And at the same time, there’s also the possibility is that given the cash strain that either Boeing or other suppliers may be under is that they will adjust inventory. So, we’ve just taken that cautious view, prepared that against — for example, against the conversion of straight 90% of net income, which is a long-term guide. You can see from what we’ve given you this morning, it’s like 85% plus or minus and that provides the allowance for just in case we have not only the growth rate that we expect, but also if we get caught holding the having to hold the bag in terms of a little bit lower take the natural schedules as some of those MAX inventories are adjusted. We don’t know that. It’s just an assumption. I mean clearly what we hope for is that they build fully and at great quality levels of rate 38.
That’s what we want. That’s what we hope for. We look for great success from our customers. We’d love to see that. And should they build and schedule and then increase schedules for an increase in rate in 2025 then that will be really good for us. And you could expect us to be further increasing our sales should those scenarios play out. But at the moment, we’re not prepared to go there because we don’t know.
Seth Seifman: Great. Thanks very much.
John Plant: Thank you.
Operator: The next question comes from David Strauss with Barclays. Please go ahead.
David Strauss: Thanks. Good morning.
John Plant: Hi, David.
David Strauss: So, John, I guess, following up on that. So, if I take 5% on the free cash flow conversion, it looks like it’s about $50 million that you have assumed in working capital or inventory build related to conservatism around what Boeing takes. But even with that, it looks like or I guess on top of that, it looks like you’ve got maybe $100 million, $150 million of working capital usage in that free cash flow guidance. Is that correct? And if so, what is that? And the other part of the question is capital deployment. I know you don’t have anything baked in, but how are you thinking about that given — I know you have $200 million you’ve got left to retire this year, but that — given the cash guide gives you a fair amount of room to use coming on the share repurchase side. Thanks.
John Plant: Yeah. So, you can — it’s always these multipart questions, which we get here. So, first of all, of course, given that revenues are increasing, let’s call it $0.5 billion in the guide, there is a natural 15% to 20% working capital drag on that. So, let’s use the 20% because the math becomes so much easier. There’s $100 million of working capital for you to which we added the sort of number that you talked about in terms of that propensity which might happen. So that’s where we are on that assumption. And in terms of how we deploy, we haven’t actually fixed anything at this point, but it’s hardly likely that we’re going to enter a refinancing for a couple of hundred million. So, it’s quite possible that we may decide just to retire that and take those interest rate savings into, let’s say, end of the fourth quarter and into 2025.
And therefore, you can assume that’s all we’re going to do probably. I mean, we could do a bit of a refi around the ’25s, that’s on a TBD basis, but that’s not going to be a big drag either which way a platform any fee structure and breakage cost. But then the majority then you can assume it’s going to be share buyback. So position all wise, you can assume that 2024 will be a bigger year for share buybacks compared to 2023 where you can see the majority of the action was further on the debt side to put our balance sheet into the great shape that it’s currently in. And so, roughly speaking, you can assume further leverage improvements despite the share buyback thoughts that we have at the moment, which are going to be elevated compared to 2023.
David Strauss: Great. You got both parts. Appreciate it.
John Plant: Thank you.
Ken Giacobbe: Thanks David.
End of Q&A:
Operator: This concludes our question-and-answer session, and the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
