Thomas Meth: Pavel, the sustainable aviation fuel space, in general, is still going very, very strongly. We continue to work with many counterparties in that space. All of them are asking the same question, where is the wood fuel coming from? And whether it’s in the boardrooms or whether it’s in their financing questions, and we are providing a key solution for that. And we’re one of the only ones who can provide that solution. That is something we’re working on with Alder. But it’s not limited to Alder. Alder is progressing, and we believe that they, as — like many other companies, are going to successfully deploy capital to build plants to generate sustainable aviation fuels. And so one of our great partners, and we have many more that we’re working with.
Operator: Our next question comes from Jordan Levy with Truist Securities.
Jordan Levy: Thomas, maybe start out with you. I wanted to see if I could get a sense of how you all have historically looked to evaluate productivity and cost profile on a plant level basis. And how you’re thinking about that potential changes there as we go forward.
Thomas Meth: So when you go back to 2020, 2021, we had a strong sense of cost control. Our cost position was predictable. And then as we went into 2022, cost position certainly went up, right? We initially thought it was more temporal through the war in Ukraine and inflationary pressures. We really struggled through the first quarter with pandemic-related issues. And it certainly turned out that — and we had expansions that we did at many of the plants. And so what we’ve seen in September, October, November is that these expansions were starting to really flow through on a daily basis. And where we have struggled a little bit is certainly on the reliability of those new plants. We have certainly struggled a little bit with third-party cost management, and we have struggled with turnover, right?
And particularly those elements are — the good news is many of these, if not all of them, are actually within our control. And so we believe we can get the cost down like we’ve said. We’re certainly working very hard to train people. The issue with turnover is not that you can’t replace people, but it takes 6 months for these people to be the necessary operators that they can actually problem solve independently in a , for example, in a plant. We’ve made good progress there. but not as fast as we thought. And so we know what needs to be done. We have the skilled labor in place and the retention plans and productivity is driven by uptime of the plants, in addition to cost management. And the uptime of the plants is not — in some plants, it’s not quite where it needs to be.
It’s a core focus of ours. I think we’re making progress. As I’ve said, and the trajectory will show. We’ll report out on this — on the progress. So we’ll provide on a go-forward basis, given that this, in the short term, is our #1 key initiative. We’ll provide more detail as we go forward that the analyst community as well as our investors can measure progress.
Jordan Levy: I appreciate that. And maybe shifting over to the contract side. As we go through ‘23 and into ‘24, you have a large portion of the mix starts to shift over to Japan contracts. I’m just curious if that acts as another headwind in terms of cost, given higher shipping costs and if you all have addressed that in your .
Thomas Meth: Absolutely. It’s a great question. So no, this will not have any negative implications. In fact, we, of course, received a headline price that accounted for higher shipping costs. And so a lot of these contracts that we have in Japan should provide the same or better margins like we’ve seen historically. I will also say that the contracting environment right now is certainly providing us with an opportunity to enter into contract at a substantially higher contract price than we’ve seen historically. Certainly, pricing is up 20% compared to what we’ve seen historically. And so that will start to roll through. That actually will start to roll through already in the second half of this year. That’s why revenue number for Q1 was $219, on average, it’s going to be $234 this year. And certainly, as contracts roll through, you’ll see revenue per ton increase.
Operator: This concludes our question-and-answer session. I would like to turn the conference back to Thomas Meth for any closing remarks.
Thomas Meth: Thank you, everyone, for taking the time to join us today. We’ve outlined today that — in the short term, #1 priority is cost reductions. Our revenues are like as expected, our cost position is not. But we will fix that. We have that in our control, and we’ll report out on our progress. And we look forward to providing progress updates on that and our business throughout the coming months as we execute that improvement plan, and deliver much better quarterly results going forward. Thank you for joining us today.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
