GTLS
#Morning, <UNK>.
I'm sorry.
What was the first part of the question.
I got distracted.
In the US the attempts to be marine oriented majority of the applications for transport schemes to the Caribbean Islands or to South America displacing diesel fuel primarily for power gen that's a bit weaker more recently as LNG spot market prices in Europe have, even from relatively, to small quantities have come down do $4.00 per million Btus it makes it difficult to get people excited about investing in the US currently.
Your second question as to whether we think we're at the trough of backlog I think that we're probably reasonably confident we're on the bottom within the D&S business.
The E&C business can still come down further, but with a few orders would be on the upswing.
It's just ---+ there's not much upside for accuracy in calling the bottom or following the timing of an upturn.
Huge.
Too early to tell.
It looks to be very interesting.
If you look at the press and comments that are being made by some of the ---+ the very large industrial players like GE and Xiamen focusing on their data (inaudible) and connected businesses you can view us as fast followers who are doing this in smaller chunks and with more personalized attention to our customers.
So I think we're just exploring something that we think can be equal in size to our equipment manufacturing business but we frankly don't have any idea of how quickly that develops.
I would say that's not a short-term prospect.
It's something that we view as being a attractive growth opportunity over the next five to ten years.
Headcount we're down about 23% of where we were by the end of 2014 versus where we are today in the end of March.
Capacity wise.
Capacity wise in terms of bricks and mortar and production equipment we have significantly greater capacity than we had at that time.
Subject to bringing people back on, which we're capable of doing, we would have greater production capacity than we had he two years ago.
Currently with our (inaudible) it's lower.
Right now we can probably support $1.3 to $1.5 billion of revenue within a six month time frame, which is kind of the time that's required for us to respond to orders booked.
Remember if we take significant orders in E&C those projects are executed over 12 months to 24 months.
And so the labor ramp-up is ---+ can be for the ---+ can be going on through half of that project.
So I'm not really very concerned about our ability to ramp-up quickly.
In most parts of the world ---+ at this point in the cycle labors relatively available and I would anticipate that that situation would continue into a ---+ well into a recovery.
Simply because in most industries particularly around the energy industry deployment is still coming down.
.
Well, we certainly have deposits on contracts that were signed, that's a fact, I can't sit there and say, you know, ---+ it was your question, will those flow through if they were canceled.
I would classify that as competitively sensitive.
Generally solid, flat to up slightly on the basis that we have some very good products that tend to perform significantly better than competitors and we also have a very strong market presence as well as good alignment both with our customers and their end users in those markets.
We've done a lot of development work of tailoring products specifically to those applications and we have an attractive position.
The challenge with any E&C is that historically our ability to predict margins, which has never been outstanding, is helped by having significant projects in backlog and that gives us ---+ and that might account for 70%, 80% of revenue and margin in the forward quarter or quarters.
At a time when our backlog is low a greater percentage of our business is short cycle for emergency applications or things where the customer is willing to pay a premium because of outages or shutdowns.
And so depending on the level of actual sales there can be better margins but because those lead times are short we don't have a view, even as soon as the next three months, as to what part of the mix that will be.
In terms of the margin in backlog, again, as you get towards the exhausting, the longer project lead time backlog, and you're in a competitive environment, it tends to be lower so the margin in backlog, currently in backlog is generally lower than the margin we reported in the most recent quarter but adding on higher margin, short lead time projects can significantly impact that.
(Inaudible).
We just don't know.
That's good assumption.
In the startup phases, with respect to margins, potential margins, there's not a lot of established competition.
However, in the early phases it does require SG&A to develop that business.
I think that we've got a great balance and a great team working on this and we're handling the startup issues by allocating resources from other parts of our business and, I have to say, it's been done pretty creatively so we're very pleased with the results to date and the prospects.
<UNK>, it's a bit of all of the above.
Many of our customers who are operating plants that include our equipment have had retirements or cut backs in experienced personnel.
In many cases they are reacting to current lien times by saying we have to improve up time and efficiency or we can't stand to have the accidents or outages we've lived with in the past because so much was going on we couldn't deal with it.
And so it's a sale, we're making the sale based on improving the effectiveness of their plants, improving the reliability of their plants.
Or in the case of financial owners that have been brought about by LLC or (inaudible) limited liability partnerships where there has been less experienced people operating more plants we're finding there's a willingness to get involved in engaging our services for risk mitigation.
Yes, I guess to answer your first question around D&S/LNG, you know, basically last year, in 2015, D&S/LNG represented approximately 25% of orders and sales, would not anticipate that changing dramatically here in 2016 based on where we see opportunities and ---+ say for instance, again, the Clavados order in Lithuania was an LNG oriented order, the import terminal in India, that we announced, as well here.
So, you know, again, those are LNG oriented revenues so don't expect that mix to change much in 2016 and, actually, that's been a good trend for us so I wouldn't see a major change there.
Thank you.
We've certainly seen strong headwinds and talked about it for a long time.
We're not unique in our upstream energy equipment business and we don't see a dramatic change in the near term.
We do think we've reacted appropriately and our diverse bi-product portfolio will enable us to successfully navigate this downturn.
We expect to continue to generate positive operating cash flows through the year and we'll continue to focus on our cost structure without losing sight of our strategic goal of delivering long-term growth.
And, I remind everyone, in our business when confidence returns and people start to invest we tend to see our sales, our backlogged sales and operating leverage increased dramatically and we're determined to keep ourselves in the position to do that, prudently.
So thank you very much for listening today.
Goodbye.
