Operator: The next question comes from Steven Fisher from UBS.
Steven Fisher: Just coming back to the second half improvement. I mean, you gave some of the factors. Again, I’m just curious how you actually translate some of those indicators you talked about into the magnitude of the growth forecast that you have, how much science is there in it, are you sort of just using historical seasonality percentages? I mean I know — I guess there was an automotive forecast that you could apply. Just curious how you get to the actual magnitude of what’s implied in the second half growth rates?
Christopher Rossi: Over the years, we have models that tie, for example, IPIs by region or light vehicle production and how that translates into business for us, Steve. So there is some math behind it but obviously, it starts with a forecast of what those IPIs are going to do, and I kind of laid out the third party prognosticators and their view of that. But then we always have the ability to balance that with customers. So in the Infrastructure business, where that’s a lot of project business, we do rely heavily on what our customers are telling us. But those are — so there is math behind part of it and then certainly, there’s what the customer sentiment is.
Steven Fisher: And then in the event that some of that doesn’t play out, to the extent that you hope what’s the potential to accelerate any restructuring benefits that you might have for going forward? Could you pull that forward or would you just sort of let that play out in the timing of what it’s supposed to be?
Christopher Rossi: I think, Steve, that’s a good question. As we talked about at Investor Day, we’ve got $100 million of cost out actions and improvements. It’s productivity based and we’re moving some structural costs associated with plants and a number of other things. And the down payment on that was our project, we call it Project Rebalance, the restructuring, Pat just spoke of, which is $20 million. So the point is that we already have active projects that are in flight and we’ll certainly look to — we’re always looking to accelerate those anyway. But if the environment worsens, the good news is we’re not starting flat footed because we’ve already got some things moving forward.
Operator: The next question comes from Steve Volkmann from Jefferies.
Steve Volkmann: So my question about Europe and it seems like you have really strong growth over there in both segments and sort of contrary to a lot of what we’re hearing from others in Europe. So I’m curious why you think that is the case? And I guess you’re probably seeing some share gains over there. But maybe there’s a different mix, maybe a little more Aerospace over there or something, I don’t know. Just any commentary on why that is sort of the standout growth area?
Christopher Rossi: I think in terms of Metal Cutting, Steve, Gen Eng was up. And that — as you know, a big chunk of Gen Eng is actually Transportation. And if you think about the light vehicle production in Germany, in particular, last year versus the Q1 this year, they were way down, they were producing at very low levels. And so what we attribute the improvement is, is that there was a year-over-year improvement off a low baseline. The good news is that their supply chain issues are behind them and they’re still trying to fill some of the backlog. And so then the other thing that I think is equally important and a big driver is that their transformation to EV is happening and we’re winning those EV projects. So as you pointed out, some of this is also just share gain of winning a good number of those projects.
I think if I — and then the other thing is we’re focused on Aerospace and Defense and that certainly was up in Europe. And that’s a combination of just continued strong markets there but we also feel like we’re picking up share. For Infrastructure, it was [Technical Difficulty] I think that that was largely driven by our Aerospace and Defense business. And for obvious reasons, the Defense business is up in Europe.
Steve Volkmann: And then fit for purpose, Chris, just an update there. Is that still adding to share as well?
Christopher Rossi: Yes, it is. As you know, we brought the two segments together, WIDIA and the normal Metal Cutting business, we’ve put them both together. We’re now going to market with a strategy, where we offer the broad portfolio to our distributors and our customers that have need for both fit-for-purpose applications and sort of the higher end custom solutions that the Kennametal brand brings. So we feel like that strategy is working and we are picking up share across the globe.
Operator: This concludes the question-and-answer session. I would like to turn the conference back to Chris Rossi for closing remarks.
Christopher Rossi: Thank you, operator. Thanks, everyone, for joining the call. We’re committed to drive above market growth by leveraging our competitive advantages, expand margins, while generating strong free operating cash flow and and increasing shareholder value. As always, we appreciate your interest and support. And don’t hesitate to reach out to Mike, if you have any questions. Have a great day, everyone.
Operator: A replay of this event will be available approximately one hour after its conclusion. To access the replay, you may dial toll-free within the United States, (877)344-7529. Outside of the United States, you may dial (412)317-0088. You will be prompted to enter the conference ID 727-28-61 then the pound or hash symbol. You will be asked to record your name and company. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
