization for the second time in 2020 and a customer supply financing program by approximately $30 million. Second, we made $12 million of cash restructuring payments. And third, we made additional voluntary cash contributions to our UK pension plan of approximately $45 million to make a large reduction in the gross pension liability. For the absence of that, our free cash flow is after everything. And if we had not paid down the accounts receivable securitization, the UK pension under restructuring, the cash flow of $76 million would have been higher by approximately $87 million at over $163 million in the quarter. The cash balance for Q2 improved. After the separation of Arconic Corp. on April 1st, the opening cash balance of Howmet was approximately $800 million. At the end of the second quarter, the cash balance was $1.3 billion. The increase was due to approximately $65 million of cash generation after separation costs, and the net addition of $420 million as a result of refinancing bonds from 2021 and 2022 to 2025. Net debt to EBITDA was 2.73 times. Revolver capacity of $1 billion is undrawn. Now, let’s move on to slide five. We made a rapid response to COVID-19 in the market declines. First, with regard to our employees and customers. Employee safety is a top priority. We’re actively managing employee health risks; programs that meet or exceed local standards. All of our sites are now up and running. We are reliable partners to our customers who are critical to the national defense, to commercial aviation, and to the global economy. Regarding profit and liquidity, management has undertaken the following actions: furloughing some of the hourly workforce, reducing overtime; permanently reducing all types of labor, both hourly and salaried; elimination of temporary workers; flexing of materials and services; reducing capital expenditures; and reducing our working capital. Lastly, as I mentioned, we refinanced our 2021 and 2022 bonds into 2025 and added $420 million of cash to the balance sheet. And the revolver is undrawn. Now, let me turn it over to Ken to give more details on our second quarter performance. And then, I’ll begin to speak to the outlook for the second half of the year.

