So, I was very pleased. And the trend continues to look well. It was not only that it was better in the third than the second. But the trend throughout the third quarter sequentially, August and September was better than August, et cetera. So, I’m pretty happy with what the team there is doing, but the important piece here is that the demand for the product is very, very strong. So it’s really in our hands to continue to drive this improvement plan that we have. We have a great team. And demand is there and the margins are there, everything is ready for us to continue to improve margins there and take it back to become a business that can be accretive to our margins.
Trey Grooms: Right. Yes. Okay. Thanks for that color. And then I’m sorry if you touched on this. I know you touched on it, but — so sorry to come back to it again. But for just a little bit more detail on the transportation side. You called out low river levels. I think orders kind of impacted orders a little bit. But how do you kind of think about just given where we are in the cycle. How are you thinking about that business as we kind of look in 2024 directionally?
Antonio Carrillo: Yes. Let me talk first about the river levels. When you look at statistically, I mean, the last couple of months have been very, very low historically. But if you look seasonally, it’s a normal season for this to happen. So, since a couple of weeks, we’ve received rain and levels are coming up quite a bit. So, I think we don’t expect it to be an issue going forward in the year or early 2024. So — but when that happens, this more cyclical businesses, I would characterize the move in our customers as more volatile than in other businesses. So, when things go by in a quarter, you will get all pessimistic. When things go great, you get all optimistic. So it’s we expect it to become better as we — the important aspect, I will go back to the fundamentals of the business.
The replacement market is there, the demand is there the customer sentiment is positive that margins need to be replaced. We have a good backlog into 2024. We have a significant portion of our sales already, let’s say, secured. And that allows us to work with our customers on timing, on — but I don’t want to give away my capacity. So we want to focus on our margins. And we’re going to — we have time to work with our customers on getting new orders, et cetera. So, we have time. I’m confident that the demand is there, and we’re going to get the orders to fill 2024 and that is going to be a better year.
Trey Grooms: Got it. Thanks Antonio for all the color. Much appreciated and best of luck for the — as we go through the rest of the year.
Antonio Carrillo: Thank you very much.
Operator: And we’ll take our next question from Brent Thielman with D.A. Davidson.
Brent Thielman: Hey Great. Thanks. Good morning. Antonio, could you speak a little more to the issues in the Engineered Structures segment? I mean it sounded like there was a mix issue, but maybe some inefficiencies in the system, maybe how long does it take for you to work through that, get the facilities where you want them to be? And then I guess, how do we think about the margin profile of the business is any different as they move into 2024?
Antonio Carrillo: Yes. So, let me start with one that has been cooking for the year. As Gail mentioned in her script, the — two of our biggest plants are in Mexico. And when you have manufacturing expenses, salaries, everything, depreciation, maintenance, et cetera — in pesos when you translate it into dollars and the dollar a year ago was at 21, and now it’s at 18. But during the quarter, it grew below 17 per dollar. So it appreciated pretty significantly. If you look historically — and from Mexico, if you look historically, that’s once in a lifetime thing that happens, but it happened. And that’s okay. So throughout the year, it has been hitting us, but through efficiencies and really good margin orders, we have been able to not even talk about it.
If you remember our call, we haven’t even talked about it because we have been able to overcome it — this quarter, I mean, it was no different, except that the peso appreciated more. And we have these operational issues that I mentioned. We have several equipment down in a few facilities that forced us to go outside and outsource pieces. And also the larger margin orders that moved into 2024. As I mentioned in my remarks, I expect margins to improve in the fourth quarter as we — the peso has improved a little bit, that should help. Also, as we ramp up our facilities that have been shut down in some equipment, I mentioned we will not have all our equipment ready for the fourth quarter. So the margin improvement should be, let’s say, over time, we should see improvement.
And then into 2024, as we get into the bigger margin orders and reduce the smaller margin orders, we should return to the more normalized margins. So — so this is — some of the problem was self-inflicted. We have things to do there, and we have to learn the lesson, some others outside. But I think the margin potential, the margin profile for the business should not change.
Brent Thielman: Okay. And then can you talk about the demand climate you’re seeing for when, I guess, outside of the large order that is tied to the New Mexico investment? What does it look like outside of that from a customer demand perspective?
Antonio Carrillo: Sure. And I’m going to start by saying what’s — I think so the obvious, but I want to reiterate it because when I sit down with people sometimes, they ask me about offshore wind. And we are not involved in offshore wind. Offshore wind it’s a very complex environment, and we were not participating in this, and that’s a good thing. So, we are only in offshore wind. And in onshore wind, things are different. — going back a year, year and a half ago, we had no tax credits. The industry was slowing down. And if you remember at that time, I had mentioned when the inflation reduction act got approved, I — my expectation was that it would take longer for it to really kick in. We didn’t expect these larger orders at the beginning of the year, and we thought it was going to be sometime 12 to 18 months for the industry to start working through permitting and all those things.
We got this big order in the beginning. We’re starting our new facility. We expect to start delivering towers in mid-2024, and we have a good backlog for 2024 for 2001 plants. Having said so, there are still things to work out in terms of the tax rate has not been completely defined by the IRS. And the industry is starting to go through this permitting and bottlenecks in the system. So, it’s going to be choppy. I don’t expect this to be — every quarter, we get a big order. I think we’re going to go through a few quarters where the orders and suddenly we get a big order. The fundamental aspect is that what I said in my remarks — we are set up for better 2024 than 2023 given our production and margin profile. And we have time with our plants in good shape to be able to — for those bigger orders to materialize and grow beyond 2024.
So 2024 should be better than 2023 and then we should be ready to continue to ramp up as we move along.
