Question-and-Answer Session
Operator
(Operator Instructions). And your first question comes from the line of David MacGregor of Longbow Research. Please proceed.
David MacGregor - Longbow Research
Yes, Good morning everyone.
Anne Stevens
Good morning, David.
David MacGregor - Longbow Research
Just a question with respect to the press release, you said that revenue and volumes are expected to be down 25%, should we infer from that that you are expecting a relatively stable pricing environment?
Doug Ralph
No, that would assume our current outlook of pricing conditions which are becoming more aggressive in the market place, especially on a lower-end more commodity part of the business.
David MacGregor - Longbow Research
Okay, you just said revenue and volume down 20% to 25%. It seems like most of the downturn that you will scribe to volume as opposed to price.
Anne Stevens
Well the pricing pressure we're experienced is in the lower end of the market. So there is pricing pressure out there, we have moved our business to about 40% long-term contract and obviously we have had some push outs, but we do expect our customers to meet the terms of the agreement.
David MacGregor - Longbow Research
Okay. I realize you got some higher cost inventory coming through and you are probably working down some of your fixed costs, what you would be thinking about these days in terms of fixed cost, variable cost proportion, once upon a time it was a 75:25, is it closer to an 80:20 now?
Doug Ralph
We have been focused on maintaining our fixed cost and trending at a rate that’s in dollars below the level that we were at last year and we've taken a number of actions on the both the headcount area as well as other areas of that spending. And then in variable cost our objective has been to truly make those variable with production and so based on that the percentage of fixed cost is going to increase slightly in percentage terms but it’s not a big percentage amount.
David MacGregor - Longbow Research
From that normalized 75:25 relationship?
Doug Ralph
Just by nature of top line and then specially for the second half being down 20% to 25% fixed cost would probably increase 2% to 3% of the total part something of that magnitude.
David MacGregor - Longbow Research
Okay that’s helpful. Thank you. And a final question just has to do with your hedges, nickel hedges and other hedges, what would be the impact over the next couple of quarters, cam you quantify that for us?
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