Graham Burns : Great. Some type of progress. Thank you very much.
Thomas Meth : Thank you.
Operator: Thank you. Our next question will be from Mark Strouse of JPMorgan. Please go ahead.
Unidentified Analyst : It’s Deron for Mark. Thank you for taking my question. First, I just want to look at kind of some of the puts and takes in the $14 to $19 reduction for the rest of the year in the DAP costs. But I just want to focus right now on the fiber cost here. How much of that $14 to $19 is coming from fiber reductions? And then given the lag that you have between contracting the fiber pricing and when it’s recognized in your P&L, do you feel like you have pretty good visibility into the end of the year for the pricing impact there?
Thomas Meth : Yes. Drew, great to hear from you, and thank you for the question. So, when you think about the — I’ll start with Q2 and then take it all the way to the end of the year, right? In Q2, fiber cost reduction was about 50% of the reduction that we saw. And as we’ve previously discussed, it takes a month or two months for the purchases across the scale to actually turn into lower-cost revenues. And so we’re seeing that now in June, right? If you have me talk in May that what we saw come across the scale in April really shows progress. And in June, that actually then really flowed through. And we’ll continue to see that. We certainly expect some more fiber improvement, but most of the $14 to $19 will come from other buckets.
The other buckets, I would say, $5 of that will be increased fixed — improved fixed cost management. That is R&M spend, contract labor, and cost control. We’re managing this business very, very tightly. And what we’ve started to see really take hold in June, still is potential and that will drive $5 off the $14 to $19 out. And then we’ve really demonstrated increases in volume that leads to fixed cost absorption. It is probably about half of the $14 to $19 and how fast we can get to the potential of these plants on a reliable basis, we’ll define whether we’re going to end up coming out of this year at $14 or $19. I would say that previously, when a less reliable plant had a bad day, it was down, for example, for 1.5 days. Now a bad day means we’re losing a couple of hundred tonnes a day.
This is very, very different already in what we’re seeing come through in June, and that gives us confidence that we are on the right path to increase volume and fixed cost absorption in addition to some of the cost management improvements that we’ve seen.
Unidentified Analyst : Understood. That’s very helpful. I just want to circle back on Bond quickly. Is there any rules of thumb we can kind of think about for how you guys are going to make this decision upon timing? If you’re in the guide throughout the rest of the year, is it fair to assume that’s going to be on track from there? Or are there other things that are going into that decision that we might not be able to see from here? And then just lastly on that. Are there any costs associated with the delay that could weigh on profitability?
Thomas Meth : I will start with the second part. We don’t expect any material cost for the delay, so, we have really good optionality there. Look, I think if and when we hit our numbers, we continue to now hit our numbers for the second half of the year, that’s going to be a key input factor. I will say that we also have to make sure we understand what ’24 will look like, and what cash flow from operations will look like in ’24 and ’25. And the key input factor for me is — for that is, have we driven a cost position into our business that will generate the vast majority of our profitability from manufacturing wood pellet against our existing long-term contract book. And is that cost position sustainable or exposed to variability going forward.
