Commercial Metals Company (NYSE:CMC) Q4 2023 Earnings Call Transcript

Commercial Metals Company (NYSE:CMC) Q4 2023 Earnings Call Transcript October 12, 2023

Commercial Metals Company misses on earnings expectations. Reported EPS is $1.69 EPS, expectations were $1.88.

Operator: [Call Starts Abruptly] Today’s materials, including the press release and supplemental slides that accompany this call, can be found on CMC’s Investor Relations website. Today’s call is being recorded. After the Company’s remarks, we will have a question-and-answer session and will have a few instructions at that time. I would like to remind all participants that during the course of this conference call, the Company will make statements that provide information other than historical information and will include expectations regarding economic conditions, effects of legislation, U.S. steel import levels, construction activity, demand for finished steel products, the expected capabilities, benefits and timeline for construction of new facilities, the Company’s future operations, the timeline for execution of the Company’s growth plan; the Company’s future results of operations, financial measures and capital spending.

These and other similar statements are considered forward-looking and may involve certain assumptions and speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. These statements reflect the Company’s beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are described in the Risk Factors and Forward-Looking Statements section of the Company’s latest filings with the Securities and Exchange Commission, including the Company’s latest annual report on Form 10-K and quarterly report on Form 10-Q. Although these statements are based on management’s current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to be correct, and actual results may differ materially.

All statements are made only as of this date. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements in connection with future events, changes in assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the Company’s earnings release, supplemental slide presentation or on the Company’s website. Unless stated otherwise, all references made to year or quarter-end are references to the Company’s fiscal year or fiscal quarter. And now for opening remarks and introductions, I will turn the call over to the Executive Chairman of the Board of CMC, Ms. Barbara Smith.

Barbara Smith: Thank you. Good morning, everyone. Thank you for attending CMC’s fourth quarter earnings conference call. As we reported in our press release this morning, it was another period of historically strong financial results. I would like to thank CMC’s 13,000 employees who made these results possible. Your hard work and focused efforts are driving our success. I’m joined this morning’s call by CMC’s President and Chief Executive Officer, Peter Matt; and our Senior Vice President and Chief Financial Officer, Paul Lawrence. We will start today’s discussion with comments on CMC’s fiscal 2023 results and accomplishments during the year. Peter will then discuss fourth quarter performance, provide commentary on current market conditions, and offer an update on CMC’s strategic growth projects.

Paul will cover the fourth quarter’s financial information in more detail and Peter will conclude with our outlook for the first quarter of fiscal 2024, after which we will open the call to questions. Fiscal 2023 was an another exceptional year for CMC, one that included record employee safety performance, historically strong financial results and solid progress on our announced growth initiatives, including several strategic bolt-on acquisitions. As you know, the company and its Board of Directors began implementing a CEO succession plan this year. I announced my retirement as CEO in July and our Board unanimously voted to appoint Peter Matt as CMC’s new Chief Executive, effective September 1st. My fellow directors and I are extremely confident in Peter’s ability to lead CMC through this next chapter, and I look forward to continuing to support the company as Executive Chairman of the Board.

Turning now to our financial results. CMC generated core EBITDA of $1.46 billion in fiscal 2023, down only modestly from the record of $1.55 billion set in fiscal 2022. Without proper context, it’s easy to lose sight of just how impressive these figures are. During each of the last two years, CMC’s core EBITDA was nearly double that of any previous record year and was more than 4x higher than the average annual EBITDA during the decade prior to the completion of our strategic transformation. These remarkable results clearly demonstrate the impact of the thoughtful and decisive strategic actions we took over the last several years, which have enabled us to significantly grow our company and set us on a path for continued success. Fiscal 2023 strong reported net income translated into an annual return on invested capital of 18%.

This is well in excess of CMC’s cost of capital, and an unmistakable indication of the value we are creating for our shareholders. Of the accomplishments achieved in fiscal 2023, we are most proud of our record employee safety performance. It’s CMC’s mission that each employee leaves the work site at the end of each day in the same condition in which he or she arrived. CMC’s safety culture of proactive awareness, accountability, and innovation continues to move us forward to our goal of zero incidents. Last year’s incident rate was tied for the lowest on record and the number of OSHA recordables declined from the prior year despite having more employees at more sites and enduring in unusually hot weather across most of our operational footprint.

