And any way to kind of ballpark if you’re 80% back to maybe being recovered on normalization of supply chain components and delays, not needing to restart those lines of production defend us off the final assembly steps? How far back — are you there?
Jeff Leonard: Yes. Let me take the first crack at that, and I think Richard wants to add a comment or two as well. He’s give me that eyeball look like he does. When you look at the chassis situation, Tim, there are still problems that all the truck builders are having getting frame rails out of Mexico. They all share one supplier and so believe it or not, kind of a straight piece of bent steel, the frame rail is holding up production for all the major OEMs in North America. That’s issue number one. And issue number two is Allison Transmission has been having difficulties at the moment, getting the transmissions that we need for the vacuum trucks. And that has set back the pace of recovery in the truck chassis market a little bit.
Having said that, we’re going to get hundreds more chassis in 2024 than we were in 2013. I think we are in a very, very strong position and we are finally starting to get a nice diversity of chassis coming in after working to diversify our supply channels six months or so ago. So, I think we’re probably better than 80% back in terms of the supply chain itself. But we still have these shop floor inefficiencies when something like a frame rail doesn’t come or a transmission doesn’t come and suddenly a chassis that you’re expecting to receive doesn’t show up on your door. And then there’s still some labor issues in some of our bigger plants, not labor unrest, just shortage of getting enough people to be able to run these plants the way we run them — want to run them — the way we want to run them.
But I would say it’s much better now than it was a quarter ago, and I think it’s going to continue to improve. Go ahead Rick.
Richard Wehrle: I think, Tim, the key to me here is not as — it is chassis. But our width is high, not because of chassis, our width is high because of component parts or lack of them when we need them. If they’re here on time and they’re efficient, we’re open — when we open the work order, we run right through it and we complete and close but when we end up missing something, we have to go park that unit, and it could be as I said before, 90% to 95% complete, and we can’t finish it and we have to go start on something else until the component gets in. That’s the efficiency that we keep pushing back on that we have to work on that someone needs to do a better job and help us out there and trying to make sure that those components are delivered to us on time with a good quality cost price item in there, so that helps us, because stopping and starting is probably about the worst thing you can do, and it’s worse in the Industrial division than it is in vegetation management.
Tim Moore: Thanks for that color, Richard and Jeff.
Jeff Leonard: Add a little bit — just add a little more color for you, Tim. The supply chain problems were actually more of an issue in the fourth quarter in Vegetation Management. Some of the bigger components that we need four few sides started to be more disruptive than we had seen for a while, and that caused us some real headaches in forestry, up in our Morbark business that we were not anticipating. So we’re handling our way through that. But net-net, as you look across the company, we are in a much better place. Steel prices are looking a little bit favorable as we ended the year. So that could be a little bit of a tailwind for us for at least the first few months of 2024, so on balance, as I said, I think I’ve called the bottom.
You guys can all tell me on a quarter or two from now in the ag space, but I’m calling bottom. And I think I’m optimistic about where the next couple of quarters may go. And I certainly think we’re going to be back to very nice running by about the middle of this year in the Vegetation Management division.
Tim Moore: Great. That’s really good. I always appreciate your candor and this is such a good improvement, though, even on industrial equipment compared to 1.5 year or two years ago with the — going back to the final staffing, just thanks for investors to know that like you’re not there yet 100%, but there’s still that extra operating margin level expansion. Just from it when you get there. One other…
Jeff Leonard: As I said, when you go into the industrial equipment division, Tim, the vacuum truck business is our steady performer, and they’re doing great. And we were able to add nicely to the rental fleet and expect to add significantly to the rental fleet as we go into 2024. That’s going to be very positive. That’s very profitable for this for us. And then our sweeper and debris collector business, which has been running okay, not perfectly the last couple of quarters of 2023 really picked up the pace in the fourth quarter, and it’s got a really good start. We came out of the gate in 2024, also with a very good backlog. So that’s an improvement. And then our snow removal group was at its best point in years from a profitability point of view with an exceptionally strong background – backlog. So the outlook in snow is very nice for us right now, too.
