John Tumazos: You made reference to four good projects, hopefully, to add revenue and profits. Germany, expansions in Canada and Mexico, and the TWB license for ablation, if I’m saying it correctly?
Jeff Klingler: Yes.
John Tumazos: Real roughly, in terms of a range, how much are the revenue impacts of these items? We, as listeners, might not comprehend whether they’re $10 million in annual sales or $50 million in annual sales, or $100 million. I’d love to get excited and think that they’re going to double the company, but I probably need a cold shower?
Jeff Klingler: No, I understand. It’s a good question. I think, at the end of the day, as we ramp these things up, it’s going to take a few years to ramp all of them up. It’s going to be more than $100 million a year in revenue for us, once they’re fully ramped up.
John Tumazos: In terms of each one individually, so we can get an idea where the buck and goes singles versus the big ones?
Jeff Klingler: Yes, I’m talking about in terms of overall. I would say that the Tempel projects, are the two big ones. The ablation is going to be a little bit smaller. We’re going to start small there and ramp up. I mean, the ablation line is going to be under $10 million, whereas you’ve got those other two projects in Canada and Mexico, are $80 million plus each. So right now, we’re comfortable saying more than $100 million a year, when they’re fully ramped up.
John Tumazos: So the Tempel projects are Canada and Mexico. In Germany, how much is the revenue impact of that expansion?
Jeff Klingler: That’s relatively small. That’s probably around $40 million per year. And then, what we’re going to do with that Nagold facility in Germany, is we’re also going to put growth plans in place there as well. We don’t have those plans done yet, but we didn’t buy it, just to buy it for what it was. It was also to grow our presence in Europe in electrical steel.
Geoff Gilmore: I would just add that the customer activity and excitement, around our acquisition in Germany has exceeded our expectations, after just only a few months. So, we’re pretty optimistic. We’re going to do some good things there.
John Tumazos: They’re very green there, but I love everything. It’s finally are better.
Jeff Klingler: They certainly are.
John Tumazos: They got rid of nuclear and coal faster than anybody and jumped right into Putin’s arms. In terms of the specific machinery, could you just give us a flavor of what kind of machines you’re putting in place in Germany, in Canada, and Mexico to better understand the nuts and bolts?
Geoff Gilmore: Jeff, why don’t you answer that?
Jeff Klingler: Sure. I’ll start with Germany. Germany will be lamination presses so to stamp electrical steel laminations for traction motors, for hybrids and battery electric vehicles. In Mexico, it is more of that same. Then, of course, all the automation equipment that comes along with that, as we’re making rotors and stator stacks. That requires some downstream equipment, but the primary addition in Mexico will be EV presses. These are very high-end, very technical, very specific pieces of equipment. Then, in Canada, it’s a little more of a range. We’ve got furnaces. We’ve got a slitter that is specifically designed for grain-orientated steel, to process grain-orientated steel. Slitter, furnaces, Tranco Machines, things that support the production of distributed gap cores, and wide miter cut lines for large miter transformer cores as well.
Geoff Gilmore: And John, I just want to add, and you’re probably already familiar with this, this is machinery and equipment we’re already very familiar with. It is part of our core competency. And we are making these expansions just due to increased demand. We have the know-how.
John Tumazos: Worthington has come a long way from 1955 and buying a slitter machine. Which of the 10 or more processes that Worthington does are most competitive, and which of them are highest value-added, better profits?
Geoff Gilmore: In terms of – first of all, I’m glad you recognized we truly are a niche value-add producer. So, if we’re looking at what’s most value-add, I think definitely Tempel and electrical steel laminations, certainly very high value-add. A lot of engineering expertise needed to implement that equipment and run it. Hence, higher margins. I think tailor-welded blanks and light-weighting solutions. That’s also a very unique niche-type high value-add market, very similar to Tempel. Again, hence the higher margins. And then certainly, John, there’s galvanizing that you’re familiar with. Ours is a bit different. It’s hot-rolled substrate. That’s a differentiator. Cold-rolled strip, is also very high value-add. And why these are all niche-type markets that we play in and a big part of our strategy.
And then, of course, you’re very familiar with our pickling operations and slitting operations. And obviously, those would be markets that would be a bit more competitive. But what we’re proud of, your comment on 1955, is we really think we have a great story on innovation. It’s often not recognized, but we’ve continued to march up the value-add chain over the years. And it’s why the company has performed so strongly, and why we will well into the future.
John Tumazos: I could understand a mill or an auto company, with a very large volume tolling utilizing a particular process like a pickler where they might have a bottleneck or need. For something like galvanizing your customers or end customers, why would they buy from Worthington rather than buying from [Nucor Core Steel Dynamics], Cliffs, U.S. Steel, or independent is a few small independent galvanizers? I guess you’re going right to HVAC companies and other galvanized users for those sales?
Geoff Gilmore: So, why would they buy from us specifically? Of course, we’re going to be cost-competitive with the mills, but why would they buy specifically from us? I’m going to tell you what we hear from the customers. And what we would hear from the customers, it’s our service. We’re very responsive. We’re able to be probably a bit more flexible with scheduling and help. Clearly, we have premier quality, or we wouldn’t continue to see the orders, but I really do think it’s our speed, it’s our service, and it’s our flexibility. And John that’s – I’m just telling you what I hear from the customers.