Additionally, 114 of our facilities were incident-free. While we are pleased with our continued improvement, the safety mission is never complete, and we will continue to push forward toward our goal. CMC continued to make solid progress on our strategic growth initiatives during fiscal 2023. Peter will provide more details in his remarks, but at a high level, this includes the operational startup of Arizona 2, continued growth in Tensar’s EBITDA contribution and the execution of several strategic bolt-on acquisitions. As I enter my retirement and evaluate CMC today, I could not be more pleased with where we stand. The company has a very strong foundation comprising of an excellent culture, great employees, leading market positions, a compelling growth strategy and a balance sheet that provides tremendous confidence and flexibility.

I know with Peter’s leadership and the support of all 13,000 employees, the future of CMC is as bright as it’s ever been. Before I turn the call over to Peter, I would like to express my deep gratitude to the many people on this call that have shown me so much support over the years. It’s been my privilege to work with you and to call many of you, my friends. Peter, over to you.

Peter Matt: Thank you, Barbara. It’s an honor to take the helm of a company so masterfully led for much of the last decade, and good morning to everyone on the call. CMC’s fourth quarter financial results were among the strongest in our company’s history, though down slightly from recent record levels. CMC generated net earnings of $184.2 million or $1.56 per diluted share on net sales of $2.2 billion. Including the impact of non-operational items, which Paul will cover in detail, adjusted earnings were $200 million or $1.69 per diluted share. CMC generated consolidated core EBITDA for the quarter of $340 million, producing an annualized return on invested capital of 15.2%. Once again, our North American segment demonstrated remarkable resilience, posting its 11th consecutive quarter of year-over-year adjusted EBITDA growth, excluding the gain on the sale of land recognized during the second quarter of fiscal 2022.

Even more impressive, excluding the land sale, our North American segment has increased EBITDA on a year-over-year basis in 21 of the last 22 quarters. Turning now to CMC’s markets in North America. Rebar shipments remained healthy during the fourth quarter, and total finished steel volumes increased on a year-over-year basis. Activity levels across our geographies and into our various customer groups were consistent with the prior quarter. Overall, the seasonal volume pattern was very normal. The data we track indicates that annualized rebar consumption remained between 9 million tons and 9.5 million tons during the third and fourth quarters. This level is consistent with the rate that has prevailed since early calendar 2021, which is a 5% to 10% increase compared to the pre-pandemic average.

Strong pricing and demand conditions for domestic rebar have started to diverge from the weaker global environment and growth within the U.S. construction sector similarly stands in contrast to most other global regions. This robust relative demand has attracted rebar imports from non-traditional suppliers who have put pressure on domestic pricing in recent months. Despite these more challenging conditions, we expect CMC’s North American business to continue generating margins well in excess of historical average levels, but down from the record highs of recent quarters. Turning to key forward indicators. CMC’s new downstream bid volumes continued to grow by a solid double-digit percentage during the fourth quarter, signaling a large and expanding pipeline of potential future construction projects.

Our internal view is directionally consistent with the Dodge Momentum Index, which measures the value of non-residential projects entering the planning phase and tends to lead on the ground activity by approximately 12 months. Index registered an average year-over-year increase of 15% during the three months of CMC’s fiscal fourth quarter, with both institutional and commercial components improving from the prior year. While bid levels indicate an attractive future pipeline, we have experienced a slowdown in the rate at which contracts are awarded which in turn, has caused some reduction to the volume and the value of CMC’s downstream backlog. Compared to the prior year, our quarter-end backlog value declined by 8%. Based on our observations and conversations with customers, we believe there are a couple of factors driving the slowed pace of project awards.

The first is tightness in the market for construction labor, particularly specialty trades that continues to constrain project scheduling. Rather than incur construction delays driven by a lack of labor availability, some owners may choose to wait to award and construct a project. CMC and several other construction suppliers have discussed this dynamic in the past, and we believe it is likely to extend the duration of the current cycle. Second factor is a tighter credit market for many types of commercial projects. Current lending conditions do not preclude projects from obtaining financing, but the economic hurdles are higher. This dynamic also lengthens the amount of time between project bidding and award. Given the backlog contraction discussed, volumes of downstream products are likely to decline modestly on a year-over-year basis during the next couple of quarters.