Tim Moore: That’s great. And I can’t wait to things for fire on all cylinders from industrial and you get back to the 12% plus operating margin pretty easily, you should, with the outlook for them. One, just switching gears since most of my questions are already answered on the vegetation side. What about just any updates on upcoming launches or trade shows for hybrid and electric [indiscernible] offering, US and European cities and towns, they’re starting to pursue better duty cycles and more environmental friendly fleet mixes. Anything you talk about there in launches and introductions
Jeff Leonard: Yes. Well, we launched an electric mower in our French operations about a year ago. That’s starting to really gain momentum now and sell very, very well. We’ve started expand the production of the hybrid – hybrid timber wood chipper that we make in the UK and are going to bring that to the North American market here very shortly. So that’s positive. Our small compact hybrid street sweeper has come out of the gate very, very well and actually surprises us with the momentum behind that. So that’s looking very positive. And then I think you probably saw our all-electric street sweeper, the M6, at the show at ConExpo. And we’ve had a little bit of a setback here and that the electric chassis are played from the supplier that.
We’re not going to get as many of those in the first quarter as we’d hope. But, I mean, we’re talking about chassis you count on one hand, so it’s not a needle mover from that point of view. But the momentum is very, very good, and I continue to believe this company is in a very good position. The really bright news with our larger electric sweeper has proven to give more operating hours than we expected on a charge of the batteries. The battery packs are performing better. So we’re getting a more net yield productivity time out of that product than we were expecting and the early customers that have seen it have been very, very impressed with that. And I was too, from an engineering point of view, how well that’s turned out. So we’re in a great position there from my perspective.
Tim Moore: Yes. That’s great color on the battery pack. And I’m a big fan of that hybrid Timberwolf sweeper to continue predominantly well in North America as a whole now. But thanks a lot. Appreciate it.
Jeff Leonard: That’s a net machine. Okay, Tim. Thanks.
Operator: The next question is a follow-up from Mig Dobre with Baird. Please go ahead.
Mig Dobre: Thanks for the follow-up. In Industrial, is there a way to frame for us pricing in your backlog? So if we’re looking at the 18% increase year-over-year in backlog, how much of that would be priced relative to volume?
Richard Wehrle: I would probably tell you, two-thirds of that is more volume than it is for price. But our price has gone up every single month, we’ve made adjustments in every single quarter on our backlog. So yeah, it’s in there.
Jeff Leonard: Mig, the purchase cost side of equate is flat, meaning we’re not seeing much price escalation from our suppliers at the moment, a little bit on the chassis, but it’s very, very modest. So most of that gain is in fact, just good running in the business from my point of view. So I think the majority of that is true growth.
Mig Dobre: I see. I asked the question because I’m trying to figure out what’s a reasonable expectation for revenue growth in Industrial in 2024, right? I mean, your backlog is high. It sounds to me that while there’s still some supply chain issues, you’re expecting more chassis in 2024 than you had in 2023. So your volume should be up. Pricing is positive and should help you. So, can you maybe help us understand what the reasonable expectation for revenue in 2024?
Jeff Leonard: Yeah. I think when you look at that division, make a couple of things. I mean, in terms of the chassis we have failed in some parts of the business were actually sold out for 2024, which is great. Those machines haven’t been delivered yet. So I think you will see nice revenue growth out of the Industrial division. They’re feeling bullish about where they sit right now, and they’ve come out of the gate very strongly in the first quarter so far. I can’t be specific about that, obviously, but we like the momentum and what we see there. So I think there’s plenty of room for organic revenue growth in the Industrial division. We were with that division had yesterday at our Board meeting, and Mike likes where he’s sitting.
And the backlog has never been higher in that business it’s a beautiful spot to be in. And then as you point out, with regard to the chassis, we’re going to get hundreds more chassis in 2024, at least that’s what we’ve been promised than what we saw in 2023. That will flow through in a couple of nice ways. Our rental fleet should go up very nicely, hopefully by triple digits, but certainly by double digits in terms of unit count. And that helps, because we’re running that fleet so hard right now. It’s hard to keep up with it. The utilization is so high. You’re putting a lot of wear and tear on the trucks in the fleet. But secondly, it’s helping our sweeper business that has a big backlog and has been constrained on that. And we’re building trucks now on our Debris Collector Group in Richmond, and they’ve sort of been the poor guys at the back of the line to get chassis and they’re starting to get chassis flowing through again.
So, I think we’re going to see nice organic growth in the Industrial division. Yes.
Richard Wehrle: One other thing to that, Mig, in 2024 will be a full year of Royal Truck and that will probably definitely push their sales above a double-digit increase.
Mig Dobre: Okay. Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.
Edward Rizzuti: Okay. Thank you very much. I appreciate everybody joining the call today. And we look forward to having you join our first quarter conference call in May of 2024. Thank you…
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
