Tim Clarkson: In terms of people, is there a limit to how much volume you can do in terms of how many people you have in that division? I know it’s a relatively small division in terms of how many people are working there.
MattWolsfeld: But it’s scalable because we primarily have just a supervisor, engineers that then work with crews in the various geographic locations that are already vetted, trained, bonded, what have you. So we don’t really have an issue in terms of scalability.
Tim Clarkson: Right, right. And really it’s a little unconventional, but certainly the technology mitigates pollution in a couple ways: one, by obviously not allowing the oil and gas to leak into groundwater, which is really bad; but also in terms of not having these huge metal tanks that have to be replaced every 30 years instead of the 10 year deal, which is obviously steel is an extremely polluting process to create. So this is also a technology that really enhances the environment as we transition away from oil and gas eventually towards 100% non-fossil fuels. But in the meantime, they’re there, and we want to mitigate the pollution obviously.
MattWolsfeld: You said it better than I could. Thank you.
Tim Clarkson: Thank you. All right, I’m done.
Operator: Thank you. Our next question or comment comes from the line of Gregory Weaver from the Invicta Fund. Mr. Weaver, your line is now open.
Gregory Weaver: Hi. Good morning, guys.
Patrick Lynch: Morning. Happy new year.
Gregory Weaver: Happy new year. Nice to see the oil and gas. I’ve been patiently waiting and hopefully this is it. It’s good stuff if you can get that mixed in with the rest of your business. Patrick, when you say that income will be up, profitability will be up in fiscal ’23, is that including joint venture income or is this just the corporate level?
MattWolsfeld: It’s kind of across the board. The expectations is from a joint venture standpoint, we are seeing — we’re continuing to see — let’s say, the biggest influence to the decreased profitability at the joint ventures was the raw material prices of polyethylene. And we are starting to see polyethylene decline — the price of raw material decline slightly on a global level, and so all the different subsidiaries and joint ventures are starting to experience that benefit. Similarly, we’re starting to get a little bit of a tailwind from a currency standpoint as far as the change in the euro to U.S. dollar. Those two factors will impact profitability at the joint venture level with the expectations that we’re also going to start to see some sales growth.
So that’s one factor. Additionally, in North America, the continued growth that we’re seeing in Natur-Tec will benefit it, the growth we’re seeing in oil and gas at the very positive margins that we have there will also benefit. So it’s across the board the expectations of finally having some of these headwinds turn into tailwinds. The biggest, I don’t want to say headwind we still face, but obviously still a headwind that we face is in China. That is an entity that we have that previously was contributing, was profitable, and was contributing cash that right now is in a bit of a state of flux right now given what’s going on in China, specifically with COVID. However, with talking to various people, specifically about what’s going on in China, it appears that there should be a nice rebound once they’ve dealt with COVID issues and things start to normalize there that there’ll be a rebound on the ground level.
The expectations are that our sales people and travel restrictions and things like that will free up certainly in the second half of the year. And so that leads us to believe there’s going to be a nicer rebound in China from a profitability standpoint as well. So certainly, expectations are that we’ll see some nice growth going from first quarter to second quarter and then into what’s traditionally the rust season of third and fourth quarter that it should be a solid year from a profitability standpoint.