All that said, our downstream backlog remains at historically high levels and should continue to support healthy shipment levels going forward. Looking beyond these near-term dynamics, we remain very confident in the long-term outlook for our business, driven by powerful structural trends that are remaking much of our economy and should bolster construction activity for years to come. Enormous investments have been announced with some already underway to improve our nation’s transportation infrastructure, reshore vital manufacturing and upgrade the electric transmission grid to facilitate the transition to renewable energy. Each of these trends will benefit not just rebar consumption, but provide a meaningful tailwind to our Tensar engineered solutions and other value-added product lines as well.

We have frequently discussed the infrastructure investment in Jobs Act, IIJA, and its anticipated benefit to rebar demand. At run rate levels of spending, we expect IIJA to add an incremental 1.5 million tons of annual consumption. There are clear signs that enormous amounts of work are moving through the pipeline. As evidenced by data from Dodge Analytics, which tracks infrastructure projects in their pre-design and design phases. According to this data, the value of early phase projects increased over sevenfold on a year-over-year basis during the three months ending in August. Once designed, those projects will move to budgeting, funding and letting phases. It is after the letting phase that contracts are awarded, resources are scheduled and on the ground activity can begin.

We have already seen the value of state transportation projects awarded year-to-date through July increased by 18%, compared to the prior year, according to the American Road and Transportation Builders Association, ARTBA. This year-to-date figure represents a 43% increase from just two years ago. Also, according to the ARTBA total state Department of Transportation Highway budgets are set to increase by 13% in fiscal 2024, which, for most states started in July. Several states in our core Sunbelt region are budgeting even larger increases. As an example, Texas by far CMC’s largest state by shipments recently proposed a 17% expansion to its 10-year DOT budget. Based on these signals, we expect that by next year’s construction season, the IIJA and increased state DOT budget should have a material impact on construction activity and rebar consumption.

Apart from transportation, the announced investments in major reassuring and energy transition projects are staggering. The $52 billion CHIPS Act has helped drive over $315 billion of announced projects to build semiconductor fabrication plants and supporting facilities over the coming decade. These massive installations are generally constructed in multiple phases spanning several years and require unparalleled amounts of rebar. The necessary structural rigidity and broad footprint also make these facilities strong candidates for Tensar soil stabilization solutions. Additionally, the scale of the semiconductor plants and their workforces attract investments from suppliers, retail stores, restaurants, et cetera, and require expenditures for local infrastructure, all of which consume rebar.

Approximately $150 billion of investments in electric vehicle and EV battery manufacturing have been announced since 2021, according to the Environmental Defense Fund. The expected spending on energy transition is similarly impressive. According to the American Clean Power Association, roughly $150 billion of renewable energy projects have been announced during the 12 months ended in August, with an additional $22 billion being invested in the construction of clean energy manufacturing facilities to produce utility-scale batteries, wind turbines and solar panels. The $250 billion IRA is expected to support these projects and additional energy transition and manufacturing projects in the future, which presents a significant opportunity for CMC.

Our rebar is used in the foundation and structure of the manufacturing facilities. As well as the foundations of wind turbines, Tensar’s engineered solutions are used extensively for temporary and service roads to access wind farms and solar field. Additionally, CMC’s Anchor Cage business, which was acquired through our purchase of EDSCO provides foundation support to the transmission lines that will carry electricity from new energy product projects to the grid. Taken together, the construction activity required to upgrade our nation’s infrastructure, hardened critical supply chains and transition to greener energy is expected to provide a meaningful tailwind to CMC’s North America operation for years to come. I’ll now turn to Europe. Where market conditions are challenging, sluggish demand and excess supply have combined to put pressure on pricing and compressed margins.

General economic uncertainty continues to negatively impact sentiment and activity levels across our key end markets. Additionally, high interest rates despite recent Central Bank easing, remain an overhang to the Polish residential construction sector. We responded to the current market imbalances by reducing costs and rightsizing production and believe that others have done the same. These supply side adjustments should help stabilize the market. The environment in Europe is currently difficult, but will normalize. We remain committed to our strategic presence in Poland, which greatly out-earns its cost of capital over the course of an economic cycle and provide CMC with valuable optionality for the future. We have an exceptional team in Poland as well as best-in-class cost structure, that ensures our long-term competitiveness.

