Patrick Winterlich: So obviously, we’ll talk about our medium-term growth in a lot more detail in February. But essentially, I’m not going to say, there’s going to be no dollar inventory growth. But I actually think we’ve got a — we’re actually sort of focus on a relative days metric, how many days of inventory we’re holding. And we have the opportunity to reduce that and as several more days down. And so as our top line grows, we knew it to minimize the growth in inventory. As I say, I’m not saying it will be zero, but it shouldn’t have to grow too much more, certainly significantly at a much lower growth rate than the top line grows, which will then give us that improvement in relative days of holding.
Peter Skibitski: Okay. That’s great. Thank you.
Operator: Next, we’ll go to Robert Spingarn at Melius Research.
Robert Spingarn: Hey, good morning. Nick, Patrick, Kurt. Nick, you talked about what I’m going to call destocking in the narrowbody business, first half of 2024. And we’re going with this, it sounds like it gets better in the second half, but can we think about the de-stocking relative between Airbus and Boeing? Is it greater for Boeing, given what’s going on there? And how much risk would you say we have when we think about the news that came out yesterday, I know Michael referred to this in the beginning, it is very fresh news. I’m trying to get an idea of when you will be at rate parity on these narrowbody programs?
Nick Stanage: Yeah, Robert. So again, pointing out one platform versus the other is really driving the stacking in the first half of the year and some of the de-stocking in the second half is really not as relevant as the shipset content and at what rates they are. So it’s relative to that consumption and where they are. So there was not one that jumped out. Now, clearly, with the news that’s been coming out, and as some of the issues get resolved, and I’m very excited to see that shipments for — to China appear to have resumed and the grounding of the Dash 9. It sounds like it’s been lifted. So I think Boeing and their supply chain are working through, putting in some enhancements to ensure that they deliver what the FAA is looking for.
And again, if you look at what we rolled up in our plan, we still feel, even given the news yesterday, which probably will continue to evolve, we still feel good with our guidance. We think we we’re conservative enough in the right areas that we’re holding to that.
Robert Spingarn: Okay. Okay. And then I just have a — I don’t know if it’s a follow-up. But the 737 MAX 7 and 10 have this anti-icing issue waiver situation, and with the nacelle and the composite materials, I wanted to ask if you guys are involved there. And if there is a redesign, is that a headwind or a tailwind?
Nick Stanage: Well, you can assume anything with our customers where we can help provide a solution we’re going to be involved. So, it’s really too early to say what a redesign might entail, what it might be involved with. But historically, any time there is an enhancement or a new engine or nacelle or component, there tend to be more composites involved, and we tend to get a greater portion of that. So again, it will take some time to work through the details there, and it’d be premature for me to comment on what direction that will go specifically.
Robert Spingarn: Are you on the existing nacelle?
Nick Stanage: Yes.
Robert Spingarn: Okay. Thank you.
Nick Stanage: You’re welcome.
Operator: We’ll take our next question from Gavin Parsons at UBS.
Gavin Parsons: Thanks, guys. Good morning.
Nick Stanage: Good morning.
Gavin Parsons: If I’m interpreting it right, it seems like maybe there are three buckets of costs that are really impacting margins, right, you mentioned inflation, lower volume on narrowbody than you expected and cost ahead of growth. And I kind of wanted to focus on the last one. The press release talks about training new labor, driving operational excellence and bringing assets online. Is there a way to think about how much of that is abnormal or elevated costs versus normal course of business before the volume has come through?
Patrick Winterlich: Yes. I’m not sure I’d describe any of it as abnormal. I mean, we’ve — as we’ve called out many times, we focus very strongly on supporting our customers. We are not going to be the bottleneck and we’re going to be ahead of the ramp rate. Now that, as I’m sure you all understand, it’s difficult to judge, especially in the narrowbody market right now, which is quite erratic. They’re complicated supply chains. As Nick described, we have dozens of ship to points for both of those planes. And so it’s complicated, and we have to be ahead of that. And so it’s really about bringing in costs, bringing in labor, training that labor, making sure the plant and equipment is maintained and ready, and so we’ve got machines running, but they’re not fully utilized, they’re not truly efficient at the moment.
But you have to support them and you have to have general infrastructure across the business to be ready. And we — following the first half of ’23, we were obviously anticipating a stronger second half of ’23 than we saw. I mean we raised guidance perhaps mistakenly now in July, but we did. And then that second half didn’t materialize as we thought it might. But we are prepared, we are positioned now as we go into ’24, ready to support our customers. And so I wouldn’t call it abnormal. It’s part of being prepared for growth ahead.
Gavin Parsons: Okay. That’s helpful. And then any sense you can give us about energy and raw material costs today relative to where they were pre-COVID?
Patrick Winterlich: Pre-COVID. So I mean, energy costs, I would say, is still higher. They’ve come down a bit. They’re not growing now, or at least that they might be in the very small degree in certain pockets. But largely, they’ve come down. I’m not sure they’re as low as — well, I’m pretty sure they’re not as low as they were pre-pandemic, but they’re not growing. It’s not a big year-on-year headwind at all for us. In terms of other raw materials, we’re seeing a little bit of inflationary pressure, but it’s nothing like the pressure we saw over the last couple of years, where we saw significant headwinds. So we’ve still got some elevated costs, but they’re not growing. Commodity-type raw materials have definitely softened a bit, and so that’s very helpful. Others are a bit more sticky, but they’re not growing is the way I would describe the situation.