Great. Thank you, John. Before getting started, I wanted to make a few comments on our basis of presentation. As a result of the separation on April 1, 2020, Howmet Aerospace has reported results of the separated entity, Arconic Corporation as discontinued operations for Q1 2020 and prior periods. Per GAAP, it’s important to note that corporate costs for the pre-separation periods were only allocated to Arconic Corporation if the costs were specifically attributable to the entity. Therefore, for pre-separation periods, Howmet retained 100% of all shared corporate costs. For 2019, Howmet statements will show approximately $190 million of corporate costs excluding special items since the shared costs were not allocated to our Arconic Corporation. For clarity, we’ve provided a schedule on slide 20 in the appendix, which is consistent with Howmet’s 2020 Investor Day and shows an estimate of historical operational corporate costs. For 2019, the comparable annual operational corporate costs were estimated to be $100 million, rather than $190 million. Looking forward into 2020, operational corporate costs are expected to be approximately $75 million. So, let’s move to slide 6. In the second quarter, commercial aerospace was 54% of total revenue, defense aerospace was 18%, commercial transportation was 12%, and industrial combined with our other end markets was 16%. COVID-19 and 737 MAX production declines most severely impacted the commercial aerospace and commercial transportation markets, which were down 36% and 54% year-over-year, respectively. We continue to expect defense aerospace to grow year-over-year due to the strong demand for the Joint Strike Fighter on both new airplane builds and engine spares. In the second quarter, defense aerospace was up 3% year-over-year; and within the industrial and other markets, IGT was up 25% year-over-year. Now, let’s move to slide 7. On this slide, we’ve provided historical information for the combined segments with an estimated operational view of corporate. Howmet Aerospace will present financial information for four segments: Engine Products, Fastening Systems, Engineered Products, and Forged Wheels. Compared to the prior year, Q2 revenue declined approximately $570 million with a corresponding segment operating profit decline of $160 million. The associated segment decremental margin for Q2 2020 was approximately 28% year-over-year. Included in the results are price increases of $9 million, which are expected to continue in the second half. Additionally, cost reductions were $55 million in the quarter as we benefited from actions taken in early April as well as last year. Without the price increases, the cost reductions, and a flex of variable cost in line with a significant and sudden revenue decline, segment operating profit decrement would have been more in the 37% range rather than the 28% range reported. In the appendix, we’ve provided historical information for each of the segments. Now, let’s move to slide eight. For each of the segments we’ve provided historical revenue, segment operating profit, and segment operating profit margin. We have also provided the revenue by market split for the current quarter, as well as commentary on performance. First, we’ll start with the largest segment, engines. For the second quarter, year-over-year revenue was down 30%. Commercial aerospace was down 44%, driven by COVID-19 and 737 MAX production declines. Commercial aerospace was somewhat offset by a 7% year-over-year increase in defense aerospace and a 25% increase in IGT as that market rebounds from a weak level in 2019. Price increases continued in the segment. Moreover, the team was able to quickly flex variable spending to mitigate the impact in the quarter of the significant decline in commercial aerospace revenue. The decremental margin for Q2 was 23% year-over-year. Now, let’s move to fasteners on slide nine. For the fastener segment, second quarter year-over-year revenue was down 18%. Commercial aerospace was down 15%, driven by COVID-19 and 737 MAX production declines. Fastener shipped overdues in the second quarter, and we expect a steeper revenue decline in Q3 as inventory levels are being adjusted at our customers, and we expect seasonal revenue declines driven by European operations. The fasteners' commercial transportation business was down 43%. Cost reductions across the segment helped to mitigate a decrease in revenue but higher absenteeism and the delay in European cost reductions resulted in the 40% year-over-year decremental margin. Now, let’s move to slide 10 to review structures. For the structures segment, second quarter year-over-year revenue was down 31%. Commercial aerospace was down 40%, driven by COVID-19 and the 787 production declines. Decremental margins were 6% year-over-year. Price increases, cost reductions, and exiting unprofitable businesses in 2019 allowed structures to increase operating margin by 70 basis points year-over-year, despite the 31% decline in revenue. Lastly, let’s move to slide 11 for wheels. In the second quarter, the wheels segment was the hardest hit, with a 56% reduction in revenue year-over-year. Decremental margins were 47%. For the month of April, almost all of our OEM customers were shut down with a gradual recovery in May and June. Despite the significant and rapid revenue decline, the segment was profitable due to the rapid cost reductions, as well as their ability to quickly flex variable spending. Now, let’s move to slide 12 for special items. Special items totaled $171 million on a pre-tax basis, which included three main items: First, a $64 million charge for pension plan settlements, primarily due to a voluntary action in the UK to reduce our gross pension liabilities by approximately $320 million; second, a $65 million charge related to the early redemption of 2020, 2021, and 2022 notes in the second quarter; and the third item was a $46 million charge related to severance programs that are tied to the 2020 cost reduction actions as we continue to navigate through a period of demand uncertainty. So, let’s now move to Slide 13. In the second quarter, we’ve completed a good deal of work to improve our capital structure and liquidity. We completed the following actions: We redeemed all of our 2020 bonds for $1 billion. We redeemed $889 million of our 2021 bonds, leaving $361 million, which will mature in April of 2021. We redeemed $151 million of our 2022 bonds, leaving $476 million that will mature in February 2022. Lastly, we completed a new bond issue for $1.2 billion, which is due in May of 2025. Our next significant debt maturity is in October of 2024. We also amended our revolving credit facility in the second quarter. As a result of these actions, we were able to increase our cash position by approximately $420 million. We also took pressure off the balance sheet by reducing the near-term maturities and increasing our available liquidity. Before turning it back over to John to discuss the 2020 outlook, let me cover some assumptions on slide 14. Corporate overhead is expected to improve to $75 million for the year based on further cost reductions. The annual operational tax rate remains in the 28% to 30% range for the year, but we could have volatility in the quarters based on the current environment. Lastly, pension and OPEB cash contributions remain at $210 million for the year and include the discretionary Q2 payment of $45 million, which reduced the UK gross pension liability by $320 million. So, now, let me turn it back over to John.

