Nicholas Grasberger : Sure. Yes. So I would say that the core business outside of the long-term contracts is approaching where it was pre-COVID, it’s not quite there, if you look at the fourth quarter. This will be the strongest fourth quarter we’ve had in the Rail business in the core business in some time and clearly back to pre-COVID levels. And the view for next year is quite healthy, and we see a lot of that in backlog today. So we feel quite good about the core. As I noted just a minute ago, these long-term contracts in Europe are large. They’re complex. The supply chains are very complex. You can imagine, during COVID, the disruptions to that supply chain, you can also imagine the impact of inflation on those contracts over the past couple of years.
So the process of renegotiating on our side and on the buyer side conducting diligence and understanding the risks on these contracts takes time, longer than we’d like, but it is what it is. And so I don’t think there’s a question of if we’ll get to a deal late this year, early next year, but simply a matter of when. And again, as I mentioned, I think the fourth quarter, which we expect to be strong will help the process.
Aadit Shrestha : Great. And just switching gears, I guess, sort of still related to Rail, but I think you talked about leverage, you expect it to come down further 0.5 a turn in FY ’24. So potentially exits FY ’24 at 4x for Rail sale. Are you assuming any sort of pay down of debt in that? And how much further can leverage come down after the Rail sale? Does it come down 0.5 more turns? So you’re potentially exiting FY ’24 at 3.5x leverage?
Nicholas Grasberger : Yes. I think certainly, excluding the impact of the Rail divestiture, we should be well below 4x by the end of next year. And we do expect the rail transaction to be a delevering event. So I won’t give a specific number now. We’ll have much better view in February when we have our next call, but that 1/2 turn plus of incremental deleveraging next year plus the impact, the delevering impact of the Rail divestiture will certainly put us well below 4x.
Aadit Shrestha : Great. And then just last one for me. So you did raise the EBITDA guide for $10 million. Just — and then I think — I’m sorry, free cash flow was lowered by $10 million, but then you raised the EBITDA by $8 million. So what accounts for that sort of a lower free cash flow and raise in EBITDA?
Nicholas Grasberger : Yes. It’s really a function of receivables in China. We came into this year with, I’ll call it, a $50 million challenge. We’re kind of $35 million through that. And we have $15 million that’s being pushed into Q1. And so again, this is not a situation where there’s a question of whether it’s collectible, it’s just a matter of when. And there are a few contract — contractual matters that need to be resolved and they will. And I see this $15 million or so that we had assumed that we would collect in the fourth quarter, we’ll be — we’ll see that in Q1.
Operator: [Operator Instructions] The next question comes from Davis Baynton with BMO Capital Markets.
Davis Baynton : This is Davis on for Devin Dodge. So in the previous year, you had mentioned some lost revenues from a lack of staffing in Clean Earth, but this seems to have improved in 2023. Are labor conditions continuing to accelerate there? And maybe what’s your current outlook in the Clean Earth’s labor conditions?
Nicholas Grasberger : Yes. I think you’re referring as many other companies did to the shortage, the rather acute shortage of truck drivers that we had in Clean Earth last year. That was one of many challenges we had, coupled with inflation and logistics costs and diesel prices and so forth. But yes, that was a challenge for us last year. I won’t say that we’re fully staffed to the level that we’d like with respect to drivers, but we are in a much, much better position than we were in previous quarters. So I really don’t believe that we’re losing much in terms of revenue or profit based on the labor situation.
Davis Baynton : Okay. And then just switching over to Harsco Environmental. So you had — you’ve already talked a bit about the weaker-than-expected steel production by customers in that segment. But maybe could you please just expand a bit about what your steel mill customers are saying in terms of near-term production levels? And how much visibility do you have into that business?
Nicholas Grasberger : Yes. Well, first of all, let me just comment on the mix within HE. Certainly, some geographies are growing quite nicely, India. We’re the only mill service provider in India. And India is growing quite well. We’ve seen reasonable growth in China this year. We’ve seen good growth in Turkey. It’s really the Americas and Western Europe that have kind of held us back. Fortunately, our — the margin differential is weighted — the higher margins are weighted towards the developing markets that are doing relatively better than Europe and the U.S. In terms of visibility, we, of course, follow many different forecasts for steel production. We listen to our customers as well. We thought coming into the second half of the year that we — this year, we’d see a bit of an uptick, and it just hasn’t happened.
And so we thought we’d be plus 1% or 2% in the second half of this year versus second half of 2022. And in fact, it’s been down a bit. Most forecasts that we see in most of our customers, as we discuss 2024, do expect volume growth. If you look at steel mill capacity utilization at least at the mills that we support, if you take out the first half of [2020] is kind of at a 10-year low. And so we certainly expect that to improve. Our customers do, economists do and so we do anticipate growth in 2024.
Operator: This concludes our question-and-answer session. I would now like to turn the conference back over to Dave Martin for any closing remarks.
David Martin : Thank you, Debbie, and thank you to everyone that joined this call. Please feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri and look forward to speaking with you soon. Thank you.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
