Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Jonathan Lichter with Sidoti & Company. You may proceed.
Jonathan Lichter - Sidoti & Company
In terms of your customers, are they going to stick with you when production returns?
John C. Sheptor
Jonathan, good morning to you. This is John. Our customers have given us full support throughout this entire rebuild period. Many of them have communicated with us. As we prepare for restart, they are ready to receive product. We are confident that we continue with the strong relationships through the start-up period.
Jonathan Lichter - Sidoti & Company
So you don’t anticipate losing any customers as you ramp up?
John C. Sheptor
At this time, we’ve had no customer contact us, Jonathan that they plan to change their long-term relationship with the company.
Operator
Your next question comes from the line of Hamed Khorsand with BWS Financial. You may proceed.
Hamed Khorsand - BWS Financial
Just a couple of questions here. When can we see the gross margin turn positive given your current operational abilities? I would have thought that with the natural gas coming down as much as it has, it would have been a benefit to you. Is there a cyclical lag?
John C. Sheptor
Hamed, we discussed our gas hedging program and a fair amount of visibility lag in our 10-K and our 10-Q and we do as a routine process, hedge forward on natural gas. So in any hedging program, you’re smoothing out the peaks and smoothing out the valleys, generally speaking. So our gas costs have certainly not dropped as rapidly as the market dropped during the first quarter. I think that’s reflected in our natural gas costs as we reported in the 10-Q. Again, there’s some discussion in there about our current position and expectations for the balance of the year on gas costs. Obviously, some of the costs elements that we have been talking about now for several quarters are related directly to the lack of production coming out of Savannah and the actions that we’ve taken to mitigate that impact, freight costs, for example, purchase sugar costs, the energy mix issue which is obviously a very significant one given coal versus gas costs in recent times. So all of those are certainly impacting the cost structure and impacting the margins that you’re looking at. We would see many of those costs as we do begin operations in Savannah beginning to recover to more normal levels, subject obviously to our market conditions.
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