In terms of then on the engine side, you’ve read commentary or I think anyone, I’ve seen was the GE commentary instead of let’s say 1,700 engine 1,600 engines, isn’t really impactful for us at this point in time? Because for us it’s just us meeting their rate requirements and then there’s a choice as I said rather than the previous question, what goes to OE compared to what goes to search requirements. We’re dealing with very robust demand on both sides. We see that demand increasing again next year plus some blended in changes potentially for the technology change yet to come.
Noah Poponak: Okay. I appreciate it. Thank you.
John Plant: Thank you.
Operator: The next question comes from Sheila Kahyaoglu with Jefferies. Please go ahead.
Sheila Kahyaoglu: Hi John and hi Ken. Thank you, guys.
John Plant: Hi Sheila.
Sheila Kahyaoglu: So hey, I have two questions if that’s okay. So John don’t [indiscernible].
John Plant: Well, I am completely leaning today announce it is two-parts, three-parts so yeah sure. Go for it.
Sheila Kahyaoglu: You are. You are. But I want some good nuggets here. So the OEs that are calling out castings and forgings in terms of supply chain kind of slowing down the supply chain. I know you’ve been clear that Howmet isn’t a bottleneck and you aren’t in the large structural casting business anyway. So maybe could you characterize your output today? And what you’re capable of in terms of demand? And then, this is more of like a larger opportunity in terms of pricing and volume. How do you think about that trade-off going forward?
John Plant: Generally forgings and castings have been a bit of a whipping below for a couple of years. With commentary I think maybe even before, it was any basis for it albeit, subsequently I think there has been a basis for a commentary where to replace the skill levels to produce some of these in particular the casting is really at a very high order. So the trade the recruitment and then trading lines to produce effective production workers in some of this certainly strain. I think all of the companies in that regard including Howmet. We did choose to start recruitment a bit earlier. And I know that I’ve cost the company probably 20 basis points of margin by being slightly ahead of the curve — recruitment. But at the same time I think has paid dividends for us and the fact that we’ve been in a vision to produce generally on time, at rate and generally good quality.
So I think it’s been a good trade-off for us. I want to correct you on the structural casting side we’re probably the number two in the market behind precision cast parts, but they are still, the big dog on the block in terms of production of structural castings. We do produce them and we’re at a good rate for let’s say, 98% of all of our structural castings. I mean early on we had a few moments things like fairings and is like shelling pieces and coming off at good rates and no cost [Ph] or whatsoever. And so should there be increased demand for structural castings obviously where we tool and if not the availabilities that to us for the next few years should engine manufacturers want to is that we’re in a position to supply because we still have some available capacity and indeed are willing to invest commensurate with it being a good return of capital.
And generally I’ve been quite positive about investing in our engine business and contrasting that to — the our structures business is based upon returns. So it’s one way of saying we’re in a good state, restructure casting we are the significant supply to the industry on turbine blades. And I hope that gives you enough nuggets.
Sheila Kahyaoglu: How’s do you think about pricing and your contract structures going forward given the constraints in the supply chain and you’re hiring ahead of the curve.
John Plant: Pricing has been positive for us. And I think it reflects the value that we bring. When I look at some of the requirements for the increased temperature performance in the, let’s say, narrow-body engines. We are bringing to bear some of the not all, but some of the technologies that we’ve deployed for the F-35 engine in terms of ability to manage both pressure thermal performance in the high-pressure turbine. And we’re able to produce parts. We obviously work with the customers to engine into specification. But if they’re specified at 2,500 degrees and operate higher we can take it higher because as you know for the F-35 we’re up at 3,500 degrees and indeed the only company that well that can provide the turbine parts with that performance in that environment.
We’ve already commented previously that we are working on the improvements for the currently 2028 upgrade to that engine to improve its thrust and time and air. And so again, we are able to take the temperature performance of those parts and elevate it further. And we’ve talked a little bit, but only a little bit in our Technology Day about some of the technologies that we’d be able to deploy for that. And so we’re in a position to bring a degree of performance and capability at scale, which I think needs to reflect in value because in truth the turbine blade is a pretty small part of the value of the engine and to achieve the requirements for let’s say lower carbon footprint continually taking up the pressure inside the engine to improve the optimization that you have fuel and therefore its burn characteristics for lower dilution and the whole say fuel efficiencies and carbon footprint presents great value to the industry.
Sheila Kahyaoglu: Great. Thank you.
John Plant: Thank you.
Operator: The last question today comes from Seth Seifman with JPMorgan. Please go ahead.
Seth Seifman: Hey, thanks very much. Good morning everyone. So John I know you said you wouldn’t say this or haven’t said this and so I’m not necessarily expecting a number in terms of the margin outlook for next year, but if we think about that sort of baseline incremental of 30% plus or minus 5%. How do we think about the puts and takes for where next year can come in relative to that 30%. Does the addition of headcount and the need for the learning to develop among your employees? Does that keep things sort of below that 30% range as it’s been in recent years? Or are there other opportunities to be above it? What’s the best way to think about that at this point?
John Plant: Yes. I mean, we were able to step up the last quarter to 19% operating profit and 23% EBITDA rate. I don’t have any commentary regarding margin rates for next year. What I still see at the moment is potentially, I don’t know this, but potentially a few more months of choppy production particularly on the free manufacturing side, it’s just an assumption. Maybe we get lucky towards the second half of next year or the back end of next year and we see things get smooth out, we have seen some things begin to move in our favor and smooth that as I commented on the inventory side, we also think about our engine business. But in terms of — at what point do we reach what I previously have referred to the state of Grace where things move out margins become stable and better and cash just use that as the industry and hopefully out of Howmet.
I’ve always said that’s a year away and I still think you see year away could be the back end of ’24, but more likely getting to ’25 and that hopefully combines with if the ’25 external debuts of what the aircraft production will be including its wide-body mix then that begins to get I’d say into a good state. So, I have generally medium to long-term optimism and feel we are in a really great place with great backlog and good things to come, albeit still having to face up to shorter-term challenges of all the things we’ve talked about in terms of broad rate changes and the assumptions change in many parts of the market, in particular the commercial aerospace part of the market. I think it’s a better best I can give.
Seth Seifman: Excellent. Thanks very much. Helpful.
John Plant: Thank you, very much.
Operator: This concludes our question-and-answer session and concludes the conference call. Thank you for attending today’s presentation. You may now disconnect.
