Don Newman: Sure. Why don’t I add just a couple of things. One, I think you asked Rich is titanium accretive. The short answer is, yes. It is an accretive product space for us. The second question, I think that you also asked was in regard to the capacity. And maybe I can add to what Bob shared around capacity. So we have talked repeatedly about we’re adding 45% of our titanium melt capacity on existing assets. And so to give you an idea of kind of how we’re seeing that staged in 2024. So you guys have a sense of what that build looks like relative to a run rate. The way you want to think about it is go back to the original targets that we gave, and what we said is, related to this 45% increase in our melt capacity, we expected that capacity to add in excess of $150 million of revenue might even share something closer to $160 million of revenue at run rate, and assume 30% margin.
So, those numbers still hold. I think that there may be some upside to them, but we will share that at the right time. But then the question is when do we hit the run rate? What does that look like? We’ve talked about the second half of 2024 being a really strong second half relative to first half. This is part of the reason. And so, what you want to think about is for these assets, we expect that they’re going to be at the run rate capacity from an income statement standpoint and we see them as kind of building from maybe — it would be split 40%-60%, if you will 40% of that contribution we’d be seeing in the first half and 60% in the second half. I know, I’m mixing math here, but it gives you an idea of the step change that we’re expecting from half to half.
So hopefully that’s helpful.
Richard Safran: Yeah, I appreciate it. Now just real quickly, I get the impression from your slides that the supply chain issues are pretty much over for you. I think you said manageable. I just wanted to set expectations. From your standpoint, are sales and margins no longer going to be impacted by the supply chain constraints we’ve seen?
Bob Wetherbee: In ATI? No.
Richard Safran: Correct.
Bob Wetherbee: Yeah. We think they’re behind us. The bottleneck issue was around the first step in the process from — testing to using the billet. That’s why the billet press was important. It was originally designed to be a nickel press. And when you shift over to titanium, you have to add a couple of pieces to the puzzle to make sure you’re making a quality titanium part, different temperature, different issues. So that’s behind us. I think we eat and breathe the issues around all kinds of melting. That’s why we talk about being melt long. We’re not investing huge amounts of money in melting other than what we talked about with titanium, which within our guidance. I do think there are two issues that are out there in the marketplace that we are working.
One is what I’d call contracted services with significant training or certification requirements, which makes it hard for contracted services to ramp quickly. Some people see that as like ultrasonic inspection and some of that in aerospace is kind of under the rest with some of the other activities that are going on in the market. The other issue is there are some single points of failure out there. We get — we’re part of directed buy contracts with our major OEMs where they ship and bill it to us. And there are a couple of other parts of the supply chain where they’ve had a failure, I think extrusion facility in Texas has had a problem that affects some of the supply chain. But those that are within our control and those things we can manage we feel very confident that we have what we need to execute in 2024.
Richard Safran: Thanks very much.
Operator: The next question goes to Timna Tanners of Wolfe Research. Timna, please go ahead. Your line is open.
Timna Tanners: Hey, good morning, everyone. Two questions from us.
Bob Wetherbee: Good morning, Timna.
Timna Tanners: Just to clarify and understand outlet. Good morning. So, just wanted to see, if you could elaborate on the comment about taking actions operationally to align with lower demand. Is that short term, long term, if you could just explain that?
Bob Wetherbee: Yes. I think that was me to make that comment. And it was really about our activities in the AA&S segment related to the industrial markets. You know, one of the industrial markets that’s in there is some of the I call it the nickel clad pipe projects for oil and gas basically in Brazil those kind of places. We want to make sure we got the right amount of capacity there. We’re also seeing like everybody a little bit of softness in the residential construction space. So we have some engineered products that go into that space. And then we obviously watch the distribution channel although the vast majority of what we sell today is the OEM direct we still see some inventory destocking going on in those places, but it’s mostly in the AA&S segment and it’s stabilized I think is the key.
So the headwinds are still there, but they’re not getting any worse. And we are seeing some signs of life and green shoots for Q2. But hopefully that helps. Is that what you’re looking for Timna?
Timna Tanners: Yes. I’m just trying to think about how material they could be so some tweaks or if we’re talking about big changes there.
Bob Wetherbee: Yes, that’s weak. They’re in the tweak category.
Timna Tanners: Okay.
Bob Wetherbee: So whenever you’re doing dealing with your cost structure you wouldn’t call them necessarily tweaks because it can involve people and crewing and shifts and that kind of thing. But I would say they’re modest at best. I think most of them have already been taken. It’s just a matter for them to show up in the results which should be by Q2.
Timna Tanners: Got it. Thank you. Okay. So the next question was just about the metal price impact. So I just want to understand that better because if you look at nickel. The big shift in prices I mean it was a terrible year for nickel last year, but the bulk of that commodity price change was in the first half of the year. So just thinking about that for — going forward should we think about just annualized impact rather since you said it was more Q4 weighted? Or how should we think about the impact of metal price changes for the future?