Thanks, Ken. Let’s move to slide 15. We are providing you an outlook, and that really is to give the best possible visibility to the Company. Of course, we have been monitoring air traffic around the world and the best estimates of aircraft builds. And this leads us to provide this view to you for the balance of the year, given that we’re well into the second half. However, we do recognize that there remain significant uncertainties regarding the external environment, for example, spikes regarding COVID-19, visibility of customer inventory corrections, and aircraft build rate changes in the face of any further COVID spiking. Here are the salient points. Full-year revenue is expected to be $5.2 billion for the year, plus or minus $100 million; commercial aerospace is expected to be down 35%, consistent with our previous view; commercial transportation is expected to be down 45%, which is a modest improvement from our prior view; defense aerospace and industrial markets are expected to be up, with defense aerospace up 10% and industrial up 5%. The consolidated annual revenue for all of our markets is expected to be down approximately 25% to 28% year-over-year. EBITDA is expected to be $1.03 billion for the year, plus or minus $35 million, but it is made up of very different quarters. For example, in Q1, we had a good level of revenues, nevertheless, offset by disruption in the latter part of March, and then, of course, the transition quarters, as I call them, the second and third quarters, then to the fourth quarter to new operating cost levels. Naturally, the outlook remains our best estimate at this stage, given the volume variability due to the complete airline and aircraft build environments, as previously mentioned. Q3 revenue is expected to be the low point for the year based upon the current view on these approximately $1.1 billion, plus or minus $50 million, as we expect significant commercial aerospace customer inventory corrections in the quarter and the normal seasonal slowdown in Europe. Cost reductions continue throughout the third and fourth quarters as we approach run rate. Fourth-quarter revenue is expected to recover somewhat, and EBITDA margins are expected to return to similar levels as the second quarter. This trajectory is important to note, especially since the operations methodology has been cost elimination and not cost deferral. Q2 to Q4 adjusted free cash flow is expected to be $400 million, plus or minus $50 million. For the year, we expect free cash flow to be in the $300 million range, including a modest working capital benefit of less than $50 million. And of course, these cash flows I just mentioned after the reduction and pay down of approximately $50 million of our accounts receivable securitization program and a customer supply financing program, plus over $60 million of cash severance payments. Moreover, the cash flow includes a voluntary UK pension payment made in the second quarter of approximately $45 million to reflect the $320 million reduction in gross pension liabilities that Ken already mentioned. Earnings per share is expected to be in the range of $0.60 to $0.72 per share. Now, I’ll provide some additional commentary for the year and the second half. We are increasing our in-year cost reduction program to $100 million. Moreover, we expected an additional $50 million of structural cost savings in 2020 from the 2019 actions. These cost reductions are permanent and will help accelerate margin expansion when markets eventually recover. We’re continuing to flex variable costs in addition to this with revenue decline. We are reducing CapEx further. Annual capital expenditure is now expected to be $175 million or approximately 3% of revenue. Our previous target mentioned on the first quarter call was $200 million. We do expect pricing to remain favorable for the year. Q3 is expected to be weaker than the second quarter due to significant custom inventory adjustments and the seasonality already mentioned. However, in the fourth quarter, we do expect some modest recovery of volumes with adjusted EBITDA margins similar to the second quarter. And now, let’s move to Q&A.

Thank you. We will now begin the question-and-answer session. Our first question comes from Carter Copeland of Melius Research.

Hey. John, can you just give us a sense of the reduction in the run rate, kind of build rates on the OEM side? What we should be thinking you’ve kind of laid out here for the next, I don’t know, 18, 24 months as that’s level loaded at down 35% or 40% or 50%? Any color you can help us on how you thought about that build plan and how that fits in with your cost plan?

Yes. Currently, we have the most visibility from Airbus, which has clearly communicated build rates that are well-known. For narrow-body aircraft, the rate is set at 40 through April of next year, while wide-body aircraft, particularly the A350, has seen a reduction to 5 per month. Regarding Boeing, we've had various demand forecasts in recent months, and the expected build rate is very low at 7. This makes it challenging to assess our position concerning inventory and related factors. We understand that in our engine business, demand and entry levels at companies like GE significantly influence us. Essentially, we are working with the published data from Boeing and Airbus and projecting that into 2021. However, we do not have clarity on when we might expect a recovery. On the flip side, as we are reducing inventory in response to the current demand downturn, we anticipate that as production rates improve, we will see some inventory build-up to prepare for a potential demand recovery. We have chosen not to specify when that demand will return but are aware of the difficulties in the current environment. Our focus has been on eliminating costs rather than deferring them, ensuring that when demand does return, we will be well-positioned to leverage our EBITDA margins from this quarter and our outlook for the year. Additionally, we are aware of the potential low points, like Q3, and while I don’t intend to pursue aggressive cost reductions for a single quarter, I aim to be prepared for recovery when it happens. Should the future differ from our current expectations, we are ready to adjust our cost structure as needed. I hope this gives you a clearer understanding of our perspective regarding what we know and what remains uncertain at this time.

Yes, it certainly does. Regarding the inventory reduction in the channel that you mentioned and that you expect in Q3, can you provide any insight on whether this is more pronounced in one area than another, such as engines versus fasteners? Any details you can share would be helpful.