As noted in our press release, CMC’s first quarter results are expected to benefit from two large rebates totaling $60 million, which we will discuss more fully during our outlook commentary. Before turning the call over to Paul, I would like to provide an update on CMC’s key strategic growth projects where we have made significant progress during the quarter. First, we successfully started operations at our new state-of-the-art Arizona 2 micro mill, and we are now in the process of ramping up output. This is an exciting milestone and the culmination of years of effort by our team on site and support staff across the company. As a reminder, we are targeting 500,000 tons of output at full run rate, comprised of 350,000 tons of rebar and 150,000 tons of merchant product.

Initially, the mill will focus on increasing rebar production before commissioning merchants later in fiscal 2024. We anticipate fiscal 2024 production to approach 400,000 tons and expect to achieve EBITDA breakeven by the end of the first half of fiscal 2024. Beyond steel, we made meaningful progress on our Tensar platform. The division achieved its highest quarterly EBITDA to date driven by strong customer adoption of its latest proprietary offering, Interac. The new product is being recognized by customers for delivering strong value by reducing construction time, lowering project costs and increasing asset life. Our financial performance is also benefiting from improved manufacturing performance and the integration of the recently acquired geogrid production line in Oklahoma.

CMC continued to expand its commercial portfolio in the fourth quarter with the acquisition of EDSCO, a manufacturer of rebar anchor cages for the electrical transmission and wind energy markets. The company is a leader in its space and poised to benefit from anticipated strong growth in U.S. energy markets. This transaction is an example of the type of value-accretive, bolt-on acquisitions we will continue to pursue, which deepen, broaden and diversify our construction reinforcement offering to customers and enhance our margin profile. In addition, we conducted the groundbreaking ceremony at Steel West Virginia earlier this summer. Our operations and leadership teams are on site and early construction activity is now underway. One final note, earlier this month, CMC announced a refresh brand and logo to better reflect our strategic direction.

Commercial Metals Company now has become CMC, a name that both ties our organization to its strong legacy and broadens its horizon beyond metals to include an expanded array of engineered solutions. CMC strives to become the clear leader in early phase construction solutions which requires offering our customers value options across a number of platforms and materials. The company’s new brand reflects who we are today and our broader aspirations for the future. With that, I will now turn the call over to Paul to provide more detail on our financial results. Paul?

Paul Lawrence: Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal fourth quarter 2023 net earnings of $184.2 million or $1.56 per diluted share compared to prior year levels of $288.6 million and $2.40, respectively. Results this quarter include net after-tax charges of $15.7 million, related to the ongoing commissioning efforts of Arizona 2 and the impairment of a downstream asset. Excluding these items, adjusted earnings were $199.9 million or $1.69 per diluted share in comparison to adjusted earnings of $294.9 million or $2.45 per diluted share during the prior year period. Core EBITDA was $340 million for the fourth quarter of 2023, representing a decline from the $419 million generated during the prior year period, but still among the five most profitable quarters in CMC history.

Slide 13 of the supplemental presentation illustrates the year-to-year changes in CMC’s quarterly results. Our North America segment achieved earnings growth, while Europe experienced a significant reduction from the strong results posted in the prior year quarter. Consolidated core EBITDA per ton of finished steel was $221, which remained well above historical levels and compared to $269 per ton a year ago. CMC’s North American segment generated adjusted EBITDA of $375.3 million for the quarter, equal to $327 per ton of finished steel shipped. Segment adjusted EBITDA improved 1% on a year-over-year basis. The increase was primarily the result of an expansion in the margin of average downstream selling price over scrap costs as well as lower controllable costs per ton.

Improvement in controllable costs occurred despite additional expenses related to the start-up of Arizona 2 and a major planned upgrade outage at one of our merchant rebar mills. Turning to Slide 15 of the supplemental deck. Our Europe segment reported an adjusted EBITDA loss of $25.7 million for the fourth quarter of 2023 compared to positive EBITDA of $64.1 million in the prior year period. Decline was primarily driven by lower average selling price, a reduction in shipment volumes and higher cost for energy. CMC’s energy costs remain competitively positioned relative to the broader European industry. But no longer provide us with the outsized advantage we enjoyed in fiscal 2022. Europe volumes decreased 9% compared to the prior year quarter, driven by lower Polish construction activity and muted European industrial production.

