Peter Matt: Yes, we actually feel very confident about where we are on government awards, and actually we’ve seen government awards continue at a healthy pace here. What I’d say is just kind of taking a couple steps back, if you look at infrastructure spending, infrastructure spending grew in 2023. We expect, and all the other prognosticators expect, that it’s going to grow in 2024. And we can see, both in the form of kind of the pipeline of projects and the design and pre-design phase, significant increases that have been significantly increased over the last literally nine quarters. So that, we think, is kind of evidence that there’s more coming through the pipeline. And lastly, what we’re seeing is state budgets are growing at a healthy rate.
And we commented in the prepared remarks that they’re up about 13% on average. And we believe we are seeing some of the IIJA money coming through now. Remember, it’s a little difficult to see precisely when it comes because the funds are commingled with state monies, but we do believe we’re starting to see that, and we believe that’s going to grow over the course of 2024. And one thing that I’d also kind of point out on IIJA is, remember, the way the program is structured, every year there’s a grant, but it doesn’t necessarily mean that the spend in that year is the same. So over the course of the program, we believe you’re going to see kind of an escalating level of spending. So we continue to be very bullish on what infrastructure means for our business and the demand for rebar.
Operator: Thank you. [Operator Instructions] The next question comes from Alex Hacking with Citi. Please go ahead.
Alex Hacking: Yes, hi. Good morning. On the emerging business group, which you’ve highlighted that you see that growing faster than everything else, are there any long-term targets there for how big you want that business to ultimately get, either in absolute terms or as a percentage of the total company? Thanks.
Peter Matt: Yes, thanks, Alex. Good question. We’re very excited about the potential of the emerging businesses group. I think it’s premature at this point to kind of articulate a specific target for where we think it will be. What we like about that business, as we said, is it tends to have – the businesses in there tend to have solid organic growth rates, they tend to have higher margins, and they tend to have less volatility, all of which will be kind of helpful in the overall financial profile for our company. So it’s an area that we intend to grow, we want to grow, but coming back to my comment on M&A, we’ve got to be disciplined about how we grow, and that means that we’ve got to be comfortable that we can generate returns in excess of our cost of capital in the moves that we’re making in that space.
We are very optimistic that we can do that, so we’re confident that you’re going to see some nice growth in that segment. But it’s a little bit premature to call it specifically. What I would say is that our expectation is that it will be a significant contributor to our earnings and cash flow if you look out kind of three, five years.
Alex Hacking: Okay, thanks. And then something a bit more discreet. The European cost rebates, energy rebates, given where energy prices are today, do you have any estimate of what kind of rebate you would expect at the end of this year? Thanks.
Paul Lawrence: Yes, Alex, it’s a good question. So there’s two separate programs, as I outlined, that we received. The first relates to the cost of CO2 credits that’s embedded in the underlying energy costs that the operation pays, and that is most closely tied to the CO2 credit costs themselves. And given that the demand over time is expected to continue to increase for those credits, we expect that that credit is likely to remain at the level it is today or increase. The other credit was in relation specifically to higher cost energy, and you’re correct as you state that energy costs have come down from their peak. They’re still elevated, and so while the program itself was simply for 2023 and we have received the full amount of that, it could be that the new government that comes in place puts a further program in place should the energy costs continue to remain elevated and uncompetitive with other geographic jurisdictions.
Alex Hacking: Okay, thanks. So just to clarify, the CO2 program is still in place and is sort of linked to the market price of CO2 credits, and the energy rebate program is now gone, but potentially could be replaced?
Paul Lawrence: That’s correct. The CO2 is in place through 2030.
Alex Hacking: Okay, perfect. Thank you.
Operator: Thank you. The next question is a follow-up from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.
Phil Gibbs: Thank you. What’s the length of your fabrication backlog right now if you think about it in terms of months or quarters?
Peter Matt: Yes, I mean the fabrication backlog tends to run with a duration of about 12 months, and that’s a weighted average duration. That’s, I think, a good level for where it is today.
Phil Gibbs: And then as you talk about the typical force or normal seasonality associated with the second quarter versus the first quarter, what is that in your mind? Is that 5%? Is that more or less?