It's both. It's one of the most challenging aspects for us to provide visibility, as we can't accurately reveal the number of engines, the quantity of spares in reserve, or the precise inventory levels. We noted significant arrears as we finished 2019. However, as I mentioned in an earlier call, those arrears can disappear once the builds are no longer needed. We believe we are experiencing a period of inventory reduction, but we cannot be certain how much will be cleared. In the third quarter, there may still be some residual inventory extending into the fourth quarter and potentially beyond, depending on the outlook. Additionally, we recognize in our cash flows that our working capital will not be as optimal this year, especially concerning inventory. By the end of the fourth quarter, we will have some trapped inventory due to previous demand estimates, and we had planned materials that we will not be able to deliver, even while holding our customers accountable. There will be a considerable turnover of tens of millions of trucked inventory throughout the year, which will take time to clear in the following year. In summary, inventory remains the most challenging aspect to gain visibility into. We can only analyze the current schedules, and it's clear that at least one quarter will be further affected as our customers reevaluate their needs.

Great. Thank you for the color, John.

Thanks. Good morning, everyone.

Hey, David.

Good morning.

So, John, I guess, I want to follow up on Carter’s questions around destocking. The decline that you saw in commercial aero in the quarter, 36%, I know is different across different businesses. But overall, it was much better than pretty much all your peers, your supplier peers that saw a bigger decline and are calling for destocking to go on now for several quarters. It sounds like you’re calling for a Q3 destock and then, we’re back kind of in line with production rates. I guess, what kind of visibility you have, or what are you seeing that could be different than what everyone else seems to be indicating?

I’m not suggesting that everything will be resolved in the third quarter, because we lack the level of certainty and visibility we would prefer. Therefore, we’re factoring in the possibility of this situation persisting throughout the year. However, I believe there will be more focus in the third quarter. Additionally, I want to reiterate that I mentioned in the first-quarter call that I expected commercial transportation to recover somewhat faster than commercial aerospace, and we are indeed observing that trend. The second quarter was quite significant as many commercial truck plants were completely closed during April and part of May, but we are witnessing improved demand primarily in North America and Europe. We anticipate that this demand will strengthen as we approach the fourth quarter. Our current outlook suggests that commercial transportation will still be relatively low in Q3, but we expect it to improve based on the visibility we have from our customers. We also anticipate a further inventory increase in commercial aerospace during Q3, allowing for that trend to continue into Q4. This serves as a guideline for where we believe we’ll finish the year. I wish the situation was more definite. We have done our best to provide guidance, but we acknowledge that it is not perfect.

Moving to margins, you mentioned that the cost savings are permanent and that there are further pricing opportunities ahead. Where do you see incremental margins once volume starts to recover or stabilize? When do you think you can return segment margins to the above 20% range that we achieved in Q1 before the COVID pandemic? Thank you.

Yes, that's unfortunate news, so I don't want to make any predictions about margin guidance for the future. Our strategy is to avoid deferring costs because I worry that if we do, costs will return once we see improvements. I believe the focus should be on eliminating costs altogether. Historically, after significant attempts to reduce structural costs, many companies have seen operational enhancements. The main question is when the volume and inventory levels I mentioned earlier will improve, and none of us can predict that. I'm doing my best to position Howmet for when volume returns, aiming for the EBITDA margins we've discussed for Q2 and Q4 even during challenging times. This preparation is key for Howmet to capitalize on future growth, but the timing remains uncertain. Our priority is to position ourselves effectively and quickly to continue generating cash, which is what we're currently working on.

Yes, David, what I would add to that too is, you saw that we increased our structural cost out target in year to a $150 million in year. And when you’re looking at where we are year-to-date, we had $26 million in the first quarter, that was really related to the 2019 action that came into this year; in the second quarter, we had $55 million. So, year-to-date, that puts us at about $81 million. So, good track record, if we have 81 already in the bank, and we’re targeting 150 for the full year. On top of that, if you look back to the first quarter, we took a severance charge at the beginning of COVID-19 of about $20 million, and then you see another severance charge in the second quarter of about $46 million. So, there’s good trajectory on the cost out, the prices continuing. And also, we’ve exited some unprofitable businesses last year as well. So, that should help us.

Hi. Good morning.

Hi, Robert.

First, I’d like to thank you for the level of detail here and frankly, for the willingness to guide, because not many have. I wanted to ask you about visibility, especially regarding the MAX. How well can you see what your customers have in terms of inventory? Are you currently building MAX engines at a rate of 7 per month or 14 for the engine and 7 for the shipset? And can you share what kind of inventory the engine manufacturers have on hand?

