Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from the line of Jeff Hammond with Keybanc Capital Markets.
Jeff Hammond
Hi good afternoon guys.
Sal Fazzolari
Hi Jeff.
Steve Schnoor
Hey Jeff.
Jeff Hammond
I just wanted to I guess get a little more granular on this Mill Service issue and turn around. I guess, if I pull out the fuel cost impact, your margins look still down sequentially. I just want to better understand within some of the other operational issues, what in your mind kind of got worse despite what seemingly was a more stable production environment? And then two, maybe just give us a better sense of where you see the inflection point where some of these improvements start to come together. Maybe you answer those and I get one more?
Sal Fazzolari
All right Jeff. First of all, as you recall on the operation other than the things you said, which you stated very well, is if you look at some of the operational issues we are still working through some of these maintenance things by having equipment delivered. We are just in the process of implementing these cost optimization initiatives. Some new contracts are just getting started up and should contribute. And we expect those new contracts to perform very well as the year progresses. And you can look back at the press releases over the last 12 months starting with China late last year, as well as some in Brazil and other parts of the world and Argentina and so forth. As those contracts kick in, you should start seeing performance. So, when you underpin it by the -- we'll start recovering a little bit of the fuel, the efficiencies start getting a little better, and the new contracts kick in and so forth. We believe the first quarter is certainly the low point here.
And so sequentially you should see, we believe, an improvement in the second quarter and that will continue to build with a much more improvement in the third quarter. And that is the way we are seeing it right now. These negotiations on these contracts, its good news/bad news. The bad news obviously is they are protractive. But that is the good news. That means that we are making some headway; the customers listening; so which means that we'll probably resolve lot of these more favorably than we perhaps felt maybe even like a month or two ago. So, the things are turning more satisfactorily but it just takes, you can appreciate the bureaucracy and the amount of time to resolve these things. Jeff it is, just one of those things. Believe me, we’d like to push them and get them done a lot quicker. We are really at their mercy relative to timing. So on balance, this is certainly the low point.
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