Tensar generated EBITDA of $22.6 million during the fourth quarter, providing the largest earnings contribution yet as a division of CMC. EBITDA performance yielded a margin of 28%, up meaningfully from the prior year quarter. The increase was driven by strong customer acceptance of Tensar’s latest proprietary GEO grid solutions interact as well as improved domestic manufacturing performance. As a reminder, Tensar performance is included within CMC’s existing segments. Of the $22.4 million in EBITDA, $18.2 million was included within CMC’s North American segment, while the remaining $4.4 million was reported within the Europe segment. While CMC’s consolidated financial results were historically strong, earnings were lower than what we had anticipated when we discussed our results in June.

Sequential decline in profitability was driven by three primary factors. The first and most significant factor was the deterioration in the market environment in Europe. During the quarter, as I mentioned, pricing and margins declined as slowing Polish construction, muted European industrial activity and customer destocking measures depressed steel consumption. We responded to these conditions by reducing production by roughly 25% to rightsize inventory levels and lower market supply. We believe many other producers have made similar cutbacks to output. Second factor was the effect of an inventory cost lag at our North American mills. Although we reported very similar margins over scrap in the fourth quarter relative to the third quarter, profitability was negatively impacted by selling higher cost in inventory into the declining price market.

Those who follow CMC will appreciate this is a temporary issue that will reverse once scrap costs stabilize or increase. The last factor of note was reduced scrap flows into our recycling yards as a result of the lower scrap pricing and the hot summer we experienced throughout the U.S. Diminished volumes have the effect of reducing fixed cost leverage and increasing price competition among recyclers in order to attract inbound material. We view this overhang as likely to be short-lived as volumes will rebound. Turning to the balance sheet, liquidity and capital allocation, as of August 31, cash and cash equivalents totaled $592.3 million. In addition, we had approximately $990 million of availability under our credit, term loan and accounts receivable facilities bringing total liquidity to just under $1.6 billion.

During the quarter, we generated $409 million of cash from operating activities, which benefited from a working capital release of approximately $123 million. Free cash flow amounted to $242.5 million, defined as our cash from operations less $166.9 million of capital expenditures. Fiscal 2023 cash flow from operations of $1.3 billion set a new record and was nearly double the prior year level. The strong performance was driven by solid earnings and a working capital release of roughly $149 million. Free cash flows of $737.4 million was also a record for CMC. About one-third of our free cash flow was allocated to strategic growth acquisitions, a quarter was distributed to shareholders in the form of dividends and share repurchases, and the remainder was used to repay the senior notes that matured in 2023.

We are pleased with our current debt levels and maturity profile and expect future capital allocations to have a prioritization towards growth and shareholder distributions. As I alluded to, our leverage metrics remain attractive and have improved significantly over the last several fiscal years. As can be seen on Slide 19, our net debt-to-EBITDA ratio now sits at 0.4x. We believe our robust balance sheet and overall financial strength provide us great flexibility to finance our strategic growth – organic growth projects and pursue opportunistic M&A while continuing to return cash to shareholders. CMC’s effective tax rate was 22.6% in the fourth quarter. And looking ahead to the first quarter of 2024, we expect an effective tax rate between 24% and 25%.

Turning to CMC’s fiscal 2024 capital spending outlook, we expect to invest between $550 million and $600 million in total. Outside of normal sustaining investments expenditures in fiscal 2024, includes substantial capital dollars for the construction of Steel West Virginia. CMC continues to deploy capital to support growth plans and reinforce our core operations. During the year, we invested $234.7 million for strategic bolt-on acquisitions, which expanded our commercial portfolio and value proposition to customers. As well as increasing our internal captive scrap capabilities in certain key geographies. Lastly, CMC purchased 352,000 shares, during the fiscal fourth quarter at an average price of $52.75 per share. Transactions since the initiation of the buyback program through Q4, have amounted to approximately $263 million, leaving $87 million remaining under this authorization.

With that, I will turn it back to Peter for outlook for comments on CMC’s outlook.

Peter Matt: Thank you, Paul. We expect first quarter financial performance to remain strong by historical standards, but declined from the fourth quarter as a result of seasonally slower shipments, steel product margin compression in North America and the continuation of challenging market conditions in Europe. During the first quarter, we anticipate that our Europe operations will receive approximately $60 million from two large government rebate programs. The first is an annual CO2 credit estimated at $25 million, up from $9.5 million received last year. The second is structured as a reimbursement by the Polish government for elevated energy costs incurred during the European energy crisis. Proceeds from this program are expected to be $35 million and are calculated based on the magnitude of energy cost inflation in calendar year 2023 relative to the 2021 baseline.