Our schedules for any LEAP-1B engine currently are at a very low level, not surprisingly, given the engine inventory, which is there, which we don’t have exact numbers because it’s a project to GE Aviation. And obviously, they had a level of part flow that was assuming much different build levels compared to where we find ourselves at the moment. So, we are at a very low point of build for the LEAP engines and LEAP-1B in particular with Boeing. And so, I think that will continue at a very low level throughout 2020. And then, assuming that the recertification goes ahead, which we have no reason to believe that it won’t, and that be good news and then Boeing plans to resume deliveries and then increase build rates as we go into 2021. And that’s a time that we’re looking forward to because we have been without a MAX build for a long period of time now. And so, I think the whole industry is looking forward to that time. Because we do think that narrow-body is where the demand will be in the future.

Is there any way you can give us some sense of your content on that program, on a per aircraft basis, or anything you can say?

We’ve never given or not in recent times given shipset values by aircraft. I don’t really want to do that on today’s call. But clearly, if you look at the impact that we had in our first quarter, where we did call out MAX more specifically, and then you can see obviously, it’s essentially not present at all in our second quarter. You can see that the combined effect of that MAX and the COVID-related impacts of aircraft assembly plants being down, because of employee quarantine, and also just the whole demand from airlines, I mean it’s a very, very difficult picture for the commercial aerospace aspect of that business. But I don’t really want to call out the shipset value at the moment.

And just a clarification, I don’t think you said this before. But, in terms of the commercial aerospace revenue decline in the quarter, I think 36%. Can you specify how much that was down for OE versus aftermarket? And I’m not just thinking about airfoils and aftermarket, but all of your commercial aero aftermarket. And then, what’s contemplated in the second half guide for those two buckets?

Last quarter, we provided more details about spare sales, which are around $800 million to $850 million for the entire company, so let's round it to about $800 million. In 2019, this was roughly $400 million for defense aerospace and another $400 million for commercial aerospace. This year, I expect the $400 million for defense aerospace and the industrial business to be slightly higher, potentially over $450 million due to the OE build and the required spare packages. However, I anticipate a significant decline in commercial aerospace from that $400 million, likely down to about $150 million. Consequently, we will see substantial reductions in the aftermarket in Q2 and Q3. Overall, we might end up with total spares for Howmet in 2020 around $600 million, although the quarters will vary greatly due to the current low requirements for repair and overhaul.

Hi. Can you hear me?

Hi, Gautam.

Okay. Perfect. Good morning. I apologize for the question. I have to…

You want to have a solution?

Exactly. Earlier, you mentioned that pricing could exceed $20 million this year. I would like an update on that and on your outlook for pricing in 2021. Additionally, I am trying to determine if you expect earnings per share to increase next year compared to this year. Could you also address the structural cost reductions for next year, pricing, and the relationship between revenue and volume shipments? I understand that this may only provide directional guidance for next year, but can you share your thoughts on whether you believe earnings per share will be up next year, especially considering the challenging comparison in Q1 and other variables? I have a follow-up after this.

I believe it's too early to discuss guidance for 2021. We have put in significant effort to provide the visibility we can. As someone mentioned earlier, we either have the courage to share insights in the second half or we simply do not understand the situation well enough. Therefore, I won’t address 2021 at this moment. While I do have my own perspective, we're focused on understanding our revenue run rates, margins, and overall trajectory into both 2021 and 2022. We are contemplating these aspects carefully. However, I prefer not to give guidance right now. The key focus was providing insight into our exit rate trajectory and outlining some of the inventory challenges we need to navigate, which we hope to resolve by next year, although there's no guarantee. I’ve indicated there may be some recovery in commercial transportation as we approach the later part of the year. Regarding pricing, total dollar amounts will depend on revenue, which we know will not match 2019 levels, and we acknowledge that the current environment is tough for everyone involved. We believe that the price trajectory we’ve discussed will be impacted by the pressures in the industry. We have tried to provide direction for the rest of the year through our Q2 report. Currently, we are on track with our commitments and are working to position the company effectively in terms of our cost structure. We aim to manage inventory flows, acknowledging the limited visibility we have. Nevertheless, we strive to position ourselves optimally so that when revenue does begin to improve, we will be ready to build and manufacture the necessary parts while maintaining profitability based on our cost planning from 2020.

Yes. I appreciate that. I guess, there are a couple of notable things, the structural cost out next year versus this. How does 150 this year compare to what you anticipate for next? And maybe just directionally, if pricing will be better and pricing realization will be better in '21 versus '20, because that was the plan at the Investor Day. I wondered if at least directionally still the plan?

