Where the moment the date on hand is well out of order in terms of, where it needs to be and is not yet improving at all, but we’ll begin to improve I believe as we go through 2024. In the case of Structures, that’s probably our worst business in terms of days on hand. And if you remember last quarter, wasn’t particularly a great quarter in terms of the throughput of the business. And so, I elaborate — business not to focus on inventory, but just to use inventory as the buffer to help stabilize the manufacturing operations, and therefore, improve the margin, which is what you saw occur in the 300 basis points improvement in the structures business. At this point, I don’t think it goes anywhere at all in the fourth quarter. And that’s a combination of still needs to stabilize its operations.
But also at the moment I see customers laying in additional demand particularly laying in additional urgent demand on the titanium side. I’m not yet prepared to add heads, nor working capital in inventory, nor input materials until I’m satisfied with the economics to pay those premium costs. And so if anything I’m going to hold back on that because I’ve got better places to deploy capital, which is what I told you last quarter and generally in the business of analysts is that I’m very disciplined on where we allocate capital. And so at the moment, I’m not trying to drive working capital particularly in that business, but that will come next year as that business begins to smooth out and improve its production and gain more responsiveness in terms of I’ll say people paying for the premiums or if they want the demand and drop in then they pay for it.
Otherwise they don’t get it. It’s that simple. So that deals with working capital be it can’t preemptively, David and I’ll pass to Ken.
Ken Giacobbe: Yeah. Thanks David. So as John articulated their days are really the key on working capital. And then also depending on where we are in the cycle — business segment. So as we exit this year, I think we’ve given everybody the walk in the assumptions tab of the deck to kind of walk through it. But that would indicate a working capital burn this year roughly about $190 million plus or minus. And it’s really driven by — we’ve increased the revenue guide once again so you have more AR that goes with that plus we’re keeping inventory in the business to make sure that we’re not the bottleneck for our customers, delivering on time in full at the right spec is really important for us. So we’ve got a little bit more inventory.
Next year we’ve got another growth projection here. So I anticipate there’ll be working capital burn again next year in 2024, probably be better than this year as we work down inventory in the business but it’s again going to be dependent on where we are in the cycle. So I believe it’s in really good order here driven by the growth of the business. On the pension expense side, as John mentioned I’ll start at the top of the house. We’ve taken gross liabilities down by 45% since separation. That’s a pretty big decline. Big significant part of that is the actions that we’ve taken to reduce gross liabilities. So as we get a bit of a help from the increase in discount rates but there’s a lot of action around that gross liability. John mentioned cash, it will be up next year.
We remeasure it at the end of the year. So that’s pretty much of a volatile line. So we’ll give you more guidance on the next call in terms of what the cash contributions would be. The expense side — that’s a little bit more visible right now. Again we strike it at the end of the year. If you look at our pension and OPEB expense right now it’s $35 million on an annual basis. So next year based on asset returns, the market has been a little tougher. I’d say probably another $15 million plus or minus $5 million on either side of that. It’s really not material. But I think that’s all in good order as well.
David Strauss: Great. Thanks for all the detail.
Operator: The next question comes from Scott Duco with Deutsche Bank. Please go ahead.
Scott Deuschle: Hi. Good morning.
John Plant: Hi, Scott.
Scott Deuschle: Two very quick questions both for John. First did price realizations accelerate again in the third quarter. I think they had accelerated last quarter. And then on Fasteners, can you say whether you’re shipping at five a month on 787 at this point? Or are you still tracking a bit below that? Thank you.
John Plant: Okay. I don’t think we’ve given the third quarter detail on the commercial side. I think that would be in our 10-Q later when we file it, whilst I’d say that it’s in good order and in line with what we previously said both for the quarter for the year. And I stand behind my comments regarding 2024 we made them on the last call. 787 at the moment we’re a little bit below rate and fully expecting that to move up to grade seven next year. And as I’ve commented before we see very strong underlying demand for that aircraft. And I can see the need to go above rate seven as well. It’s only a question of when.
Scott Deuschle: Okay. Great. Thank you.
Scott Deuschle: Thank you.
Operator: The next question comes from Myles Walton with Wolfe Research. Please go ahead.
Myles Walton: Thanks. John I was hoping you could dig a little bit deeper into the fastening margin performance and obviously, sort of, troughed at the beginning of the year and has been showing some signs of resiliency and improvement. I think at the beginning of the year you told me to not expect much for a couple of years. Are we at a point where new management plus the rate increases on the wide-bodies we should start to think about getting back to 2018, 2019 Fastener performance?
John Plant: Well, I think, it’s a bit premature to get back there because I mean the conditions there and the wide-body market in particular is quite different to what they are now. So basically in the first quarter, which is probably a low points in base margins reflected essentially a total metallic build of aircraft and you can call it zero in terms of any real volume on the composite side. So that’s one factor. Of course that’s begun to change. The business itself has also begun to improve. And I see very much improved signs of operating efficiency improvements, but with a ways to go. I see additional discipline in the business commercially and there’s still a ways to go. And going forward into next year what I see is a volume increase for commercial aircraft production also fractional improvement in mix because of the wide-body going to next year in particular in your assumptions on what the final wide-body production will be in composite aircraft essentially on wide-body transitioning from metal to composite aircraft through the course of the year.
Hopefully with some delivery of 777X parts as well which has got a composite wing. And so I’ll say general improvement in conditions for the business, but still with a big thrust on improving its productivity and throughput efficiency which needs to occur. So, basically, some ways to go yes optimism will continue good trend over the last couple of quarters but too soon to call out any specifics on it. And I don’t think we have a guide by segment anyway. But I haven’t guided or have that margin for next year just given you like the revenue increases. So that gives you a picture of our business.
Myles Walton: Thanks John.
John Plant: Thank you.
Operator: Next question comes from Ronald Epstein with Bank of America. Please go ahead.
Ronald Epstein: Hey John, how are you?
John Plant: Hey Ron.
Ronald Epstein: Yes. The topic that doesn’t tend to come up much is the forged wheels. And it appears that it’s been running ahead of expectations. I mean how should we think about that? And what are your expectations around it? And when we think about modeling it what would be a prudent way to do so?