These rebates are expected to drive a sequential improvement in Europe segment adjusted EBITDA. Looking at the longer term, we remain very confident regarding the outlook for CMC in the markets we serve. The United States is in the early stages of massive investment trends that are intended to remake large portions of our economy by extensively upgrading infrastructure realigning global trade patterns and reorienting automotive production to electric vehicles and transitioning the electricity grid to greener sources of energy. Construction makes all this possible, and we have positioned CMC to be both a primary beneficiary of the expected growth and a key solution provider to our customers. Once again, I would like to thank our customers for their trust and confidence in CMC and to thank all of the CMC employees for delivering yet another quarter of solid performance.

And with that, we’ll take questions, operator.

Operator: Thank you. And at this time, we’ll now open the call to questions. [Operator Instructions] The first question is from Tristan Gresser of Exane BNP. Please go ahead.

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Q&A Session

Tristan Gresser: Yes. Hi. Good morning and thank you for taking my questions. The first one is on the Q1 guidance. I wanted to ask you a little bit more about the moving pieces there. If I look at spot rebar metal spread in the U.S., they have fallen about by $100 in Q3. Is that the level of metal spread compression you expect to be reflected in Q1? Or is it something closer to $50 a ton maybe – also in terms of timing, given the short lag for rebar, is it fair to assume that most of the weakness we’ve seen in rebar metal spread will flow into that Q1? Thank you. That’s my first question.

Paul Lawrence: Yes. I think just in terms of the metal spread compression, the number that you’re citing is seems high to us. And in terms of timing, what we expect is that you will see the impact flow into Q1 as you indicated.

Tristan Gresser: All right. That’s really helpful. So I guess my follow-up is having a little bit of hard time getting to a lower EBITDA quarter-on-quarter, if I get metal spread compression there, some more stability on the fab business and a $60 million uplift then on Europe, I guess something close to something basically stable quarter-on-quarter. So I’m just going to ask what kind of volume decline do you expect in North America, Europe in Q1? And also without the $60 million uplift in Europe, would you have seen underlying margins decrease further?

Paul Lawrence: So in terms of the volume decline in North America, we expect there to be kind of normal seasonality. So we’re talking about up to a 10% change. And I think what you should assume in Poland is that absent this – these rebates, Q1 looks a lot like Q4. So we’re not calling for a meaningful recovery in Poland in Q1.

Tristan Gresser: Okay. That’s really helpful. And maybe the last one, and I know it’s a little bit of a tricky one, but on the timing on the infrastructure plan, I mean the rebar demand chart you showed in your presentation looks flat year-to-date. Is that fair to imply that we have yet to see most of this kind of infra boost. And if you were to put a number, and I know it’s difficult, how much of this 1.5 million ton demand uplift do you believe is already out there being reflected in rebar prices? Is that 50%, 20% or even lower? And lastly, I think on your opening remarks, I think it feels to me that basically saying the quarter to watch for any meaningful uptick there is potentially calendar Q2. Is that fair?

Paul Lawrence: Yes. So okay, a lot of questions there, but we’ll try to cycle through them. So first, in terms of the amount of infrastructure spend that we’re seeing, so far, it’s been very limited. What we can see is that it’s working through the design and the predesign phases of the process, but we don’t believe that we’ve seen much of the spend yet. And to your second question on rebar pricing, we do not believe that the kind of infrastructure spend bubble is baked into the current rebar prices, right? So once that demand starts to materialize, we expect we’ll see more of that. And if you talk about when the inflection is going to occur, again, it’s hard for us to give too precise a number, but – or too precise a date.

But I guess what we do is if we think about North America, again, we do see the kind of bidding activity very high. We do see some short-term constraints in terms of kind of getting projects built out just given some of the labor constraints. But we expect this is coming and we expect it’s coming in 2024. And so that should give some help to 2024. The other thing that I would say we’re seeing is two factors, that I think are important here. One is we’ve seen scrap stabilize. And usually, that’s a harbinger for kind of better pricing on the rebar side. And the other thing that I would say is that imports have remained at relatively manageable levels relative to kind of where they’ve been historically. And we believe that’s because of the kind of the economics of bringing steel to the U.S. are not as compelling.