Question-and-Answer Session
Operator
(Operator Instructions) We’ll take our first question from Timna Tanners with UBS.
Timna Tanners – UBS
Hello everyone.
Jack Hockema
Good afternoon Timna.
Timna Tanners - UBS
Good afternoon, good morning to you. I wanted to ask a little bit more specifics on the guidance. The comments are as I understand it, so please correct me, but as I understand it, the higher value add products are seeing further weakness in price and volume and you’re listing some signs of stability in the lower value add products, but you also say that you see some cost benefit.
So, could I ask you to maybe specifically talk about your EBIT guidance or how you see those two measures flushing out? I appreciate visibility is difficult, but can you give us a little better sense of how those two can offset one another.
Jack Hockema
Yes, well Timna, we don’t provide guidance other than just general terminology or general indications of how the business climate is changing. I think you captured the essence of it there in your question. It’s not that pricing is deteriorated in the high strength applications. It’s that the mix is getting a little bit leaner.
As we’ve said many times on these calls and in investor meetings in the past, in the aerospace and high strength segment of our business, the contract plate business is actually the lowest value added product compared to non-contract plate and sheet and coil and drawn tube and cold finish and it’s in those non-contract areas where we are seeing weakening demand, primarily as a consequence of destocking, but not weakening prices.
The rest of what you said, right now we see some stabilization, knock on wood, in the other aspects of the business, so hopefully that means demand is stabilizing and we are seeing continuing improvements in our cost performance. How rapidly we continue to ramp that down is tough, that’s why we continue to chase the volume, but we’ve had good success in the first quarter and we’re optimistic about the second quarter.
Timna Tanners – UBS
Okay. So, what you’re saying is on the non-contract tons for heat treated plate maybe is where there’s more weakness or would that be like some of the armored plate for armored vehicles?
Jack Hockema
Actually armored plate is in general engineering. When we talk about the aerospace and the high strength sector, most of our plate business is contract business. There’s a small portion that’s non-contract that goes through service centers.
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