If I was going to change course, I didn't. The second point is, there will clearly be a positive impact carried over into 2021 from the cost reductions we are currently implementing, especially since they begin in April amidst the demand we are experiencing. It's important to note that we have chosen to eliminate costs rather than defer them. Many companies are deferring costs, which is a trend seen across the industrial sector. I want to avoid having costs return when programs resume, and that’s how we are addressing the situation.

And my follow-up is inventory plans through the first half of next year or beyond, you mentioned there’s going to be some trapped inventory at year-end. Do you think inventory will be a source of cash maybe for the next year, or can you give us a timeframe as to when that might abate? Because, it obviously is in the second half. How long…

Obviously, it all depends upon the angle of the demand line. Let’s assume that if all things were flat, then the fact we have trapped inventory at the end of this year would mean that would be a source of cash in 2021. Obviously, if 2021 were to show some form of demand increase, then all things being equal, normally, you have some working capital that will begin for us. But, obviously, it will be muted by whatever inventory we carry out of 2020 into 2021. And all I’ve said so far, without getting into specific numbers, some tens of millions that we’ll be having in excess at the end of this year.

Thank you very much and good morning. I appreciate the recovery in commercial aerospace, as it is somewhat uncertain. However, I wanted to inquire about commercial transportation since I am not very familiar with that market. In terms of realistically returning to the 2019 levels in that sector, do we have any clearer visibility or forecasting capabilities?

We currently have a perspective on the situation, though I can't guarantee its accuracy given the circumstances. I believe in 2022, our production volume of wheels will be close to what it was in 2019. However, I’m not asserting that it will exceed that figure. I am gaining confidence in this outlook. We've also indicated that each year we capture a bit more market share from steel wheels, and we have launched a new 39-pound wheel, putting us at the forefront of the market. This is reflected in our global market shares in wheels. I anticipate that as we head into 2023, we could surpass the volume levels of 2019. This is our assessment; it doesn't guarantee outcomes, but it represents our thinking about the business. Importantly, we are restructuring our production capacity so that when demand increases, we can manufacture more efficiently than in the past. This will depend on the demand being present to support our results. The actions we are taking would not have been possible if we had maintained the demand levels of 2019 during 2020 and 2021. We aim to take advantage of this opportunity to reshape parts of our production and improve cost efficiency. So, we foresee 2022 reflecting our current volume and 2023 exceeding the 2019 levels.

Okay. Thanks very much.

It’s a long way answer when you’re battling in individual weeks and quarters at the moment.

Yes, I completely understand that. Regarding 2023, during the Investor Day earlier this year, you mentioned a plan to remain for three years. Clearly, no one anticipated what would happen. I just want to confirm if there has been any change in your perspective due to the events of the past five months.

I think, you’re just asking me, am I old and worn out now by the current travails that we’re going through? The answer’s no. I mean, Tolga is giving huge assist, and the business getting into it across the base. And the plan is exactly as I stated. I made a commitment. I always see commitment through. And no diminution in that regard at all. It’s just that we’re working through some issues of business, which we hadn’t really expected. But, it’s just business. It’s just the normal thing you go through and accept that life is not totally smooth.

I’m interested in the financial situation of your smaller suppliers and any related areas. Is there talk about increased consolidation given the tough financial conditions affecting everyone, especially smaller suppliers? Are your customers discussing potential partnerships at this time?

No, my perspective is that currently, there are no companies in a position to take aggressive steps because we lack clarity and confidence regarding future aircraft demand and airline loading factors. As time progresses, circumstances may change. At this moment, any proposals made to companies would be difficult to evaluate due to the low visibility. However, by 2021 or possibly even in 2020, I anticipate that clarity will improve. It is during that timeframe that if there is any M&A activity in the broader industrial space, including aerospace, I would expect such moves to happen when there’s more visibility. Ultimately, any acquisitive actions will depend on the Board’s evaluation. That’s my opinion. However, we have not been approached by any of our customers regarding potential acquisitions or similar matters.

And then just relatively, I mean, given the lack of clarity, I mean, are there any areas that you’re concerned about suppliers and their financial condition, their ability to supply you?

We examined our supply base, and among all our suppliers, there is just one that we need to monitor closely to ensure they can successfully supply us. Overall, we've made efforts to position our supply base in a way that minimizes our dependence on any single supplier, as that's not an ideal situation. While I won't specify which one might pose a risk, so far, everything is looking good, and I haven't identified any issues that would create problems for us.

Thank you for the time.

Okay. Thank you.

Ladies and gentlemen, we have reached our allotted time for questions. Thank you for participating in today’s conference. You may now disconnect.

Thank you.